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Solicitors

Dont act for both parties!

A solicitor acted for both parties in a property transaction in breach of r6 of the Solicitor's Practice Rules 1990 which states that the same firm cannot act for both sides "if a conflict of interest exists or arises" or if the seller is selling or leasing as a builder or developer, which he was doing in this case. The seller did not know that the purchaser had criminal convictions. The solicitor did. What is more the solicitors were providing monies to the purchaser to help with the deposit. The solicitor was under two irreconcilable duties: (i) to the seller to disclose that fact and (ii) to the buyer not to disclose that information. To disclose discreditable facts about a client, and to do so without the client's informed consent, is likely to be a breach of duty, even if the facts are in the public domain to keep the information confidential. (Lord Walker, para 34). The transactions of course went badly wrong and the seller suffered bad losses.

Held: The solicitors were liable for the loss (at para 8). Lord Scott:
    So the conclusion seems to me inescapable that the solicitors had put themselves in a position in which they owed to their two clients, Mr Bromage on the one hand and the appellant on the other hand, contractual duties that were inconsistent with one another. If, at an early stage, they had told the appellant that they could not act for him and that he should go to other solicitors, they would have extricated themselves from their dilemma. In the event, however, they continued to act for both clients and it was inevitable that they would be in breach of the contractual duties they owed to one or the other. The unfortunate victim turned out to be the appellant and they have no answer, in my opinion, to his claim against them for damages for breach of contract.
Lord Walker drew a parallel with another situation (para 35):
    If a house owner contracts to sell his house to one purchaser for 240,000 and then a week later contracts to sell it to another purchaser for 250,000, he assumes two contractual duties which are on the face of it irreconcilable, unless the seller has grounds for rescinding either contract, or can persuade one or other purchaser to release him from his obligation. That is so whether he enters into the second contract with his eyes open, in the hopes of making a larger profit, or whether (rather improbably) he does so inadvertently. It is no answer for him to say to either purchaser: I am sorry, I am obligated to another. His dilemma is his own fault (the phrase used by Lord Cozens-Hardy MR in Moody v Cox [1917] 2 Ch 71, 81 ..).
And went on (para 44):
    Mr Gibson submitted that a solicitor who has conflicting duties to two clients may not prefer one to another. That is, I think, correct as a general rule, and it distinguishes the case of two irreconcilable duties from a conflict of duty and personal interest (where the solicitor is bound to prefer his duty to his own interest). Since he may not prefer one duty to another, he must perform both as best he can. This may involve performing one duty to the letter of the obligation, and paying compensation for his failure to perform the other. But in any case the fact that he has chosen to put himself in an impossible position does not exonerate him from liability.
Hilton v Barker Booth and Eastwood [2005] UKHL 8

Article: Conflicts of interest by Ian Wood, barrister A fuller explanation of the case (Solicitors Journal 4 March 2005, p250).


Solicitors' Practice Rules 1990

The Law Society has made changes to rules 6(3) and 6A, which deal with conflicts of interest, relating to the situation where a solicitor acts for both the lender and the borrower. The change was announced in the Law Gazette. They do not arise out of the above case but arise out of the introduction of Commonhold. In force 9 February 2005.

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