A hot topic around our office this week has been “conflict of interest”. It’s an interesting issue, because it is something we lawyers see happening around our clients’ companies quite often, and are so conscious of in our own work. Our clients have to be able to trust that when we give advice, we are acting in our client’s interests, not our own. So, for example, we cannot act for both parties in a dispute.
There are clear rules relating to the solicitor-client relationship, a key rule being that we cannot act for a client in any circumstance where we might also have a personal interest. If a lawyer does get involved in a conflict of interest, disciplinary action is taken using statutory processes that make torture on a rack seem like a tap on the wrist.
That’s when we are acting as lawyers. What a lot of people don’t realise is that these rules operate as much outside the office as inside it. For example, if you are a lawyer who happens to be on the Board of a voluntary organisation such as a sports club, the conflict rules still apply. It can be hard for people to understand why you are prepared to give your time on a voluntary basis, but can’t give them advice when the society needs it if the outcome of that advice might necessarily involve you personally in your organisational role. No, it’s not about money – or only indirectly, in that you risk losing your practicing certificate and therefore your livelihood.
Similar conflict provisions apply to many other occupations, either through statute (such as the new Real Estate Agents Act) or through professional and industry organisation rules. The financial advisers now have a statute regulating their industry, but before that was in place were required to comply with a code of ethics which formed part of their membership of the Financial Advisers’ Institute.
I read one of their disciplinary cases recently, and it raised a number of scary issues. The financial adviser concerned made his big mistake when he did something that most people would get done by a lawyer: he drafted a will for a client. (No: don’t make a DIY will! The case law is full of DIY wills gone wrong!).
This chap arranged for the client to appoint him as advisory trustee (remunerated of course), leave him some of her personal property and also $10,000. He hadn’t had any legal training but said he had “read widely on the subject”. That’s a bit like looking up law on Wikipedia and following what that says. So the adviser didn’t tell her to seek independent advice either.
Of course you don’t have to be a lawyer to see the conflict of interest in all of this. Fortunately, the client concerned blew the whistle to the Institute, and the adviser was sensible enough to plead guilty to breaching its rules of professional conduct. It cost him a lot – he had to pay $18,835 for reimbursement of costs to the Institute together with his own legal costs (probably a similar sum) plus a $3000 fine.
He was lucky – if he had been a lawyer he would almost certainly have been struck off the register and named and shamed publicly. But, that’s where conflicts of interest can lead you.
This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at firstname.lastname@example.org.