Tim O’Dwyer, Consultant at Mitchells Solicitors, shares what to look out for when acting for both parties in a conveyance, with an example from South Australia. He will delve further into this at the upcoming A Practical Guide to Critical Conveyancing Issues on Thursday 11 March, 2021.
This is the basic rule: A solicitor may act for both parties, but once a conflict arises between the duties owed to those clients, the solicitor may continue to act for one of the clients provided the duty of confidentiality to the other client is not at risk and the parties have given informed consent.
Here is a true story from South Australia:
Bernard Flood had been a registered conveyancer for 28 years, and had a good thing going in Mt Gambier until a local agent contacted Consumer Affairs.
The agent had sacked a salesman before reporting illegal ‘insider-trading’ and Flood’s role in it. After the salesman was criminally convicted, Consumer Affairs charged Flood with acting unlawfully in three purchases. He had not disclosed his directorship and shareholding in purchasing companies to the sellers, and so breached a SA Conveyancing Regulation.
This provided that, if a conveyancer acting for both parties becomes “subject to a conflict of interest,” he/she must “notify both parties in writing and cease to act.”
‘Conflict of interest’ means a ‘personal or pecuniary interest’ in the transaction apart from providing conveyancing services.
There was a clear conflict in the three transactions where Flood’s companies were the buyers. While acting for both parties, he neglected to notify his seller clients of this conflict of interest — and so profitably continued to act. He had appropriately informed the sellers he also acted for their buyers. Those sellers did consent to this state of affairs.
In the first matter, because the sellers were personally known to Flood, his barrister submitted he would have ‘naturally’ mentioned his interest in the purchasing company.
In the second matter, the seller company had dealt with Flood before and since. The Judge concluded the ‘unlawfulness’ of Flood’s conduct was still the same.
The third sale was negotiated by and generated commission for the local agent’s salesman who was also an undisclosed director and shareholder in the purchasing company. Flood failed to disclose not only his own conflicting interest, but also the salesman’s conflicting ‘beneficial’ interest in this purchase. The seller testified how she felt “quite angry“ and “ ripped-off”.
Flood claimed his failures were “simply an oversight”, but the Judge found his negligent “departures from the standards expected of conveyancers” more serious: “It is vital…conveyancers meet high ethical standards, be aware of their professional responsibilities, ensure their systems and methods are such that conflicts of interest like these are avoided. Necessary disclosures to clients must be full and frank.”
Yet this negligent and unethical law-breaker got off lightly.
The judge found Flood had not benefited from his non- disclosures (despite not refunding his illegally-earned fees), his unintentional failures resulted from “bad practice”. He was of “otherwise good character” and “retained the support” of local agents. With no previous convictions, a successful practice, high regard in town and community involvement Flood copped a severe reprimand and a $2000 fine.
For more than 40 years Tim O’Dwyer has practised as a Queensland solicitor. He is also a Justice of the Peace and Notary Public. Nationally recognised as a ‘real estate watchdog’ and consumer advocate, he often appeared on programs such as Today Tonight and A Current Affair. His legal articles have been published across Australia.
Tim has a Law degree from Queensland University and a Master of Arts from Griffith University. He is a consultant with Mitchells solicitors of Moorooka Qld.
Finally Tim has written a book: REAL ESTATE ESCAPES, “True Tales of Getting Out of Contracts, Leases, Prosecutions and Legal Liability” (www.realestateescapes.com.au).
“There is no-one in Australia more able than Tim O’Dwyer to write a book on real estate escapes. Forged in his legal practice and honed…by his practicality and sense of fair play, this book contains lessons for all…buyers, sellers, estate agents, legal practitioners and law students. Tim’s journalistic style and subtle humour, plus the escapes themselves, makes it a good read.” Geoffrey Adam, lawyer, property commentator and CEO of Australian Institute of Conveyancers (SA) (2002-2015)
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