THE CLIENT PERSPECTIVE

We have seen that many of the measures adopted by firms when acting in the face of conflict are heavily dependent for their success on the integrity of the individual solicitors involved.

I suppose you could say that the firm had fully informed consent as when the conflict was discovered they obviously asked the other acquiring company and us whether we were prepared to accept the conflict. Because we were so far down the line with the deal, neither of us had much choice. Although the two teams were physically sepa­rated, they worked on the same computer system. But I trusted the partner that I was working with and believed his integrity in relation to ensuring that Chinese walls were erected and maintained. I am surmising that they did maintain the Chinese walls within the computer systems.

This client acknowledged that he had no way of checking whether the measures introduced by the firm were secure:

As soon as work goes to our outside lawyers we sort of lose control and you think, ‘Well, I presume they’re operating Chinese walls’. We can never be sure though.

Client D held the same view:

You have to trust the law firm because there is absolutely no way we could monitor what the solicitors actually get up to.

There appear to be two reasons why clients allow firms to act in a manner which could potentially damage their interests. The first is that clients may have little choice but to accept the situation because by the time they discover the conflict the case has reached an advanced stage. The scenario outlined above by Client A, where it was almost too late to halt the transaction, provides a good illustra­tion of this.

It would have been extremely difficult for us to have done anything else bearing in mind the late stage of the proceedings and the fees we’d incurred up to that point.

There could be a number of other reasons why clients were prepared to take a relaxed view of firms’ wish to continue to act for both parties to a conflict. For example, as in the following illustration, the client might feel relatively invul­nerable within any prospective litigation, or alternatively, the client may have felt that the information which the firm had about them was unlikely to be dam­aging even if passed on:

I felt that we did at least have the upper hand in the transaction and therefore I was more comfortable about the measures employed. I suppose, on the evidence, I was sure we were going to win but I am confident that I would have felt very nervous if the shoe had been on the other foot. In other cases where I have had to assume proper Chinese walls were in place we haven’t handed over any particularly confidential information, so the firm was predominantly dealing with paperwork.³⁸

Client B told me that he felt he had little option other than to trust the firm in these circumstances:

If we were working with our solicitors to market something and we found out that they were working for a competitor of ours who was directing his efforts at the same market, we would want to be satisfied that some measures were in place. We want an assurance that they had appropriate segregation, but we just have to trust them that the measures will work.

This client took some reassurance from the fact that he could also draw on the advice of his own in-house team of experienced lawyers:

Our own legal team acts as a double check where there is a conflict. I suppose in that respect we can be regarded as quite a sophisticated client.

He also observed that clients are always in competition—one could say ‘in con­flict’—in the sense that they are competing for the services of the best lawyers in the firm:

If by diverting lawyers from us...

Client B suggested that in expecting a certain level of service from the largest law firms, clients must be prepared, in return, to adopt a more flexible attitude towards conflicts:

The biggest firms have spent a long time thinking about conflict procedure because they know that there can’t be one-horse law firms. This is because we, as clients, demand a firm which is large enough to provide the expertise and resources we require. So we accept that they will act for us one day and then against us another.

Client B maintained this view despite the fact that the measures employed by certain firms had caused difficulties for his company. The only sanction consid­ered was that of withdrawing their business:

We complained to the firm and said, ‘How can you possibly have done this? Never do this again.’ We then didn’t use them for a while but I would never say that we would boycott them permanently.

However, other clients, who could also be described as ‘sophisticated’, are less confident that the measures which firms adopt to manage conflicts are sufficient. Client C had one experience of a firm acting in a clear conflict situation. Even though the firm in question devised mechanisms for separating information, he felt uncomfortable about the whole process:

They said that they’d erected a complete Chinese wall, with two completely separate teams. But by the very nature of the case, the wall was built ad hoc and because of the size of the transaction in question (£11 billion) you needed to have at least four employment lawyers and four tax lawyers for each client. The corporate and litigation departments were also involved. Therefore, the wall had to run, not just across one department, but across the whole firm. I don’t doubt that they made a good show of it as they’d found themselves in this conflict situation (for which they’d get two sets of fees) but I never used the firm again.

In summary, it would appear that major clients, such as those who routinely instruct the large City firms, have a ‘sophisticated’ approach to conflicts not unlike that of the firms they instruct. They understand very well the financial power that they wield, and for the most part they are content to rely upon this power as the best insurance against unethical conduct on the part of those law firms with which they have an established relationship.