Change tracker - Code of Content

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.

The definition of conflict in 3.01(2) requires you to assess when two matters are "related". [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 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.

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.

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).

This reflects the fact that 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 circumstances in which you could act despite a conflict are set out in 3.02.

Two different situations are defined. These are in 3.02(1) and (2):

• (a)
  • (i)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(1) deals with the situation where the clients have a "common interest", they all want to continue to instruct you and it would be disproportionate, for example, in terms of cost and general disruption to their matter, to require them to instruct separate solicitors.

  • (ii)

    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.

  • (iii)

    The "common interest" might arise, for example, where you are acting for several members of a family in relation to their affairs or acting for various individuals in the setting up of a company. Any areas of conflict must be substantially less important to all the clients than their common purpose and may, for example, relate to slightly different views on how the common purpose is to be achieved. It will be your duty to keep the differences under review with the clients and to decide if the point has been reached when it would be untenable to continue to represent all of them in a fair and open manner or without any of them being prejudiced.

  • (iv)

    There exist some multi-party complex commercial transactions, where sophisticated users of legal services, who have a common purpose, may expect a firm to act for two or more parties, because this will facilitate efficient handling of the matter (taking into account amongst other things the desire to complete the transaction quickly, the availability of necessary experience/expertise and the overall costs). Indeed in many cases it may already be accepted business practice for firms to act in this manner. An example is acting for different tiers of lenders (for example senior lenders and mezzanine lenders) and/or different parties (for example arrangers/underwriters and bond/security trustees) in entering into a financing transaction where there is already an agreed or commonly understood structure with regard to the ranking of their respective claims, the content of their respective obligations and associated commercial issues.

  • (v)

    While accepted business practice can be considered as a factor in determining whether an appropriate common purpose exists, you and your firm should always exercise caution when proposing to act in accordance with 3.02 and should be mindful of the residual test of reasonableness referred to in 3.02(3).

  • (vi)

    In some situations it might be possible for you to consider whether the retainer could be limited to those areas where there is no conflict with the clients seeking separate advice on any areas of conflict. This could only be done where the conflict did not undermine the overriding common purpose (see below for further guidance on limiting retainers).

  • (vii)

    In some circumstances it might be possible that, while a conflict would prevent you from acting for another party on all aspects of a matter, a mandate limited to a specific issue where there is common purpose might be accepted. For example, you may be retained by the owner of a company to advise on its disposal. In that case you would not generally be able to advise another party on the purchase of the company. However, in the hope and anticipation of a successful sale a seller client which is a sophisticated user of legal services might agree that you should also accept a limited retainer to provide competition law advice to the prospective purchaser regarding the filings for competition law purposes that would be required in the event that the two businesses were combined.

  • (viii)

    When acting under this exception, especially in family situations, you need to consider the developing legal position. Courts are likely to make a presumption of undue influence where one of the parties who is considered vulnerable through age or other circumstances places trust and confidence in the other party. In any situation of doubt it may well be in the best interests of the clients that they are separately represented.

• (b)
  • (i)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(2) is intended to apply to 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. Examples where this exception might apply include:

    • (A)

      acting on insolvencies so that a firm can act for more than one creditor;

    • (B)

      acting for competing bidders, and/or for those involved with the funding of bidders, for a business being sold by auction; and

    • (C)

      acting for competing tenderers submitting tenders to perform a contract.

  • (ii)

    The wording of 3.02(2) is sufficiently wide to permit other transactional work in the commercial field where clients can give consent. Solicitors and their firms should exercise considerable caution when proposing to act in accordance with 3.02(2) in categories of work where to do so is not already accepted business practice.

  • (iii)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(2) should not be applied to disputes over assets other than in the context of corporate restructurings and insolvencies.

Reasonableness is an important rider to 3.02. There may be situations where, despite compliance with 3.02, it would still not be reasonable to act. The apparent unequal bargaining position of the parties, concerns about the mental stability of one of the parties, a family arrangement where an elderly parent is providing security for their son's or daughter's business loan, and the importance of one of the clients to the firm may all be situations where instructions to act for both or all parties should be declined. Having accepted instructions you must be satisfied that you can act even-handedly for both or all clients and that, taking into account any limitations in a specific retainer, you do not favour one at the expense of the other(s).

The criterion against which reasonableness will be judged is whether one client is at risk of prejudice because of the lack of separate representation. In relation to all situations where you are proposing to act for two or more clients under the provisions of 3.02, the onus will be on you to demonstrate why it was reasonable to act for all the clients at the time the instructions were accepted. Above all, you must be satisfied that unfettered advice can be given, without fear or favour, to the clients. You must also keep under review whether it remains reasonable to continue to act for them. You should also have regard to 1.04 (Best interests of clients) which requires you to act in the best interests of each of your clients.

• (a)

  [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(4) places obligations on you to discuss with the clients the implications of you, or your firm, continuing to act for all of them. You must be satisfied that the clients understand the issues and that their consent is independently and freely given. 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. Extreme caution will be required where one of the clients is particularly vulnerable due to mental health, language or other problems affecting their understanding of the issues, although where a litigation friend acts for a person who lacks capacity they will be able to consent on that person's behalf. Similarly, you must always be alert to situations where a client might be consenting under duress or undue influence and in those circumstances must insist on separate representation. For the avoidance of doubt, and for evidential purposes, you should always keep a written record of all discussions with the clients about the implications of your acting for them. You must always obtain all the clients' written consent on each occasion when acting under either of the exceptions.

• (b)

  Where seeking informed consent under 3.02(1)(b) you should identify by name the other clients you or your firm propose(s) to act for, or be able to do so when their identities are known. Provided that you do this and comply with the requirements of 3.02(4), the obligation to obtain "informed" consent in 3.02(1)(b) will have been satisfied. Where consent is sought under 3.02(2), you need to comply with the requirements of 3.02(4) but you need not identify by name the other clients you or your firm propose(s) to act for.

When acting for two or more clients on a matter, or a related matter, there may be circumstances where you will have to cease acting for one or both clients. This may be in circumstances where no conflict was apparent when accepting instructions but a conflict subsequently arose or when acting under one of the exceptions and it becomes impossible to fulfil the conditions set out in 3.02. In these circumstances 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 rule does not specifically deal with potential or future conflict, although it does make clear that a significant risk of conflict should prevent a solicitor from acting. You should always be cautious, therefore, about accepting instructions where the possibility of future conflict is evident. The risks should be explained to the clients about the problems and expense which the requirement for future separate representation could bring.

There may be situations where, when acting for two or more clients, it is appropriate to continue to advise them but necessary to make clear that there are defined areas of conflict on which you cannot advise, and one or more of them may need separate advice. Your retainer with your clients will, when these situations arise, need to be limited to exclude those areas of work or advice. Care must always be taken, however, to ensure that the clients understand:

• (a)

  exactly what you are proposing to deal with on their behalf; and

• (b)

  those contested areas which are to be excluded from the retainer.

A limited retainer would be unlikely to be appropriate in any situation where one of the clients was disadvantaged in some way as against the other. This might be because of an unequal bargaining position or because one had some form of disability. In any situation where you agree to act for two or more clients by limiting the retainer it is important that you keep all developments under review to ensure that it remains appropriate to continue to act.

There may be some circumstances in which you should refuse instructions when, although there is no actual conflict of interests as defined in rule 3, you might feel unable to do your best for a client because of some form of professional embarrassment. It may be, for example, that if you have acted for a client in the past and accept instructions to act against that client you may feel inhibited in doing your best for the new client because of the past relationship with the former client. If so, the instructions from the new client should be refused as you would, otherwise, be in breach of core duties 1.03 (Independence) and 1.04 (Best interests of clients).

There may also be situations where you and your firm are asked to act with consent, using an information barrier in accordance with rule 4 (Confidentiality and disclosure), but the information you hold and which you cannot disclose to your client is of such a nature that it would cause severe embarrassment to your firm if, or when, it later came to light that your firm held such information. It may be, for example, that you are asked to act for a client on the acquisition of a business in circumstances where confidential information is held by your firm that the business has a serious problem with its accounts. Similarly, it may be that you are asked to prepare an employment contract for a company which is planning to recruit an individual who is known, confidentially, to be under investigation for fraud. In those circumstances you and your firm would be seriously embarrassed acting for a client who you knew was wasting legal fees on an outcome the client would not want to pursue if in possession of the knowledge held by your firm. It could be argued that you are not acting in the best interests of the client (see 1.04 (Best interests of clients)) or that you are damaging public confidence in the profession (see 1.06 (Public confidence)).

