Misconduct. Obtaining consent before acting for both parties
This is a summary of a decision by a Lawyers Standards Committee under the transitional provisions of the Lawyers and Conveyancers Act 2006. This summary was published in LawTalk 736.
A lawyer who acted for both the vendors and the purchaser in a house sale without the prior informed consent of both parties was found guilty of misconduct.
The matter arose when the purchaser, a longstanding client of the lawyer, approached the vendors asking to buy their house and obtained a signed agreement the next day. The purchaser also provided a signed authority from the vendors for the lawyer “to act on our behalf in the sale of our property”. A second document was purportedly a consent form signed by the vendors for the lawyer to act for both parties, and also apparently restricted the lawyer’s role to the conveyancing part of the transaction.
The lawyer relied on these documents and did not communicate with the vendors directly at all, nor inquire into the circumstances of the sale or the signed authority and consent. The Standards Committee heard evidence that the male vendor was suffering from dementia and was probably incapable of understanding the transaction at the time.
Finding the lawyer guilty, the Standards Committee gave guidance on the requirements for obtaining informed consent – which remains relevant because the committee’s view is that the corresponding rule in the new Rules of Conduct and Client Care (Rule 6.1) simply explains and illustrates the position under the old rule.
The Standards Committee found that the lawyer was not entitled to rely on the two documents as constituting prior informed consent by the vendors. Rather he should have made sure that the vendors had in fact given consent, that they had done so on the basis of proper and adequate information, and that they had the necessary personal and mental capacity.
The Standards Committee said that the burden of obtaining informed consent was a high one and could not be met by cursory advice. The lawyer must ensure that he or she has explained all reasonable possibilities as to conflicts arising and their effects.
The lawyer should give this advice personally, although there might be exceptions where the lawyer could rely on the advice being given by another lawyer. However, it would never be adequate for the advice to be given by a layperson, and especially not by the other party for whom the lawyer was acting, as in this case.
The Standards Committee said there could be no defence that the negotiations were completed before the vendors retained the lawyer and that the lawyer’s obligations were transactional only and non-contentious. That would mean lawyers closing their eyes to the possibility that the transaction they were completing was not in the interests of one party.
The Standards Committee was equally concerned that there was no evidence that the purchaser had received independent informed advice.
Although the Standards Committee found the lawyer guilty of professional misconduct, it declined to censure and fine him because of his previous excellent record but did order him to pay Law Society costs of $10,467.50. The Committee recommended that the events and the result of the offending be published for educative purposes, but not the identity of the lawyer or any party.