Conflict of interest, confidentiality and disclosure: you are right to question your solicitor

We have been approached by several clients recently who have expressed concerns regarding their solicitors and whether they are conflicted. What can you do if you are unsure whether your solicitor has a conflict of interest and should not be acting for you?

Our Scenario

Three siblings were shareholders in a company. Two were statutory directors, the third was not but was engaged in a complex and messy divorce. The company had been exposed to significant alleged acts of fraud and stripping/ misappropriation of its assets whilst managed by the two directors and one of the two directors operated a directly competing business.

The complication arose because the same firm of solicitors acted for (1) the sibling getting divorced, (2) the company, (3) the individual directors and (4) the competing company. When the siblings found themselves in dispute with each other, it left them asking the question as to whom the solicitors could act for?

What are the rules?

The rules covering conflict of interest, confidentiality and disclosure are found in chapters 3 and 4 of the Solicitors Regulation Authority (“SRA”) Code of Conduct.

The SRA Code of Conduct can be a dull old read. However, it distils down to the fact that:

  • A solicitor cannot act for a client where there is a conflict or significant risk of a conflict between the solicitor and that client;
  • Where there is a conflict or significant risk of conflict between two or more clients, the solicitor cannot act for all or both unless it falls within very narrow exceptions.

When deciding which clients the solicitor can act for, serious consideration should be given by the solicitor to issues regarding confidentiality and disclosure.

Protection of confidential information is a fundamental feature of a solicitor’s relationship with their clients. The duty continues after the end of the retainer and even after the death of a client.

A solicitor also has a duty of disclosure to clients. The duty is limited to information of which the solicitor is aware, and which is material to the client’s matter. A solicitor cannot continue to act for a client for whom they cannot disclose material information.

Where the duty of confidentiality and duty of disclosure cannot be reconciled, the duty to protect confidential information is paramount.

What happened in our scenario?

When the issue of conflict was first raised, the solicitor’s firm in question ceased to act for the sibling getting divorced. This was done at short notice before the final divorce hearing and left the individual unrepresented and ending up with a less beneficial settlement than they may have done.

A professional negligence claim in the offing?……probably.

Was the firm entitled to act the way it did and why did it act that way?

The cynical view is that it was following the money. The firm knew it was not going to generate much in the way of fees from the sibling getting divorced, but the potential for earning fees in respect of the company and directors was significant. Sadly, we see this all too often.

What should have been the outcome?

In simple terms, the firm of solicitors should have ultimately ceased acting for all three siblings and the two companies. In the short term, the solicitors could have continued to act in respect of the divorce, as it was close to completion and in so doing, there was no conflict of interest or breach of duty that regards the other siblings or the company.

The solicitors chose to do the very thing they could not do.

They acted for the directors who were in dispute with the sibling and shareholder getting divorced. They also continued to act for the company which was in direct conflict with the directors, one of whom also had a company in direct competition (which they allegedly acted for as well!) both of whom had presided over alleged acts of fraud and asset stripping of the company. There was serious conflict of interest.

To avoid working with a conflicted solicitor, a good starting point is to ask yourself:

Can my solicitor disclose material information to me without breaching their duty of confidentiality to their other client?

If the answer is no, your solicitor probably shouldn’t be acting for you.

If you need independent legal advice regarding issues relating to your solicitor’s conduct or potential issues of solicitor negligence, you should contact Neil Kelley at Griffin Law on 01732 525923

By |2019-04-09T11:11:45+01:00November 6th, 2017|Helpful Guidance|0 Comments

About the Author:

Neil Kelley
Neil is the head of Griffin Law's litigation and dispute resolution team and has over twenty years’ experience in dispute resolution.