Avoid multiple-client cases, lawyers told

Source : Straits Times – 25 Aug 2009

A COURT of Three Judges has expressed concern about lawyers representing multiple clients in the same case after one lawyer was suspended for a year for professional misconduct.

In issuing its guidelines last week, the court – comprising Justices Chao Hick Tin, Andrew Phang and V.K. Rajah – advised lawyers to avoid getting themselves into such situations.

Mr S. Uthayasurian had acted for six parties involved in a property development project in Tanglin Hill.

The transaction involved an investor who was talked into developing a property owned by the Brunei government.

The man who proposed the project and disbursed the funds, Mr Louis Ang, was an undischarged bankrupt.

The investor, Mr Satinder Singh Garcha, found that within a month of investing $1 million in the project in May 2006, only $50,000 was left, with the cash having gone to other parts of the project and legal costs.

Mr Singh complained that Mr Uthayasurian failed to advise him of the potential conflict of interest and alert him to Mr Ang’s bankrupt status.

Mr Uthayasurian, a lawyer of 18 years, was slapped with a one-year ban on practice after the court found him guilty of professional misconduct in May.

In issuing the grounds of judgment last week, Justice Rajah said: ‘Conflict of interest issues often raise knotty overlapping problems in relation to a (lawyer’s) duty of confidentiality, loyalty and conscientiousness.’

He suggested several ways in which lawyers can prevent themselves from getting into trouble, if they do choose to act for several parties in the same case.

Lawyers should not act for multiple clients where the clients’ interests or objectives are not identical.

If they handle multiple clients with diverse interests, they must advise them of potential or actual conflicts and obtain their informed consent.

The court also reminded lawyers that they should not be ‘a conduit, post-box or puppet’ through which information is unthinkingly passed between the various clients.

Lawyers said it is common in conveyancing deals for more than one party to be served by the same solicitor as it saves costs for all involved.

‘But the nature of the case here is different from a conveyancing transaction, and the guidelines are timely to alert lawyers of the pitfalls involved,’ said lawyer S. Wijaya.

This was a project development, not a conveyancing transaction involving the sale and purchase of a property.

But even seemingly straightforward conveyancing deals could lead to conflicts of interest, according to lawyer Mark Goh.

He cited the example of a lawyer who acts for a bank and the borrower of a loan from the bank for a housing transaction.

Often, the bank will subsidise the legal fees for lawyers from its own panel.

The lure of lower costs makes the choice of going with the same lawyer attractive for the borrower, but it raises the potential for conflicting interests.

‘We are lucky that so far no case of such nature has surfaced in the courts,’ he added.

In any case, the deal which Mr Uthayasurian came to grief on was no ‘run-of-the-mill transaction’, said Justice Rajah.

Expressing concern over the lawyer’s ‘troubling lack of judgment’, the judge said ‘a reasonably competent solicitor would have recognised that this transaction was redolent of dubious and duplicitous dealings and would have resisted from acting for all the parties on the proposed terms’.

Justice Rajah said that in acting for more than one client, lawyers should be guided not just by rules of professional conduct but also by ‘intuitive common sense and considerations of practicality’.

While lawyers should keep their perspective in representing multiple clients, Justice Rajah said a better approach was not to do it at all.

‘A risk avoidance approach is to be preferred. The rule of thumb for a prudent solicitor is this – when in doubt, don’t,’ he wrote.

The case in the spotlight

LAWYER S. Uthayasurian represented six parties in a property project in Tanglin Hill.

The project was to build bungalows on land owned by the Brunei government and it involved several agents and developers.

Property developer Satinder Singh Garcha had been approached to invest $1 million in the project.

But the lawyer did not warn Mr Singh of the diversity of interests between him and the other parties which could lead to conflict.

Mr Singh claimed the lawyer had advised him to authorise one of them, Mr Louis Ang, an agent, to handle the disbursements to buy out other investors and pay the law firm.

But he was not told that Mr Ang was an undischarged bankrupt, which was a failure by the lawyer to protect his client’s interest as bankrupts are subject to certain restrictions.

Mr Singh was also not told by the lawyer of the payouts by Mr Ang.

The court held the lawyer had fallen short of professional standards and was guilty of gross misconduct.