Analyzing Professional Conduct Issues in Legal Practice

In this problem scenario, the issues related to professional conduct are considered with regard to Jones & Smith. This critique applies the Solicitors Regulation Authority (SRA) Principles, Code of Conduct and relevant legislation and case law to discuss the issues of client care and professional conduct involved in the case scenario.

Solicitors are bound to follow the SRA regulations and are exposed to legal action by their clients through the Legal Ombudsman if they breach the standards. The SRA Code of Conduct contains principles, including the principles relevant to this case scenario, such as, providing a proper standard of service, and protection of the money of the client.

Issue 1:

With regard to Daphne’s consultation with Chiwetel Ejiofor, the issue is that of conflict of interest between the two parties. As Abel Rahman is also a client who instructs Daphne Jones, there is a possibility for conflict of interest between two clients. The SRA provides that a solicitor should not act in a matter which involves a conflict of interest or poses a significant risk of conflict of interest. A conflict of interest involves a situation where solicitor has separate duties to act for two or more clients in the same or a related matter. The SRA allows this if clients have a substantially common interest in relation to the matter or are competing for the same objective and have given their informed consent in writing, and the solicitor has put in place effective safeguards to protect confidential information of the clients, and is satisfied it is reasonable to act for all the clients.

In this situation, the interests of Abel Rahman and Chiwetel Ejiofor are not substantially common. Indeed, they are adverse since Rahman is the landlord of the property about which Chiwetel is consulting with Daphne Jones. In this situation, SRA, paragraph 6.5 is relevant. This provides that the solicitor should not act for a client in a matter where their interest is adverse to the interest of another current or former client for whom the solicitor holds confidential information material to that matter, unless effective measures are taken to mitigate the risk of disclosure of the confidential information; or the client whose information the solicitor holds has given informed consent in writing.

In this situation, Daphne Jones has not informed either Abel or Chiwetel about the possibility of conflict of interest. Therefore, her act of consulting with Chiwetel is in breach of the principles of SRA, paragraph 6. There can be legal consequences of this. In Hilton v Barker Booth and Eastwood, the defendant solicitors were acting for both the purchaser as well as the developer of a property and they concealed this from the parties, which led to the decision by House of Lords that the defendant solicitors were in breach of their professional duty. In this situation, what should have happened is that Daphne should have informed both Abel and Chiwetel about the conflict of interest and taken their written consent before proceeding with the consultation with Chiwetel. This is because conflict need not be existing, but may also be potential, which means, a conflict that can be reasonably foreseen looking at the relevant facts and circumstances of the particular case. Thus, gaining consent would have ensured that she has complied with the requirements of SRA with respect to avoidance of conflict of interest under paragraph 6. To summarise this point, the solicitors may only act for two clients in the same matter if the conditions in paragraph 6.2 of the SRA are satisfied.

1. Solicitors Regulation Authority, “SRA Handbook” accessed < https://www.sra.org.uk/solicitors/handbook/code/content.page > (‘SRA’).
2. SRA, paragraph 6.2.
3. Bolkiah v KPMG [1999] 2 AC 222.
4. SRA, paragraph 6.2 (b) (i).
5. SRA, paragraph 6.2 (b) (ii).
6. SRA, paragraph 6.2 (b) (iii).
7. SRA, paragraph 6.5 (b).
8. Hilton v Barker Booth and Eastwood [2005] 1 All ER 651.
9. Ibid.

Issue 2:

With regard to Daphne’s professional conduct, there are two issues of concern. The first issue is that of arriving late to the court. The second issue is of drinking at workplace. These issues can be considered under Principle 2 that upholds public trust and confidence in the solicitor profession and legal services provided by authorized persons. This issue also engages Paragraph 3.2 of the Code of Conduct which clearly states services must be provided ‘in a timely manner’.

Lawyers are expected to act with reasonable care and skill when representing their clients or acting on their behalf and the breach of these standards can lead to action in professional negligence if the client is able to establish that foreseeability, proximity and reasonableness requirements in the court. Foreseeability relates to the consequences of the actions as are foreseeable by the lawyer; proximity relates to the nexus between the action and the harm caused to the client; and reasonableness relates to the sense of justice involved in the imposing of a duty of care. When the court is applying these standards to professionals, the court would consider the standard of care expected from a lawyer as a reasonable professional.

Another important point to be noted with regard to Daphne’s actions is that there is a possible action for breach of regulatory practices on her part under the Legal Services Act 2007; this Act lays down ethical standards and professional principles that are to be complied with by the legal professionals. Thus, lawyers must maintain proper standards of work in order to be considered to be acting as per standards of professionalism.

