The Conflicted Conveyancing Referral
Priya is a solicitor in a three-lawyer suburban practice. Her firm acts for a husband and wife, the Doyles, on the sale of their home and the purchase of a smaller unit. The real estate agent handling both transactions is the Doyles' son-in-law, Marco. Marco has referred four conveyancing clients to Priya this year and has told her he expects the referrals to continue. During the purchase, Priya discovers that the vendor of the unit, a Mr Haddad, is a long-standing client of the firm on unrelated commercial matters. Mr Haddad's commercial retainer is worth roughly three times the Doyles' conveyancing file. Priya's principal, Graham, tells her to 'just get both files done, it's a small town'. The Doyle purchase contract contains a special condition allowing the vendor to remain in occupation for 60 days rent-free after settlement. Priya suspects Mr Haddad drafted that condition to suit himself.
1. Analyse the conflicts of interest in this scenario and identify which, if any, can be managed with informed consent.
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There are three overlapping conflict issues: a current-client conflict, a referral-driven personal interest, and an imputed conflict at firm level.
1. Doyle purchase versus Haddad retainer. The firm acts for both sides of a conveyancing transaction in substance, even though it nominally acts only for the Doyles. Mr Haddad is a current client. A solicitor cannot act for both parties to a transaction where their interests are adverse, and cannot act for one while holding confidential information from the other that is material to the deal. The 60-day rent-free occupation condition is a live point of adversity: Priya suspects it was drafted to benefit Mr Haddad, and she may hold confidential information about his intentions or finances from the commercial retainer.
Consent cannot cure this. Informed consent may permit acting despite a conflict in limited circumstances, but it cannot cure acting for both sides of the same matter, and Mr Haddad's confidential information cannot be used against him or disclosed without his consent. The firm must cease acting for one party. Given the commercial retainer is worth more, Graham will want to keep Mr Haddad, but the firm cannot simply drop the Doyles mid-transaction without regard to their position.
2. Marco's referrals. Priya has a personal interest in keeping Marco's referrals flowing. That is a conflict between her own interest and her duty of loyalty to the Doyles. She must not let the prospect of future referrals affect her advice on the special condition. This cannot be cured by consent; it must be managed by disclosure to the Doyles and by ensuring advice is given independently.
3. Imputed conflict. Because Priya holds confidential information from Mr Haddad, the whole firm is potentially conflicted. Screens and separate files may assist but do not cure a current-client conflict in the same transaction.
2. Graham insists the firm keep both files. What should Priya do, and what are the consequences if she complies?
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Priya cannot comply with Graham's instruction. Her personal obligations of loyalty and confidentiality are not extinguished by a principal's direction, and 'it's a small town' is not a legal answer.
What Priya should do:
- Decline to act further on the Doyle purchase while the firm also acts for Mr Haddad on any matter connected to it. She should record her concerns in writing to Graham.
- Advise the Doyles, in writing, that the firm has a conflict and that they should obtain independent legal advice. She must not disclose Mr Haddad's confidential information in doing so; she can explain the existence of the conflict without revealing its content.
- Recommend that the firm cease acting for one party. If Graham refuses, Priya should consider whether she can continue at the firm, and may need to seek advice from the regulator or a senior practitioner.
- Ensure Marco's referral arrangement does not influence the advice on the special condition. Any referral fee or expectation should be disclosed to the Doyles.
Consequences of complying:
- Disciplinary action for acting in a conflict of interest and for breaching confidentiality.
- The Doyles could set aside the transaction or sue for negligence if the special condition harms them.
- Mr Haddad could complain that his confidential information was used against him.
- Costs orders and damage to the firm's reputation.
- Priya personally faces sanction even if Graham gave the instruction; 'I was told to' is not a defence.