Obtaining instructions and the conflict check
As has been pointed out, acquiring work from clients is no longer as straightforward as perhaps it once was. One newly-qualified solicitor stated:
Being a solicitor these days involves obtaining work rather than actually doing it.
You don’t realise that a lot of our job is marketing and bringing in new work. Even trainees are expected to be doing marketing and attending beauty parades. You are marketers and conflict situations could arise when you are simply going out getting the work.[327]‘Beauty parades’ or ‘contests’ are part and parcel of the work of large commercial firms.[328] Before solicitors are retained on a particular matter, they meet the prospective client and discuss both the case and the firm’s capacity to handle the affair. This procedure may then be repeated with a number of different firms until the client is satisfied that he has chosen the appropriate firm for the task.
Tendering is another method of obtaining work. A representative of firm 24 described the process as follows:
We are asked to submit a tender for work for a particular body along with a number of other firms. As well as considering price, tendering can involve giving written answers to a number of scenarios presented by the potential client.
scenarios given in the tender can, of course, be hypothetical, but there is nothing to prevent clients from using real-life facts.
The potential dangers involved in such procedures were exemplified in the Canadian case of Ainsworth Electric Co Ltd v Alcatel Canada Wire Inc.[329] A dispute arose between the plaintiff, Ainsworth, and the defendant, Alcatel, in relation to the installation of a radio communications system for the Toronto underground. Ainsworth refused to proceed further when Alcatel demanded it undertake work which Ainsworth claimed was not part of the contract.
Alcatel issued a notice of default in September 1995, and then a notice of termination under the contract in October 1995. In October 1995 Ainsworth instructed Howard Wise, a partner at the Toronto firm of Fraser & Beatty, to act on its behalf. Mr Wise had handled Ainsworth’s construction litigation for many years. He began a lien action against Alcatel in December 1995 and subsequently, in January 1996, an action against Alcatel’s insurers.Meanwhile, Alcatel interviewed three firms as part of a ‘beauty contest’ in order to find lawyers for the anticipated litigation. In October 1995 the project manager of Alcatel and two members of its in-house legal team met two lawyers from the Toronto firm of Goodman Phillips Vineberg. The meeting lasted an hour and a half, in which time the Alcatel representatives claimed to have disclosed confidential information regarding the dispute, in particular their proposed defence. A second meeting was held five days later which also lasted 90 minutes and, again, Alcatel’s representatives alleged confidential matters were discussed. Shortly after this meeting Goodman Phillips Vineberg were informed that they would not be instructed.
Two years later, Howard Wise left Fraser & Beatty to join Goodman Phillips Vineberg, taking the Ainsworth account with him. Potential conflicts were checked but, as no file had been opened, Goodmans had no record of the Alcatel interview and, therefore, no conflict became apparent to them at that stage. Alcatel’s solicitors wrote to Goodmans reminding them of the meetings and alleging that confidential information had been disclosed to the firm. Mr Wise stated that he had not discussed the matter with the members of the firm who had taken part in the beauty parade and, at the same time, he arranged for a Chinese wall to be erected. Alcatel shortly afterwards changed solicitors and applied to the court to have Mr Wise and Goodmans removed from the case.
The judge held that a solicitor-client relationship existed between Goodmans and Alcatel, even though Alcatel had merely been ‘shopping’ for a firm, and that, therefore, Goodmans owed Alcatel a duty of confidentiality under the Canadian Law Society’s rules of professional conduct.
Moreover, it was held that the firm, through its representatives at the meetings, had received confidential information from Alcatel which was relevant to the dispute. The information was, however, said to be of a general nature, and no documents had ever been disclosed. Since documents are a necessary part of cases of this type, Goodmans would not have learned much about the critical facts and it was held that no confidential information prejudicial to Alcatel had been imparted. This, combined with the fact that Mr Wise had erected a Chinese wall as soon as possible, and that this appeared to be secure, led the judge to conclude that Mr Wise could continue to act for Ainsworth.Whilst the outcome in this instance was fortunate for the firm of Goodman Phillips Vineberg, the case illustrates that merely trying to obtain work can create a conflict.[330] As one solicitor observed to me:
Spotting potential problems is not something that you are given training on or taught about in law school.[331]
Another problem associated with obtaining new instructions is the danger of what has become known as ‘taint shopping’. This describes ‘the behaviour in which someone purporting to be seeking legal assistance interviews a lawyer or law firm for the purpose of disqualifying them from future adverse representation.’[332] Firm 19 had experienced difficulties of this nature. As one partner recalled:
We have one highly specialist department and you will get people phoning up for five minutes of advice knowing that this will then bar the firm from acting for their competitors.
Various methods have in fact been adopted to avoid a conflict or potential conflict. Firms reported that the first task to be undertaken before any fresh instructions are taken from a new or existing client is a procedure which they referred to as a ‘conflict check’.[333] Ideally this process should be completed before any detailed information, beyond that necessary to conduct the check, is acquired by the firm.
