Wednesday, 8 December 2010

Conflicts of Interest

Within about 10 minutes of me posting the article about the appearance in court of David Pearce and John Maestri, I received the first of a number of emails with links to Rule 3 of the Solicitor's Code of Conduct, which deals with conflicts of interest between clients. Some parts of Rule 3 deal primarily with conveyencing or dealing with competition for the same asset, but some parts of it have a more general applicability.
3.01 Duty not to act

(1) You must not act if there is a conflict of interests (except in the limited circumstances dealt with in 3.02).

(2) There is a conflict of interests if:

(a) you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict; or
(b)  your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter.
On the face of it, it seems clear that there is a conflict of interest between David Pearce and the Trust of St Benedict's, in that he is alleged to have harmed a pupil over whom the Trust had a duty of care. They have differing interests in the "the same or related matters", and it would seem to me that "there is a significant risk that those duties may conflict".

Tony Nelson is acting on behalf of David Pearce, and I understand also acted on behalf of Stanislaus Hobbs at the time of his trial in 2007, in defending both against charges that they sexually assaulted pupils of St. Benedict's School. There's nothing wrong with lawyers acting on behalf of clients accused of crimes, even unpleasant ones. Everyone deserves a fair trial and proper legal representation.

The difficulty arises when the same solicitor acts for another party in the same or a related matter. And in this case, it is Tony Nelson who has instructed Lord Carlile with regard to the inquiry into sexual abuse at St Benedict's School and Ealing Abbey.

This inquiry might conceivably uncover further evidence of wrongdoing by Pearce, with regard to the charges currently under consideration by the courts or with regard to other abuses which might lead to further criminal charges being laid. If Nelson is being energetic in his encouragement of Carlile in the inquiry, then it would seem that he is not acting in Pearce's best interest, and Pearce would be well advised to obtain alternative representation. On the other hand, if Nelson is acting in Pearce's best interest, then it would seem to me that he can only do so by ensuring that Carlile discovers as little as possible. If that is case, the integrity of the inquiry is compromised.

There are cases where a solicitor can act even where there is some degree of conflict of interest. These cases are spelled out in Rule 3.02.
3.02 Exceptions to duty not to act

(1)  You or your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if:
(a) the different clients have a substantially common interest in relation to that matter or a particular aspect of it; and

(b) all the clients have given in writing their informed consent to you or your firm acting.

(2) Your firm may act for two or more clients in relation to a matter in situations of conflict or possible conflict if:

(a) the clients are competing for the same asset which, if attained by one client, will make that asset unattainable to the other client(s);

(b)  there is no other conflict, or significant risk of conflict, between the interests of any of the clients in relation to that matter;

(c) the clients have confirmed in writing that they want your firm to act in the knowledge that your firm acts, or may act, for one or more other clients who are competing for the same asset; and

(d)  unless the clients specifically agree, no individual acts for, or is responsible for the supervision of, more than one of those clients.

(3) When acting in accordance with 3.02(1) or (2) it must be reasonable in all the circumstances for you or your firm to act for all those clients.

(4) If you are relying on the exceptions in 3.02(1) or (2), you must:

(a) draw all the relevant issues to the attention of the clients before agreeing to act or, where already acting, when the conflict arises or as soon as is reasonably practicable, and in such a way that the clients concerned can understand the issues and the risks involved;

(b) have a reasonable belief that the clients understand the relevant issues; and

(c) be reasonably satisfied that those clients are of full capacity.
It isn't merely Tony Nelson's firm, Haworth and Gallagher, which is acting on behalf of the two clients, but Tony Nelsom himself in person. So only 3.02(1) applies, because there is a difference in wording between the start of 3.02(1) "You or your firm may act" and 3.02(2) "Your firm may act".

The exception in 3.02(1) is quite tightly defined. I have no doubt that Tony Nelson is wise enough to have obtained the written consent referred to in 3.02(1)(b). But the mere existence of the written consent isn't of itself enough. In addition, both he and the clients need to be justifiably of the opinion that "the different clients have a substantially common interest in relation to that matter or a particular aspect of it.

The Solictors Code of Conduct (page 49)has extensive guidance notes on how to interpret the rules on conflict of interest.
2. Conflict is defined as a conflict between the duties to act in the best interests of two or more different clients, or between your interests and those of a client. The definition appears in 3.01(2). This will encompass all situations where doing the best for one client in a matter will result in prejudice to another client in that matter or a related matter.

3. The definition of conflict in 3.01(2) requires you to assess when two matters are “related”. Subrule 3.01(3) makes it clear that if the two matters concern the same asset or liability, then they are “related”. Accordingly, if you act for one client which is negotiating with publishers for the publication of a novel, an instruction from another client alleging that the novel is plagiarised and breaches copyright would be a related matter.

4. However, there would need to be some reasonable degree of relationship for a conflict to arise. If you act for a company on a dispute with a garage about the cost of repairs to a company car, your firm would not be prevented from acting for a potential bidder for the company, even though the car is a minor asset of the company and would be included in the purchase. If you act for a client selling a business, you might conclude that your firm could also act for a prospective purchaser on the creation of an employee share scheme which would cover all the entities in the purchaser’s group, this work perhaps requiring the future inclusion of the target within the scheme and consideration as to whether this raised any particular issues.

5. In each case, you will need to make a judgement on the facts. In making this judgement, you might want to consider the view of your existing client where you are professionally able to raise the issue with him or her. You should also take care to consider whether your firm holds any confidential information from your existing client which would be relevant to the new instructions and if so, to ensure that you comply with rule 4 (Confidentiality and disclosure).
It seems to me that there clearly is "some reasonable degree of relationship" between Pearce and the Abbey. It also seems inevitable that some confidential information has been provided by one client or the other. It all seems extremely fishy.

I've no idea who is paying for Nelson to represent Pearce, whether it is coming out of the Legal Aid Fund, whether the Abbey is paying, or Pearce has some independent means. When the Charity Commission carried out its Statutory Inquiries into the Trust of St Benedict's, one of the issues considered concerned the civil case against "Individual A" and the Trust, and the fact that Individial A's representation was paid for out of charitable funds. They concluded that "given the circumstances of this particular case, it was arguable that this decision fell within the reasonable range of decisions available to the trustees".

But at least in the civil case, the two defendents were separately represented. Mr. Paul Stagg (instructed by Match Solicitors) represented Individual A, while Mr. Andrew Warnock (instructed by Beachcroft Wansboroughs) represented the Trustees.

I doubt that any complaint to the Solicitor's Regulatory Authority would get anywhere, and unless and until such a complaint were to be made and upheld, Nelson is able to continue to represent both clients. But it seems to me to be an unnecessary insult to the parents who hope and expect the Trustees to act properly, openly and in the best interests of the pupils of the school.

Even if the Trustees wanted to pay for Pearce's defence (and the Charity Commission agreed that it was OK for them to do so out of charitable funds), it wouldn't have been hard for a different solicitor to have been appointed and paid for, so that there would be no possibility of any conflict of interest. Why do the Trustees insist on sailing so close to the wind?

Do you really want to send your children to a school where the Trustees are prepared to act in this way?


  1. An example of the demonstrably conflicted loyalties at the Trust.

  2. How many angels can dance on the end of this legal pin? Not so many it seems.