Conflicts Policy (May23)

Purpose

This policy aims to inform all file handlers of their obligations in respect of handling conflicts and conducting conflict checks, how we expect conflict checks to be performed, managed and evidenced and the procedures to follow should a conflict of interest, or high risk of a conflict occurring, be identified.

Scope

This policy applies to anyone involved in the conduct and supervision of client files. Compliance is mandatory and breaching conflict of interest rules can have serious consequences such as disciplinary sanctions from the firm and/or the SRA, disqualification from representing clients and the firm being sued.

Responsibility

Timothy Halliday is the Compliance Office for Legal Practice (COLP) and is responsible for this policy and overseeing our compliance with the SRA Standards and Regulations regarding conflicts of interest.

Background

The general rule is that we must not act if:

• there is a conflict of interests, or a significant risk of a conflict; or
• we hold material confidential information for a past or present client and that confidentiality would be put at risk by us acting.

In this policy the word “conflicts” refers not only to conflicts of interest in the strict sense, but also to situations that put confidentiality at risk.

We must identify conflicts swiftly and make appropriate decisions about them. The SRA Code of Conduct for Firms (“SCCF”) requires us to have “effective governance structures, arrangements, systems and controls in place” to enable us to comply with the SRA’s regulatory arrangements, including those regarding conflicts of interest. Further, unidentified or mismanaged conflicts can do serious damage to client relationships and to our firm’s reputation. Compliance with our conflicts policy is important, and compulsory for everyone.

You should always have regard to the SRA Principles and act in such a way as best upholds them. It is a fundamental legal and ethical requirement that we always act with integrity, independence and in the best interest of each client. Section 6 of the SRA Codes of Conduct deal with conflicts of interest and with confidentiality and disclosure.

Training

The firm organises training for all relevant personnel to enable them to identify what conflicts are and when they might arise via our Access Training Platform.

If you are in any doubt about your obligations, consult Timothy Halliday (COLP).

Types of conflict

In deciding whether we will act, or continue to act, the following types of conflicts and related risk must be considered.

1. Client Conflicts

The SRA Glossary defines “conflict of interest” 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”.

We may sometimes be able to act despite a client conflict if the clients have a substantially common interest, or if the conflict arises only because they are competing for the same objective. However, various conditions must be satisfied (see Codes of Conduct, paragraph 6.2(i)-(iii)). See the note below on “substantially common interest”, which is the most common exception in practice.

2. Confidential Information

Paragraph 6.5 of the SRA Code of Conduct for Solicitors (“SCCS”) requires that “You do not act for a client in a matter where that client has an interest adverse to the interest of another current or former client of you or your business or employer, for whom you or your business or employer holds confidential information which is material to that matter” unless “effective measures have been taken which result in there being no real risk of disclosure of the confidential information” or “the current or former client whose information you or your business or employer holds has given informed consent, given or evidenced in writing, to you acting, including to any measures taken to protect their information.”

3. Conflicts Arising in Existing Matters

If a conflict arises during a matter, please notify Timothy Halliday (COLP) without delay. We will generally need to cease acting. We will normally only be able to continue to act for one client if we do not hold material confidential information for the other.

4. Own Interest Conflicts

This 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 conflict, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter”. Under no circumstances can we act where there is an own interest conflict or the high risk of an own interest conflict, including where we have the client’s informed consent.

5. Potential Conflicts

As noted above, we cannot generally act if there is a significant risk of a conflict.

6. Commercial Conflicts

Although it is not professionally improper for us to act in litigation against a current or past client, where we hold no relevant and material confidential information for that client, we will normally decline to do so. That is mainly in the interests of good client relations, but it also avoids any argument that we have confidential information about how the client approaches his or her legal affairs, as a result of our previous work. Likewise, a business client may be unhappy if we were also to advise a competitor even though we are not acting for them on a related matter. If you believe that a commercial conflict may arise, please speak to Timothy Halliday (COLP) for guidance.

