GROUP THREE: THE PIOUS PROVINCIALS

All the firms within this third group claimed that they followed Law Society rules when facing conflict situations. Indeed, some claimed to adopt an even stricter approach:

We would not act if there were the merest and slightest possibility of a conflict aris­ing.^[410]

These firms had little or no criticism of either the rules or the Law Society.

The guidelines are reasonably straightforward and the Law Society actually gives telephone advice. This can be very helpful because where there is uncertainty, they are quite willing to answer questions on the telephone and in writing. So, if you feel you are running into a conflict which you can’t resolve yourself or through discussion within the firm, then the Law Society themselves will aid. They will help you in inter­preting the existing rules.^[411]

Those who questioned whether the rules were appropriate for the profession as a whole did not direct their criticisms at the Law Society:

I think it is necessary that the Law Society lays down guidelines because whilst I think some firms would probably ask these questions of themselves, there is a danger that if there aren’t guidelines, the scent of a big deal can overcome the independence one ought to have. Therefore, I think it’s right there are guidelines and that the Law Society keeps them under review. They don’t suit everyone but they need to be there.^[412]

However, whilst there appeared to be a consensus as to the criteria to be applied in a conflict situation, there were differences in the firms’ precise interpretation of the rules. In this respect it is possible to sub-divide these provincial and smaller City firms into three further groups:

1. The Truly Pious

Five practices, as well as claiming to adhere strictly to the rules, had excellent knowledge and understanding of the various requirements contained in the Guide.

The Law Society does not allow Chinese walls and so we implement that precisely. Where we have decided that there is a potential conflict and both clients have requested that we continue to act, we adamantly refuse. Law Society rules specifically state that disclosure of a conflicting interest does not permit us to act even where the clients consent. They couldn’t make it much plainer than that, could they?⁶⁵

When asked whether a strict application of the rules prejudiced their firm in any way, four out of five thought it did not. In fact, quite the reverse:

I would be happier if the rules even prohibited acting for two established clients on a conveyancing transaction.⁶⁶

As we apply the rules to the letter, there is neither any question of us taking clients’ or individual fee-earners’ views into account. This creates happiness within the practice and clients are not put out because it is the Law Society rather than the firm which is making the decision.⁶⁷

One firm, however, held that it did suffer commercially because of the strictness with which it applied the rules governing conflicts:

There is little doubt that we are prejudiced by applying the rules to the letter. Not only are we affected but sometimes our clients lose out as well. We provide an excellent commercial service to clients and we are especially renowned for certain areas of prac­tice. As we are situated in the provinces, it is quite a small legal community. Therefore, when we say we cannot act, clients very often cannot obtain the same standard of legal service within the locality and are often put to the additional expense of instructing London lawyers. What affects us the most is the implementation of the rules which say that where a conflict arises between two or more clients, then we should stop acting for all of them.⁶⁸

2.

Four provincial firms claimed that they never applied anything other than the Law Society rules, but when questioned further revealed that their understand­ing of the Guide was poor. Some lacked basic knowledge of the regulations. One assistant solicitor said:

You just get a gut feeling for conflicts. It is something that you pick up from practice rather than learn from scratch. You would only look at the actual rules themselves if you had a complaint. In fact, don’t ask me to quote from them because I wouldn’t know where to start.⁶⁹

Another solicitor was surprised to learn that a new Guide had been produced. Pointing to the latest edition of the book, he said, ‘Oh, is there a new Guide?’ In fact, the ‘new’ Guide had been in circulation for some two years.⁷⁰

⁶⁵ Firm 25.

⁶⁶ Firm 13.

⁶⁷ Firm 12.

⁶⁸ Firm 26.

⁶⁹ Firm 28.

⁷⁰ Lack of knowledge of the Guide has been highlighted elsewhere. See, for example, G Chambers, n 54 above: ‘Only a third of those who had their own copy of the Guide knew that they

Where these firms had tried to apply the rules, they may well have done so inaccurately. An example was provided by one managing partner:

If all parties to a transaction require us to act, then we would be able to, because then there is no existing conflict. But we only do it where the Courts and Law Society say we can.⁷¹

Although these firms were not able to quote the relevant provisions from the rules, they appeared to work on the premise that they should not act in any con­flict situation. Thus they operated for the most part within the Law Society’s parameters, but there remained an element of doubt given their limited grasp of the regulations.

3. The Outwardly Pious

The remaining four firms had quite large commercial and private client practices. These firms at first claimed that they were complying fully with all relevant regulations, but eventually all admitted to the occasional lapse.

