GROUP TWO: THE MINDFUL MODERATES
Almost all of the firms in this second group (namely, medium-sized City and national firms) cited the Law Society rules as their primary yardstick when determining whether they should act in a conflict situation.
Although a few practices adopted slightly different criteria, their approach appeared to be in broad conformity with that laid down by the Law Society:The criteria which we take into account are diverse. Obviously, if there is an actual conflict we would not act. In a potential conflict situation we would tread very carefully, pointing out to all parties that there was a potential conflict and as soon as we felt uncomfortable, we would immediately say so. The object at all times is to have happy clients and most clients appreciate that conflicts do arise from time to time.[399]
We assess the likelihood of there being a real conflict. We also ask the clients whether they accept that we may have to pull out at a later date.[400]
Unlike their colleagues in the very large City firms, solicitors within mediumsized City and national practices appeared for the most part to operate in conformity with the professional rules. One conflicts partner said:
I do actually go to the rules contained within the Guide and look at them and consider what is proper. I don’t just say, ‘Blow that, we’ll just go on with it’.[401]
His response was typical of others within this group. Many of those interviewed were able to quote verbatim from the Guide and showed that they had a good working knowledge of the rules. This is not to say that all solicitors found the rules easy to follow. Indeed, some reported the rules to be ‘baffling’ or ‘not particularly clear’.[402] Firm 17 was typical in this respect:
Take Rule 15.01, for example. It states that a firm should not accept instructions to act for two or more clients where there is a conflict or a significant risk of a conflict between the interests of those clients.
How are we to know precisely what is meant by ‘significant risk’? Again, with Rule 15.02, the Guide states that we should not act against a former client if we have relevant confidential information. Now what we consider relevant and what a client considers relevant may be two different things, but no definition is given. Perhaps the clearest example is provided by 15.03. The Rule definitely says that a firm must not continue to act for two or more clients where a conflict arises between those clients. Then, in the notes, it says that the firm must usually cease to act for both clients but may continue to act for one if not in possession of any relevant confidential information. What on earth is meant by ‘usually’? It gets worse. Having been told that we must not continue to act for these two clients, note 4 states, and I quote, ‘It is doubtful whether, in circumstances other than where there has been an amalgamation of two or more firms, a ‘Chinese wall’ can be erected so that a firm can continue to represent the interests of two clients whose interests conflict.’ Talk about vague!Another firm complained that the rules were illustrated by reference to examples that were not relevant to a practice such as theirs:
Even where commentary is provided to accompany the Rules, the examples given all relate to high-street practice and are not relevant to bigger firms like ours.[403]
A closer analysis of firms within this group revealed some departures from the Guide. Nine of the eleven practices said that they had employed a Chinese wall on at least one occasion.[404] Moreover, of these nine, five admitted that Chinese walls were, as one put it, ‘not a rare thing within the firm’. Even those who did not admit to using a wall, conceding in the words of one that ‘the Law Society takes a dim view of such behaviour’, admitted that they would act ‘if clients are prepared to agree to us acting in a conflict situation.’[405]
Firm 17 explained how they justified acting outside Law Society rules:
We are not so much breaching the rules as working within the spirit of them.
We normally try to find a way of accommodating clients’ wishes. Of course, always at the back of our mind is the thought that if the conflict does become too acute, we will have to send the clients elsewhere. These situations are difficult and sometimes we do turn to the ethics and guidance department of the Law Society for advice. They usually err on the side of caution and tell us to give both clients up.Some practices were keen to point out that devices such as Chinese walls were only used for non-contentious commercial matters and then only where the parties were long-established clients of the firm and there was no danger of the matter becoming contentious.
It would appear, therefore, that there are two main differences between this group of firms and large City practices. First, these firms do not encounter as many conflict situations, and secondly, whilst the large City firms freely confess to breaching the rules, the medium-sized firms are more cautious about admitting this. There is also a third difference, which I discuss further below, namely that the medium-sized firms appear not to experience many conflicts arising from the possession of confidential information; the most common difficulty they face is that involving direct conflicts.
These medium-sized firms were also less inclined to criticise the Law Society, although that did not mean that there was no criticism of the existing regulatory regime:
The Law Society is seen in London as somewhere you go for lunch or to do a bit of research. In the provinces, it seems to have a bit more clout. If ever I’ve tried to complain that one of the big firms has a conflict, I’ve got very short shrift. It always comes down to ‘If they’ve got a conflict, it’s their business. If they failed to watch their own back and their client decides to complain, it’s up to them. What’s it got to do with you as a third party?’[406]
This was not the only firm to suggest that large City firms got away with flouting the rules, thereby securing an advantage in the market-place.
Another managing partner made the point as follows:I think we are prejudiced by adopting a more stringent approach to conflicts. What is aggravating is that by applying the rules more strictly than other firms we do lose clients. You apologise to the parties concerned and hope that they will come back to you next time but life isn’t like that. The new firm will be keen to provide a very good service. A level playing field would be appreciated if we are not going to be squeezed out of the market. This, however, requires the Law Society to enforce the professional rules.[407]
The question which needs to be asked at this point is why these firms do not have the same attitude towards conflicts as do their colleagues in very large City practices. A simple answer may be that they do not wish to attract attention to themselves. They may feel that they do not carry the same amount of weight in the legal community and are thus more wary of openly opposing the Law Society. In addition, as they do not have the same number of fee-earners it may be less feasible for them to act in a conflict situation. Although it could be argued that national firms are in many ways better equipped to adopt such measures, it could well attract adverse comment if one office were to act against another.
Another possible explanation concerns the precise nature and client-base of these firms. Over half the firms within this group specialise in a particular type of litigation. Accordingly, they may not be troubled by conflicts to such an extent as a firm dealing mainly with corporate and commercial clients. Support for this theory was found in the comments of some managing partners:
We do not really experience any problems in abiding by the rules. But then perhaps it’s the nature of our work. We do 75-80% litigation and then it is only defending insurance companies. It is, therefore, very easy to spot a conflict and to say ‘Sorry, we are already acting for the other side’.[408]
Secondly, clients who instruct firms of this size may not be as sophisticated as clients of the major City firms.
For example, they may not have in-house lawyers to protect their interests and may not understand how a firm can continue to act where there is a conflict. In other words, commercial considerations may not at present be driving medium-sized City and national firms to ‘manage’ conflicts to the same degree as large City firms.Although firms within this group may not face the same types of conflict as the large City firms, the risks involved may be greater. If their clients are less sophisticated, there is perhaps a greater danger of their complaining at a later date. Also, these clients are more likely to complain to the Law Society than to commence legal action and there is thus less opportunity to ward off potential embarrassment for the firm. Moreover, the risk of individual fee-earners acting in their own interests is arguably greater as they may see a particular piece of work as an opportunity to make their mark within the firm. So these firms may still be confronted with awkward dilemmas in practice. This was succinctly expressed by one senior partner as follows:
We want to compete with the larger firms. In order to do this, we need to attract more work and bigger clients but we can’t do this unless we can offer the same service. But this involves adopting the same approach towards conflicts. Unfortunately, we are not big enough not to draw attention to ourselves and we cannot grow without breaching the rules. So we are in a cleft-stick unless something is done to alter the rules.[409]