Professional Ethics – An Update
This article distills and summarises the key points of the session on Professional Conduct and Ethics held on 3 November 2020, as part of the Law Society’s Annual CPD Day 2020. It focuses on three areas:
- Conflicts of interest between multiple/former clients under the Legal Profession (Professional Conduct) Rules 2015 (PCR);
- In relation to personal conflicts of interest, the scope of “interest in any matter” under rule 22 of the PCR and what a legal practitioner should do when an adverse interest arises; and
- What executive appointments are permissible under the PCR.
a. Conflicts of Interest – Multiple / Former Clients
The sanctions framework for conflicts of interest was provided by the Court of Three Judges in Law Society of Singapore v Ezekiel Peter Latimer1(2019) 4 SLR 1427. (EPL case). Solicitors should bear in mind the following five key takeaways:
1. The solicitor’s duty of unflinching loyalty to a client is a fundamental one.
In the EPL case, the respondent lawyer (L) had concurrently acted for both a foreign worker (S) and his employer (D) in charges brought against each of them under the Employment of Foreign Manpower Act for making a false declaration as to S’s fixed monthly salary in S’s work permit application.
The Court of Three Judges found that, amongst others, L had placed himself in a position of conflict of interest, contrary to rule 25 of the predecessor Legal Profession (Professional Conduct) Rules, by preferring the interest of D over that of S. In representations made to the Attorney-General’s Chambers on S’s behalf, L had failed to put forward S’s account that D had deceived S into believing that his salary was as stated in the application, and had instead indicated a contrary account.
The Court of Three Judges observed that “[m]isconduct arising from a conflict of interest is reprehensible because it entails a grievous violation of a lawyer’s duty of unflinching and undivided loyalty to a client”.2Id, at (48). This duty was a “foundational responsibility on which the integrity of the legal profession and the public interest in securing proper legal representation depend”.3Id, at (48).
2. The solicitor’s culpability and the harm caused underpin the sanctions framework.
The principal purpose of disciplinary sanctions is “not to punish the errant solicitor but to protect the public and uphold confidence in the integrity of the legal profession …”.4Id, at (46). The sanction to be imposed in disciplinary cases involving a conflict of interest will therefore reflect “both the culpability of the errant solicitor and the harm caused by his misconduct”.5Id, at (49). In this regard, the Court of Three Judges will take into account a range of non-exhaustive factors as shown in Table 1.
Table 1: Factors relevant to assessing culpability and harm
|Impact of solicitor’s misconduct upon:|
3. The default sanctions for serious misconduct involving conflict of interests are severe.
The default sanctions for misconduct involving conflict of interests are calibrated according to the category in question (see Table 2). If a case falls on the higher end of the harm-culpability spectrum, the default sanction for misconduct would be more severe.
Table 2: Default sanctions for different categories of conflicts of interest
|Category||Situation of conflict of interest||Default sanction||Rationale|
|1||Errant solicitor preferred his own interests over that of a client||Striking off|
(unless truly exceptional circumstances exist)
|Category 1 cases are presumptively more serious and deserving of a more severe sanction than the other categories, because they often entail an abuse of the client’s trust in the solicitor.6Id, at (60).|
|2A||Errant solicitor preferred the interests of one client over the other||Suspension of 2 years||Category 2A cases typically merit a higher sanction because they presumptively involve both greater harm and culpability than Category 2B cases, in view of the actual subordination and undermining of at least one client’s interests.7Id, at (71).|
|2B||Errant solicitor failed to advise a client of a potential conflict of interest arising out of concurrent representation||Lower than the default sanction for Category 2A, but a suspension may be appropriate if a larger public interest is harmed|
As the EPL case clearly constituted Category 2A misconduct, the Court of Three Judges ordered L to be suspended for 3 years (higher than the default sanction). The Court of Three Judges took into account L’s relatively high degree of culpability (he had deliberately crafted representations to favour D’s interest) and the relatively high level of harm caused to S (S had been convicted of and fined for a criminal offence). Moreover, L was a solicitor of 21 years’ standing.