7. Positional Conflicts

A new client may ask us to take a position that contradicts the position we have taken on behalf of another client. That may arise particularly in contentious matters dealing with developing areas of law, but it can arise in any area.

Although it is not professionally improper for us to advance inconsistent legal arguments in different cases, we will often wish to avoid doing so. Accordingly, the new instructions should not be accepted without the prior approval of Timothy Halliday (COLP).

Substantially common interest

Under paragraph 6.2(a) of the Codes of Conduct, we may act for two or more clients although there is a client conflict because they have a substantially common interest. For example, two or more individuals setting up a company or buying an asset together may ask us to draft an agreement setting out their mutual rights or members of the same family in relation to their affairs. It may, in such situations, be disproportionate, for example in terms of cost and speed of response, for them to engage separate solicitors.

“Substantially common interest” is defined in the SRA Glossary as a situation where “there is a clear common purpose between the clients and a strong consensus on how it is to be achieved.”  This definition envisages situations of clear common purpose (and an agreed route to it) and is not the same as situations where there is simply a common interest.

In order to rely on this exception, the following conditions must be satisfied:

• all the clients have given informed consent, given or evidenced in writing, to us acting;
• where appropriate, we put in place effective safeguards to protect our clients’ confidential information; and
• we are satisfied it is reasonable for us to act for all the clients.

SRA guidance suggests we should consider factors such as the following in deciding whether it is reasonable to act for all of the clients:

• The respective knowledge and bargaining power of the clients.
• The extent to which there will need to be negotiations between the clients.
• Any particular benefits to the clients (e.g., genuine niche specialist knowledge, speed, convenience, lower cost) from you acting for both.

If we consider that we are able to rely on this exception in order to act for the clients, we should document our analysis of the situation. If we are acting for two or more clients, we must always keep the position under review. For example, if one of the conditions set out above is no longer fulfilled then we must cease acting for one or both clients.

Property transactions – acting for buyer and seller

The SRA Codes of Conduct, unlike the rules that applied up to 2011, do not have detailed provisions about acting for buyer and seller (including lessee and lessor) in property transactions. We must therefore apply the same principles as we would in any other area of work. Acting for buyer and seller clearly carries a high risk of conflict, and we will rarely do so. However, if there is no conflict of interests, we may conclude that we can act in certain circumstances, such as where the clients are already agreed on all the relevant terms and all of the relevant information relating to the transaction can be shared openly between the clients.

If acting on both sides of a transaction

Note that SRA guidance states that you should not act for multiple clients if you foresee the need for substantive negotiations between the clients to take place, or you consider that it is likely that all information relevant to the matter cannot be shared between the clients.

In any case where you decide you can properly act for both buyer and seller, you should be able to clearly demonstrate that:

• an effective risk assessment has been carried out
• why you consider that there is no conflict or significant risk of conflict
• consideration should be given as to whether there is any indication of undue influence
• both clients have been advised in writing of the implications involved and
• informed consent has been obtained from both clients in writing.

Once the above have been demonstrated, a conflict report must be completed by the fee earner on each side of the transaction and must be authorised by an independent Director. This is then recorded on the firms’ central conflicts register.

The clients must be represented by separate fee earners, who must at all times be aware and keep confidential any information imparted to the fee earner concerned, which cannot be shared with any fee earner on behalf of or representing the other client. Effectively “Chinese walls” need to be in place.

Where there was not initially thought to be a conflict between a buyer and seller, however a conflict subsequently arises between them, this must be reported to Timothy Halliday (COLP) without delay.

Property transactions – acting for borrower and lender

We will not act for borrower and lender if the mortgage is not a standard mortgage.

