Acting for both parties fraught

In Di Giovanni v Council of the Law Society of New South Wales¹, the practitioner acted for both parties in a commercial property conveyance.

The vendor through his company was a long-standing client of the practitioner and the purchaser was a company that was formed for the benefit of various members of the practitioner’s extended family. The practitioner informed both parties that she was acting for the other and in particular, warned the purchaser that if a conflict arose, she would be required to cease acting for them. Unusually, no such written advice was provided to the vendor.

As it is inevitable in these circumstances when you believe that the transaction will proceed without a problem, the vendor wanted to resile from the contract between exchange and completion and the practitioner failed to cease acting for the purchaser and attempted to negotiate a mutual rescission which failed. The vendor proceeded with the settlement but was unhappy and 18 months after the sale, lodged a complaint alleging the practitioner had acted improperly due to the conflict that arose between the parties. 

The Council of the Law Society of New South Wales found the practitioner had engaged in unsatisfactory professional conduct resulting in the practitioner being reprimanded and ordered to undertake targeted ethics training.

The practitioner then proceeded to do a Mr Lehrmann and made “the mistake of going back for his [her] hat”². She sought an administrative review of the decision on the basis that she complied with both her professional and fiduciary obligations to each client and both clients were made aware that she was acting for both of them. She was unsuccessful.

The Tribunal noted the following:

Advertisement

• The potential for actual conflict arising is apparent whenever a solicitor acts for multiple parties in a transaction of this nature when despite both wanting to achieve a transfer, their “interests are adverse in that each wishes it would occur in the way most favourable to them”.³ The practitioner was in breach of r11.3 of the Conduct Rules because there was no “informed consent” from the vendor when she commenced to act for both parties.

• The practitioner was in breach of r11.5 of the Conduct Rules when she continued to act for the vendor after he expressly instructed that he wished to resile from the contract and the purchaser would not consent to do so. At that point, the parties’ respective interests clearly diverged. She should have ceased to act for all parties at that point, at least in the absence of “informed consent”. The vendor never gave “informed” consent:
  “To have given consent on an informed basis, the vendor would at least need to have been apprised of the outcome and effect on him and the vendor company of the potential for conflict later crystallising. As a minimum standard, he should have been advised, at least orally but preferably in writing, that in the event of an actual conflict of interest arising the Solicitor was bound to cease to act for both parties in the absence of informed consent from them both.”⁴

• The practitioner’s failure to take contemporaneous file notes and confirmatory correspondence contributed to her difficulties in supporting her submission that the parties were made aware of her relationship with each of them. The practitioner’s excuse that these failings were due to business and personal demands “may explain the situation but does not excuse it. A solicitor should not take on more work for a client than they can manage with the high level of diligence that is quite properly expected of them.”⁵

The Tribunal varied the original orders resulting in a reprimand, completion of an ethics tutorial and a report to the satisfaction of the Legal Regulation (Director) and an apology to the vendor.

Please also note the following:

Should-I-act-for-both-a-buyer-and-a-seller-in-a-conveyance?

Guidance-Statements/No-23-Acting-for-Family-and-Friends

Footnotes
¹ [2024] NSWCATOD 66.
² Lehrmann v Network Ten Pty Limited (Trial Judgment) [2024] FCA 369, 1091.
³ Ibid, 48.
⁴ [2024] NSWCATOD 66, 46.
⁵ Ibid, 61.