Nine years on a standards committee, six key learnings

Lesson one: ethical pitfalls are all around us

We are surrounded by potential ethical pitfalls, some more obvious than others. To successfully navigate past these pitfalls, a good starting point is developing an intimate knowledge of the Conduct and Client Care Rules 2008.

Lawyers who go for weeks or even months without studying the Rules are likely playing a dangerous game of Russian roulette with their professional obligations.

Lawyers who know the Rules will recognise a loaded chamber before they pull the trigger.

Lesson two: foundational principles

Though significant, the Rules are not the touchstone of professional responsibility. Rather, they are non-exhaustive minimum standards of behaviour that lawyers must observe and are a reference point for discipline.

The foundational principles for professional conduct are found in section 4 of the Lawyers and Conveyancers Act 2006. Lawyers must:

• uphold the rule of law and facilitate the administration of justice;
• be independent in providing regulated services to clients;
• act in accordance with all fiduciary duties and duties of care owed to their clients;
• protect, subject to overriding duties as officers of the High Court and to duties under any enactment, the interests of clients.

Sir Robin Cooke once said when speaking of the foundational document that is the Treaty of Waitangi, “a nation cannot cast adrift from its own foundations”.

So it is with the foundational principles that guide the professional conduct of the legal profession: Lawyers cannot cast adrift from such foundations.

To study the Rules without reference to the foundational principles is like building a house on weak subsoils.

Lesson three: fiduciary duties

One of the foundational principles is to act in accordance with all fiduciary duties owed to clients.

The distinguishing obligation of a fiduciary is the obligation of single-minded loyalty to a client. Most lawyers understand that.

Unfortunately that principle is often overlooked when a lawyer or law firm acts for more than one client on a particular matter. It is very difficult to provide single-minded loyalty to more than one client. As a wise man once said, “no man can serve two masters”.

Ten years after the Rules were implemented, the legal profession continues to be afflicted by lawyers who act for more than one client in breach of rule 6.

This ethical affliction does not discriminate according to area, location or size of practice. To the contrary, I have seen national law firms attempting to circumvent their professional obligations by having different members of the firm acting for different clients on the same commercial transaction or even in a dispute or legal proceeding. (Worryingly, not all such cases end up before a standards committee).

In my experience, rule 6 is the most commonly breached of all the Rules. Even in those rare situations where a lawyer or law firm may permissibly act for more than one client, it is unusual for the lawyer to have obtained the necessary prior informed consent of all parties concerned.

Lesson four: the correct use of information barriers

An information barrier does not cure a conflict. This is because fiduciary obligations are not divisible but are owed to each client by all lawyers in a firm.

Information barriers are concerned with confidentiality obligations (see lesson five), not fiduciary obligations.

Ironically, the use of an information barrier when acting for multiple clients is actually a red flag that the law firm should not be acting for more than one client in the first place. It often suggests that the law firm has appreciated there is more than a negligible risk of a conflict and that the law firm is attempting to circumvent rule 6 by using a Chinese wall.

Lesson five: the duty of confidentiality

I have come to understand that a lawyer’s fiduciary obligations end with the termination of the retainer. The only duty to the former client which survives the termination of the client relationship is the continuing duty of confidentiality.

Illogically, lawyers still seem to have it backwards – we are generally reluctant to act against a former client, but generally happy to act for more than one client on the same matter.

We overlook the fact that our ethical obligations have it the other way around; it is often permissible for a lawyer to act against a former client (so long as confidentiality is maintained – rule 8.7.1), but generally not permissible to act for more than one client in the same matter.

Lesson six: the importance of an ethics committee

In my view, every firm (no matter the size) should have a committee of designated lawyers to consider ethical dilemmas and make recommendations and decisions when tricky situations arise.

Such committees function best when comprised of a range of people across different disciplines, who meet regularly and are genuinely committed to upholding professional responsibilities, even at the cost of short term profitability.

A fully functional ethics committee is a repository of wisdom and knowledge and a safeguard against ethical atrophy.

Conclusion

Lawyers occupy a privileged place in society. With that privilege comes great responsibility. All lawyers share a responsibility to meet high professional standards and to maintain public confidence in the legal profession.

Lawyers who devote regular time to familiarising themselves with their professional obligations are more likely to understand their obligations and unsurprisingly less likely to fall into one of the many pitfalls they will encounter during professional practice.

A good starting point is being familiar with rules 6 and 8.7.1 and more importantly, the foundational principles that underpin these rules.

In the case of law firms, individual diligence is best supported by a fully functional ethics committee, to ensure that ethical adherence is not just an individual matter.

Sam Hood samuel.hood@nwm.co.nz is a partner with Hamilton firm Norris Ward McKinnon.