Managing Client Relationships Flashcards
What are the 3 Cs of client care?
Customer due diligence (CDD);
* Conflict checks; and
* Client care letters.
Breaching the law or codes
You cannot accept the client’s instructions if you would be breaching the law.
Principle 1: acting in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.
Principle 2: act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.
If your client asked you to commit a fraud, for example lie to a lender about how much the client’s property is worth in order to obtain a mortgage, you would not be able to act for the client.
If accepting your client’s instructions would lead to a conflict of interest with another client, you would not be able to act as you would be breaching CCS.
Provide a competent service
CCS 3.2: ‘You ensure that the service you provide to clients is competent and delivered in a timely manner.’
Examples where you may be at risk of breaching CCS 3.2 include:
Are you a corporate lawyer being asked to advise on a property matter? If so, you are unlikely to provide a competent service to your client, so you should refer your client to another lawyer.
Are you too busy to be able to provide a service in a timely manner to the client? If so, you should refer the client to another lawyer. This could be someone else in your team.
Are you authorised to act on your client’s behalf?
CCS 3.1: ‘You only act for clients on instructions from the client or from someone properly authorised to provide instructions on their behalf. If you have reason to suspect that the instructions do not represent your client’s wishes, you do not act unless you have satisfied yourself that they do. However in circumstances where you have legal authority to act notwithstanding that it is not possible to obtain or ascertain the instructions of your client, then you are subject to the overriding obligation to protect your client’s best interests.’
For example, if you are acting for a husband and wife on a matter you need to be sure that you have authority to act for both of them. So if your instructions come from one spouse, ensure that you have confirmation in writing from the other spouse that they are happy for you to act on their behalf.
If you have reason to believe that the instructions do not represent the wishes of your client, you cannot act.
Other obligations
Remember also that you must always comply with your ongoing obligations under the SRA’s requirements, which may affect the way you provide advice to your client. These include:
Principle 6: acting in a way that encourages equality, diversity and inclusion.
CCS 1.1: You do not unfairly discriminate by allowing your personal views to affect your professional relationships and the way in which you provide your services.
Own interest conflict – CCS/CCF 6.1
Firstly, looking at an own interest conflict, this is defined in the Glossary and it is:
‘any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict with your own interests in relation to that or a related matter.’
So, it’s really important that the conflict relates to the client’s instruction to you – not some other issue. An example of where the conflict relates to the matter you are instructed on is if you are buying a property from a client and you are instructed on the sale.
If there is a significant risk of a conflict arising, rather than an actual one having arisen, that is enough to be caught within CCS/CCF 6.1.
Paragraph 6.1 of the Codes states that you cannot act if there is an own interest conflict - there are no exceptions to this. However, these conflicts are very rare.
Own interest conflict - examples
Some examples of circumstances when an own interest conflict would arise are in the SRA’s guidance on conflicts of interest and include:
· A financial interest of yours or someone close to you: for example a client asks you to carry out due diligence on a company you or your spouse/partner own shares in.
· A personal or business relationship of yours: for example, you are asked to advise on a claim against a relative of yours, a friend, or someone you are involved with in a financial or business enterprise.
· Your role as an employee: for example a client asks for advice in relation to a dispute involving your employer or a fellow employee.
· Your own conduct as a firm or individual: for example, where the wrong advice has been given to a client or a wrong action taken on their behalf.
Conflict of interest – CCS/CCF 6.2
The second category of conflicts, which is less rare than an own interest conflict, is a conflict of interest. Conflict of interest is defined in the SRA glossary as: ‘a situation where your separate duties to act in the best interests of two or more clients in relation to the same or related matters__conflict’.
The most obvious example is where there is a dispute and you are instructed to act for the parties on both sides of the dispute, or you are instructed to act for both the buyer and the seller on a transaction.
This type of conflict is a lot more common than an own interest conflict.
Conflict of interest – CCS/CCF 6.2
So, let’s look at the key elements of a conflict of interest, remembering that under SRA Principle 7, we have a duty to act in the best interests of each client.
The key elements of a conflict of interest are:
· the conflict has to arise out of the ‘same or related matters’ – this is not defined but look for the same asset or liability or a reasonable degree of relationship between the assets or liabilities for the conflict to arise.
· the duties owed to your clients’ conflict – would advising one client to do what is best for it prejudice the course of action you would recommend to another? Or even completely conflict with it?
As with own interest conflicts, if there is a significant risk of a conflict arising, rather than an actual one having arisen, that is enough to be caught within CCS/CCF 6.2.
If you fall within the scope of CCS/CCF 6.2, you cannot act unless you fall within one of two exceptions.
SCI exception
There are only 2 exceptions to the rule in CCS/CCF 6.2.
The first one is set out in the Codes at paragraph 6.2(a) and is where:
· the clients have a substantially common interest, defined in the SRA Glossary as:
‘a situation where there is a clear common purpose between the clients and a strong consensus on how this is to be achieved.’
AND
· all of the criteria in 6.2(i) –(iii) are met.
‘Clear common purpose’: It is arguable that for all commercial deals the clients have a clear common purpose: to get the deal done. Some students think that means the clients have a SCI but this is not the case, otherwise you would have the same firm acting for both the buyer and seller in most deals.
You also need a ‘strong consensus’ as to how to achieve that common purpose. To satisfy this element the parties must have already agreed all the key terms of the deal and how it is going to proceed. This means there will be very little, if any, negotiation.
