Ethics incorrect Q's Flashcards
A solicitor at a firm regularly advised a company on a number of matters. Most recently in March, he advised the company on the company’s articles of association and a new contract opportunity. Later that year in September, the solicitor receives a telephone call from one of the directors who is also a shareholder of the company. She says that relations between the directors of the company are very strained and she no longer wishes to be involved in the business. As a result, the director is taking steps to end her relationship with the company and she is negotiating with the other directors about a possible severance package. The director would like the firm to advise her on her departure from the company. The company is no longer a client of the firm.
Which of the following statements best describes what the firm should do?
A- Not act for the director unless informed consent is given or effective measures have been put in place so there is no real risk of disclosure.
B - Not act for the director because the firm cannot act in the client’s best interests without breaching its duty of confidentiality to the company.
C - Agree to act for the director because the company is no longer a client of the firm.
D - Agree to act for the director if the director gives informed consent as there is no conflict of interest.
E - Agree to act for the client as the duty of disclosure overrides the duty of confidentiality.
Option A is the correct answer because a solicitor owes a duty of confidentiality to their former clients (Para 6.3 of the SRA Code of Conduct). The solicitor may have information which is material to the director’s matter and would have to be disclosed (Para 6.4 of the SRA Code of Conduct) unless the exceptions under Para 6.4 apply, which would be unlikely. It may be possible for the firm to act for the new client director, but as the solicitor holds information, which might reasonably be expected to be material to the new client’s matter and the director’s interests are adverse to the interests of the former client company (because they are opposing in the negotiations), Para 6.5 of the Code applies. Under Para 6.5, you must not act unless effective measures have been put in place which result in there being no real risk of disclosure, or the former client gives informed consent to the firm acting.
Option B is wrong because while it would not be acting in the client’s best interests unless there was a breach of confidentiality by disclosing information which may be material to the director’s matter, the firm could still act if it got informed consent or put in place safeguards in accordance with Para 6.5 of the SRA Code of Conduct.
Option C is wrong because there is still a duty of confidentiality to former clients (Para 6.3 of the SRA Code of Conduct).
Option D is wrong because while there is no conflict which arises as a conflict only arises between two or more current clients, there is still a duty of confidentiality to former clients. The firm can only act if appropriate steps have been taken in accordance with Para 6.5 of the SRA Code of Conduct. Informed consent would be needed from the former client, the company.
Option E is wrong because the duty of disclosure does not take precedence.
A solicitor at a small firm specialising in commercial contract and projects work has agreed to act personally for two security company clients who are each proposing to submit a tender to be exclusive security services provider for the same sporting event. Each client has given its informed, written consent to the solicitor acting for both security companies at the same time.
Can the solicitor act personally for both clients in these circumstances?
A - Yes, because the clients are both competing for the same objective.
B- Yes, because both clients have given their informed, written consent to the solicitor acting.
C - Yes, because the clients have a substantially common interest and it would be reasonable to act for both clients at the same time.
D - No, because there is a conflict of interest and both clients are likely to need to keep some information confidential from each other.
E - No, because it is likely that an own interest conflict will arise or a significant risk of such a conflict.
Option D is the correct answer because the solicitor has agreed to act personally for both clients. It is clear that a conflict of interest will exist between the clients, and although there is a possible exception to the prohibition on acting in such a circumstance if clients are “competing for the same objective” (paragraph 6.2(b) of the SRA Code of Conduct for Solicitors, RELs and RFLs), the solicitor will not be able to put the required safeguards in place to protect the clients’ confidential information. By acting personally for both clients the solicitor will know both clients’ confidential information, and it is not realistic to suggest that he could separate these sets of information in his mind. In the scenario described it is almost certain that the clients would wish or need to keep some information confidential from each other.
For the reasons described above it is very unlikely in practice that an individual solicitor will be able to act under the “competing for the same objective” exception. By contrast, it may well be possible for separate lawyers or teams within a firm to act for different clients who are “competing for the same objective” if there are effective barriers in place to prevent cross-transmission of information.
Option A is wrong because the solicitor has agreed to act for both clients personally. As explained in relation to Option D, above, this makes it very unlikely that the solicitor will be able to act on the basis of the clients “competing for the same objective” (Paragraph 6.2(b) of the SRA Code of Conduct for Solicitors, RELs and RFLs).
Option B is wrong because, even if the clients give their informed, written consent to the solicitor acting in these circumstances, there is still likely to be a need to protect each client’s confidential information but a lack of effective safeguards to do so (as described above).