Where professional embarrassment is not a factor and the circumstances which would otherwise prevent you from acting in 4.03 (duty not to put confidentiality at risk by acting) do not arise, it will be a purely commercial decision as to whether you should act against the interests of another client or former client, provided there is no conflict as defined in 3.01 or 3.02.

If you are employed as an in-house lawyer your employer is your client. The nature of this relationship may cause problems because you do not have the same freedom as a firm would have to decline instructions. There may be occasions, for example, when you are asked to advise your employer in situations where conflict or potential conflict arises between your interests and the interests of your employer. These include:

• (a)

  where your personal interests as an employee may conflict with the interests of your employer who wants advice on a course of action which could be detrimental to you as an employee where, for example, a merger could lead to your redundancy;

• (b)

  where your employer asks you to do something which would place you in breach of your professional obligations, for example, to file a document with the court which you know contains false information; or

• (c)

  where your employer may act against your advice and, for example, engage in criminal activity which may require you to take action against your employer.

In relation to situations where your personal interests may conflict with a course of action proposed by your employer you need not necessarily be excluded from advising your employer. Your employer will usually be aware of exactly how you will be affected by its proposals, and if you are able to give objective advice on the legal issues where your expertise is required you would normally be free to do so. There may, however, be situations where you are so affected by the advice you are asked to give that you feel your objectivity and independence are impaired and in those situations you would have to ask your employer to seek other advice, either internally or externally. What is important in these situations is that there is transparency about your interests. Beyond that, you will have to make a judgement about whether you feel you have the necessary objectivity to advise.

If your employer was unaware of your interests – and, therefore, the potential for conflict - the position would be different. If, for example, you had a large shareholding in another company and your employer's proposed action could adversely affect the value of those shares then you would either have to disclose your interest or explain that a conflict prevented you from advising on that issue.

In situations where you are asked to act contrary to your professional obligations then you should not compromise your position and you must refuse to carry out instructions which would have this result, even if ultimately this led to the loss of your job.

There may be situations where there is a positive legal obligation on you to take action against your employer where, for example, your employer is engaging in money laundering or where there are "whistle blowing" obligations. Legal issues of this nature are beyond the remit of this guidance. They are situations where your relationship with your employer has reached the stage where you would need to consider the advisability of seeking legal advice on your own position.

Finally, as an in-house lawyer you are, under rule 13 (In-house practice), able to act for a limited number of other bodies and individuals. For example, if employed by a company, you may act for a holding, associated or subsidiary company of that company employer. If you do so you must ensure that you do not act in any situation where there would be a conflict between the interests of your employer and the other company for whom you are also acting (see 13.01 and 13.03). Similarly, if employed in local government you may act, for example, for local councillors in certain circumstances, provided you can comply with rule 3.

In publicly funded cases, regulations require that one solicitor be appointed to act for all co-defendants in a legal aid case unless there is, or is likely to be, a conflict. The purpose of this is to ensure economy in the use of public funds by ensuring that a single solicitor represents co-defendants where it is proper to do so. The professional conduct obligations which deal with conflicts of interest have always prevented a solicitor or firm acting for two or more clients where there is a conflict or significant risk of a conflict arising between the interests of two or more clients. A solicitor can act, however, for co-defendants where conflict is not a factor. The difficulty often lies, however, in spotting potential conflict and deciding whether it is sufficiently real to refuse instructions.

Your starting point should always be your fundamental professional obligation to act in each client's best interests. Can you discharge this obligation to each client? This means first asking each client if they are aware of any actual or potential conflict between them and then, if they indicate that there is no such conflict, asking yourself whether you feel there are any constraints on the advice you would want to give to one client, or on the action you would want to take on that client's behalf, which are likely to arise because you act for another co-defendant.

A conflict of interest arises wherever there is a constraint of that sort, for example where it is in the best interests of client A:

• (a)

  to give evidence against client B;

• (b)

  to make a statement incriminating client B;

• (c)

  to implicate client B in a police interview;

• (d)

  to provide prejudicial information regarding client B to an investigator;

• (e)

  to cross-examine client B in such a manner as to call into question his or her credibility;

• (f)

  to rely upon confidential information given by client B without his or her consent; or

• (g)

  to adopt tactics in the course of the retainer which potentially or actually harm client B.

If these obligations actually come into conflict when acting for two or more clients you will have to cease to act for one and often both. This can cause considerable disruption and expense, which is why the rules require that you should not accept instructions if there is a significant risk of this happening.

Many criminal clients will, of course, have retained you at the police station prior to a police interview and are thus not at that stage defendants. The obligations referred to above apply at this early stage, and you must be satisfied that accepting instructions on behalf of a client prior to a police interview does not place you in conflict with another client who is also to be interviewed. In order to assess whether you can act for both clients it is important that you do not interview the clients together and that you get instructions which are as full as possible from the first client before any substantive contact with the second client. However, never let the police deter you from seeing the second client because they think there is a conflict – that decision must be yours.

A further consideration when taking instructions at the police station, especially out of office hours when an immediate conflict check is not possible, is that the firm may already act for another defendant in that matter or information obtained at the police station may be relevant to another client on an unrelated matter. For example, the firm may be acting in divorce proceedings for a wife where violence is alleged and information that her husband has been charged with an offence involving violence would be relevant and may make it impossible to continue acting for the wife. This highlights the importance of carrying out a conflict check at the earliest opportunity.

When considering accepting instructions from more than one client in the same matter you need to assess not only whether there is a conflict at the outset, but whether events are likely to arise which will prevent you from continuing to act for one or both at a later stage in the proceedings. In almost all cases there will be some possibility of differences in instructions between the clients but the rules do not prevent you acting unless the risk of conflict is significant. Assessing the risk is often not easy. It is also important that where you have accepted instructions from co-defendants you remain alert to the risk of conflict arising as the case progresses.

When considering whether there is an actual conflict there are obvious indicators such as whether the clients have differing accounts of the important relevant circumstances of the alleged crime or where one seems likely to change his or her plea. There are also less obvious indicators. These would include situations where there is some clear inequality between the co-defendants which might, for example, suggest that one client is acting under the influence of the other rather than on his or her own initiative. If you are acting for both this may make it difficult for you to raise and discuss these issues equally with them. In trying to help one, you might be undermining the other. If you believe you are going to be unable to do your best for one without worrying about whether this might prejudice the other you should only accept instructions from one.

The risk of future conflict can be an even more difficult issue to assess. It may be that you have two clients who are pleading not guilty and who are apparently in total agreement on the factual evidence. Should they both be found guilty, you need to consider at the outset whether you would be able to mitigate fully and freely on behalf of one client without in so doing harming the interests of the other. It may be that one has a long list of convictions and is considerably older than the other. If so, it may be that the younger client with a comparatively clean record was led astray or pressurised into committing the crime and would want you to emphasise this in mitigation. If there is a significant risk of this happening you should not accept instructions from both.

Even where care is taken when accepting instructions from more than one client in the same matter there will inevitably be situations where a conflict subsequently arises. This will commonly happen where one defendant changes his or her plea or evidence. A decision will then have to be taken as to whether it is proper to continue to represent one client or whether both will have to instruct new firms. In making this decision you need to consider whether in the changed circumstances your duty to disclose all relevant information to the retained client will place you in breach of your duty of confidentiality to the other client. In other words, you need to decide whether you hold confidential information about the departing client which is now relevant to the retained client. If you do have such information then you cannot act for either client.

Following changes to regulations affecting publicly funded cases, some practitioners have reported pressure from some court clerks on solicitors to represent co-defendants even where there is a clear risk of conflict. Similar pressure has been applied by police at police stations prior to interviews. However, the professional rules of conduct preclude you acting for both clients in those circumstances, and the regulations are not intended to put solicitors in a position where they are asked to act contrary to their professional responsibilities. If asked by the court for your reasons why you cannot act for both defendants, you must not give information which would breach your duty of confidentiality to your client(s). This will normally mean that you can say no more than that it would be unprofessional for you to continue to act.

