Rule 3 (Code of Conduct)

...there is a conflict of interests (Rule 3.01 (1))

The situation is covered by Rule 3.2

You might feel unable to do your best for a client because of some form of professional embarrassment. See guidance notes 14-16

• - You/your firm owes separate duties to act in the best interests of two or more clients
• - In relation to the same matter
• - Those duties conflict OR there is a significant risk that those duties may conflict
• NB: Consider also if there is a likelihood of future conflict (see Guidance note 11)

Rule 3.01(2)(a)

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 (Rule 3 Guidance Note 1)

• - Your duty to act in the best interests of any client in relation to a matter
• - Conflict or there is a significant risk it may conflict with your own
• NB: Consider also if there is a likelihood of future conflict (see Guidance note 11)

Rule 3.01(2)(b)

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 (Rule 3 Guidance Note 1)

Any matter which involves the same asset or liability.

• For example:
• 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 (Rule 3 Guidance Note 2)

However, you must also consider whether there is a reasonable degree of relationship for a conflict to arise. Rule 3 Guidance note 3 (see this for further examples).

You must make a judgement on the facts. You may wish to consider the view of your client (if this can professionally be taken) and any confidential information held. Rule 3 Guidance Note 4

1) - The different clients have a substantially common interest in relation to that matter or a particular aspect of it;

This is the "common interest exception" - it would be disproportionate in terms of cost/disruption to require them to instruct separate solicitors (Rule 3 Guidance Note 6(a)(i)). For there to be a "common interest" there must be a clear common purpose and a strong consensus on how it is to be achieved. However, it will be for you to decide objectively on the facts in each case whether there is a "common interest" and it is appropriate to act. In making this decision, you should always consider whether the clients will be represented even-handedly with equal weight being given to the instructions from each. Look at guidance note 6 for further examples involving families or complex commercial transactions. Remember to consider the developing legal position.

AND

- All the clients have given in writing their informed consent to you or your firm acting.

Rule 3.02(1)

2) It must be reasonable in all the circumstances to act for all those clients (Rule 3.02(3))

3) There may be circumstances in which, despite peripheral or potential conflict, the clients' best interests are served by you, or your firm, being able to act for two or more clients who are able to give informed consent

• - The clients are competing for the same assets
• - Which if obtained by one will make that asset unattainable to the other client(s)
• - There is no other conflict, or significant risk of conflict, between interests of any of the clients in relation to that matter
• - 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 - see Guidance Note 9(b) for the definition of informed consent.
• - Unless the clients specifically agree, no individual acts for, or is responsible for the supervision of, more than one of those clients

Rule 3.02(1)(b)

It must be reasonable in all the cicumstances to act for all those clients (3.02(3)). This is important as all the conditions may be fulfilled but it must still be REASONABLE to act. Be particularly careful if one person's bargaining position is weak (i.e. old or infirm, see guidance note 7). The criterion against which reasonableness will be judged is whether one client is at risk of prejudice because of the lack of separate representation.

Likely to apply in specialised areas of legal services where the clients are sophisticated users of those services and conclude that rather than seek out new advisers they would rather use their usual advisers in the knowledge that those advisers might also act for competing interests. An "asset" is not necessarily physical, and can include a contract or a business opportunity. See guidance note 6(b) for further examples. You should be wary of using the exception under 3.02(2) where it is not accepted business practice to do so.

This exception should not be be applied to disputes over assets other than in the context of CORPORATE RESTRUCUTINGS and INSOLVENCIES.

- Draw all the relevant issues to the attention of the clients before beginning to act OR if already acting when the conflict arises or as soon as is reasonably practicable IN SUCH A WAY THAT the clients concerned can understand the issues and the risks involved.

You should consider setting out in your initial terms of business letter the issues discussed in relation to the conflict of interests and how that might affect your ability to represent both or all of the clients as the matter progresses. Be particularly aware of weakness due to age or health or the influence of duress. You should always keep a written record of all discussions with the clients about the implications of your acting for them - Guidance Note 9

- Have a reasonable belief that the clients understand the relevant issues.

- Be reasonably satisfied that those clients are of full capacity

Rule 3.02(4)

You could also consider acting on a limited retainer - see Guidance Note 12

You may only continue to act for one (group) of your clients

Provided that the duty of confidentiality to the other client(s) is not put at risk.

It is important to try and LIMIT the DISRUPTION that will inevitably be caused for the clients. One way of doing this is to discuss and agree with the clients at the outset what will happen if a conflict arises and agree which client the firm would continue to represent where this is possible.

- The client wants to make a lifetime gift or a gift on death

- To you, a manager owner or employee of the firm or a family member of any of these people

• - The gift is a significant amount:
• - In itself OR
• - Having regard to the size of the client's estate and the reasonable expectations of prospective beneficiaries

Unless the client is a member of the beneficiary' family.

If the client refuses, you must stop acting for the client in relation to the gift.


Rule 3.02(4)

When, as a result of this public appointment:

- There is a conflict of interests, or a significant risk of a conflict.

