When Can Lawyers Or Conveyancers Act For Both Parties?

Posted on October 24, 2018 by | 0 Comments

Tim O'Dwyer M.A., LL.B OPINION
by Tim O’Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

Real Estate Encyclopedia

 

A junior journalist had a couple of questions about my paper “Should you act for both parties?” delivered at the Australian Institute of Conveyancers National Conference. “What’s conveyancing?” he asked. “And what’s the difference between conveyancers and solicitors?”

A pre-conference media release had assumed – mistakenly – that everyone knew conveyancing was the contract preparation, professional advice, negotiation, documentation and searches involved when you buy or sell real estate, and that conveyancers generally provide these same services in competition with solicitors – except in Queensland, Tasmania and the ACT. (My Victorian colleague Peter Mericka takes issue, of course, on what conveyancers may lawfully do in Victoria.)

Whether someone acts for a buyer, a seller or both at once, I told the conference, conveyancing isn’t newsworthy until mischief occurs. But there is a real risk of newsworthy mischief, I suggested, if you act for both parties in the same transaction. “Say no every time to ‘both parties’ conveyancing,” I said, “because mischievous conflicts of interests can arise.”

Law Societies and Conveyancing Institutes across Australia, however, mostly say “yes” – provided clients consent and no interests conflict.

In Queensland, for instance, the Law Society has long green-lighted this popular and lucrative practice. The Solicitors’ Handbook, nevertheless, notes the “complexity of the law” on conflicts of interests, cautions “meticulous” observance of it and suggests (not requires) in “both parties” matters that solicitors should (not must) obtain clients’ informed, voluntary and written consents. (Although there are no conveyancers in Queensland, many solicitors and law firms promote themselves as specialist conveyancers.)

In New South Wales the same solicitor may act for both parties, but the Law Society’s Code of Practice states: “Each party should be informed in writing that the solicitor . acts for the other party and of the potential for future dispute and additional expense. If a party objects, then the solicitor . should decline to act for one or both of them.” The Code of Ethics for The Australian Institute of Conveyancers (NSW Division) recommends conveyancers not act for more than one party, but if they do, the clients must be treated equally. NSW conveyancers may in fact be deterred from this practice because indemnity insurance excess doubles for claims in such circumstances. (This disincentive may be common to many of the professional indemnity schemes for conveyancers and solicitors throughout Australia.)

Victorian solicitors must not, under Professional Conduct Rules, act for both vendor and purchaser unless both acknowledge having been fully informed in writing “concerning the potential disadvantages”. If a material conflict of interests arises the solicitor must cease to act for both unless they agree in writing that the solicitor may still act for one. But there must be no constraint “by reason of any common law, equitable or statutory duty.” Victorian conveyancers operate under the same Code as NSW conveyancers.

The ACT Law Society opposes, with some limited exceptions, solicitors acting for both parties because if a conflicts of interests arises solicitors “cannot properly fulfil their duty to both parties”.

In Western Australia solicitors are not restricted from acting for both parties however the Law Society there says, “Principles relating to conflicts of interests of course, nevertheless apply.” W.A. conveyancers operate under the same Code as Victorian and NSW colleagues.

The Rules for Tasmanian solicitors provide that they may not act for more than one party unless they are “satisfied on reasonable grounds” the parties are aware the solicitor may be prevented from “disclosing any relevant matters to one party and . from giving advice to one party if that advice is contrary to the interest of any other party”. Clients must give informed consents, and solicitors must immediately cease to act if they are “not able to” without acting contrary to their clients’ interests. (Legislation for the licensing of Specialist Conveyancers has been passed by the Tasmanian Parliament.)

The Law Society rules in South Australia require solicitors to “avoid conflict of interest between two or more clients” but they may still act for both parties in a conveyance if each consents and accepts that the solicitor may not disclose to each “all information relevant to the matter” or give advice to one contrary to the other’s interests. If a solicitor “determines” he or she cannot continue to act for both without “acting in a manner contrary to the interests” of the clients, the solicitor must immediately “cease to act for all parties”. Conveyancers in South Australia are allowed by law to act for both parties provided the issues, conflicts and risks are disclosed to both in a prescribed form. The Institute of Conveyancers (SA Division) widely discourages the “both parties” practice, but its Code of Conduct (which mostly mirrors other Divisions’ Codes of Ethics) obliges a conveyancer to cease to act for either client (except as permitted by law) when a conflict arises.

The Northern Territory Law Society’s Rules of Professional Conduct provide that a practitioner intending to act for more than one party must be satisfied that each is aware the practitioner acts for the other, and that each consents to this. The clients must also consent to the possibility that their lawyer may not disclose to each all relevant information within the lawyer’s knowledge, or give advice to one contrary to the other’s interests. A lawyer handling a conveyance for both parties in the N.T. must cease to act if he or she “determines” a conflict of interests will arise. N.T. conveyancers may act for both parties but are obliged by law to disclose this to each client. They must cease to act if there is a conflict of interests. Few N.T. conveyancers will act for both parties anyhow, because their indemnity insurance specifically excludes coverage in that situation.

Whatever the rules may be – wherever you are buying, selling or otherwise dealing in property – the warnings remain the same: Don’t use the same solicitor or conveyancer as the other party. You may be told (by a selling agent) that using one solicitor or conveyancer will be cheaper. You may be told (again by a helpful agent) that this speeds things up. It may seem more convenient (especially for the agent), but this is clearly an extremely unwise, high-risk practice for solicitors, conveyancers and their clients. Not necessarily in that order.

(See Tim O’Dwyer’s previous article on this subject)

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