A foot in each boat: dangers in acting for more than one party
BY GINA TASOULIS – MAY 06, 2022 8:25 AM AEST
Snapshot
- There are dangers in acting for both parties to a transaction, even where the parties appear to be aligned.
- Although consent may be provided, ‘fully informed’ consent may be difficult to obtain.
- Don’t be distracted by what the parties have in common, ask what is in the deal for each client individually before agreeing to act.
Helping people is fundamental to our work as solicitors. The desire to be helpful is often a reason that solicitors agree to act for more than one party. The parties may seem aligned; the work may be straightforward; and separate representation may add cost and delay. But what dangers arise if a solicitor decides to help by acting for multiple parties? Should you do it?
The rules
Acting for more than one party is regulated both by professional conduct rules and by solicitors’ fiduciary obligations.
It is a breach of a solicitor’s fiduciary duty to act whilst in a position of conflict between duties owed to one client and duties owed to another. Gat equitable principle is repeated in rule 11 of the Australian Solicitors’ Conduct Rules 2015.
Both general equitable principles and the Conduct Rules allow an exception where the clients to whom the conflicting duties are owed give informed consent. The authorities make it clear that, to negate what would otherwise be a breach of fiduciary duty, the clients’ consent must be ‘fully informed’, which is a ‘question of fact in all the circumstances of each case’ (Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 466).
However, what is needed for fully informed consent depends on the circumstances – and what is important in the circumstances may not always be apparent at the start of the matter.
Recent decisions in the NSW Court of Appeal highlight how difficult it can be for a solicitor to demonstrate that a client has given fully informed consent.
This article originally appeared on lsj.com.au