For the avoidance of doubt, you cannot resolve a conflict by instructing another firm or counsel to undertake the advocacy on behalf of one client. Neither can you pass one of the clients to another member of your firm. The rules make it quite clear that your firm cannot act for clients whose interests conflict.

Any decision to act, or not to act, for co-defendants should be recorded with a brief note of the reasons.

There is no objection to your acting as a conciliator and mediator between parties in a dispute. However, in so acting you should have regard to the appropriate codes of practice such as those issued by the Law Society from time to time. These codes provide detailed guidance on dealing with conflict when acting as mediators.

If tendering for local authority work, your firm will need to consider how frequently the range of work is likely to give rise to conflicts between existing clients and the local authority, for example, in housing and custody matters where the firm acts against the local authority.

If you are a licensed insolvency practitioner you must consider whether any relationship which you have, or your firm has, with clients or others might affect your independence and create a conflict preventing you accepting an appointment to administer an insolvent estate or bankruptcy. See also rule 17 (Insolvency practice).

There are no circumstances where you can act for a client whose interests conflict with your own interests. The situations outlined in 3.02 where you can act for two or more clients whose interests conflict have no application in this situation. This is because of the fiduciary relationship which exists between you and your client which prevents you taking advantage of the client or acting where there is a conflict or potential conflict of interests between you and your client. Examples appear below.

In conduct there is a conflict of interests where you in your personal capacity sell to, or buy from, or lend to, or borrow from, your client. In all these cases you should insist the client takes independent legal advice. If the client refuses you must not proceed with the transaction.

You should never enter into any arrangement or understanding with a client or prospective client prior to the conclusion of a matter under which you acquire an interest in the publication rights with respect to that matter. This applies equally to non-contentious business.

Whilst you are entitled to take security for costs you should be aware of the risk of the court finding undue influence. Before you do take a charge over a client's property it is advisable, therefore, to suggest the client consider seeking independent legal advice. Such advice would not normally be essential unless the terms of the proposed charge are particularly onerous or would give you some unusual benefit or profit. It is, however, important always to ensure that the client understands that a charge is being taken and the effect of such a charge.

You are not able to secure costs by a first legal charge over your client's property if this means that you are entering into a regulated mortgage contract as a lender. A regulated mortgage contract is an investment which is regulated by the Financial Services Authority (FSA). It arises where the lender provides credit to an individual or trustee, and it is secured by a first legal mortgage on land which is in the United Kingdom, and at least 40% of the land is, or is to be, used as a dwelling by the borrower or, where the borrower is a trustee, by a beneficiary of the trust or by a related person. You must be authorised by the FSA in order to secure your costs in this way. Detailed guidance on this is in the booklet "Financial Services and Solicitors" available from the Professional Ethics Guidance Team.

You must always disclose with complete frankness whenever you have, or might obtain, any personal interest or benefit in a transaction in which you are acting for the client. In such circumstances, you must insist that the client receives independent advice.

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

Your interests referred to in this rule may be direct (for example, where you seek to sell to or buy property from the client or lend to, or borrow from, the client), or indirect (for example, where your business interests lead you to recommend the client to invest in a concern in which you are interested).

This rule applies, therefore, not only where you are personally interested in a transaction, but equally where another person working in your firm has an interest of which you are aware and it impairs your ability to give independent and impartial advice.

The interests envisaged by this rule are not restricted to those of a primarily economic nature only. For example, if you become involved in a sexual relationship with a client you must consider whether this may place your interests in conflict with those of the client or otherwise impair your ability to act in the best interests of the client.

If you are a director of a company for which you act, or own shares in the company, you must consider whether you are in a position of conflict when asked to advise the company upon steps it has taken or should take. It may sometimes be necessary to resign from the board or for another solicitor (including a solicitor from the same firm if appropriate) to advise the company in a particular matter where your own interests conflict, or are likely to conflict. If acting for a company in which you have a personal interest you should always ensure that your ability to give independent and impartial advice is not, for that reason, impaired.

If you hold a power of attorney for a client you must not use that power to gain a benefit which, if acting as a professional adviser to that client, you would not be prepared to allow to an independent third party. This applies regardless of the legal position, for example, as to whether you could lend the donor's money to yourself.

You are free to negotiate your terms of business, including costs, with your clients. This includes negotiating conditional fees which are subject to statutory regulation. In all these negotiations you are not acting for the client. There may be situations, however, where the terms of business are particularly unusual and it would be prudent for you to suggest the client seeks independent advice. It would be advisable to do so if, for example, as part, or all, of your remuneration you are to receive shares in a company you are setting up on behalf of your client.

You need to consider whether the conditional fee agreement involves you in insurance mediation activities, such as arranging and/or advising on after the event insurance contracts, etc. Solicitors who carry on insurance mediation activities either need to be able to comply with the Solicitors' Financial Services (Scope) Rules 2001 or be authorised by the FSA. Detailed guidance is in the booklet Financial Services and Solicitors available from the Professional Ethics Guidance Team.

You must always be careful to ensure that any settlement achieved for a client, or any advice given in a non-contentious matter conducted on a contingency fee basis, is in the client's best interests and not made with a view to your obtaining your fee.

Where you discover an act or omission which would justify a claim against you, you must inform the client, and recommend they seek independent advice. You must also inform the client that independent advice should be sought in cases where the client makes a claim against you, or notifies an intention to do so. If the client refuses to seek independent advice, you should not continue to act unless you are satisfied that there is no conflict of interest. See 20.09 (Dealing with claims).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.04 does not prevent you accepting a client's gift but does require the client to take independent advice where the gift is significant, or significant as compared with the client's likely estate and the reasonable expectations of prospective beneficiaries.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.04 allows you to prepare a will for a family member under which you receive a significant gift without requiring the client to seek independent advice on that gift. However, extreme caution should always be exercised in these circumstances as your ability to give independent, dispassionate advice could easily be undermined by your relationship with others within, and outside, the family. The risk of conflict, therefore, is very high. If you are to receive a significant gift from the estate you need also to consider the reasonable expectations of the other prospective beneficiaries, who are likely to be your relatives. If, having taken these reasonable expectations into account, it appears that you are to receive a benefit which is in any way disproportionately large you should always ensure that the client is separately advised on that gift. "Prospective beneficiaries" in the context of this rule means others who would be reasonably expected to benefit because of their relationship to the client and their reasonable expectations would be dependent on the closeness of that relationship. An objective test would be applied in the event of a complaint.

There are other factors which should be taken into account when preparing a will for a family member under which you benefit. It may also be far easier for a close family member to talk through their proposals for their will with someone who has no personal interest in its contents and who is unlikely to be offended by any suggestions they might wish to make. Finally, your relative's bequests are secure from allegations of undue influence if their will is drawn by someone totally independent and who does not take a benefit from it. "Family member" is not defined in 3.04 to allow a flexible approach to be taken. Co-habitants are not included in the exception to independent advice because their legal position is less secure than those related by blood, marriage or adoption.

A "significant amount" for the purposes of 3.04 cannot be quantified because the particular circumstances of the proposed gift must be taken into account. In general, however, anything more than a token gift will be considered significant. If, therefore, anything more than a token amount is accepted without the client having separate advice (other than where you are acting for a family member as permitted by 3.04) you may be exposed to allegations of misconduct.

When considering whether a gift is of a "significant amount" the date of preparation of the document is relevant when determining the size of the estate.

If more than one gift is made to members of a firm, for example, £1,000 to each of the partners in the firm, they should be amalgamated for the purpose of establishing whether the gift is "significant".

The implications of 3.04 need to be made clear to all members of your firm who take instructions from clients, whether solicitors or not. Supervision is important to ensure compliance.

Where you are given money or property to distribute for the benefit of others, such as in a secret trust, this is not considered to be a "gift" for the purposes of 3.04. However, care should be taken to ensure that records are kept confirming the arrangement and to ensure that the transaction is not one which could contain a potential for money laundering.

