New Zealand Law Society - Clear conflict of interest

Clear conflict of interest

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Names used in this article are fictitious

A lawyer who acted for two people amid a separation has been fined $3,000 by a lawyers standards committee due to the “clear breach of conflict” that ensued.

The lawyer, Crewler, had acted for Mr Landless and Ms Squeers on a number of matters while they were married. That included the establishment of a family trust. Crewler was a professional trustee of the trust.

At a meeting in 2013, Mr Landless and Ms Squeers advised Crewler they wished to separate their affairs. They told him they were separating amicably and did not wish to use separate lawyers to undertake various matters relating to the family trust, including dividing its assets between them.

Crewler told the standards committee he considered Mr Landless and Ms Squeers would each be entitled to a share of the family trust assets. He suggested various property transactions and other mechanisms to divide the shares and settle them in separate trusts.

Crewler said he advised Mr Landless and Ms Squeers of the inherent conflict that may arise, but that both were adamant they did not wish to seek independent advice, although they may do so later about greater relationship property matters.

Crewler said he reluctantly continued to act for the family trust on the sale of the family trust’s main asset – a family home.

The committee said it considered it may have been acceptable for Crewler to act in the sale of the family home, given it was owned by the family trust of which he was a professional trustee.

However, he ought to have immediately refused to act on Mr Landless’ and Ms Squeers’ request to assist in the redistribution of the family trust’s assets following the sale, the creation of new trusts, the drafting of new wills and the preparation of enduring powers of attorney.

The standards committee concluded that in such circumstances Crewler was very clearly acting not only for the family trust but also for both Mr Landless and Ms Squeers in their personal capacities, notwithstanding the fact that each had competing interests.

The divergence between Mr Landless’ and Ms Squeers’ interests was “so obvious” that Rule 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 was immediately triggered, the committee said.

Rule 6.1 says that a lawyer must not act for more than one client on a matter where there is more than a negligible risk that the lawyer may be unable to discharge obligations owed to one or more clients.

“The only way for [Crewler] to ensure that the interests of both Mr [Landless] and Ms [Squeers] were properly protected would have been for him to terminate the retainers of each of them … and request that each seek independent legal advice,” the committee said.

In fining Crewler $3,000, the committee noted his previous good record and that his breach of rule 6 and 6.1 was “relatively serious”. The committee also ordered Crewler to pay $1,000 costs.

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