I have been involved in a battle royal with the Office for the Supervision of Solicitors concerning Rule 15.03 because we continued to act for a partnership after a dispute arose between the partners. The dissident partner requested the advice that we’d given to the others on the grounds that they were a client of the firm at the time. When we refused, that partner referred the matter to the Office for the Supervision of Solicitors. The Office took their side and said we were in conflict with Rule 15.03. On the face of it, we were in breach of 15.03 because it states that a firm should not continue to act for two clients if a conflict arises. But, then, if you read note 1 of the commentary to the rule, it states that the firm must usually cease to act for both clients unless it is not in possession of relevant confidential information and even then it would be prudent to confirm that the other party does not object to us acting. I asked them to tell me in what circumstances a solicitor could continue to act under the terms of that note and what was the meaning of the word ‘prudent’. They refused to answer and referred me to the Law Society’s Ethics Division. The Ethics Division said that it was perfectly per­missible to act against a dissident partner despite a conflict, provided that the firm had no relevant confidential information. They also stated that the use of the word ‘pru­dent’ was only advisory which means that you have a discretion whether or not to do

had a copy of the seventh edition. One in five were using the sixth edition and one in 10 the fifth or earlier. The greatest number, however, did not know which edition they possessed.’ Commercial Lawyer, 33 June 1999, ‘A senior solicitor...

⁷¹ Firm 8.

it. We proved that we were not in possession of relevant confidential information but the Office for the Supervision of Solicitors indicated that they were still going to rebuke us.

The second complaint resulted in a disgruntled client threatening to sue the firm for negligence:

We were involved in a high-value sale of assets and share capital. We acted for three individuals who were shareholders in the company. Just before the transaction was completed, one of the three took himself off to another firm of solicitors and tried to stop the transaction being completed. We knew that we had a conflict but it was too late to pull out as our clients had already signed some contracts and were bound to complete the sale. We, therefore, completed the transaction for them. We are now in the process of dealing with the complaints and there is a threat of a negligence action against the firm.

The third instance did not lead to an action against the firm but, nonetheless, demonstrated how embarrassing it can be when a conflict situation goes wrong:

We acted for a company who owned a ransom strip leading to an estate of executive houses.^[413] We were instructed to sue all of the householders on this estate for trespass for using the ransom strip without authority. The case went to the Court of Appeal and we won but still the other side refused to purchase the strip. We were once again instructed to sue the householders. It turned out that we had acted for two of the householders in the purchase of their properties... We were caused a huge amount of embarrassment. It even resulted in an early day motion in the House of Commons in which we were condemned for acting in a conflict of interest.

Apart from the embarrassment to the firm and the rebuke imposed by the Office for the Supervision of Solicitors, these examples demonstrate how expensive and time-consuming conflicts can be. But why have these firms been caught out whilst larger firms appear to have escaped censure? One explanation is that provincial firms are not dealing with the same type of clients as City firms. Large corporate clients would be unlikely to make a complaint to a disciplinary body, preferring instead either to take their business elsewhere or to initiate proceed- ings.^[414]

It is little wonder, therefore, that these smaller firms were reluctant to admit to breaching the rules. Indeed, such experiences had prompted them to keep a closer eye on the work of other members of the firm to ensure that the firm was not embarrassed further. One senior partner said:

I keep a careful watch over everyone. A few months ago, two partners were arguing because one was acting for a partnership and the other had been instructed by one of his prize clients to sue one of the partners. I stepped in and said that we will withdraw from both cases.^[415]

Fear of complaints was not the only concern of these practices. As they were based in the provinces and client choice was limited, two further problems arose. First, a client might bring pressure to bear on them to act in a conflict situation, arguing that there was no other firm in that locality capable of handling the work. This is a particular version of a problem to which I have already referred, namely that a broader interpretation of the client’s interests might suggest that it is desirable, from both the solicitor’s and client’s perspec­tive, to continue to act even though facing what is notionally a conflict. Secondly, assistant solicitors cause more problems than their City counterparts if they choose to move between firms. Because these provincial firms tend to be smaller in size, assistants are often involved in more cases and get to know more clients. If they decide to take up a different post in the same town, there is a con­siderable likelihood thereafter of a conflict arising and a client complaining:

Potential conflicts are something that we have been forced to start thinking about when we are recruiting new staff. It’s not just partners and assistants you have to con­sider. We have to look to see how heavily support staff have been involved in cases before they start working on something for us.^[416]

Although these firms were fully aware of the penalties involved should a conflict turn against them, it did not mean that they were unprepared to act in such situations. A partner in firm 20, having experienced three major complaints, explained why:

I think I would be hypocritical if I said there had never been an occasion when we hadn’t taken into account the size and profitability of the job involved and decided to take a risk and act.

Perhaps all that can be said in favour of such an approach is that those firms which have encountered difficulties with disgruntled clients, or with the Office for the Supervision of Solicitors, are likely to take special care to ensure that, where they act in a potential conflict again, no-one has cause to complain:

Because we have been disciplined about the matter, we are doubly sure that all parties are happy with us acting and that all necessary procedures are in place to protect clients, solicitors and the firm.^[417]