Conflicts of Interest

Question 1

What are the two key types of conflict of interest?

Answer 1

1) Own-interest conflict (where client and solicitor’s interests conflict)

2) A conflict of interests between two or more clients

Question 2

Can a solicitor act if there is a own-interest conflict?

Answer 2

No - no exceptions either

Example - The solicitor couldn’t act for a client suing a company where the solicitor was a major shareholder

Question 3

Can a solicitor act if there is a conflict of interests between two or more clients?

Answer 3

Generally, cannot act if there is a conflict or a significant risk of one arising between two or more current clients

Two exceptions:

1) The clients have a substantially common interest in relation to the matter or the aspect of it

• There must be a clear common purpose and a strong consensus as to how it is to be achieved (group of people setting up a company)

2) The clients are **competing for the same objective **

• Applies if there is an objective, which if it is attained by one party, it is unattainable by the other client
• Objective defined as an asset, contract or business opportunity which two or more clients are seeking to acquire
• Would not apply to sellers and buyers as one is seeking to get rid of an asset and one is seeking to acquire it

Question 4

If an exceptions does apply, what other requirements must be met?

Answer 4

(a) all the clients have given informed consent, given or evidenced in writing, to the solicitor acting;

• Client must appreciate the issues and risks involved

(b) where appropriate, effective safeguards are put in place to protect the clients’ confidential information; and

(c) the solicitor is satisfied it is reasonable to act for all the clients

• This is an ongoing consideration and particularly relevant if one client is vulnerable or there isn’t equal bargaining power

Importantly, the solicitor could not personally act for both, but the firm could

Question 5

What is the position around property transactions and conflicts of interests?

Answer 5

SRA view is that buyer and seller do not have substantially common interest and they won’t be competing for the same objective - so cannot act for both

Common practice for solicitors to act for joint buyers of a property, but each case must be assessed on its merits

In residential transactions, where the lender is a bank and the borrower is offered a mortgage on standard terms, no negotiation is typically necessary, so often the solicitor can act for both or there is a ‘substantially common interest’ of a good and marketable title to the property being acquired