Ombudsman's casebook

A monthly column of examples from the files of the Legal Services OmbudsmanConflicting interestsThe Guide to the Professional Conduct of Solicitors, 1999, eighth edition, says a solicitor must not act where a conflict of interests - or a significant risk of conflict - arises between two or more clients.

As the following cases show, some solicitors need to be more alert to the potential for future conflict, where joint instructions are received from clients working apparently in perfect harmony, when the reality is somewhat different.Happy familiesIn 1992, Mr D loaned 25,000 to his son's business.

Both were advised by the family solicitor, who had done a lot of work for the family and the business over many years previously.

The son, Mr E, who was responsible for paying the loan back, was told that when his father died he would receive a sizeable share of his father's estate - and, not surprisingly that was a significant factor in his decision to take on the loan.

However, Mr D subsequently decided to use his wealth to fund a comfortable retirement overseas, leaving the son out in the cold, but still with the liability to pay off the loan.

Mr E complained to the Office for the Supervision of Solicitors (OSS) that the solicitor had acted for lender and borrower where there was a conflict of interests.

The OSS had two attempts at getting to grips with the complaint about conflict.

This resulted in no less than two recommendations by the ombudsman that they reconsider their decision.

The second time around the track, the ombudsman decided that the OSS had overlooked the wider context of the complaint - the long-standing business relationship between Mr D and Mr E, the solicitor's role over the years and the potential for a breakdown in cordial family relationships, long after the ink had dried on the dotted line of the loan agreement.The ombudsman's recommendation came before an OSS committee.

It decided that the service provided by the solicitor to Mr E was inadequate because he had failed properly to advise on the merits of obtaining independent legal advice and on the pros and cons of signing the loan agreement.

The committee also found that the solicitor failed to tell Mr E that the verbal agreement about being included in Mr D's will was not worth the paper it was not written on.

As a result, Mr E was awarded 750 compensation from the solicitor and the solicitor was given two severe reprimands - one for acting where there was a conflict of interests and the other for disclosing confidential information about Mr E to Mr D and a third party involved in sorting out his retirement plans.Battle of willsMr W and Ms Y were appointed as lay executors of a relative's will.

There were eight beneficiaries, including Ms Y.

Mr W wanted the lay executors to sort out the estate, but Ms Y thought otherwise and instructed a solicitor.

Sometime later, concerned at the solicitors' performance and with the two executors not on the best of terms, Mr W complained to the OSS.

The OSS decided that there had been no obligation on the solicitor to tell Mr W to obtain independent legal advice, because he was not the solicitor's client.

Mr W was dissatisfied with the OSS' decision and complained to the ombudsman.The ombudsman decided that there was evidence that aspects of the solicitor's work had been done under the joint instruction of Mr W and Ms Y - an application for probate for instance - and there was clear evidence that the solicitors regarded both as their client.

In view of this and the evident falling out between the two clients from beginning to end, the solicitors should have recognised that this was a conflict waiting to happen - something that should also have been picked up by the OSS.

Therefore, the ombudsman decided that the OSS should reconsider the complaint.