The Conflict Check That Arrived Too Late
You are a two-lawyer firm. On Monday, a new client, Bakker BV, asks you to advise on a dispute with its former supplier, Hendriks BV. You accept and open a file. On Wednesday, your partner mentions that Hendriks BV consulted her two years ago about a distribution agreement with 'a customer in the north'. She did not act further, received no confidential documents beyond a draft contract, and the matter closed. Your firm's conflict register was not searched before acceptance because the partner was on holiday. Bakker BV has paid a €4,000 retainer. The partner says she remembers little but thinks the earlier matter 'might be related'. Bakker BV's dispute concerns the same distribution agreement.
1. Analyse the conflict of interest and identify the professional rules engaged.
Read the worked answer
The firm may be acting against a former client of one of its lawyers in a related matter, which engages the duty of loyalty and the duty of confidentiality. The key questions: is the new matter the same or substantially related to the former matter, and does the firm hold confidential information from Hendriks that is relevant to Bakker? The facts point to substantial relation: both concern the same distribution agreement, and the partner saw a draft contract. Even a short consultation creates confidentiality obligations that survive the end of the engagement. Because the firm is small, imputation is a serious problem: information held by one lawyer is treated as held by the firm, and screening is harder to justify than in a large firm. The failure to run the conflict check before acceptance is itself a practice-management failure that must be addressed, not hidden.
2. What must you do now, and what are the consequences if the firm continues to act?
Read the worked answer
Stop work on the merits immediately and escalate internally. Verify what the partner actually received and whether any confidential information is relevant; document the inquiry. The safest course is to decline the engagement and return the unused portion of the retainer, explaining that a conflict has arisen without disclosing Hendriks's confidences. If the firm believes it can continue, it must obtain informed consent from both clients where permitted, and consider whether the former client's consent is realistically obtainable; a former client is unlikely to consent to the firm acting against it on the same contract. Continuing without proper consent risks disciplinary sanction, a civil claim from Hendriks, and possible disqualification from acting. The €4,000 retainer does not change the analysis; financial pressure is not a reason to keep a conflicted file.
3. Recommend concrete practice-management changes to prevent recurrence.
Read the worked answer
Adopt a mandatory conflict check before any engagement letter is signed, with a written record of the search and the person who performed it. Maintain a single searchable register of clients, adverse parties and matter descriptions, and require every lawyer to log consultations even where no engagement follows. Introduce a rule that no retainer is accepted while a partner is unavailable if that partner's client list has not been checked. Add an annual conflicts training session and a short checklist attached to every new-matter form. For a two-lawyer firm, keep the process simple enough to be followed: one form, one register, one sign-off. Finally, review the Bakker file now, document the decision and the reasoning, and consider notifying the firm's professional indemnity insurer if a claim from Hendriks is plausible.