OR

- The public might reasonably conclude that you, or your firm, had been able to make use of the office or appointment for the advantage of the client

OR

- Your ability to advise the client properly and impartially is inhibited.

• - Advise or act for any party in respect of a dispute in which you or any person within your firm is acting, or has
• acted, as mediator

- Provide ADR services in connection with a matter in which you or any person within your firm has acted for any party

- Provide ADR services where you or any person within your firm has acted for any of the parties in issues not relating to the mediation, unless that has been disclosed to the parties and they consent to your acting.

Rule 3.06

1) The transfer of land FOR VALUE , and the grant or assignment of a lease or some other interest in land FOR VALUE.

Both commercial and residential conveyancing transactions are covered

2) Lessor and lessee

Act for more than one party.

As permitted by, and in accordance with, 3.08 to 3.15


Rule 3.07

Property selling = negotiating the sale for the seller

Mortgage related services = advising on or arranging a mortgage, or providing mortgage related financial services, for a buyer.

Mortgage includes a remortgage

• You may act for seller and buyer when:
• - The transaction between the parties is NOT AT ARMS LENGTH
• - Provided there is no conflict or significant risk of conflict

• AND
• - It is not prohibited by rules 10.06(3) or (4)

1) It is not prohibited by Rules 10.06(3) or (4) - Rule 3.09

2) The written consent of both parties is obtained (Rule 3.10(a))

3) No conflict of interest must exist or arise (Rule 3.10(b))

4) The seller must not be selling or leasing as a builder or developer

• 5) when the seller and buyer are represented by two separate offices in different localities:
• (i)differentindividuals authorised to do the work, who normally work at each
• office, conduct or supervise the transaction for seller and buyer; and
• (ii)no office of the firm (or an associated firm) referred either client to the office conducting the transactions.

• 6) One of the following applies:
• (a)both parties are established clients or
• (b)the consideration is £10,000 or less and the transaction is not the grant of a lease; or
• (c)seller and buyer are represented by two separate offices in different localities.

Rule 3.09 and 3.10

1. It does not conflict with Rule 10.06(3) or (4) - Rule 3.11

• 2. One of the following applies:
• (a)the only way in which you are acting for the buyer is in providing mortgage related services; or
• (b)the only way in which you are acting for the seller is in providing property selling services through a Solicitors' Estate Agency Limited (SEAL) - Rule 3.11

3. The written consent of both parties is obtained

4. No conflict of interest exists or arises

5. Different individuals must conduct the work for the seller and the work for the buyer and, if these individuals need supervision, they must be supervised by different individuals who are authorised to do the work.

• 6. You must inform the seller in writing, before accepting instructions to deal with the property selling, of any
• services which might be offered to a buyer, whether through the same firm or any associated firm

• 7. You must explain to the buyer, before the buyer gives consent to the arrangement:
• (i)the implications of a conflict of interests arising;
• (ii)your financial interest in the sale going through; and
• (iii)if you propose to provide mortgage related services to the buyer through a SEAL which is also acting for the seller, that you cannot advise the buyer on the merits of the purchase.

Rule 3.13

• If any of the circumstances set out in 3.09 apply (established clients; consideration of £10,000 or less;
• representation by two separate offices), you may sell the property, provide mortgage related services, and act for seller and buyer in the conveyancing, subject to the prohibition in 10.06(3) and (4) and compliance with the conditions set out in 3.10 and 3.13 as appropriate.

You can continue to act for one of them but only if the duty of confidentiality to the other is not put at risk. If it is you must stop acting for both.

Rule 3.15

• 1) A conflict of interest exists or arises
• 2) On the grant of an INDIVIDUAL mortgage AT ARM'S LENGTH
• 3) If, in the case of a standard mortgage of property to be used as the borrower's private residence only, the
• lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21, or do not permit the use of the certificate of title required by 3.20
• 4) If, in the case of any other standard mortgage, the lender's mortgage instructions extend beyond the limitations contained in 3.19 and 3.21.

1. It is provided in the normal course of the lender's activities

2. A significant part of the lender's activities consists of lending

3. The mortgage is on standard terms

An individual mortgage is any other mortgage.

Rule 3.17(1)

Material terms in any of the documents relating to the mortgage transaction must not be negotiated between the lender's and borrower's lawyerscontemporaneously with effecting the mortgage.

• NB: In commercial transactions, the element of negotiation will often relate to the
• facility letter or facility agreement rather than the mortgage deed itself.

Rule 3.17(2)

• Provided there has been no contemporaneous negotiation of material terms between the parties' lawyers, a mortgage
• will be on standard terms where the lender uses a prescribed form of mortgage deed.

Minor variations, such as the usual clause limiting the liability of trustee mortgagors, are not regarded as material and do not alter the nature of these terms as standard.

Rule 3.17(3)

• In addition to its normal standard terms, a lender may have a different set or sets of standard terms applicable
• to specialised types of borrower, such as registered social landlords. Provided these terms are applied by the lender to all equivalent specialist borrowers or have been agreed between the lender and a specialist borrower as applicable to all transactions between them, they will constitute standard terms for the purposes of 3.16 to 3.22.

