Conduct - Conflicts of interests and undertakings

2 types of situations where a conflict may arise

conflict between two or more clients

conflict between client’s interests and solicitor’s interest

SRA Glossary - conflict of interest

situation where the solicitor’s or firm’s separate duties to act in the best interests of two or more clients conflict

6.2 code

solicitor or firm must not act in relation to matter or particular aspect of it if there is a conflict of interest or significant risk of conflict unless clients have substantially common interest or clients are competing for the same objective

which clients will conflict arise 

two current clients of the firm but remember confidential information

examples of direct conflict

litigation, negotiate on matters of substance, inequality of bargaining power

when can you act with a conflict

in defined circumstances and with the informed consent of both parties

substantially common interest exception

6.2(a)

what is a substantially common interest - SRA Glossary

situation where there is a clear common purpose between the clients and a strong consensus on how its to be achieved 

example of substantially common interest

group of people who want to set up a company

if differences arise after common interest what to do

cease to act

competing for the same objective exception

para 6.2(b)

competing for same objective 

which two or more clients competing for an objective, which if attained by one client, will make that objective unattainable to the other clients or client 

what is an objective

asset, contract or business opportunity which two or more clients are seeking to acquire or recover through liquidation or by means of an auction or tender process or a bid or offer

conditions for acting under exceptions - 6.2

all clients given informed consent, evidenced in writing, effective safeguards are in place, satisfied its reasonable

what must the consent be

informed consent - client appreciates the issues and risks involved

what to consider for reasonableness to act 

client is at risk of prejudice if they are not represented separately 

code paragraph 6.1

solicitor or firm must not act where there is an own interest conflict or significant risk of an own interest conflict

examples of solicitor’s interest conflicting with client

client wants to make a gift of a significant amount, solicitor has an interest in business which they recommended to client, personal relationships

code paragraph 4.1

obliges a solicitor to account properly to clients for any financial benefit they receive as a result of their instructions

what to consider for own interest conflicts

financial interest, personal relationship, appointment of solicitor to public office, commercial relationship, employment

SRA glossary - undertaking

a statement given orally or in writing whether or not including the word undertaking to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something

when must solicitor perform undertakings - 1.3

perform all within an agreed timescale or within a reasonable amount of time

how can an undertaking be withdrawn 

by agreement 

how is solicitor liable for breach of undertakings

personally liable

what happens for failure to comply with an undertaking

solicitor may be sued personally, breach and may be disciplined by SRA or SDT

what should firm do with undertakings

maintain an effective system that records when they have been given and discharged

ambiguity in undertakings 

interpreted in favour of the recipient 

when should undertakings be avoided

when they are wholly reliant on the action/inaction of a third party

how to avoid liability third party undertakings

use their reasonable endeavours

will a solicitor still be personally liable for ‘on behalf of’ solicitor’s client

yes

what should you make sure of before giving an undertaking 

clear and express authority from their client 

will an undertaking be binding if circumstances change

yes but may be varied or discharged

can court enforce an undertaking

yes and party may seek compensation for loss

how should firms protect against undertakings

indemnity insurance

1.3 - who is covered by undertakings 

given by solicitors, non-admitted staff and anyone held out by the firm as representing the firm