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Fined for acting for parties with conflicting interests

13 May 2015

A lawyer, C, has been censured and fined $4,000 by a lawyers standards committee, which found he had acted for parties with conflicting interests.

C also admitted failing to comply with rule 3.4 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008. This rule requires lawyers to provide a client, in advance, with information in writing on the principal aspects of client service.

The complainant alleged that C acted in several property transactions involving her mother, Mrs D, and her half-brother, Mr E. The transactions included a refinance of one of Mrs D’s residential properties and the sale of another. Subsequently, the sale proceeds were applied to Mr E’s debt.

The complainant said that C had acted with a conflict of interest in these transactions because of his relationship with Mr E, who had benefitted as a result of the transactions. She noted that C was a director and the sole shareholder in Mr E’s business.

Although she described C as a “business partner” of Mr E, C denied this and said that he had never held any beneficial interest in any assets owned by any of the companies in which Mr E had been involved. His role was that of independent director and independent trustee of certain entities, without any beneficial ownership or interest in those entities.

The complainant also stated that it was clear and apparent that Mrs D had lacked the mental capacity to understand the various transactions.

The committee noted that a lawyer colleague of C, F, had acted in the conveyancing and had not been consulted by Mrs D on either the wisdom of the transaction or the unconditional sale and purchase agreement subsequently signed.

The committee noted that C had become involved in taking instructions from Mrs D on the application of the proceeds, instructing E to prepare an Authority and then presenting the Authority for Mrs D to sign.

“Clearly Mrs [D] should have been referred for independent advice as to the application of these proceeds and before signing the Authority in question,” the committee said. “Alternatively, it should have been paid into her bank account for her to apply as she wished, even if she then proceeded to apply it in the same manner as the practitioners did.

“The committee noted that [C] acknowledged that he should have referred Mrs [D] for independent legal advice at this stage, before he had dealt with the Authority and proceeds.”

It should have been “obvious” that Mrs D should have been advised by an independent lawyer, given the fact that Mr E was indirectly and directly benefitting from these dealings. “This despite Mrs [D]’s alleged explanation that she wanted to benefit Mr [E], as he would have received the property under her will in any event had she remained the proprietor of the property up to her death,” the committee said.

Accordingly, the committee determined that C was in breach of his professional obligation in that regard and made a finding of unsatisfactory conduct.

The committee noted that C had admitted failing to comply with rule 3.4 and made a finding of unsatisfactory conduct on that also.

As well as the censure and a fine, the committee ordered C to pay $3,500 costs.

Last updated on the 17th August 2015