We may act for borrower and lender on the grant of a mortgage of land where it is a standard mortgage [of a property to be used as the borrower’s residence], we are satisfied that it is reasonable and, in the clients’ best interests for us to act. “Standard mortgage” means one provided in the normal course of the lender’s business and the mortgage is on standard terms, and the certificate of title required by the lender is in the form approved by the Law Society and the Council of Mortgage Lenders.

When acting for both the borrower client and the lender, we must notify the lender client of information which may affect their decision to lend, such as discovering that the client has misled them on an issue. Before doing so, we must obtain the client’s consent to notify the lender of this information. If the client refuses to provide this consent, we will no longer be able to continue to act for both them and the lender and must notify the lender that we are declining to act due to a conflict of interest.

If the buyer is obtaining a mortgage and we are also acting for the lender, we must notify the lender that we are acting for both buyer and seller and obtain the lender’s approval.

Property Transactions – Buy-to-let mortgages

If the property will be used as a buy-to-let, this will not meet the criterion for a standard mortgage that the property is used as the borrower’s private home.

If you’re considering acting for both lender and borrower in a buy-to-let purchase you may want to:

• Assess each case individually
• Consider the risk of a conflict arising
• Document your reasoning if you choose to act for both borrower and lender
• Check the lender’s position on whether you should act for both parties
• Have separate files for the lender and the borrower

Restricting the retainer to avoid conflicts

In some circumstances, it will be possible to avoid a conflict of interests or the significant risk of a conflict of interests by restricting the scope of your retainer. For example:

• Two individuals that resolved their dispute through mediation instruct the same solicitor for the limited purpose of drafting a court order that reflects the agreement that came out of the mediation.
• Two parties competing to acquire a company instruct the same solicitor to undertake due diligence on this company and share with both parties all the information that the solicitor obtains. Each party instructs its own independent solicitor on the other aspects of the attempted acquisition.

In order to avoid a conflict of interests by restricting the retainer, the following conditions must be satisfied:

• From the outset, each client must fully understand which issues fall within the scope of the retainer and which do not, the meaning and importance of both sets of issues to the overall matter, and the risk that the arrangement entails for them.
• None of the clients should be left without advice in a way that will prejudice them, and the limited retainer should not be put in place in order to avoid giving advice to one or more parties on risks or difficult problems. Indeed, the SRA normally expects limited retainers to be entered into at the clients’ request rather than at the lawyer’s suggestion, particularly where the clients concerned are not sophisticated commercial entities.
• If clients want to jointly instruct you regarding an agreement they previously reached on their own (such as in the first example above), they should each be advised to seek independent legal advice on the terms of this agreement.
• The limited retainer must be in all parties’ best interests and there must be no real disadvantage to any of the clients of your restricting the retainer.
• There should be no undue influence or duress, no imbalance of bargaining power, or no vulnerability or position of weakness on the part of any client that would make it unfair for you to act for multiple clients through a limited retainer.

Conflict checks

Conflict of interest checks should always be carried out before accepting a new matter, even where the retainer will be for a longstanding client.

You should make sure that you have sufficient information to enable you to conduct appropriate checks. This will include details such as, for example: the name of your client(s) and other relevant parties, their addresses and relevant business interests.

Consideration should be given in each instance to the nature of the retainer, so that additional information can be obtained when necessary to enable appropriate checks to be conducted.

Practically, as part of the file opening process you must complete a new matter form, which includes the following information:

• details of the client
• a matter description including the role of the client
• details of all other parties involved, with their position and relationship.

You should also indicate on the form if the matter is highly confidential, as this might affect whether and how the matter is listed in the weekly conflict email that is circulated to the firm. Please complete the form carefully, because our checks depend upon it.

The file opener will then check the information provided against our database and will notify you if there appears to be a conflict.

Equally importantly, if during the matter additional parties become involved, or the substance of the matter changes, you must carry out fresh checks.

If a Conflict of Interest Is Identified

If any conflicts are identified during the file opening process, you must notify Timothy Halliday (COLP) without delay. Work should not be started on the client’s file until the conflict or potential conflict has been discussed with notify Timothy Halliday (COLP) and they have subsequently given permission to proceed with the matter.

