Conduct unbecoming. Acting for both parties without informed consent
This is a summary of a decision by a Lawyers Standards Committee under the Lawyers and Conveyancers Act 2006. This summary was published in LawTalk 759.
A lawyer representing both parties to a transaction asked them to sign a blank page attached to what was purportedly a written consent for him to act for them both, while providing at best only a cursory explanation of the issues around conflict of interest and consent. A Lawyers Standards Committee found the lawyer guilty of unsatisfactory conduct, fining him and ordering him to pay costs.
The lawyer was acting for both parties in a joint-venture transaction. Rule 1.04 of the Rules of Professional Conduct (in force at the time) permits this only if the lawyer has obtained the prior informed consent of both parties. The lawyer told the Standards Committee he had handwritten a consent document, and had explained its terms to both parties and advised them they were both entitled to obtain independent advice. He said neither objected to him acting for them both.
The lawyer said he had then asked the parties to sign a separate blank page attached to the handwritten document. This was a common practice of his, he said, and this signed page was intended to be the final page of a typed document that he would draw up afterwards. He said he intended to get the parties to sign the typed consent the next time they came to his office, but the handwritten document was overlooked and not typed up.
One of the parties – the lawyer’s usual client – confirmed that a handwritten consent was presented to them both for signing. However, the other party told the Standards Committee that at no time did the lawyer counsel him about conflicts of interest or explain to him verbally about the issue of consent. He denied signing the consent.
The Standards Committee decided that some sort of discussion about consent may have taken place, but any such discussion had been cursory, so that the party who was not the lawyer’s usual client did not appreciate the significance of what was being discussed. He thought he was signing blank pages for various documents that were necessary to complete the transactions.
The Standards Committee said it recognised the practice of handwriting a document and typing it later, but the lawyer should have asked the parties to sign the final page of the handwritten document itself, not a blank page, as that practice can be subject to abuse.
The Standards Committee also considered a term of the handwritten consent that purported to indemnify the lawyer for any loss or damage he suffered in attending to the matter. It thought this blanket indemnity was improper: only substantial or unusual risks should be excluded, not liability in everyday transactions. Rule 1.12 of the Rules of Professional Conduct states the general principle, that lawyers must accept legal responsibility for their actions. That principle is also reflected in the Rule 3.5 of the current Conduct and Client Care Rules, which requires any limitation of liability to be fair and reasonable in the circumstances.
The Standards Committee concluded that the lawyer’s conduct was unacceptable when measured against the standards of “competent, ethical and responsible practitioners” (B v Medical Council [2005] 3 NZLR 810). It considered his conduct to be serious, and found him guilty of unsatisfactory conduct in the form of conduct unbecoming. In addition to the formal reprimand the Lawyers Standards Committee fined him $3,000 and ordered him to pay $1,000 in costs to the New Zealand Law Society.