Examples of the public offices and appointments which 3.05 covers are:

• (a)

  local councillor;

• (b)

  judicial appointments;

• (c)

  justices and justices' clerks;

• (d)

  [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]gaming board [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]the Gambling Commission [;END INSERTED MATTER;];

• (e)

  coroners;

• (f)

  police authority;

• (g)

  the Legal Services Commission's Regional Legal Services Committees; and

• (h)

  Criminal Injuries Compensation [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Authority [;END INSERTED MATTER;] [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Board [;END DELETED MATTER;].

Where you hold (or a member of your firm or family holds) any of these, or similar, offices or appointments it will be up to you in every case to consider:

• (a)

  whether any political or other interest which you may have in connection with the office or appointment may conflict with, or affect, your duty to act in the best interests of any of your clients (including your ability to advise impartially and independently);

• (b)

  whether any duties which arise from your office or appointment conflict with, or affect, your duty to act in the best interests of your clients;

• (c)

  whether the terms of appointment, or any statutory provisions, restrict your ability to act in any particular matter; and

• (d)

  whether there is likely to be a public perception that you have, or your firm has, been able to obtain an unfair advantage for your client(s) as a result of the office or appointment.

Where you are aware that a member of your firm or family has accepted an appointment it is important for you to consider whether there is likely to be a public perception of your firm gaining an unfair advantage for your client(s).

You may provide ADR services as part of your practice or through a separate business. For more information on separate businesses see rule 21 (Separate businesses).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.06 also applies when you provide ADR services through a separate business.

"ADR service" means the service provided by you when acting as an independent neutral, for example, as mediator, conciliator or arbitrator.

The [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]SRA [;END INSERTED MATTER;]Board [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]of the Solicitors Regulation Authority [;END DELETED MATTER;]recommends that those who offer ADR services comply with a code of practice such as the Law Society's Code of Practice for Civil and Commercial Mediation and Code of Practice for Family Mediation.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ules 3.07 to 3.15 set out the limited circumstances in which you may act for more than one party in conveyancing, property selling or mortgage related services. They apply to all types of conveyancing transaction, commercial and residential.

The general rule is that separate representation is required because conveyancing is an area where the risk of a conflict arising between two parties is high and where any conflict may affect a conveyancing chain.

When judging whether or not a transaction is "at arm's length", you need to look at the relationship between the parties and the context of the transaction. A transaction may be regarded as not "at arm's length", even if it is at market value or is stated to be on arm's length terms. A transaction would not usually be at arm's length, for example, if the parties are:

• (a)

  related by blood, adoption or marriage, or living together;

• (b)

  the settlor of a trust and the trustees;

• (c)

  the trustees of a trust and its beneficiary or the beneficiary's relative;

• (d)

  personal representatives and a beneficiary;

• (e)

  the trustees of separate trusts for the same family;

• (f)

  a sole trader or partners and a limited company set up to enable the business to be incorporated;

• (g)

  associated companies (i.e. where one is a holding company and the other is its subsidiary within the meaning of the Companies Act 1985, or two associated companies); or

• (h)

  a local authority and a company within the meaning of 13.08(c).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ules 10.06(3) and 10.06(4) deal with the prohibition on acting for more than one prospective buyer, or for seller and buyer where there is more than one prospective buyer. These provisions recognise the inevitable conflict of interests which makes it impossible to act for more than one prospective buyer, or for the seller and one of several prospective buyers. If you were already acting for seller and buyer (for example, both are established clients), you would be unable to continue acting for both if another prospective buyer were introduced during the course of the transaction. There is a significant inherent conflict in these circumstances. It would be impossible, for example, to reconcile the interests of both clients if it were in the seller's best interests to exchange with the other prospective buyer.

The test of whether a person is an "established client" is an objective one – is it reasonable to regard the person as an established client? A seller or buyer who instructs you for the first time is not an established client. A former client is not necessarily the same as an established client. There needs to be a degree of permanence in the solicitor-client relationship as exemplified by some continuity of instruction over time and the 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.

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.

A builder or developer who acquires a property in part exchange, and sells it on without development, is not selling "as a builder or developer" within the meaning of 3.10(c) and 3.13(c).

If acting for seller and buyer under the provisions of 3.07 to 3.15, you would have to stop acting for at least one of the clients if a conflict were to arise during the course of the transaction. Clients should be made aware of the consequent disruption and additional expense involved in such circumstances, and of the advantages of separate representation, before giving their written consent.

An RFL cannot undertake conveyancing. RELs may undertake conveyancing only if they are entitled to do so under regulation 12 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119).

The effect of 3.11 is as follows:

• (a)

  if providing mortgage related services to the buyer (either through your own firm or a SEAL - see 3.12 for the definition of a SEAL [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;] which allows participating authorised non-SRA firms but requires at least one participating firm to be a recognised body or recognised sole practitioner [;END INSERTED MATTER;]), you may also provide property selling services to the seller (either through your own firm or a SEAL) and do the seller's conveyancing; and

• (b)

  if providing property selling services to the seller through a SEAL (not your own firm), you may also provide mortgage related services to the buyer (either through your own firm or the SEAL) and do the buyer's conveyancing.

A SEAL may act for the seller and provide mortgage related services to the buyer; one of the participating firms may do the seller's conveyancing, and another participating firm may do the buyer's conveyancing.

There will be no breach of 3.16(2)(c) to (d) or 3.19 if the lender has certified that its mortgage instructions and documents sent pursuant to those instructions are subject to the limitations set out in 3.19 and 3.21, and certifies any subsequent instructions and documents in the same way. If there is no certification, when acting in a transaction involving the charge of property to be used solely as the borrower's private residence you must notify the lender that the approved certificate of title will be used and that your duties to the lender will be limited accordingly (see 3.20(b)). In other types of transaction, you should draw the lender's attention to the provisions of 3.19 and 3.21 and state that you cannot act on any instructions which extend beyond the matters contained in 3.19.

As an alternative to printing the approved certificate for each transaction, it is acceptable for a lender to 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.

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.

You must inform the lender of the circumstances, in accordance with 3.18, so that the lender can decide whether or not to instruct you.

A lender's instructions (see 3.19(x)) may require a wider disclosure of your circumstances than 3.18 requires; and you must assess whether the circumstances give rise to a conflict. For example, there will be a conflict between lender and borrower if you become involved in negotiations relating to the terms of the loan. A conflict might arise from the relationship you have or your firm has with the borrower - for example, if you are, or your firm is, the borrower's creditor or debtor or the borrower's business associate or co-habitant.

In relation to 3.22(2), the limitations contained in 3.19 will not apply to the insertion into a recognised certificate of any information required by that certificate. For example, where the recognised certificate requires details of the parties' repairing obligations under a lease of the property, you may provide a summary of the relevant terms of the lease despite the general limitation contained in 3.19(i). However, any additions or amendments to the text of a recognised certificate to suit a particular transaction must not, to the extent to which they create an increased or additional obligation, extend beyond the limitations contained in 3.19.

Many lenders require their lawyer or licensed conveyancer to check the vires of corporate borrowers and that the correct procedures have been followed to ensure the validity of the mortgage. [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.19(n) enables lenders to impose duties on their lawyer or licensed conveyancer in relation to the execution of the mortgage and guarantee. Within this context it is perfectly proper for a lender to require you to obtain such information as the circumstances may require in relation to the capacity of, or execution of documents by, the borrower, third party mortgagor or guarantor; for instance, by way of certified copy minutes or an opinion from a lawyer of the relevant jurisdiction as to the validity and enforceability of the security or guarantee given by a foreign registered company. There is no reason why you should not assist corporate clients by drafting minutes or board resolutions. You should not, however, certify the validity or passing of resolutions unless you were present at the meeting and have verified that it was convened and held strictly in accordance with all relevant requirements.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.19(u) allows you to accept instructions from a lender to carry out administrative arrangements in relation to any collateral security. This expression includes 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.

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.

The definition of conflict in 3.01(2) requires you to assess when two matters are "related". [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 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.

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.

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).

This reflects the fact that 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 circumstances in which you could act despite a conflict are set out in 3.02.

