From the Ethics Committee
Avoiding conflicts when acting for more than one party
The Ethics Committee reminds lawyers that when they act jointly for more than one client, all information must be disclosed to all clients.
Earlier this year the Discipline Committee ordered a conduct review for a lawyer who represented a vendor and purchaser jointly in a real estate transaction. Although the lawyer properly advised the parties that no information received from either party could be treated as confidential, he failed to advise the purchaser that the vendor was not the registered owner of the property he was selling and only had the right to acquire the property pursuant to another contract of purchase and sale. Moreover, he did not advise the purchaser that the vendor was making a profit by “flipping” the property to the purchaser. The matter was ultimately referred to the Ethics Committee for a review of the rules governing joint transactions in real estate matters.
The Ethics Committee is of the view that the existing rules in Appendix 3 of the Professional Conduct Handbook are sufficient to ensure that both clients are protected in these circumstances. Moreover, had the lawyer made the disclosures required by Appendix 3, it would have been proper for him to act for both vendor and purchaser.
Appendix 3, Rule 2.1 requires a lawyer acting jointly for more than one client in a real property transaction to conform to the ordinary disclosure and other obligations in Chapter 6, Rules 4, 5 and 6 of the Professional Conduct Handbook when acting for joint clients. Rules 4, 5 and 6 state:
Acting for two or more clients
4. A lawyer may jointly represent two or more clients if, at the commencement of the retainer, the lawyer:
(a) explains to each client the principle of undivided loyalty,
(b) advises each client that no information received from one of them as a part of the joint representation can be treated as confidential as between them,
(c) receives from all clients the fully informed consent to one of the following courses of action to be followed in the event the lawyer receives from one client, in the lawyer’s separate representation of that client, information relevant to the joint representation:
(i) the information must not be disclosed to the other jointly represented clients, and the lawyer must withdraw from the joint representation;
(ii) the information must be disclosed to all other jointly represented clients, and the lawyer may continue to act for the clients jointly, and
(d) secures the informed consent of each client (with independent legal advice, if necessary) as to the course of action that will be followed if a conflict arises between them.
5. If a lawyer jointly represents two or more clients, and a conflict arises between any of them, the lawyer must cease representing all the clients, unless all of the clients:
(a) consented, under paragraph 4(d), to the lawyer continuing to represent one of them or a group of clients that have an identity of interests, or
(b) give informed consent to the lawyer assisting all of them to resolve the conflict.
6. A lawyer who ceased joint representation under Rule 5 or who continued to represent one or more clients under paragraph 5(a) may, with the informed consent of all the clients, resume representation of all of them after the conflict has been resolved.
In these circumstances the lawyer could have fulfilled these obligations and continued to act for both vendor and purchaser by informing the purchaser client of two relevant facts:
- the vendor did not have title to the property, and
- the purchase price the vendor was paying to acquire the property.