4. Less experienced lawyers may not be less culpable.
Although more experienced solicitors might be more culpable if they had inexcusably failed to “take necessary steps to disclose or remedy a conflict of interest”, the Court of Three Judges observed that the converse (i.e. an inexperienced solicitor would be less culpable) was not necessarily true.8Id, at (54). Solicitors, regardless of their level of experience, are required to behave honourably.
5.The current conflict of interest rules are much more nuanced than their predecessors.
Conflicts of interest involving multiple clients and former clients are currently governed by rules 20 and 21 of the PCR respectively. Although there have been no Category 2 cases decided under rules 20 and 21 of the PCR to date, the sanctions framework established in the EPL case is equally applicable to breaches of these rules. These rules are much more nuanced than their predecessors and call for additional safeguards to be taken to manage potential issues of conflicts of interest.
B. Conflicts of Interest – Personal
Recent case law developments have illustrated a number of scenarios where a legal practitioner can be said to possess an “interest in any matter”, following which he or she must undertake the obligations under rule 22(3) of the PCR. We will deal with two such scenarios.
1. Scenario One – Business transactions with clients
The first scenario involves the financial interest of the legal practitioner in business transactions with their client while acting as their lawyer. In Law Society of Singapore v Tan Chun Chuen Malcolm9(2020) SGHC 16. (Malcolm Tan), a conflict of interest arose from the legal practitioner encouraging his client to invest money with the legal practitioner’s investment company, and to simultaneously enter into an engagement with his law firm.
The Court of Three Judges held that the respondent-solicitor’s conduct constituted “a very serious conflict of interest and an abuse of trust”,10Id, at (38). where the legal practitioner had convinced his client to enter into a transaction under false pretences, which furthered the legal practitioner’s own interests over his duty to safeguard his client’s interests. In doing so, the legal practitioner had preferred his own interest, which was ultimately to procure his client to invest his monies with the legal practitioner’s investment company, through the false assurances made in connection with the role and involvement of the law practice.11Id, at (38) and (41).
The Court of Three Judges found the conflict of interest here “so fundamental”,12Id, at (41). owing to the false premise upon which the respondent-solicitor has procured the investment in the first place. The Court of Three Judges observed that even if the respondent-solicitor had taken steps to obviate the conflict, such steps may not have worked in this situation, and proceeded to strike the legal practitioner off the rolls.
The chief lesson to be gleaned from Malcolm Tan is that a legal practitioner should refrain from entering into any business transactions with a client while also acting as the client’s solicitor. Judicial pronouncements in Singapore have made clear that as a general rule, it is inadvisable for solicitors to enter into business transactions with their clients since this will often have a real potential to give rise to a conflict of interest.
As Malcolm Tan illustrates, a legal practitioner who invites a prospective client to consummate a solicitor-client relationship with him, in order to then deal with that client as a principal in a separate business transaction, steps into an ethical minefield, and courts “professional disaster”.13Id, at (58).
2. Scenario Two – Interest in averting potential negligence claims
The second scenario involves a legal practitioner’s interest to avert potential negligence claims against the legal practitioner and/or the law practice. In Law Society of Singapore v Govindan Balan Nair14(2020) SGHC 174. (Govindan Balan), the High Court held that an adverse interest under rule 22(3) had crystallised as there had been negligence of a sufficiently serious nature on the part of the respondent-solicitor (owing to his failure to file a defence on time leading to a default judgment entered against his client) and a breach of rule 5 of the PCR (honesty, competence and diligence) and the legal practitioner had failed to disclose this and inform the client of his rights in the instant situation, leading to the conclusion that he had preferred his own self-protection over his client’s best interests.15Id, at (20). The respondent-solicitor was found guilty and the High Court observed that the Council should have regard to a fine of between $15,000 and $20,000.
The lesson from Govindan Balan is that if a legal practitioner is aware that he or she has been potentially negligent in the conduct of a client’s matter, the legal practitioner should carefully consider his or her duties under rule 22(3), including the duty to make full and frank disclosure to the client, and obtaining informed consent of the client to continue acting, or depending on the circumstances, whether he or she must withdraw from acting further for the client.