Two different situations are defined. These are in 3.02(1) and (2):

• (a)
  • (i)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(1) deals with the situation where the clients have a "common interest", they all want to continue to instruct you and it would be disproportionate, for example, in terms of cost and general disruption to their matter, to require them to instruct separate solicitors.

  • (ii)

    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.

  • (iii)

    The "common interest" might arise, for example, where you are acting for several members of a family in relation to their affairs or acting for various individuals in the setting up of a company. Any areas of conflict must be substantially less important to all the clients than their common purpose and may, for example, relate to slightly different views on how the common purpose is to be achieved. It will be your duty to keep the differences under review with the clients and to decide if the point has been reached when it would be untenable to continue to represent all of them in a fair and open manner or without any of them being prejudiced.

  • (iv)

    There exist some multi-party complex commercial transactions, where sophisticated users of legal services, who have a common purpose, may expect a firm to act for two or more parties, because this will facilitate efficient handling of the matter (taking into account amongst other things the desire to complete the transaction quickly, the availability of necessary experience/expertise and the overall costs). Indeed in many cases it may already be accepted business practice for firms to act in this manner. An example is acting for different tiers of lenders (for example senior lenders and mezzanine lenders) and/or different parties (for example arrangers/underwriters and bond/security trustees) in entering into a financing transaction where there is already an agreed or commonly understood structure with regard to the ranking of their respective claims, the content of their respective obligations and associated commercial issues.

  • (v)

    While accepted business practice can be considered as a factor in determining whether an appropriate common purpose exists, you and your firm should always exercise caution when proposing to act in accordance with 3.02 and should be mindful of the residual test of reasonableness referred to in 3.02(3).

  • (vi)

    In some situations it might be possible for you to consider whether the retainer could be limited to those areas where there is no conflict with the clients seeking separate advice on any areas of conflict. This could only be done where the conflict did not undermine the overriding common purpose (see below for further guidance on limiting retainers).

  • (vii)

    In some circumstances it might be possible that, while a conflict would prevent you from acting for another party on all aspects of a matter, a mandate limited to a specific issue where there is common purpose might be accepted. For example, you may be retained by the owner of a company to advise on its disposal. In that case you would not generally be able to advise another party on the purchase of the company. However, in the hope and anticipation of a successful sale a seller client which is a sophisticated user of legal services might agree that you should also accept a limited retainer to provide competition law advice to the prospective purchaser regarding the filings for competition law purposes that would be required in the event that the two businesses were combined.

  • (viii)

    When acting under this exception, especially in family situations, you need to consider the developing legal position. Courts are likely to make a presumption of undue influence where one of the parties who is considered vulnerable through age or other circumstances places trust and confidence in the other party. In any situation of doubt it may well be in the best interests of the clients that they are separately represented.

• (b)
  • (i)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(2) is intended to apply to 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. Examples where this exception might apply include:

    • (A)

      acting on insolvencies so that a firm can act for more than one creditor;

    • (B)

      acting for competing bidders, and/or for those involved with the funding of bidders, for a business being sold by auction; and

    • (C)

      acting for competing tenderers submitting tenders to perform a contract.

  • (ii)

    The wording of 3.02(2) is sufficiently wide to permit other transactional work in the commercial field where clients can give consent. Solicitors and their firms should exercise considerable caution when proposing to act in accordance with 3.02(2) in categories of work where to do so is not already accepted business practice.

  • (iii)

    [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(2) should not be applied to disputes over assets other than in the context of corporate restructurings and insolvencies.

Reasonableness is an important rider to 3.02. There may be situations where, despite compliance with 3.02, it would still not be reasonable to act. The apparent unequal bargaining position of the parties, concerns about the mental stability of one of the parties, a family arrangement where an elderly parent is providing security for their son's or daughter's business loan, and the importance of one of the clients to the firm may all be situations where instructions to act for both or all parties should be declined. Having accepted instructions you must be satisfied that you can act even-handedly for both or all clients and that, taking into account any limitations in a specific retainer, you do not favour one at the expense of the other(s).

The criterion against which reasonableness will be judged is whether one client is at risk of prejudice because of the lack of separate representation. In relation to all situations where you are proposing to act for two or more clients under the provisions of 3.02, the onus will be on you to demonstrate why it was reasonable to act for all the clients at the time the instructions were accepted. Above all, you must be satisfied that unfettered advice can be given, without fear or favour, to the clients. You must also keep under review whether it remains reasonable to continue to act for them. You should also have regard to 1.04 (Best interests of clients) which requires you to act in the best interests of each of your clients.

• (a)

  [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.02(4) places obligations on you to discuss with the clients the implications of you, or your firm, continuing to act for all of them. You must be satisfied that the clients understand the issues and that their consent is independently and freely given. 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. Extreme caution will be required where one of the clients is particularly vulnerable due to mental health, language or other problems affecting their understanding of the issues, although where a litigation friend acts for a person who lacks capacity they will be able to consent on that person's behalf. Similarly, you must always be alert to situations where a client might be consenting under duress or undue influence and in those circumstances must insist on separate representation. For the avoidance of doubt, and for evidential purposes, you should always keep a written record of all discussions with the clients about the implications of your acting for them. You must always obtain all the clients' written consent on each occasion when acting under either of the exceptions.

• (b)

  Where seeking informed consent under 3.02(1)(b) you should identify by name the other clients you or your firm propose(s) to act for, or be able to do so when their identities are known. Provided that you do this and comply with the requirements of 3.02(4), the obligation to obtain "informed" consent in 3.02(1)(b) will have been satisfied. Where consent is sought under 3.02(2), you need to comply with the requirements of 3.02(4) but you need not identify by name the other clients you or your firm propose(s) to act for.

When acting for two or more clients on a matter, or a related matter, there may be circumstances where you will have to cease acting for one or both clients. This may be in circumstances where no conflict was apparent when accepting instructions but a conflict subsequently arose or when acting under one of the exceptions and it becomes impossible to fulfil the conditions set out in 3.02. In these circumstances 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 rule does not specifically deal with potential or future conflict, although it does make clear that a significant risk of conflict should prevent a solicitor from acting. You should always be cautious, therefore, about accepting instructions where the possibility of future conflict is evident. The risks should be explained to the clients about the problems and expense which the requirement for future separate representation could bring.

There may be situations where, when acting for two or more clients, it is appropriate to continue to advise them but necessary to make clear that there are defined areas of conflict on which you cannot advise, and one or more of them may need separate advice. Your retainer with your clients will, when these situations arise, need to be limited to exclude those areas of work or advice. Care must always be taken, however, to ensure that the clients understand:

• (a)

  exactly what you are proposing to deal with on their behalf; and

• (b)

  those contested areas which are to be excluded from the retainer.

A limited retainer would be unlikely to be appropriate in any situation where one of the clients was disadvantaged in some way as against the other. This might be because of an unequal bargaining position or because one had some form of disability. In any situation where you agree to act for two or more clients by limiting the retainer it is important that you keep all developments under review to ensure that it remains appropriate to continue to act.

There may be some circumstances in which you should refuse instructions when, although there is no actual conflict of interests as defined in rule 3, you might feel unable to do your best for a client because of some form of professional embarrassment. It may be, for example, that if you have acted for a client in the past and accept instructions to act against that client you may feel inhibited in doing your best for the new client because of the past relationship with the former client. If so, the instructions from the new client should be refused as you would, otherwise, be in breach of core duties 1.03 (Independence) and 1.04 (Best interests of clients).

There may also be situations where you and your firm are asked to act with consent, using an information barrier in accordance with rule 4 (Confidentiality and disclosure), but the information you hold and which you cannot disclose to your client is of such a nature that it would cause severe embarrassment to your firm if, or when, it later came to light that your firm held such information. It may be, for example, that you are asked to act for a client on the acquisition of a business in circumstances where confidential information is held by your firm that the business has a serious problem with its accounts. Similarly, it may be that you are asked to prepare an employment contract for a company which is planning to recruit an individual who is known, confidentially, to be under investigation for fraud. In those circumstances you and your firm would be seriously embarrassed acting for a client who you knew was wasting legal fees on an outcome the client would not want to pursue if in possession of the knowledge held by your firm. It could be argued that you are not acting in the best interests of the client (see 1.04 (Best interests of clients)) or that you are damaging public confidence in the profession (see 1.06 (Public confidence)).

