Lawyers and Conveyancers Disciplinary Tribunal on Client Conflict

In a recent significant ruling by the Lawyers and Conveyancers Disciplinary Tribunal, the legal profession was given a stern reminder of the paramount importance of managing client conflicts.

Ms. Bailey, an experienced lawyer, found herself navigating treacherous waters when she represented both a franchisor (her longstanding client) and a franchisee (a newer client) in matters that initially seemed straightforward but quickly evolved into a “nightmare web of client conflict”.  After working for both clients on non-contentious matters, a dispute arose between them.  Rather than identifying the conflict and stepping aside, Ms Bailey sought to continue to act for her longstanding client. 

The Tribunal found that Ms Bailey was gravely conflicted over the course of her various retainers.  It expressed concern that the conflict rules are too easily misunderstood by practitioners, perhaps because there is no blanket prohibition.  Rather, a lawyer is permitted to act on the same matter for multiple parties where there is only a negligible risk of conflict, provided they have informed consent.  While Ms Bailey had sought informed consent by forwarding a waiver to the franchisee client, the Tribunal found that this was insufficient in the circumstances. 

The Tribunal decided to impose the maximum fine rather than suspension, underscoring the severity of the breach and the need to send a strong message to the profession, while also acknowledging Ms Bailey’s previously unblemished record and the lack of personal gain through her breaches. 

Comment by Morgan Fee

It is clear to see why the Tribunal considered this case a “nightmare web of client conflict”.  The decision serves as a grim reminder to those in the profession to remain vigilant about their obligations. 

Interestingly, the Tribunal does not discuss the distinction between the duty of absolute loyalty – owed to current but not former clients – and the duty of confidentiality, which persists after the termination of a retainer.  The decision is perhaps a missed opportunity to highlight the nuances between the two, which is borne out in the leading decision of the Court of Appeal in Russell McVeagh McKenzie Bartleet & Co v Tower Corporation [1998] 3 NZLR 641. 

Regardless, the decision highlights that practitioners need to be at all times alive to any developing risk of conflict over the course of a client relationship.  For practitioners used to acting for multiple clients in a transaction, a common practice, making these judgements can be highly fraught. 

It is also important to heed the Tribunal’s observations about the extent of disclosures required to ensure that consent to act is properly informed when given.  The Tribunal highlighted that it was insufficient to identify the risk of conflict.  Ms Bailey also needed to advise her client why she considered there was no more than a negligible risk, what would happen if a conflict did in fact arise, and to ensure that the client understood those matters.  Practitioners will similarly need to consider whether they have adequately addressed the potential for conflict with their client where they are seeking informed consent to act. 

Morgan fee is a Senior Associate at fee langstone