This week the Gazette launches an expanded version of our ethics Q&A column to run monthly
Q. We are instructed by X & Co to provide general advice to its human resources department in relation to revising the company's staff handbook. We have also been asked to act for one of X & Co's former employees, A, in connection with bringing a claim against the company for unfair dismissal. Will our firm have a conflict of interests in agreeing to act for A?
A. No. The two matters are not directly related (see practice rule 16D(2)(b) for the definition of a conflict). If A succeeds in his claim against the company, that will obviously be prejudicial to the company, but not in relation to the particular retainer you have with the company. Similarly, whatever changes are made to the staff handbook will not have any impact on A's claim against the company.
It is a commercial and reputational decision for you as to whether you want to accept instructions to act against the company. You would also have to consider, as a separate issue, whether the firm would be putting confidentiality at risk through acting for both parties (see 16E(4) for details of the duty not to put confidentiality at risk by acting).
Q. We act for Mr Jones in connection with his divorce and, quite separately, for Mr Taylor in connection with his divorce. The firm has just discovered that Mrs Jones is cohabiting with Mr Taylor (Mr Taylor played no part in the breakdown of Mr & Mrs Jones's marriage). Is there a conflict?
A. Yes. Although initially the two matters were unrelated, they have become related as a result of Mrs Jones moving in with Mr Taylor, because any financial settlement reached in either matter will clearly have an impact on the other. Your ability to act in the best interests of both is compromised and you need to consider whether you can continue to act for one client or whether both will need to instruct new firms (see 16D(4)).
Q. We are instructed by A, who has been dismissed for gross misconduct, in bringing a claim for unfair dismissal against his employer, Z & Co. A conflict check reveals that our firm is already acting for Z & Co in defending a claim being brought by another employee for unfair dismissal by reason of redundancy. Would there be a conflict in the firm acting for both clients?
A. No. The two matters are not related and therefore there is no conflict of interests because although both retainers relate to claims for unfair dismissal, the grounds for dismissal in each case are completely unrelated. However, you would have to consider whether your firm has confidential material information from the company, for example, with regard to the way in which it deals with claims and if so, whether you would be putting confidentiality at risk by acting for A.
Q. We have been acting for a wife in connection with matrimonial proceedings that are now concluded. Our client has a costs order against the husband, although these have not yet been paid and we are in correspondence with the husband's solicitors concerning our costs. Our firm has now been approached by the husband, who wants us to act for him in buying a property. Do we have a conflict in agreeing to act?
A. Yes. Although on the face of it, the two matters are completely unrelated, there is a significant risk that a conflict could arise (see 16D(2)(b)(i)). If the husband fails to pay the costs, then you would have to advise the wife on what steps to take to enforce the order, which could include applying for a garnishee order on the purchase monies when the husband puts the firm in funds, or taking a charge on the husband's new property. In these circumstances, there is a significant risk that by acting in the best interests of the wife, you would be acting to the prejudice of the husband and your firm should therefore not accept the retainer.
Q. We act for a wife in connection with matrimonial proceedings in respect of which the husband is representing himself. There is a consent order whereby the parties have agreed to sell the matrimonial home and have agreed on the distribution of the proceeds of sale. Both parties wish us to act for them in connection with the sale, although there is some disagreement as to what fixtures and fittings should be included. What is the position?
A. You would be able to act for both parties under the 'common interest' exception to the duty not to act where there is a conflict (see 16D(3)(a), (c) and (d) for the conditions which must be satisfied), since both parties have a clear common goal. Although there is some dispute concerning fixtures and fittings, this is only a peripheral issue in relation to the main purpose.
Q. We have been approached by two partners with a view to one partner buying out the interest of the other partner in their joint business. They want us to act for both of them. Although there is a conflict between their respective interests, can we act for them under the 'common interest' exception?
A. No. Although both want the same end result, their interests in obtaining that end result are not the same. They are very much in a situation requiring negotiation between them and they cannot therefore be said to have a common interest. In this situation, the transaction serves completely different purposes for each client.
Q. We have been asked to act for a mother and a son. The son is taking two loans in connection with his business and it has been agreed that one loan will be secured on the son's flat and the other will be secured on the mother's house. Can we act for both mother and son on the basis that they have a common interest?
A. No. The two matters are related and there is a conflict because your ability to advise in the best interests of the mother is fettered by your duty to act in the best interests of the son. Although the mother is willing to enter into the transaction to assist her son, she does not have an interest in the business and cannot therefore be said to share a common purpose with the son. Therefore, your firm cannot act for both clients, unless it was possible to limit your retainer with the mother.
This column is compiled by the Law Society's professional ethics guidance team. Send questions for publication to Austin O'Malley, the Law Society, Ipsley Court, Berrington Close, Redditch B98 0TD; DX 19114 Redditch
No comments yet