PROFESSIONAL PRACTICE

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PROFESSIONAL PRACTICE

• Dr Arthur McInnis
• Handout E

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Professional Practice

• Fiduciary Duty and Conflict of Interests
• Chapter 7 on Fiduciary Duty is about
  Solicitor-Client Conflicts
• Chapter 9 is about Client-Client Conflicts
• 5.07, 5.08, 5.16

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Fiduciary Duty and Conflict of Interests

• 5.07 - A solicitor must not act, or must decline
  to act further, where there is, or is a
  significant risk of, a conflict of interest.
• 5.07(1) - For conflict of interest between a
  solicitor or his firm and a client see Chapter 7.
• 5.07(2) - For conflict of interest between
  clients see Chapter 9.
• 5.16 - A solicitor owes a fiduciary duty to his
  client see Chapter 7.

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Fiduciary Duty and Conflict of Interests

• Governing Principle - Ch 7
• A solicitor owes a fiduciary duty to his client.
• He must act with absolute openness and fairness
  to client.
• He must act in the best interests of his client.
• He must not put himself in a position where his
  own interests conflict with his duty to his
  client.
• The fiduciary duty is implied in the retainer.

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Fiduciary Duty and Conflict of Interests

• One source of duty to avoid conflict is fiduciary
• When is one a fiduciary?
• Trust/entrusts
• Reliance Reading case (1951)
• Any qualifications?
• Fiduciary duty subject to contract - Clark Boyce
  v Mouat (1993)

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Fiduciary Duty and Conflict of Interests

• Great representative cases
• Bray v Ford (1896)
• Regal (Hastings) v Gulliver (1941)
• Phipps v Boardman (1966)
• all House of Lords
• all involved solicitors
• all showed nuances

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Fiduciary Duty and Conflict of Interests

• 7.01(1) - covers direct indirect personal
  interest
• staff and partners/(consultants)
• 7.01(2) - conflicts include relationships
• family
• emotional
• personal
• or from holding
• an office
• appointment
• shares

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Fiduciary Duty and Conflict of Interests

• Read 7.01(2) with 5.08 appointment leading to a
  conflict.

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Fiduciary Duty and Conflict of Interests

• 7.01(3) - must not take advantage of a client
• test is conflict or likelihood of conflict
• examples involving solicitor and client
• leasing
• sales
• purchases
• lends
• borrows

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Fiduciary Duty and Conflict of Interests

• precondition to acting in these examples
• taking independent advice
• advice may be legal or otherwise professional
• Note - ethics and common law requirements may
  diverge

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Fiduciary Duty and Conflict of Interests

• Sale and purchase
• independent legal advice is not mandatory
• though may be voidable if no full disclosure and
  not fair Demerara Bauxite case (1923)
• and presumption of undue influence can apply
  Wright v Carter (1903)
• evidence to rebut presumption varies

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Fiduciary Duty and Conflict of Interests

• Gifts
• inter vivos - if a secret profit then accounting
  and restitution the rule Bray v Ford (1893)
• in wills - lower standard applies Re A Solicitor
• no presumption of undue influence Wintle v Nye
  but solicitor should still rebut to validate gift
  

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Fiduciary Duty and Conflict of Interests

• 7.01(4) - must not apply pressure on
  purchaser-clients to obtain financing from
  solicitors lender of choice
• 7.01(5) - no interests to be taken in
  (prospective) clients publication rights until
  conclusion of matter

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Fiduciary Duty and Conflict of Interests

• 7.01(6) - Solicitor/director/shareholder overlap
• consider the conflicts - may have to resign
• 7.02 - full disclosure when you
• have or might obtain
• a personal interest or
• a benefit
• when acting for a client

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Fiduciary Duty and Conflict of Interests

• 7.03 - Solicitors can make profits acting for
  clients BUT
• they must be disclosed to the client, e.g.
  profits cannot be secret and
• client must agree to solicitor keeping
• covers
• interest on client accounts
• commissions from 3rd parties

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Fiduciary Duty and Conflict of Interests

• Gifts
• In this Year of the Horse the famous English
  saying you should not look a gift horse in the
  mouth has special meaning BUT solicitors should
  still not forget 7.04 of the Guide.