Issue 3:

With regard to Daniel Smith, the issue is regarding his taking £ 100,000 out of client account and causing the account to be overdrawn. The SRA provides rules for how the client money is to be handled by the firm. Client money is defined in Rule 2.1 of the SRA as, inter alia, the money received or held for services delivered to the client. Rule 2.3 provides that client money is to be held in the client account and Rule 2.4 requires that the client money should be available on demand and should be returned promptly to the client as and when the latter requires it. For this purpose, it is important that the client money is not taken out of the client account for purposes that are not authorised by the client. Rule 3 clearly provides that any payments or withdrawals from the client account must be in respect of delivery of regulated services. In addition, this also breaches Principle 5 of the SRA which requires a solicitor to act ‘with integrity’.

Rule 5.1 (a) of the SRA provides that the withdrawals made from the client account can be made only when made for the purpose for which client money is held in the client account and when the client has instructed the payment to be made. Therefore, the fundamental principle regarding withdrawals of client money from the client account is that it should be authorised by the client as per Rule 5.1 (a) of the SRA. Furthermore, there has been an overdrawing of the client account, which is in breach of the Rule 5.3 of the SRA which provides that the client money can be withdrawn from the client account only if there are sufficient funds in that account. The firm can correct this situation if it immediately and promptly upon discovery corrects the breach by paying into the client account as the money that was improperly withdrawn; this is provided in Rule 6.1. of the SRA. This rule allows the firm to correct the breaches of the rules related to client money or client account promptly upon discovery. If the firm fails to correct this breach, then there are repercussions of this action for the firm, including prosecution by the SRA. It may be mentioned that the precedent suggests that courts take the handling of client money to be a duty that the solicitor has to employ stewardship for. Therefore, there is an immediate requirement to correct the breach if the firm of Jones & Smith is to avoid legal action by the SRA. At the very least, the firm may be open to investigation by the SRA with relation to the accounts if a complaint is made against them for withdrawal of money from the client account in an unauthorised manner and for the overdraft from the account.

1. Phipps v Boardman [1967] 2 AC 46; Burns v Financial Conduct Authority [2018] 1 WLR 4161.
2. Jonathan Herring, Legal Ethics (Oxford University Press 2017).
3. Ibid.
4. Midland Bank v Hett Stubbs Kemp [1979] Ch 384.
5. Legal Services Act 2007, Section 1.
6. Ibid, Explanatory Note.
7. Bolton v Law Society [1994] 1 WLR 512.

Another issue that can be considered here is that of money laundering because Abel pays in cash to the firm. In cases where the client pays in cash, the solicitor may be held liable for money laundering offences under the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2007. The solicitors are required to conduct client due diligence including for on-going monitoring. Solicitors can be made liable unless they can establish that they did not have any suspicion that the property constitutes or represents the proceeds of crime or that it is terrorist property.

Conclusion:

To conclude this essay, Jones & Smith have potentially breached SRA principles with regard to avoidance of conflict of interest by consulting with Chiwetel on a matter that involves adverse interest of the two client. Moreover, the firm do not have written consent of the clients before consulting with the new client who has an adverse interest as related to the existing client. The firm was required to take this written consent. Daphne’s actions in arriving late for court and for arriving under the influence of alcohol, involve potential risk of action for professional negligence since these actions may have led to the dismissal of the application of eviction filed on behalf of Abel Rahman. Finally, the withdrawal of money from client account exposes the firm to possible action by the SRA. The firm can avoid this by immediately and promptly paying back to the client account the money that is improperly taken from it. This would allow the firm to avoid any legal action by the SRA for improper withdrawal of the money from the client account.

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1. SRA v Barker and Newton (SDT case no 11327-2015).
2. Weston v Law Society (1998) 95(31) LSG 35.
3. Leslie King, Accounts for Solicitors 2021/2022 (College of Law Publishing 2021).
4. SRA v Barker and Newton (SDT case no 11327-2015).
5. K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039.

Cases

Bolkiah v KPMG [1999] 2 AC 222.

Bolton v Law Society [1994] 1 WLR 512.

Burns v Financial Conduct Authority [2018] 1 WLR 4161.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.

Hilton v Barker Booth and Eastwood [2005] 1 All ER 651.

K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039.

Midland Bank v Hett Stubbs Kemp [1979] Ch 384.

Phipps v Boardman [1967] 2 AC 46.

SRA v Barker and Newton (SDT case no 11327-2015).

Weston v Law Society (1998) 95(31) LSG 35.

Books

Herring H, Legal Ethics (Oxford University Press 2017).

King L, Accounts for Solicitors 2021/2022 (College of Law Publishing 2021).