Question of ethics archive

Important: The guidance below was written and issued before the introduction of the SRA Handbook on 6 October 2011, and may refer to regulatory material that is no longer in effect. Although it may still be relevant, this guidance has not been rewritten in light of the wide-ranging regulatory changes implemented on 6 October 2011. Accordingly, it has been archived.

February 2011

 Note: References to a "rule" or to the "Code" are to the rules in the Solicitors' Code of Conduct 2007.

Lender requesting bank statements from panel firms

Q. My firm is on the panel of one of the big lenders for conveyancing. The lender is currently reviewing its panel arrangements and is requiring all panel members to provide copies for the last three months of our client account bank statements. I am concerned that to do so would breach the duty of confidentiality that I owe to my clients. What should I do?

As you rightly say, solicitors have a duty under rule 4.01 of the Code to keep the affairs of clients and former clients confidential, and you should be constantly alert to requests for information, such as this one, which might put you in breach of that duty. You will therefore need to explain to the lender that the rules of conduct prevent you from disclosing copies of the statements themselves.

Although it is probably not feasible in this instance, as a general rule it is open to you to approach a client for consent to disclose confidential information to a third party. However, the client must be in a position to give informed consent, and it would not therefore be appropriate to cover disclosures of this sort in your terms of business or in your client care letter. If giving consent would not be in the client's best interests, you would need to point this out to the client and advise him or her that he or she may wish to seek their own legal advice before deciding whether to give consent.

Client leaving legacy in will to solicitor

Q. I have been asked by a close family friend to prepare a will for her. Amongst other legacies, she wants to leave gifts to my husband and I, and to our two children totalling £14,000. Her assets exceed £1 million, so this is not a huge sum. She is a very intelligent person who knows her own mind. Although I have suggested that she instructs other solicitors, she is adamant that she wants me to do it for her. I know you cannot usually prepare a will in which you benefit, but does it make a difference that she is a personal friend, or should I ask someone else in my firm to prepare it for her?

The rule governing gifts from clients—by will or inter vivos—is 3.04 of the Code. It applies whether the client wishes to leave the legacy to you, a member of your family or to anyone in your firm. You cannot therefore avoid the rule by passing the client to another fee earner in your firm.

The rule does not prevent you drawing up the will for your client, but it does require you to first ensure that the client takes independent advice. If the client refuses to do so, you cannot continue to act.

The rule only applies if the gift is for a "significant amount", either in itself or in relation to the size your client's estate and taking into account the reasonable expectations of others who might expect to benefit under the will. There is no hard-and-fast rule as to what constitutes a significant amount, but guidance note 58 provides that anything more than a "token gift" will be considered significant. Although your friend is wealthy, the sum of £14,000 is still a significant gift in itself.

There is a limited exception to the rule where the client is a family member, but not for friends. You will therefore only be able to draft the will if the client first takes independent advice.

Instructing a debt collection agency

Q. We want to instruct a debt collection agency to collect outstanding costs on our behalf. We are proposing to pay the company a percentage of each bill recovered. Is there any problem with this?

Yes. When a client fails to pay your costs, the duty of confidentiality you owe to a client is waived so far as is strictly necessary to enable you to recover your costs. This would enable you to instruct another firm of solicitors to act on your behalf, but in our view it would not enable you to instruct a debt recovery agency.

If you were to instruct a firm of solicitors, you could agree to pay them a percentage of monies recovered, but only in respect of those matters where the monies are recovered without the institution of legal proceedings. The reason for this is that contingency fees are permitted in non-contentious matters, but rule 2.04 of the Code prohibits a solicitor receiving a contingency fee in a contentious matter (see guidance notes 45 and 46).