As soon as negotiation is involved, there is a risk that each of the parties’ best interests will differ and, in acting for both, you will not be able to act in each of their best interests. This will often be the reason why the SCI exception does not apply.
CSO exception
The second exception to the rule in CCS/CCF 6.2 is set out at paragraph 6.2(b) and is where:
· the clients are competing for the same objective, defined in the SRA Glossary as: ‘two or more clients are competing for an objective which, if attained by one client, will make that objective unattainable to the other client or clients.
AND
· all of the criteria in 6.2(i) –(iii) are met.
CSO exception
So what is an objective?
Objective is defined in the SRA Glossary as:
- an asset; or
- a contract; or
- a business opportunity
which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process); or by means of an auction or tender process or bid or offer which is not public.
The CSO exception might be used for example, where two clients are competing to buy a business at an auction or through a tender process. One of the clients winning the action or tender process means that the objective (ie the business) will be unattainable to the other client.
This exception is very rare and is usually only applicable to sophisticated clients.
The conditions for SCI and CSO
So, what are the criteria or conditions which also need to apply before the SCI or CSO exceptions to a conflict of interests can apply?
They are set out in paragraph 6.2(i)-(iii) of the Codes and are as follows:
(i) all the clients have given informed consent, given or evidenced in writing, to you acting;
(ii) where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and
(iii) you are satisfied it is reasonable for you to act for all the clients.
Steps to take to identify conflicts
We have seen that you cannot act if there is a conflict, either an own interest conflict or a conflict of interests, unless one of the exceptions to a conflict of interests applies (which is rare). So, as a practical point, one of the things you will have to do is take steps to identify whether there is a conflict.
CCF 2.1 says that firms must have in place effective systems to identify conflicts. You will see that a conflict check is something you carry out when you take on a new client.
If you are instructed by a new client you need to find out if you or your firm has acted for or against any of the parties to the transaction or owners of the parties in the past
You here means you personally and you the firm.
Note that there is no standard conflict check, each firm has their own.
Own Interest Conflict
An own interest conflict is defined in the SRA Glossary as:
‘Any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.’
Own Interest Conflict
The SRA Guidance on Conflicts of Interest contains examples of circumstances that may give rise to an own interest conflict. These include:
A financial interest of yours or someone close to you: for example a client asks you to carry out due diligence on a company you or your spouse/partner own shares in.
A personal or business relationship of yours: for example, you are asked to advise on a claim against a relative of yours, a friend, or someone you are involved with in a financial or business enterprise.
Your role as an employee: for example a client asks for advice in relation to a dispute involving your employer or a fellow employee.
Your own conduct as a firm or individual: for example where the wrong advice has been given to a client or a wrong action taken on their behalf.
Own Interest Conflict
CCS 6.1: ‘You do not act if there is an own interest conflict or a significant risk of an own interest conflict.’
There are no exceptions to this rule.
If you have an own interest conflict, or there is a significant risk that an own interest conflict might arise, you must NOT act.
Conflict of Interest
A conflict of interest is defined in the SRA Glossary as:
‘A situation where your separate duties to act in the best interests of two or more clients in the same or related matter conflict.’
The most obvious example is where there is a dispute between two clients or prospective clients. CCS 6.2 will prevent you acting for both sides in a litigation dispute.
CCS 6.2 goes on to set out two exceptions when it is possible to act if you meet certain conditions.
SRA Guidance on the Conditions
Condition (iii):
(iii) You are satisfied it is reasonable for you to act for all the clients.
The SRA Guidance gives various factors to consider including:
- The respective knowledge and bargaining power of the clients: if one client is more vulnerable than the other, then it might not be reasonable for you to act for both of them. You should consider recommending that the vulnerable client obtains their own independent advice. Equally if a company is entering an agreement with an individual, it is likely that the company will be in a stronger bargaining position than the individual. If so, the individual should obtain their own advice.
- The extent to which there will need to be negotiations between the clients: if it is likely that there will be negotiations between the clients, you should not act for both of them, as it is likely that there will be a conflict of interest.
- Any particular benefits to the clients: there might be benefits in you acting for both clients. For example if the matter requires specialist knowledge, (for example for an aviation matter, there may be a limited number of solicitors who are competent to advise.) There might also be benefits of speed, convenience or lower cost from one lawyer acting for both clients.
Police station advice
All suspects are entitled to free legal advice at the police station regardless of their means.
This is accessed through the Defence Solicitor Call Centre (‘DSCC’) but is limited to telephone only advice for non-imprisonable offences.
The practitioner who attends must be an accredited representative. Throughout the Police and Criminal Evidence Act 1984 (PACE), any reference to a solicitor means ‘a solicitor who holds a practising certificate or an accredited or probationary representative included on the register maintained by the Legal Aid Agency (LAA) (Code of Practice C 6.12).
Many accredited representatives will be trainees, paralegals or ex-police officers. Any reference to solicitors at the police station should be taken to include accredited representatives. Solicitors must also complete the accreditation process in order to attend at the police station under a LAA contract.
Public funding for representation at court
- Once your client has been charged you need to arrange funding for their court appearance.
- If they are not paying privately then the cost of their defence may be covered by public funding through the Legal Aid Agency.
- On order to obtain a ‘representation order’ a defendant must pass two tests:
- the means test; and
- the merits test (the ‘interests of justice’ test).
- Both tests must be passed in order to secure public funding.