C. Executive Appointments
Rule 34 of the PCR prohibits a legal practitioner from accepting any executive appointment in specified businesses, unless the statutory exemptions apply.16See exceptions set out in rule 34(2) – (5) PCR and read in conjunction with rule 34(6) PCR.
Examples of specified businesses include businesses that detract from, are incompatible with, or derogate from the dignity of, the legal profession, or which materially interfere with the legal practitioner’s primary occupation of practising as a lawyer. Rule 34 also prohibits a legal practitioner from accepting an executive appointment in a business that involves the sharing of the legal practitioner’s fees with, or payment of commissions to, any unauthorised person for legal work performed by the legal practitioner.
Rule 34(3) permits legal practitioners to accept an executive appointment in a business entity that provides law-related services. Such services are set out in the PCR’s Fourth Schedule, and are services that may reasonably be performed in conjunction with, and are in substance related to, the provision of any legal services. Examples of law-related services include intellectual property, tax, voluntary liquidation and litigation support services.
If the business entity does not provide any legal services or law-related services, a legal practitioner may accept an executive appointment in such a business entity if the prohibitions under rule 34(1) are not breached, and if all the conditions in the Second Schedule to the PCR are satisfied. These conditions include the need to ensure that the business of the business entity does not jeopardise the legal practitioner’s professional integrity, independence or competence, and must not detract from the standing and dignity of the legal profession. The business entity must not be held out or described as to suggest that the business entity is a law practice, or that any legal practitioner in the business entity provides services, carries on business or is employed, as a regulated legal practitioner. The files, records and accounts of the business entity must be kept separate from the files, records and accounts of the legal practitioner’s law practice.
1. Rationale of rule 34
The rationale behind rule 34 appears to be to prevent the legal profession from being brought into disrepute, as set out in rule 34(1) itself. This was the reasoning applied in The Law Society of Singaporev Ong Teck Ghee17(2014) SGDT 7. (Ong Teck Ghee), where the disciplinary tribunal (DT) considered whether a consultancy agreement entered into between the respondent-solicitor and a Danish pharmaceutical company for the provision of services for marketing, lobbying and obtaining of permits was incompatible with and derogated from the dignity of the legal profession under section 83(2)(i) of the Legal Profession Act (LPA).
The DT held that the consultancy agreement did not breach section 83(2)(i) of the LPA. It was neither undesirable nor illegal to promote, increase and maximize sales or conduct appropriate lobby/network activities to ensure a “buy-decision” as these were legitimate business objectives which were to be achieved by equally legitimate methods.18Id, at (33). The DT also held that the consultancy services in question could not seriously be said to be in the same nature as selling ladies’ wear19See Re An Advocate (1964) 30 MLJ 1 – Solicitor sold ladies’ garments, which was held to be incompatible with the profession of law and therefore prohibited. In light of the view expressed in Ong Teck Ghee that “perceptions may have changed since 1963” at (36), it is questionable whether the reasoning in Re An Advocate still applies. The outcome may still be prohibited but owing to another rationale under rule 34(1)(b) of the PCR that selling ladies’ garments may be considered to materially interfere with the practice of law as the primary occupation. or running a debt collection agency20The DT referred to The Law Society of Singapore v Lim Kiap Khee (1996) SGDSC 11. But it should be noted that the disciplinary committee in Lim Kiap Khee held that it had no jurisdiction to hear and investigate the charge pertaining to carrying on the trade, business or calling of a debt collecting agency under section 83(2)(i) of the LPA. or being a housing agent.21See the Law Society’s Practice Directions and Guidance Notes 2018/2019 Practice Direction 3.8.1 at Part C.
The DT did caution that perceptions of whether a particular trade will detract from the dignity and honour of the Bar may change over time, and suggested that even in respect of selling ladies’ wear, this perception may have changed in the decades following the decision in Re An Advocate.22Supra, n 19.
Rule 34 also appears to be intended to ensure that a legal practitioner is not prevented from spending substantive time undertaking work of an executive nature that would compromise his commitment to his practice of law.23See rule 34(1)(b) of the PCR.