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Fiduciary Duty and Conflict of Interests

• - 2 categories of gifts
• insignificant in value
• significant in value
• 7.04 - Solicitors can accept gifts from clients
  IF YOU FIRST
• tell them they are not obliged to give you
  anything when it is insignificant in value, or
• require them to be independently advised when it
  is significant in value

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Fiduciary Duty and Conflict of Interests

• How is value determined? 7.04(1)
• by reference to clients estate or means
• reasonable expectations of beneficiaries

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Fiduciary Duty and Conflict of Interests

• 7.04 is narrow as
• excludes all gifts given outside solicitor-client
  relationship
• really only prohibits inviting gifts from clients
• no breadth in extension
• excludes benefits as executors
• BUT is 7.04(3) a sting in the tail?

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Fiduciary Duty and Conflict of Interests

• Conflict of Interests Overview
• conflict is between interests and duties
• premised upon principles of loyalty and
  confidentiality
• loyalty in SPR 2 and Bar Code 110
• confidentiality in 5.13 and 8.01 Guide
• the common law
• test for conflict - reasonable probability that
  one or both principles will be seriously impaired
  

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Fiduciary Duty and Conflict of Interests

• 9.01 - 9.04
• 4 rules - 2 situations
• 9.01, 9.02 - future/potential client conflicts
• 9.03, 9.04 - present/actual client conflicts

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Fiduciary Duty and Conflict of Interests

• Refusing instructions when
• there is a conflict of interest
• there is a significant risk of conflict of
  interest
• acquired relevant confidential knowledge you must
  disclose - here normally arises when acting for a
  client against a former client - contentious or
  non-contentious - similar more loosely worded out
  for barristers under para 57.

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Fiduciary Duty and Conflict of Interests

• Embarrassment - though not absolute bar
  9.02(2),(3). Permissive - contrast NA.
• Examples -
• husbands and wives 9.02(3)
• families 9.02(4)
• lenders and borrowers 9.02(5)
• partnerships 9.02(6)
• corporations 9.02(7)
• SFC investigation 9.02(8)
• prosecutions 9.02(9) - mandatory

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Fiduciary Duty and Conflict of Interests

• And 9.03(4) - confidential knowledge again
• Recall 8.03 - duty to pass information to a
  client
• or - what you know so too will the client
• what you tell the other solicitor his client will
  know
• if it is likely you will come to know something
  that you should pass on then decline to act -
  read this point with 5.07 - conflicts and
  prospective clients.
• Note therefore both information and knowledge
  covered

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Fiduciary Duty and Conflict of Interests

• conflict pertains to the clients
• whether firm or the solicitor alone
• exceptions?
• mediation and conciliation in minor disputes
  9.01(3)

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Fiduciary Duty and Conflict of Interests

• You act for one client and a second client
  arrives whose interests conflict, or appear
  likely to conflict - which client do you give up?

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Fiduciary Duty and Conflict of Interests

• Joint Client Problems
• divided loyalties
• same or differing interests
• confidential information
• consent
• possible loss of both

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Fiduciary Duty and Conflict of Interests

• 8.01(24) - Joint retainers are OK but
• duty to explain disclosure to one is disclosure
  to all
• waiver of confidentiality requires consent of all
• 8.01(25) - Joint clients OK but
• no disclosure information of one on separate
  matter to other without consent

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Fiduciary Duty and Conflict of Interests

• Supposed rationale for allowing client consent
• client choice
• expertise of solicitor
• cost savings
• familiarity of solicitor

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Fiduciary Duty and Conflict of Interests

• 9.03 present clients and conflict
• Discussion

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Fiduciary Duty and Conflict of Interests

• Deconstructing 9.03 - or does anything go?
• Excuses in 9.03(1)
• consent
• advice (disclaimer viz nothing confidential)
• relevance - does not concern matter
• no dispute or if dispute then resolved

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Fiduciary Duty and Conflict of Interests

• Excuses in 9.03(2)
• no continuing relationship
• not regularly acting
• recommendation (independent representation)
• (disclosure)
• contentment
• permissive construction of should

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Fiduciary Duty and Conflict of Interests

• Excuses in 9.03(3)
• no contentious issue
• no divergence of interests, rights or
  obligations.
• involves little or no legal advice.

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Fiduciary Duty and Conflict of Interests

• Excuses in 9.03(4)
• unrelated matter
• no conflict
• no embarrassment
• propriety
• consent
• no relevant confidential knowledge
• no good cause for refusal

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Edmund Burke

• Law sharpens ones mind by narrowing it.