Where professional embarrassment is not a factor and the circumstances which would otherwise prevent you from acting in 4.03 (duty not to put confidentiality at risk by acting) do not arise, it will be a purely commercial decision as to whether you should act against the interests of another client or former client, provided there is no conflict as defined in 3.01 or 3.02.

If you are employed as an in-house lawyer your employer is your client. The nature of this relationship may cause problems because you do not have the same freedom as a firm would have to decline instructions. There may be occasions, for example, when you are asked to advise your employer in situations where conflict or potential conflict arises between your interests and the interests of your employer. These include:

• (a)

  where your personal interests as an employee may conflict with the interests of your employer who wants advice on a course of action which could be detrimental to you as an employee where, for example, a merger could lead to your redundancy;

• (b)

  where your employer asks you to do something which would place you in breach of your professional obligations, for example, to file a document with the court which you know contains false information; or

• (c)

  where your employer may act against your advice and, for example, engage in criminal activity which may require you to take action against your employer.

In relation to situations where your personal interests may conflict with a course of action proposed by your employer you need not necessarily be excluded from advising your employer. Your employer will usually be aware of exactly how you will be affected by its proposals, and if you are able to give objective advice on the legal issues where your expertise is required you would normally be free to do so. There may, however, be situations where you are so affected by the advice you are asked to give that you feel your objectivity and independence are impaired and in those situations you would have to ask your employer to seek other advice, either internally or externally. What is important in these situations is that there is transparency about your interests. Beyond that, you will have to make a judgement about whether you feel you have the necessary objectivity to advise.

If your employer was unaware of your interests – and, therefore, the potential for conflict - the position would be different. If, for example, you had a large shareholding in another company and your employer's proposed action could adversely affect the value of those shares then you would either have to disclose your interest or explain that a conflict prevented you from advising on that issue.

In situations where you are asked to act contrary to your professional obligations then you should not compromise your position and you must refuse to carry out instructions which would have this result, even if ultimately this led to the loss of your job.

There may be situations where there is a positive legal obligation on you to take action against your employer where, for example, your employer is engaging in money laundering or where there are "whistle blowing" obligations. Legal issues of this nature are beyond the remit of this guidance. They are situations where your relationship with your employer has reached the stage where you would need to consider the advisability of seeking legal advice on your own position.

Finally, as an in-house lawyer you are, under rule 13 (In-house practice), able to act for a limited number of other bodies and individuals. For example, if employed by a company, you may act for a holding, associated or subsidiary company of that company employer. If you do so you must ensure that you do not act in any situation where there would be a conflict between the interests of your employer and the other company for whom you are also acting (see 13.01 and 13.03). Similarly, if employed in local government you may act, for example, for local councillors in certain circumstances, provided you can comply with rule 3.

In publicly funded cases, regulations require that one solicitor be appointed to act for all co-defendants in a legal aid case unless there is, or is likely to be, a conflict. The purpose of this is to ensure economy in the use of public funds by ensuring that a single solicitor represents co-defendants where it is proper to do so. The professional conduct obligations which deal with conflicts of interest have always prevented a solicitor or firm acting for two or more clients where there is a conflict or significant risk of a conflict arising between the interests of two or more clients. A solicitor can act, however, for co-defendants where conflict is not a factor. The difficulty often lies, however, in spotting potential conflict and deciding whether it is sufficiently real to refuse instructions.

Your starting point should always be your fundamental professional obligation to act in each client's best interests. Can you discharge this obligation to each client? This means first asking each client if they are aware of any actual or potential conflict between them and then, if they indicate that there is no such conflict, asking yourself whether you feel there are any constraints on the advice you would want to give to one client, or on the action you would want to take on that client's behalf, which are likely to arise because you act for another co-defendant.

A conflict of interest arises wherever there is a constraint of that sort, for example where it is in the best interests of client A:

• (a)

  to give evidence against client B;

• (b)

  to make a statement incriminating client B;

• (c)

  to implicate client B in a police interview;

• (d)

  to provide prejudicial information regarding client B to an investigator;

• (e)

  to cross-examine client B in such a manner as to call into question his or her credibility;

• (f)

  to rely upon confidential information given by client B without his or her consent; or

• (g)

  to adopt tactics in the course of the retainer which potentially or actually harm client B.

If these obligations actually come into conflict when acting for two or more clients you will have to cease to act for one and often both. This can cause considerable disruption and expense, which is why the rules require that you should not accept instructions if there is a significant risk of this happening.

Many criminal clients will, of course, have retained you at the police station prior to a police interview and are thus not at that stage defendants. The obligations referred to above apply at this early stage, and you must be satisfied that accepting instructions on behalf of a client prior to a police interview does not place you in conflict with another client who is also to be interviewed. In order to assess whether you can act for both clients it is important that you do not interview the clients together and that you get instructions which are as full as possible from the first client before any substantive contact with the second client. However, never let the police deter you from seeing the second client because they think there is a conflict – that decision must be yours.

A further consideration when taking instructions at the police station, especially out of office hours when an immediate conflict check is not possible, is that the firm may already act for another defendant in that matter or information obtained at the police station may be relevant to another client on an unrelated matter. For example, the firm may be acting in divorce proceedings for a wife where violence is alleged and information that her husband has been charged with an offence involving violence would be relevant and may make it impossible to continue acting for the wife. This highlights the importance of carrying out a conflict check at the earliest opportunity.

When considering accepting instructions from more than one client in the same matter you need to assess not only whether there is a conflict at the outset, but whether events are likely to arise which will prevent you from continuing to act for one or both at a later stage in the proceedings. In almost all cases there will be some possibility of differences in instructions between the clients but the rules do not prevent you acting unless the risk of conflict is significant. Assessing the risk is often not easy. It is also important that where you have accepted instructions from co-defendants you remain alert to the risk of conflict arising as the case progresses.

When considering whether there is an actual conflict there are obvious indicators such as whether the clients have differing accounts of the important relevant circumstances of the alleged crime or where one seems likely to change his or her plea. There are also less obvious indicators. These would include situations where there is some clear inequality between the co-defendants which might, for example, suggest that one client is acting under the influence of the other rather than on his or her own initiative. If you are acting for both this may make it difficult for you to raise and discuss these issues equally with them. In trying to help one, you might be undermining the other. If you believe you are going to be unable to do your best for one without worrying about whether this might prejudice the other you should only accept instructions from one.

The risk of future conflict can be an even more difficult issue to assess. It may be that you have two clients who are pleading not guilty and who are apparently in total agreement on the factual evidence. Should they both be found guilty, you need to consider at the outset whether you would be able to mitigate fully and freely on behalf of one client without in so doing harming the interests of the other. It may be that one has a long list of convictions and is considerably older than the other. If so, it may be that the younger client with a comparatively clean record was led astray or pressurised into committing the crime and would want you to emphasise this in mitigation. If there is a significant risk of this happening you should not accept instructions from both.

Even where care is taken when accepting instructions from more than one client in the same matter there will inevitably be situations where a conflict subsequently arises. This will commonly happen where one defendant changes his or her plea or evidence. A decision will then have to be taken as to whether it is proper to continue to represent one client or whether both will have to instruct new firms. In making this decision you need to consider whether in the changed circumstances your duty to disclose all relevant information to the retained client will place you in breach of your duty of confidentiality to the other client. In other words, you need to decide whether you hold confidential information about the departing client which is now relevant to the retained client. If you do have such information then you cannot act for either client.

Following changes to regulations affecting publicly funded cases, some practitioners have reported pressure from some court clerks on solicitors to represent co-defendants even where there is a clear risk of conflict. Similar pressure has been applied by police at police stations prior to interviews. However, the professional rules of conduct preclude you acting for both clients in those circumstances, and the regulations are not intended to put solicitors in a position where they are asked to act contrary to their professional responsibilities. If asked by the court for your reasons why you cannot act for both defendants, you must not give information which would breach your duty of confidentiality to your client(s). This will normally mean that you can say no more than that it would be unprofessional for you to continue to act.