Rule 3.17(4)

provided:

• (a)there is no conflict of interests;
• (b)the mortgage instructions do not go beyond the limits set out in 3.19; and
• (c)in the case of a property to be used solely as the borrower's private residence, the approved certificate of title set out in the annex to rule 3 is used.

Rule 3.17(6)

spouse, children, parents, brothers and sisters

Rule 3.18(2)

Yes.

Rule 3.17(8)

Rule 3.19

(a)you must use the certificate of title set out in the annex to rule 3 (below) ("the approved certificate"); and

(b)unless the lender has certified that its mortgage instructions are subject to the limitations contained in 3.19 and 3.21, you must notify the lender on receipt of instructions that the approved certificate will be used, and that your duties to the lender are limited to the matters contained in the approved certificate.

Guidance notes 17-22

Guidance notes 23-35

Never.

Rule 3, note 39

Where you in your personal capacity sell to, or buy from, or lend to, or borrow from, your client.

In such a situation you must advise your client to take independent legal advice. If s/he refuses you must not continue to act.

Rule 3, Note 40

Both legal advice and, where appropriate, competent advice from a member of another profession, e.g. a chartered surveyor

Rule 3, Note 45

Yes. For example, where your business interests lead you to recommend the client to invest in a concern in which you are interested.

Rule 3 note 46

Yes. Rule 3 note 47

Yes. Rule 3 note 48 (example of sexual relationship given)

• ...
• 1) You are a director of a company for which you act, you may need to resign - note 49
• 2) You hold power of attorney for a client - note 50

No.

• Where the terms are particularly unusual.
• For example if, as part, or all, of your remuneration you are to receive shares in a company you are setting up on behalf of your client.

Rule 3, Note 51

It must be in the client's best interests and not made with a view to your obtaining your fee.

Rule 3 Note 53

• Yes.
• BUT you must require the client to obtain independent advice if the gift is significant or significant as compared with the client's likely estate and the reasonable expectations of prospective beneficiaries.

Rule 3 Note 55

Yes.

But you need to exercise extreme caution. The risk of conflict is very great and you must consider the reasonable expectations of other beneficiaries. If you are likely to receive a disproportionately large sum you must make sure the client is independently advised.

An objective test would be applied if there was a complaint.

Rule 3, note 56.

See also note 57 as to why it might be best for a relative to seek independent advice on their will - secure from allegations of undue influence.

It is not defined. It does not include co-habitants.

Rule 3, Note 57

• This depends on the circumstances. Anything more than a token gift will be considered significant.
• Rule 3, note 58.

• The date of the preparation of the document
• Rule 3, note 59

No. But it is important to keep accurate records of this and the transaction could not enable money laundering.

Rule 3, note 62

All types. Both residential and commercial.

• Where the parties are:
• 1. Related by blood, adoption or marriage or living togehter
• 2. The settlor of a trust and the trustees
• 3. The trustees of a trust and its beneficiary or the beneficiary's relative
• 4. Personal representatives and a beneficiary
• 5. The trustees of separate trusts for the same family
• 6. A sole trader or partners and a limited company set up to enable the business to be incorporated
• 7. Associated companies
• 8. A local authority and a company within the meaning of 13.08(c).

Rule 3, note 72

It is an objective test. Is it reasonable to consider them an established client?

• There needs to be:
• - A degree of permanence
• - Continuity of instruction over time
• - Likelihood of future instruction

An individual related by blood, adoption or marriage to an established client, or who is living with an established client, counts as an established client. A person also counts as an established client if selling or buying jointly with an established client.

Rule 3, note 74

The consideration will only count as £10,000 or less if the value of any property given in exchange or part exchange is taken into account.

Rule 3, note 75

A builder or developer who acquires a property in part exchange, and sells it on without development

Rule 3 note 76

a lender can use a short form certificate of title which incorporates the approved certificate by reference.

• The form must include, in the following order:
• (a) the title "Certificate of Title";
• (b) the
• contents of the details box in the order set out in the approved
• certificate (use of two columns is acceptable) but with details not
• required shaded out or stated not to be required; and
• (c) the wording "We, the conveyancers named above, give the Certificate of
• Title set out in the annex to rule 3 of the Solicitors' Code of Conduct
• 2007 as if the same were set out in full, subject to the limitations
• contained in it."

Administrative details, such as a request for cheque, may follow the Certificate of Title.

Rule 3, note 82

• The approved certificate is only required for a transaction where the property is to be used solely as the
• borrower's private residence. The approved certificate need not, therefore, be used for investment properties such as blocks of flats, business premises such as shops (even if living accommodation is attached), or "buy to let mortgages" on properties which are not intended for owner-occupation.

Rule 3 note 83

Associated debentures, collateral warranties, second charges, rent assignments, charges over rent income and deeds of priority.

The administrative arrangements necessarily include the preparation and execution of the relevant documents and subsequent registration.

Rule 3, note 88