If it is felt that instructions should be declined, the client should be informed of this as soon as possible and they should be offered such explanation and recommendation as is professionally appropriate. You should be especially careful about not breaching your duty of confidentiality to another client in offering such explanation.

Any conflicts arising during the course of the matter must be documented on the file and the COLP informed immediately. Work on the file should be suspended until guidance has been sought from the COLP on how to proceed.

General advice files

General advice files can lead to conflicts going undetected. They may only be used where we give ongoing legal advice to a client in circumstances where there are no adverse parties. If you are giving advice under such a file and there is an adverse party, you must check that there is no conflicts issue regarding that adverse party. General advice files must never be used for contentious or transactional work.

New members of staff

When lawyers join us from other law firms, we take reasonable care to identify matters upon which they have worked in the past which may create a conflicts problem (or more accurately, a confidential information problem). However, such checks may not detect all possible conflicts. New members of staff, and those working with them, should take particular care to identify such problems at an early stage.

Own interest conflicts

To comply with paragraph 6.1 of the SCCS, you must consider whether your ability as an individual, or that of anyone within the firm, to act in the best interests of the client is impaired by any financial interest, a personal relationship, the appointment of you or a member of the firm or your family to public office, commercial relationships, or your employment. If you are aware of any such issue, either decline to act or discuss the matter with Timothy Halliday (COLP).

You are expected to be alert to any situation which may put you or the firm in a difficult position, whether falling under Section 6 or otherwise. Here are just a few examples of circumstances that can give rise to an own interest conflict or a significant risk of one:

• A financial interest of your own, or that of someone close to you. For example, if you are acting for a commercial lender on a mortgage where a colleague is the borrower you should ensure the lender is aware of the situation.
• A personal or business relationship of yours. For example, where you are asked to advise on a claim against a relative of yours, a friend or someone with whom you are involved in a common financial enterprise.
• Your role as an employee or partner. For example, a client asks for advice in relation to a dispute involving the firm or a fellow employee or partner.
• Your own conduct or that of the firm. For example, the wrong advice has been given to the client or the wrong action taken on their behalf. (See the following section for more details.)
• A gift. Avoid any situation in which anyone could suppose that there was a risk of someone’s behaviour being influenced improperly by a gift being given or received. See the firm’s Gifts Policy, which includes further guidance on this subject.
• In a personal capacity, selling to or buying from, lending to or borrowing from a client, unless the client has obtained independent legal advice.
• We must properly account to clients for any financial benefit we receive as a result of our instructions.

Own interest conflicts and putting matters right

If you make a mistake causing loss or harm to your client, paragraph 7.11 of the SCCS requires you to inform the client of this and– if possible – to put matters right. In some cases, you may be prohibited from attempting to remedy your mistake or from advising your client on remedial options due to an own interest conflict or the significant risk of such a conflict. For example, there would likely be an own interest conflict in advising the client on options for rectifying your mistake where one such option would be for the client to bring a claim for professional negligence. In that case, you would need to tell the client to get independent legal advice about how the mistake should be remedied.

If you make a mistake that causes or will likely cause loss or harm to your client, do not attempt to rectify the mistake or advise the client on options for rectifying the mistake before first getting clearance from the COLP to do so. It is likely that they will need to consult with the firm’s PI insurers before any further action is taken as the mistake may compromise a “notifiable circumstance” under the firm’s policy.

Ensure that you maintain a detailed and accurate record of the decision-making process in order to clearly justify your reasoning and show how you have analysed the risks and issues at each stage. This should include the fact that independent legal advice has been obtained by the client, if this is the case.

For more information, see the SRA guidance on ‘Putting matters right when things go wrong, and own interest conflicts.’

Review of this policy

This policy will be reviewed, at least annually, by Timothy Halliday (COLP).

May23