For the avoidance of doubt, you cannot resolve a conflict by instructing another firm or counsel to undertake the advocacy on behalf of one client. Neither can you pass one of the clients to another member of your firm. The rules make it quite clear that your firm cannot act for clients whose interests conflict.

Any decision to act, or not to act, for co-defendants should be recorded with a brief note of the reasons.

There is no objection to your acting as a conciliator and mediator between parties in a dispute. However, in so acting you should have regard to the appropriate codes of practice such as those issued by the Law Society from time to time. These codes provide detailed guidance on dealing with conflict when acting as mediators.

If tendering for local authority work, your firm will need to consider how frequently the range of work is likely to give rise to conflicts between existing clients and the local authority, for example, in housing and custody matters where the firm acts against the local authority.

If you are a licensed insolvency practitioner you must consider whether any relationship which you have, or your firm has, with clients or others might affect your independence and create a conflict preventing you accepting an appointment to administer an insolvent estate or bankruptcy. See also rule 17 (Insolvency practice).

There are no circumstances where you can act for a client whose interests conflict with your own interests. The situations outlined in 3.02 where you can act for two or more clients whose interests conflict have no application in this situation. This is because of the fiduciary relationship which exists between you and your client which prevents you taking advantage of the client or acting where there is a conflict or potential conflict of interests between you and your client. Examples appear below.

In conduct there is a conflict of interests where you in your personal capacity sell to, or buy from, or lend to, or borrow from, your client. In all these cases you should insist the client takes independent legal advice. If the client refuses you must not proceed with the transaction.

You should never enter into any arrangement or understanding with a client or prospective client prior to the conclusion of a matter under which you acquire an interest in the publication rights with respect to that matter. This applies equally to non-contentious business.

Whilst you are entitled to take security for costs you should be aware of the risk of the court finding undue influence. Before you do take a charge over a client's property it is advisable, therefore, to suggest the client consider seeking independent legal advice. Such advice would not normally be essential unless the terms of the proposed charge are particularly onerous or would give you some unusual benefit or profit. It is, however, important always to ensure that the client understands that a charge is being taken and the effect of such a charge.

You are not able to secure costs by a first legal charge over your client's property if this means that you are entering into a regulated mortgage contract as a lender. A regulated mortgage contract is an investment which is regulated by the Financial Services Authority (FSA). It arises where the lender provides credit to an individual or trustee, and it is secured by a first legal mortgage on land which is in the United Kingdom, and at least 40% of the land is, or is to be, used as a dwelling by the borrower or, where the borrower is a trustee, by a beneficiary of the trust or by a related person. You must be authorised by the FSA in order to secure your costs in this way. Detailed guidance on this is in the booklet "Financial Services and Solicitors" available from the Professional Ethics Guidance Team.

You must always disclose with complete frankness whenever you have, or might obtain, any personal interest or benefit in a transaction in which you are acting for the client. In such circumstances, you must insist that the client receives independent advice.

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

Your interests referred to in this rule may be direct (for example, where you seek to sell to or buy property from the client or lend to, or borrow from, the client), or indirect (for example, where your business interests lead you to recommend the client to invest in a concern in which you are interested).

This rule applies, therefore, not only where you are personally interested in a transaction, but equally where another person working in your firm has an interest of which you are aware and it impairs your ability to give independent and impartial advice.

The interests envisaged by this rule are not restricted to those of a primarily economic nature only. For example, if you become involved in a sexual relationship with a client you must consider whether this may place your interests in conflict with those of the client or otherwise impair your ability to act in the best interests of the client.

If you are a director of a company for which you act, or own shares in the company, you must consider whether you are in a position of conflict when asked to advise the company upon steps it has taken or should take. It may sometimes be necessary to resign from the board or for another solicitor (including a solicitor from the same firm if appropriate) to advise the company in a particular matter where your own interests conflict, or are likely to conflict. If acting for a company in which you have a personal interest you should always ensure that your ability to give independent and impartial advice is not, for that reason, impaired.

If you hold a power of attorney for a client you must not use that power to gain a benefit which, if acting as a professional adviser to that client, you would not be prepared to allow to an independent third party. This applies regardless of the legal position, for example, as to whether you could lend the donor's money to yourself.

You are free to negotiate your terms of business, including costs, with your clients. This includes negotiating conditional fees which are subject to statutory regulation. In all these negotiations you are not acting for the client. There may be situations, however, where the terms of business are particularly unusual and it would be prudent for you to suggest the client seeks independent advice. It would be advisable to do so if, for example, as part, or all, of your remuneration you are to receive shares in a company you are setting up on behalf of your client.

You need to consider whether the conditional fee agreement involves you in insurance mediation activities, such as arranging and/or advising on after the event insurance contracts, etc. Solicitors who carry on insurance mediation activities either need to be able to comply with the Solicitors' Financial Services (Scope) Rules 2001 or be authorised by the FSA. Detailed guidance is in the booklet Financial Services and Solicitors available from the Professional Ethics Guidance Team.

You must always be careful to ensure that any settlement achieved for a client, or any advice given in a non-contentious matter conducted on a contingency fee basis, is in the client's best interests and not made with a view to your obtaining your fee.

Where you discover an act or omission which would justify a claim against you, you must inform the client, and recommend they seek independent advice. You must also inform the client that independent advice should be sought in cases where the client makes a claim against you, or notifies an intention to do so. If the client refuses to seek independent advice, you should not continue to act unless you are satisfied that there is no conflict of interest. See 20.09 (Dealing with claims).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.04 does not prevent you accepting a client's gift but does require the client to take independent advice where the gift is significant, or significant as compared with the client's likely estate and the reasonable expectations of prospective beneficiaries.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.04 allows you to prepare a will for a family member under which you receive a significant gift without requiring the client to seek independent advice on that gift. However, extreme caution should always be exercised in these circumstances as your ability to give independent, dispassionate advice could easily be undermined by your relationship with others within, and outside, the family. The risk of conflict, therefore, is very high. If you are to receive a significant gift from the estate you need also to consider the reasonable expectations of the other prospective beneficiaries, who are likely to be your relatives. If, having taken these reasonable expectations into account, it appears that you are to receive a benefit which is in any way disproportionately large you should always ensure that the client is separately advised on that gift. "Prospective beneficiaries" in the context of this rule means others who would be reasonably expected to benefit because of their relationship to the client and their reasonable expectations would be dependent on the closeness of that relationship. An objective test would be applied in the event of a complaint.

There are other factors which should be taken into account when preparing a will for a family member under which you benefit. It may also be far easier for a close family member to talk through their proposals for their will with someone who has no personal interest in its contents and who is unlikely to be offended by any suggestions they might wish to make. Finally, your relative's bequests are secure from allegations of undue influence if their will is drawn by someone totally independent and who does not take a benefit from it. "Family member" is not defined in 3.04 to allow a flexible approach to be taken. Co-habitants are not included in the exception to independent advice because their legal position is less secure than those related by blood, marriage or adoption.

A "significant amount" for the purposes of 3.04 cannot be quantified because the particular circumstances of the proposed gift must be taken into account. In general, however, anything more than a token gift will be considered significant. If, therefore, anything more than a token amount is accepted without the client having separate advice (other than where you are acting for a family member as permitted by 3.04) you may be exposed to allegations of misconduct.

When considering whether a gift is of a "significant amount" the date of preparation of the document is relevant when determining the size of the estate.

If more than one gift is made to members of a firm, for example, £1,000 to each of the partners in the firm, they should be amalgamated for the purpose of establishing whether the gift is "significant".

The implications of 3.04 need to be made clear to all members of your firm who take instructions from clients, whether solicitors or not. Supervision is important to ensure compliance.

Where you are given money or property to distribute for the benefit of others, such as in a secret trust, this is not considered to be a "gift" for the purposes of 3.04. However, care should be taken to ensure that records are kept confirming the arrangement and to ensure that the transaction is not one which could contain a potential for money laundering.

