ethics4lawyers Director Michael Dolan discusses common ethical challenges which lawyers face when working in the area of leasing, including real life case studies. This article concludes Michael’s two-part series which recaps the key points from his recent Legalwise presentation at the Leasing Trends, Disputes and Ethics Seminar. Read Part 1 here. Michael will next present on ethics for Legalwise at the CPD Compulsory Units for Personal Injury Lawyers Seminar in March.
The purpose of this second article is to touch on some more common areas of ethical challenge which lawyers who practise in the area of leases encounter in their daily work. The scenarios outlined are all based on real cases.
Case Study 4
You are approached by two new business clients A and B to prepare a lease for a commercial property. A’s family trust owns the property and B will rent it for 2 years with 2 options for renewal. They ask you to act on their behalf jointly in preparing the lease documentation and sign informed consent for you to do so in accordance with Rule 11 of the Australian Solicitors’ Conduct Rules 2015. From your knowledge of the rental market you feel that the monthly rent is about 30% higher than market value, but B assures you that he is happy to pay it. You are not to be involved in payment of the rent or bond which you are told will be done by B’s accountant. You feel a little uneasy about the transaction. What ethical duties might be enlivened?
Solicitors must be ethical in the practise of their profession at all times and be mindful constantly that their paramount duty is to the court and to the administration of justice. Even though there appears to be compliance with Rule 11 of the Australian Solicitors’ Conduct Rules 2015 dealing with concurrent conflict of interest you would need to ensure that there is no actual current or potential conflict between the separate interests of A and B. In addition, you feel that something is not quite right, and therefore you need to take extra care. There is the possibility that the parties are involved in some kind of illegal money-laundering or tax evasion transaction so that you would need to make further detailed and very careful enquiries before accepting the retainer. As a rule of thumb, if it doesn’t smell right, it’s usually not right.
Case Study 5
You have been instructed by a corporate landlord to draft a lease which provides that the Retail Leases Act 2003 does not apply to the premises because the tenant’s activities are not predominately for the sale of retail goods or the retail provision of services. The landlord requires the tenant to pay its legal costs for the preparation of the lease plus any land tax. It appears to you that the lease is clearly for retail premises within the meaning of the Act. Your client is a good client and regularly instructs you to act on its behalf in leasing matters. What is your ethical position? What if you are not sure about the use of the premises?
As a solicitor and officer of the court you must comply with the law. If it is clear to you that the tenant’s proposed business activities fall within the provisions of the Retail Leases Act 2003, then you cannot be party to inserting a clause in the lease which is untrue, and you would need to advise your client accordingly and seek instructions to remove the clause. If your client declines to give you those instructions, you must cease acting in the matter. If the matter is not clear-cut, you should make further detailed enquiries to try and ensure the true position. It may be wise for you to seek the opinion of experienced counsel.
Case Study 6
Your firm acted for Mr and Mrs X in a dispute with their previous tenant Ms Z who had vacated residential premises pursuant to an order made by VCAT leaving a number of debts including telephone, electricity and gas charges. Mr and Mrs X sought to contact Ms Z in an attempt to recover the debts owing. Your personal assistant was contacted by Ms Z who gave her a mobile phone number on the express condition that she would not disclose it to anyone including your firm’s clients. Your assistant accepted the mobile phone number on this basis and emailed it to you. Are you able disclose Ms Z’s mobile telephone number to your clients? What is your ethical position?
A solicitor’s duty of confidentiality is to the client, not to third parties. However, if information was provided to the solicitor on a confidential basis and accepted by the solicitor on that basis a duty of confidentiality would arise. On the other hand, a solicitor has an ethical duty to disclose to her or his client any information relevant to the retainer in which the solicitor is acting. Had you taken the call from Ms Z, you would have had to inform her that you could not accept the information on the condition of non-disclosure to your clients. However, since your assistant has accepted the information on that basis, you are ethically required not to disclose it further.
Case Study 7
Your firm is acting for a corporate client, and you had conducted preliminary negotiations for your client in relation to the lease of a chain of 3 motels. You had several lengthy conversations with the owner’s solicitor about the proposed terms and conditions of the lease including options to renew and purchase which ended up in the final lease document. You made contemporaneous detailed diary notes of all of those conversations. The lease was signed, but after two years a significant dispute has arisen about the meaning of several of the terms and conditions in the lease (the same terms you had discussed with owner’s solicitor).
The dispute is now being litigated in the Supreme Court and the owner’s solicitor has quite a different recollection of the content of some of your telephone discussions. You are not personally acting as the instructing solicitor in the litigation, but your client’s Senior Counsel has said that she is intends to call you to give evidence about all of the conversations with the owner’s solicitor as this will be crucial to the successful outcome of your client’s claim. Can your firm continue to act for your client in the litigation?
Your firm is solicitor on the record and you are going to be called as a material witness in the case. Rule 27.2 of the Australian Solicitors’ Conduct Rules 2015 provides that “in a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court the solicitor, an associate of the solicitor or a law practice of which the solicitor is a member may act or continue to act for the client unless doing so would prejudice the administration of justice.”
However, that rule has received judicial consideration in the Court of Appeal in NSW and in two decisions of the Supreme Court of Victoria. The courts have made it clear that, in the circumstances outlined in the scenario, your firm should cease acting as solicitor on the record as part of your duty to the court to give completely untainted evidence unless there are exceptional circumstances. For a more detailed commentary including case citations, please see my News Blog on the topic: https://www.ethics4lawyers.com.au/news-blog/solicitor-as-material-witness-duty-to-the-court/
Michael Dolan is an Australian Legal Practitioner. Michael joins ethics4lawyers after a legal career spanning over 45 years, including 20 years as a senior executive in the electricity supply and mobile telephone industries in Australia and the UK. More recently Michael was a senior ethics solicitor at the Law Institute of Victoria for the past 7 years. Michael is passionate about legal ethics and enjoys advising and assisting other lawyers respond to their ethical challenges as well as presenting highly interactive educational seminars for them. Michael has written and contributed to several published articles on ethics over the past few years and has anchored several DVDs on the topic. Contact Michael at [email protected] or connect via LinkedIn.
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