Initially, therefore, all that should be done is ‘to make a list of names, because you have to find out from the person instructing you the names of all those actually involved in the transaction.’[334] One firm reported that they had a specialist unit dedicated to this task,[335] another that they had designated conflict officers,[336] but in over three-quarters of the firms interviewed any check would be carried out by the fee-earner who had been approached on the matter.Once the necessary information has been gathered from the client, it is then meant to be checked against information held by the firm concerning existing and former clients. This process is commonly referred to as a ‘client check’. Procedures for carrying out such checks varied widely between practices, with some firms reporting that the process could take up to a day to complete.[337] Some firms have a specially-constructed database containing all necessary information and say that the client check can be completed at the fee-earner’s desk. One firm described the system as follows:
The firm is quite highly computerised and anyone sitting at a desk can check whether we have—historically, from a specific date when computerised records were kept— done anything for that client.[338]
Those firms which did not possess such a database relied heavily on communication with colleagues in the firm to establish whether there might be a problem. One explained: ‘E-mail is the quickest way of getting around and we quite regularly get e-mails asking about specific situations and clients.’[339] Some firms used both methods for conducting the search: ‘We check the marketing database, the accounts database, and we also have a national e-mail checking system.’[340]
In the main, firms with computerised checking systems were large organisations with fee-earners and offices in several countries.[341] National firms also employed a database system to cover all their offices.[342] On the other hand, firms which handled litigation work in specialist fields tended to rely on electronic mail when checking whether there was a conflict.
Firm 16 illustrated this practice:We are a niche firm dealing with insurance litigation. Because of the very nature of litigation, that is one side against the other, it is pretty apparent if you have a potential conflict. For example, a building collapses and it’s either the fault of the architect or the engineer. They will both have insurance for professional negligence and they will both go to their insurers who will want to instruct lawyers renowned for construction work. Whichever insurer gets in touch with us first will be taken on as a client and then, if the other comes along, it is obvious that we cannot act. As most insurance companies are dealing with individual facts with each new claim, it makes it easy for us to spot a conflict and, therefore, we do not need a very complicated computer system to identify a conflict.
This, what might be termed more simplistic approach to identifying conflicts, raises the question of how such firms ensure that they are complying with rule 15.02 of the Guide. This rule states that if a firm has acquired relevant confidential information concerning a former client, the firm must not accept instructions to act against the client. Having acted for X insurance company against Y insurance company in one case, should a firm then accept instructions to act against X? Firm 16 responded to this question as follows:
I suppose you could dress it up as a conflict if, for example, XYZ insurance company were to say: ‘You can’t act against us because you know what makes us tick’. But it doesn’t work like that, because in the context of XYZ insurance company having an architect and ABC insurance company having an engineer... cases are dealt with on their merits and, by and large, one is looking to see whether the architect was negligent or whether it was the engineer. Clearly, I suppose you could get to know individuals within the insurance company and know who was the claims handler for the case. You will know whether he is bullish by nature or wet.
But you would be hard-pressed to determine an insurance-company-wide policy for particular issues. It doesn’t, therefore, give rise to problems. If British insurers all got together and decided that they were going to object to the fact that we are a happy band of taxi drivers who will happily go to whoever appoints us first, then, they could probably make a case of it at an intellectual level. But nobody ever has, because they would probably lose out. Apart from anything else, it is very difficult to police, because when a writ comes in with, as is often the case, four or more defendants, determining whether you have actually ever acted for the first, third, fourth and fifth is bad enough—let alone trying to get behind the scenes to see who their insurers are. People won’t tell you who their insurers are. So it is only in the fulness of time that it’s eventually smoked out that they’re insured by XYZ. More often than not, you never find out because people tend to keep that thing quiet. Moreover, it doesn’t matter because insurance companies never act in a consistent manner. They are in a litigation environment, so they don’t want to be consistent.Whilst a simple method of name-checking will uncover the most obvious difficulties (for example, that one of the parties in the dispute is or has been a client of the firm), it will not reveal any underlying conflicts. It may be that although there is no conflict between the would-be client and the other parties to the case, the transaction itself would create a potential conflict. For example, the name check will not reveal if there are subsidiary companies involved, or if the transaction itself would be of interest to an existing client of the firm. Perhaps an existing client has considered bidding for the company or piece of land in question. It was for this reason that some firms reported that it was necessary to run a second check, commonly referred to as a ‘matter check’. Firm 30 described a matter check as follows:
The most important thing to do is to obtain as much information as possible from the new client concerning the proposed transaction. For example, get all the names of the parties involved even if they are not directly relevant to this piece of work. Find out who is financing the deal. If you are dealing with a company, you also need to make a list of their subsidiaries. You then type all the relevant names into the computer, and see what it comes up with. It may be the case that the new client wishes to make a bid for Smith and Jones Limited and, when you type that into the computer, you may discover that your colleague has been instructed by a third party to make a take-over bid for Smith and Jones.
Discovering conflicts at this level is certainly not easy. As one solicitor put it: ‘The system for checking transactional conflicts is only as good as what the feeearner can think of at the time.’[343] Often, verification was sought from colleagues that there would be no difficulty in acting for a particular party in a particular matter. As one firm described: ‘We just put around a straight e-mail which says: Any problems in acting for ABC against XYZ?’.[344]
In addition to undertaking a client and matter check, many firms said that they also considered at this stage whether there was a ‘commercial’ or ‘business’ conflict. A client-and-matter check encompasses all those instances where, as firm 15 put it, ‘the Law Society would take a dim view of a firm acting.’ In other words, this is a strictly ‘legal’ conflict. Commercial conflicts, on the other hand, included circumstances where a firm would not deem it to be in its interests to act lest another major client remove its account, or perhaps a prospective client would be deterred from instructing the firm.[345] As one senior partner put it:
We would deem it not in our interests to act for one client because a major client of ours would be so cheesed off with us acting that he wouldn’t give us any more business.[346]
Many firms observed that they regarded commercial conflicts as their primary consideration in deciding whether to act. Indeed, some firms appeared uncertain as to what was meant by the term ‘conflict of interest’, addressing their thoughts solely to commercial considerations.