Examples of the public offices and appointments which 3.05 covers are:

• (a)

  local councillor;

• (b)

  judicial appointments;

• (c)

  justices and justices' clerks;

• (d)

  [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]gaming board [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]the Gambling Commission [;END INSERTED MATTER;];

• (e)

  coroners;

• (f)

  police authority;

• (g)

  the Legal Services Commission's Regional Legal Services Committees; and

• (h)

  Criminal Injuries Compensation [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Authority [;END INSERTED MATTER;] [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Board [;END DELETED MATTER;].

Where you hold (or a member of your firm or family holds) any of these, or similar, offices or appointments it will be up to you in every case to consider:

• (a)

  whether any political or other interest which you may have in connection with the office or appointment may conflict with, or affect, your duty to act in the best interests of any of your clients (including your ability to advise impartially and independently);

• (b)

  whether any duties which arise from your office or appointment conflict with, or affect, your duty to act in the best interests of your clients;

• (c)

  whether the terms of appointment, or any statutory provisions, restrict your ability to act in any particular matter; and

• (d)

  whether there is likely to be a public perception that you have, or your firm has, been able to obtain an unfair advantage for your client(s) as a result of the office or appointment.

Where you are aware that a member of your firm or family has accepted an appointment it is important for you to consider whether there is likely to be a public perception of your firm gaining an unfair advantage for your client(s).

You may provide ADR services as part of your practice or through a separate business. For more information on separate businesses see rule 21 (Separate businesses).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.06 also applies when you provide ADR services through a separate business.

"ADR service" means the service provided by you when acting as an independent neutral, for example, as mediator, conciliator or arbitrator.

The [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]SRA [;END INSERTED MATTER;]Board [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]of the Solicitors Regulation Authority [;END DELETED MATTER;]recommends that those who offer ADR services comply with a code of practice such as the Law Society's Code of Practice for Civil and Commercial Mediation and Code of Practice for Family Mediation.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ules 3.07 to 3.15 set out the limited circumstances in which you may act for more than one party in conveyancing, property selling or mortgage related services. They apply to all types of conveyancing transaction, commercial and residential.

The general rule is that separate representation is required because conveyancing is an area where the risk of a conflict arising between two parties is high and where any conflict may affect a conveyancing chain.

When judging whether or not a transaction is "at arm's length", you need to look at the relationship between the parties and the context of the transaction. A transaction may be regarded as not "at arm's length", even if it is at market value or is stated to be on arm's length terms. A transaction would not usually be at arm's length, for example, if the parties are:

• (a)

  related by blood, adoption or marriage, or living together;

• (b)

  the settlor of a trust and the trustees;

• (c)

  the trustees of a trust and its beneficiary or the beneficiary's relative;

• (d)

  personal representatives and a beneficiary;

• (e)

  the trustees of separate trusts for the same family;

• (f)

  a sole trader or partners and a limited company set up to enable the business to be incorporated;

• (g)

  associated companies (i.e. where one is a holding company and the other is its subsidiary within the meaning of the Companies Act 1985, or two associated companies); or

• (h)

  a local authority and a company within the meaning of 13.08(c).

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ules 10.06(3) and 10.06(4) deal with the prohibition on acting for more than one prospective buyer, or for seller and buyer where there is more than one prospective buyer. These provisions recognise the inevitable conflict of interests which makes it impossible to act for more than one prospective buyer, or for the seller and one of several prospective buyers. If you were already acting for seller and buyer (for example, both are established clients), you would be unable to continue acting for both if another prospective buyer were introduced during the course of the transaction. There is a significant inherent conflict in these circumstances. It would be impossible, for example, to reconcile the interests of both clients if it were in the seller's best interests to exchange with the other prospective buyer.

The test of whether a person is an "established client" is an objective one – is it reasonable to regard the person as an established client? A seller or buyer who instructs you for the first time is not an established client. A former client is not necessarily the same as an established client. There needs to be a degree of permanence in the solicitor-client relationship as exemplified by some continuity of instruction over time and the 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.

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.

A builder or developer who acquires a property in part exchange, and sells it on without development, is not selling "as a builder or developer" within the meaning of 3.10(c) and 3.13(c).

If acting for seller and buyer under the provisions of 3.07 to 3.15, you would have to stop acting for at least one of the clients if a conflict were to arise during the course of the transaction. Clients should be made aware of the consequent disruption and additional expense involved in such circumstances, and of the advantages of separate representation, before giving their written consent.

An RFL cannot undertake conveyancing. RELs may undertake conveyancing only if they are entitled to do so under regulation 12 of the European Communities (Lawyer's Practice) Regulations 2000 (SI 2000/1119).

The effect of 3.11 is as follows:

• (a)

  if providing mortgage related services to the buyer (either through your own firm or a SEAL - see 3.12 for the definition of a SEAL [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;] which allows participating authorised non-SRA firms but requires at least one participating firm to be a recognised body or recognised sole practitioner [;END INSERTED MATTER;]), you may also provide property selling services to the seller (either through your own firm or a SEAL) and do the seller's conveyancing; and

• (b)

  if providing property selling services to the seller through a SEAL (not your own firm), you may also provide mortgage related services to the buyer (either through your own firm or the SEAL) and do the buyer's conveyancing.

A SEAL may act for the seller and provide mortgage related services to the buyer; one of the participating firms may do the seller's conveyancing, and another participating firm may do the buyer's conveyancing.

There will be no breach of 3.16(2)(c) to (d) or 3.19 if the lender has certified that its mortgage instructions and documents sent pursuant to those instructions are subject to the limitations set out in 3.19 and 3.21, and certifies any subsequent instructions and documents in the same way. If there is no certification, when acting in a transaction involving the charge of property to be used solely as the borrower's private residence you must notify the lender that the approved certificate of title will be used and that your duties to the lender will be limited accordingly (see 3.20(b)). In other types of transaction, you should draw the lender's attention to the provisions of 3.19 and 3.21 and state that you cannot act on any instructions which extend beyond the matters contained in 3.19.

As an alternative to printing the approved certificate for each transaction, it is acceptable for a lender to 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.

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.

You must inform the lender of the circumstances, in accordance with 3.18, so that the lender can decide whether or not to instruct you.

A lender's instructions (see 3.19(x)) may require a wider disclosure of your circumstances than 3.18 requires; and you must assess whether the circumstances give rise to a conflict. For example, there will be a conflict between lender and borrower if you become involved in negotiations relating to the terms of the loan. A conflict might arise from the relationship you have or your firm has with the borrower - for example, if you are, or your firm is, the borrower's creditor or debtor or the borrower's business associate or co-habitant.

In relation to 3.22(2), the limitations contained in 3.19 will not apply to the insertion into a recognised certificate of any information required by that certificate. For example, where the recognised certificate requires details of the parties' repairing obligations under a lease of the property, you may provide a summary of the relevant terms of the lease despite the general limitation contained in 3.19(i). However, any additions or amendments to the text of a recognised certificate to suit a particular transaction must not, to the extent to which they create an increased or additional obligation, extend beyond the limitations contained in 3.19.

Many lenders require their lawyer or licensed conveyancer to check the vires of corporate borrowers and that the correct procedures have been followed to ensure the validity of the mortgage. [;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.19(n) enables lenders to impose duties on their lawyer or licensed conveyancer in relation to the execution of the mortgage and guarantee. Within this context it is perfectly proper for a lender to require you to obtain such information as the circumstances may require in relation to the capacity of, or execution of documents by, the borrower, third party mortgagor or guarantor; for instance, by way of certified copy minutes or an opinion from a lawyer of the relevant jurisdiction as to the validity and enforceability of the security or guarantee given by a foreign registered company. There is no reason why you should not assist corporate clients by drafting minutes or board resolutions. You should not, however, certify the validity or passing of resolutions unless you were present at the meeting and have verified that it was convened and held strictly in accordance with all relevant requirements.

[;BEGIN MATTER DELETED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]Subr [;END DELETED MATTER;] [;BEGIN MATTER INSERTED ON 31 MARCH 2009 AS PART OF CHANGES INTRODUCING FIRM-BASED REGULATION AND LDPs UNDER THE LEGAL SERVICES ACT 2007;]R [;END INSERTED MATTER;]ule 3.19(u) allows you to accept instructions from a lender to carry out administrative arrangements in relation to any collateral security. This expression includes 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.