The independent legal profession at work ... Flawed ethical rules for solicitors ... Special provisions for conflicts of interest and referral fees ... "Informed consent" downgraded
Less than desirable ethical standards have been approved by the Law Council of Australia as part of the solicitors' conduct rules under the proposed Legal Profession National Law.
The LCA is hoping that the Council of Australian Governments will sign-off on the draft rules early next year.
However, the Attorneys General, Chief Justices and the profession at large should be aware of these flawed provisions before they get a foothold.
In particular, there are at least two offensive provisions.
Rule 11, as it stands, allows solicitors to rely on "implied consent" when concurrently acting for two clients whose interests could conflict.
Rule 12 permits solicitors to accept referral fees if they have "informed consent". The trouble is the consent need not be informed, because there is no requirement to disclose the amount of the fees being pocketed.
These rules were supported by the LCA's large law firm group.
The new conduct rules also seek to bypass the common law. Rule 2.2 says:
"In considering whether a solicitor has engaged in unsatisfactory professional conduct or professional misconduct, the rules apply notwithstanding any inconsistency with the common law."
At best that rule is confusing. At worst it is just plain wrong.
The conflict of duties rule starts off reassuringly:
Rule 11.2 says:
"If a solicitor or a law practice seeks to act for two or more clients in the same or related matters where the clients' interests are adverse and there is a conflict or potential conflict of the duties to act in the best interests of each client, the solicitor or law practice must not act ..."
Then the escape hatch pops-up:
" ... except where permitted by rule 11.3."
Rule 11.3 fixes the game. It says the solicitor or law practice can only act in those circumstances if each client:
Then comes this doozy:
"For the purposes of rule 11.3.2, where a client engages a law practice having been informed that the circumstances referred to in rule 11.2 exist or may exist, then that client is taken to have given the informed consent required by rule 11.3.2."
In other words, clients do not have to give informed consent at all. It is merely assumed they consent if they are told a conflict "may arise".
It would be infinitely preferable if the rule required clients to give written consent to solicitors acting in a conflicted situation.
A similar hash is made of the rules dealing with conflicts "concerning a solicitor's own interests". Again "informed consent" has been radically reconfigured.
Rule 12.4.3 turns upside down the notion that solicitors should not act where their interests conflict with their duty to the client.
It says that solicitors will not be in conflict by:
"Receiving a financial benefit from a third party in relation to any dealing where the solicitor represents a client, or from another service provider to whom the client has been referred by the solicitor, provided that the solicitor advises the client,
(i) that a commission or benefit is or may be payable to the solicitor in respect of the dealing or referral and the nature of that commission or benefit;
(ii) that the client may refuse any referral; and
(iii) the client has given informed consent."
The crucial element is missing. The amount - which makes the "informed consent" fully informed.
Those rules have the potential to give rise to abuses. How they got under the wire is an indictment of the way the national profession reforms are being orchestrated.
Other rules are less than ethically desirable, but 11 and 12 take the cake.
The favoured style of the rules is to declare something should not happen, and then let it in through the backdoor. The exceptions swallow the rule and become the real rule.
From about rule 9 onwards, the real rules are the exceptions.
Under the most recent interim report from the national legal profession taskforce the attorneys general will be unable to give policy directions to the National Legal Services Board.
The existing power that the AG has in NSW, for example, to veto the profession's rules, will also be curtailed under the latest proposals.
All of this has been badged as vital to the "independence" of the legal profession.
Attorney General Robert McClelland has just announced (Dec. 10) that the Commonwealth will tip-in $1.7 million as start-up funding for the National Legal Services Board and the National Legal Services Commissioner.
These conduct rules may or may not protect solicitors from complaints, but most likely will not not save them from civil actions for breach of fiduciary duty.
The safest advice a law society could give its rank and file is to go beyond what the rules require - get written consent in all conflicts and provide clear details on the amounts of referral fees received.
Better still, the AGs, the CJs and COAG should strangle those two rules before they grow too fat and ugly.
See the final draft of the solicitors' conduct rules HERE.