Option C is wrong because the clients do not have a clear, common purpose and a strong consensus on how it is to be achieved (SRA Glossary).
Option E is wrong because there is nothing on the facts to suggest that the solicitor’s duty to act in the best interests of either client in relation to the matter conflicts or is at significant risk of conflicting with the solicitor’s own interests in relation to the matter. The actual problem is that the clients’ interests conflict with each other.
A management consultant, an accountant and a financial adviser are the three directors of a limited company which they believe has become insolvent.
The limited company has been a client of a particular solicitor for many years, and the solicitor has met professionally with all three directors, usually all together, on numerous previous occasions.
The accountant meets alone with the solicitor and asks for general advice about what obligations the directors of a company owe to the company’s creditors if the company becomes insolvent.
Would advising the accountant on this matter in an individual meeting create a conflict of interest for the solicitor?
A - Yes, because the solicitor would be advising the accountant on directors’ duties during an insolvency, which is not permitted.
B - Yes, because usually the solicitor has met the accountant together with the other two directors of the limited company.
C - No, because the solicitor has only been asked to give general advice on the law rather than on the accountant’s individual legal position.
D - No, because the limited company and the accountant have been clients of the solicitor for many years.
E - No, because the solicitor would be advising the accountant on a matter involving the limited company, so a conflict of interest could not arise.
Option C is the correct answer. On the facts, whilst the accountant alone has sought advice, the advice is general in nature and not specific to the accountant’s personal legal position: as described on the facts, the same advice would apply to any or all of the directors. It is therefore unlikely that a conflict of interest would arise on the facts as presented.
Option A is wrong. There is nothing in the SRA Code of Conduct for Solicitors, RELs and RFLs that states this.
Option B is wrong. Although the solicitor has usually met all three together this means that, equally, sometimes they have not all been together. Even if this were the first time that the solicitor had met the accountant alone, the facts do not immediately suggest the accountant to be acting improperly.
Option D is wrong. The length of relationship has no direct bearing on the existence or not of a conflict. Note also that the accountant has never, on the facts, been a client of the solicitor. The client is the limited company.
Option E is wrong. On the facts the solicitor’s client is the company, not the director. If it were the case, say, that the directors had been in breach of their duties to the company during the insolvency period, the solicitor would not be able to advise individual directors on their exposure. Nothing on the facts suggests that such an issue has actually arisen, but the general positon set out in Option E is nonetheless wrong.
A solicitor is acting for the chief executive officer (CEO) of a company. The CEO has been accused of sexual harassment by a former employee of the company. The CEO has reached a settlement with the former employee which includes the parties entering into a written Non-Disclosure Agreement (NDA) under which the employee is prevented from disclosing information about the sexual harassment incident to any third party. The former employee is represented by her own solicitor.
Which of the following statements is most accurate with respect to the obligations of the solicitor representing the CEO under the SRA Standards and Regulations?
A - The solicitor must decline to act for the CEO in these circumstances.
B - The solicitor must ensure that the NDA permits the former employee to be able to disclose information about the sexual harassment incident where such disclosure is in the public interest.
C - The solicitor must ensure that the NDA does not prevent the former employee from reporting a serious breach of regulatory requirements to any relevant regulatory or prosecutory body.
D - The solicitor has an obligation to act in the best interests of the client and must ensure the NDA does not allow disclosure by the former employee except as required by law.
E - The solicitor must not take advantage of the former employee’s lack of legal knowledge when drafting the NDA.
Option C complies with paragraph 7.5 of the SRA Code of Conduct for Solicitors, RELs and RFLs which provides that a solicitor must not attempt to prevent anyone from providing information to the SRA or any other body exercising regulatory, supervisory, investigatory or prosecutory functions in the public interest.
Option A is not the best answer. It would maintain compliance with paragraph 7.5 of the SRA Code of Conduct for Solicitors, RELs and RFLs (as described in relation to Option C) but would deprive the client of legal representation and is therefore not in the client’s best interests (SRA Principle 7).
Option B is not the best answer. It goes further than is necessary with respect to paragraph 7.5 of the SRA Code of Conduct for Solicitors, RELs and RFLs (as described in relation to Option C) in allowing disclosure by the former employee and would therefore go against SRA Principle 7 to act in the best interests of the client.
Option D does not take account of SRA Principle 1 and imposes tight restrictions on disclosure than are contrary to paragraph 7.5 of the SRA Code of Conduct for Solicitors, RELS and RFLs (as described in relation to Option C).
Option E is not accurate as the former employee is represented by a solicitor. It is therefore not the best answer.
