A CLARION CALL TO LAWYERS TO BE “UNFLINCHINGLY LOYAL” TO THEIR CLIENTS

• Author: Jeffrey PINSLER LLB (Liverpool); LLM (Cambridge); LLD (Liverpool); Barrister (Middle Temple); Advocate & Solicitor (Singapore); Professor, Faculty of Law, National University of Singapore.
• Citation: (2007) 19 SAcLJ 231
• Date: 01 December 2007
• Published date: 01 December 2007

The High Court has reiterated on several occasions that the advocate and solicitor owes his client the duty of “unflinching loyalty” (the terminology used in Law Society of Singapore v Ahmad Khalis bin Abdul Ghani[2006] 4 SLR 308 at [74] and Law Society of Singapore v Tan Phuay Khiang[2007] SGHC 83 at [62]). In the latter case, which involved the interests of certain persons in the client’s property transaction (the client had been referred to the respondent for this purpose), the High Court warned that an advocate and solicitor who permits his client’s interests to be compromised in any way in such circumstances is liable to be struck off the roll of advocates and solicitors. The case is particularly significant as an admonition to advocates and solicitors in the face of the increasingly common practice of referrals by third parties.

I. Introduction

1 For the second time in a period of six months, the High Court has had to re-emphasise its concern, and express its displeasure, over the failure of lawyers to be uncompromising in their loyalty to their clients in the context of arrangements involving the conflicting interests of other persons. In both cases, Law Society of Singapore v Vardan Vasantha Lakshmi;1 and Law Society of Singapore v Tan Phuay Khiang2 (the latter case being the focus of this article), the respondents were suspended from practice for two years.

2 The rules which govern ethical conduct (whether formulated in legislation, codes or practice directions) are merely aspects of fundamental, underlying values which must be integral to the lawyer’s

conscience. The principle in the Legal Profession (Professional Conduct) Rules (“the PCR”), r 2(2)(c) — that the rules of ethics are to be interpreted in a manner which must be consistent with the lawyer’s duty to “act in the best interests of his client”— must always be at the forefront of the lawyer’s mind.3 It may be that even this phrase in r 2(2)(c) is a little too vague to fully capture the essence of the special commitment and loyalty which must characterise the lawyer’s attitude to his client. It is more than simply achieving the client’s best interests through effective representation and a favourable outcome. There is a deeper ethical dimension here which impacts upon the personal relationship between the lawyer and his client. It is a responsibility which requires the lawyer to (a) vigorously guard and protect his client’s interests against any adverse influence whatsoever (however slight), (b) to have the professional sensitivity to understand his client’s particular needs, and (c) to make every possible effort to meet those needs.

3 Burdensome though it may be, the responsibility which has just been outlined is fundamental to the lawyer’s office. Having pointed out in Law Society of Singapore v Tan Phuay Khiang4 that “It is established law that an advocate and solicitor owes a duty of unflinching loyalty to his client”, V K Rajah JA went on to state that the obligation is “… an essential cornerstone of the solicitor-client relationship as it ensures that a client may confidently expect to receive impartial and frank advice and in turn repose complete trust in a solicitor to safeguard his interests”.5

II. The charge, the facts and the decision in Tan Phuay Khiang

4 In Tan Phuay Khiang, the respondent was found guilty of conduct unbefitting an advocate and solicitor in the discharge of his professional duties (pursuant to s 83(2)(h) of the Legal Profession Act6). The charge against him before the High Court was that in the course of acting for his clients (the complainants) in respect of the sale of a flat, he

“failed to advance the complainants’ interests unaffected by the interest of any other person, by acting in or preferring the interests of certain entities (including a company which provided credit and a property agency) and persons.”7 The High Court made certain observations about the following factual scenario, which it considered to be “a worrying aspect of legal practice”:8

It is fairly common for some law firms to receive substantial amounts of work via referrals made by property agents and/or licensed moneylenders. When loan transactions are involved, the transaction is typically structured in the following manner: a home-owner may borrow a sum of money from a licensed moneylender by offering his flat as security. The home-owner will typically be required to execute a power of attorney in favour of a servant or agent of the moneylender, who is then empowered to act in relation to the sale or the letting of the flat. The moneylender then later appoints or works with a related housing agent to sell the flat. Often, one of these parties may refer the home-owner to a law firm with an existing referral relationship.9

