Conflict fail leads to professional misconduct

Identifying conflict early is crucial for all practitioners, and for those acting for both companies and their directors the risk is almost certainly to be realised – a point emphatically made in a recent Western Australian disciplinary matter, Legal Professional Complaints Committee and Staffa [2020] WASAT 58.

Practitioner Kevin Staffa was engaged by W, a director of Company A, to provide advice to Company A in relation to a number of issues, including the rights and entitlements of the employees of Company A (which included W in their number).

W was subsequently given notice of his termination as a director of Company A, and sought advice from Mr Staffa, about the validity of the termination and other issues relating to the loss of his job. W sent those enquiries from his private email and instructed Mr Staffa to invoice him personally for the work.

Mr Staffa accepted the instructions and provided advice to W, including to change the passwords to Company A’s bank accounts and transfer sufficient money to cover W’s entitlements from the company to a holding account.

Mr Staffa continued to provide advice to W, while considering himself to be acting for Company A as well – a fact which he confirmed to the solicitors acting for Company A, and which was evidenced by the fact that Mr Staffa billed Company A for all his legal work.

The Legal Practitioner’s Complaints Committee (LPCC) became involved and eventually brought proceedings against Mr Staffa for professional misconduct on the grounds that:

1. He acted for both Company A and W, despite the fact that their interests were adverse.

2. He billed Company A for work he had done for W personally.

3. He advised W to transfer money covering his entitlements from Company A’s bank account to W’s bank account, even though Mr Staffa knew W had no right to the money, no authority to transfer the money and might became liable to criminal prosecution by transferring the money.

4. He was not open and candid in his dealings with the LPCC and failed to provide a full and accurate account of his conduct in relation to the LPCC’s enquiries.

The matter was heard by the State Administrative Tribunal of Western Australia, and the tribunal found that Mr Staffa had engaged in the conduct alleged, which constituted professional misconduct in relation to grounds one, three and four, and unprofessional misconduct in relation to ground two.

The tribunal did not accept that Mr Staffa had put W at risk of criminal prosecution, as such a finding was beyond its jurisdiction and entirely speculative. At the time of writing this note, orders on penalty and costs were pending.

Although Mr Staffa’s conduct shows a disturbing lack of insight into the effect of his advice and the legal realities of the circumstances, the conduct which was the subject of these proceedings springs directly from his failure to identify and deal with a clear conflict of interest. Had he identified at the outset that he could not possibly represent the interest of both Company A and W, he would have been able to avoid the path which has led to serious findings against him, and which will no doubt lead to serious penalties.

Practitioners must be constantly alive to the possibility of conflict, and note that it is certain to arise when acting for parties whose interests are adverse. While the circumstances of such conflicts are usually more subtle than those which Mr Staffa failed to identify, the consequences can be just as dire, and this case stands as a cautionary tale about the need for robust and regular conflict checks.

UPDATE: On 4 November 2020 the tribunal heard submissions in relation to penalty and costs, and on  15 December 2020 delivered its decision  that Mr Staffa:

(a) engaged in professional misconduct by providing legal services to a client when engaged by another client in the same or related matter and the interests of the clients were adverse, creating a conflict of the duties to act in the best interests of each client

(b) engaged in unsatisfactory professional conduct by rendering two invoices to a client in respect of work carried out for another client

(c) engaged in professional misconduct by advising a client to transfer money belonging to another client to a bank account controlled by the first client without the consent or authority of the other client, and

(d) engaged in professional misconduct by failing to be open and candid in his dealing with the Legal Profession Complaints Committee.

The tribunal also recommended that his name be removed from the roll of practitioners and ordered that he pay the Legal Profession Complaints Committee’s costs of the proceedings fixed in the sum of $58,000.

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