The First Schedule to the PCR, read with rule 34(1)(e), provides that legal practitioners are prohibited from accepting an executive appointment in a housing or estate agency business, and in a debt collection business. The Law Society’s Practice Directions and Guidance Notes 2018/2019 set out further examples of executive appointments that are prohibited, including where a legal practitioner doubles up as a housing agent.24Supra, n 21.
Queries that have been submitted to the Advisory Committee of the Professional Conduct Council25Alvin Chen (ed), Professional Ethics Digest 2019 (Singapore: The Law Society of Singapore, 2019), pp. 50 – 60. also provide helpful guidance on the type of executive appointments that may be accepted by a legal practitioner.
Rule 34(9) defines an executive appointment as a position associated with a business, or in a business entity or Singapore law practice, which entitles the holder of the position to perform executive functions in relation to the business, business entity or Singapore law practice (as the case may be). This excludes any non‑executive director or independent director associated with the business or in the business entity.
For example, one of the queries submitted was whether a legal practitioner could be employed by a company as a part-time in-house legal counsel while still working as a legal practitioner in a law practice. The legal practitioner was reminded that he was to regard the practice of law as his primary occupation and to maintain high professional standards. The legal practitioner should exercise his own professional judgment to ascertain the business of the company and whether his in-house legal role was an executive appointment within the meaning of rule 34 of the PCR. If the legal practitioner’s in-house legal role with the company did not affect his ability to discharge his professional duties at his law practice, the role was permissible.26Id, at p. 58 (Illustration 22).
Another query was whether a legal practitioner could be employed by a private company as its general manager or an equivalent position running day-to-day affairs, while still working in a law practice. The Advisory Committee expressed the view that the acceptance of the appointment would likely be in breach of rule 34(1)(b) of the PCR which prohibits concurrent employment and is therefore not permitted.27Id, at pp. 58 and 59 (Illustration 23).
|↑1||(2019) 4 SLR 1427.|
|↑2||Id, at (48).|
|↑3||Id, at (48).|
|↑4||Id, at (46).|
|↑5||Id, at (49).|
|↑6||Id, at (60).|
|↑7||Id, at (71).|
|↑8||Id, at (54).|
|↑9||(2020) SGHC 16.|
|↑10||Id, at (38).|
|↑11||Id, at (38) and (41).|
|↑12||Id, at (41).|
|↑13||Id, at (58).|
|↑14||(2020) SGHC 174.|
|↑15||Id, at (20).|
|↑16||See exceptions set out in rule 34(2) – (5) PCR and read in conjunction with rule 34(6) PCR.|
|↑17||(2014) SGDT 7.|
|↑18||Id, at (33).|
|↑19||See Re An Advocate (1964) 30 MLJ 1 – Solicitor sold ladies’ garments, which was held to be incompatible with the profession of law and therefore prohibited. In light of the view expressed in Ong Teck Ghee that “perceptions may have changed since 1963” at (36), it is questionable whether the reasoning in Re An Advocate still applies. The outcome may still be prohibited but owing to another rationale under rule 34(1)(b) of the PCR that selling ladies’ garments may be considered to materially interfere with the practice of law as the primary occupation.|
|↑20||The DT referred to The Law Society of Singapore v Lim Kiap Khee (1996) SGDSC 11. But it should be noted that the disciplinary committee in Lim Kiap Khee held that it had no jurisdiction to hear and investigate the charge pertaining to carrying on the trade, business or calling of a debt collecting agency under section 83(2)(i) of the LPA.|
|↑21||See the Law Society’s Practice Directions and Guidance Notes 2018/2019 Practice Direction 3.8.1 at Part C.|
|↑22||Supra, n 19.|
|↑23||See rule 34(1)(b) of the PCR.|
|↑24||Supra, n 21.|
|↑25||Alvin Chen (ed), Professional Ethics Digest 2019 (Singapore: The Law Society of Singapore, 2019), pp. 50 – 60.|
|↑26||Id, at p. 58 (Illustration 22).|
|↑27||Id, at pp. 58 and 59 (Illustration 23).|