5 The High Court said of the facts of Tan Phuay Khiang that they “… more than hint at an existing pattern of referrals and relationships between the respondent and some of the other identified parties.”10 Briefly, the facts were as follows:11 The complainants (a married couple) were the clients of the respondent. They employed A to sell their HDB flat and relied on him to make the necessary arrangements, which involved the purchase of a new HDB flat. A introduced the complainants to B (a company which provided credit) so that the complainants could borrow funds for the purpose of purchasing the new flat. A loan agreement between the complainants and B was concluded and the complainants were informed to proceed to the respondent’s office to sign certain documents. The complainants were accompanied by C, who represented D (a property agency). At the respondent’s office, the complainants signed a power of attorney which had been prepared by the respondent. The power of attorney appointed a certain person (E) (who was unknown to the complainants) to act in respect of the property transactions. The respondent informed the manager of D to collect the

power of attorney despite the fact that the complainants gave no authorisation to the respondent for this purpose.12 The complainants were also requested by the respondent to execute a statutory declaration authorising the respondent’s law practice to make payments to various entities and persons including B, C, D (as well as the previous money lender whose business had been taken over by the manager of D)13 and the respondent.14

6 The High Court pointed out that unknown to the complainants, “an intricate web of relationships existed between almost all of the payees named in the statutory declaration apropos each other, as well as with the respondent.”15B and D had engaged the respondent to act for them on previous occasions and had also referred to potential clients to the latter. D also appeared to have an indirect interest in the execution of the statutory declaration as C (D’s representative) had accompanied the complainants to the respondent’s office.16 As for A, he failed to pay the complainants the full amount due to them and “eventually disappeared”.17 Suspecting that they they had been defrauded, the complainants wrote to the respondent requesting copies of the documents relating to the loan. The respondent resisted the request for ten months (from the date of the initial request) but eventually responded (after the complainants engaged a law practice which made an official written demand on their behalf).18

7 The High Court confirmed the decision of the disciplinary committee to convict the respondent for having “failed to advance the complainants’ interests unaffected by the interest of any other person, by acting in or preferring the interests of”A, B, D and E.19 The respondent argued that as he had not acted for any of these parties in the course of his retainer, he had no duty to disclose his prior dealings with B (the company providing the loan) and D (the property agency).20 He further submitted that a potential conflict of interests would only arise in a

situation where the lawyer actually acts for the other parties in the same transaction.21 The High Court emphatically rejected this proposition:22

It is established law that an advocate and solicitor owes a duty of unflinching loyalty to his client. This is encapsulated, inter alia, in rr 2(2)(c) and 25(b) of the Rules, which require a solicitor to advance his client’s interests unaffected by the interests of any other person during the course of a retainer. This obligation is derived from the fiduciary nature of the solicitor-client relationship, which requires a solicitor to place his client’s interests above those of his own as well as those of third parties. In fact, the obligations of a fiduciary go beyond the avoidance of actual conflicts of interest, and extend to proscribe perceived or ostensible conflicts as well. While onerous in its requirements, the duty of unflinching loyalty is an essential cornerstone of the solicitor-client relationship as it ensures that a client may confidently expect to receive impartial and frank advice and in turn repose complete trust in a solicitor to safeguard his interests.

III. How the respondent failed in his duty of “unflinching loyalty”

8 The High Court endorsed the disciplinary committee’s finding that the respondent had put himself “in a position of actual or potential conflict of interest” by omitting to inform the complainants that he had “prior dealings and existing relationships” with B and D. In the course of examining how the respondent “repeatedly faltered in his indivisible duty to wholeheartedly advance the complainants’ interests”,23 the court focussed on his conduct concerning the statutory declaration and power of attorney.24

A. Statutory declaration

9 With regard to the statutory declaration, the respondent had failed to disclose to the complainants that he had previously acted for B

and D (two of the stated payees), and that D had previously referred work to him, despite the existence of an actual or potential...