Fiduciary Duty and Lawyers
A fiduciary duty exists where a person or company is required to put another person’s interests before their own. Fiduciary duty is owed by lawyers to their clients, by doctors to their patients and by directors to their companies. It involves a higher standard of care than an ordinary duty of care, which is owed in a much wider range of relationships. This article will focus on the fiduciary duty owed by lawyers to their clients.
What does a fiduciary duty entail?
When a person owes a fiduciary duty to another person (the beneficiary), they must act with a high degree of loyalty and care. The fiduciary relationship does not allow for any conflict of interest and requires complete honesty and full disclosure of any potential conflict of interest.
A fiduciary duty is the highest level of duty known to the law.
What duties does lawyers’ fiduciary duty involve?
Solicitors, as fiduciaries, owe their clients various duties. The word ‘fiduciary’ means ‘trust’ and a fiduciary relationship is one where a person is placing their trust in another person.
The duties owed to clients by solicitors are set out in the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015. These duties include:
- To act in accordance with the instructions of a client who is fit to give instructions;
- To provide legal services competently;
- To be honest and courteous in their dealings with clients;
- To provide timely and clear disclosure of fees and
- To maintain confidentiality;
- To avoid conflicts of interest;
- To disclose the costs associated with the legal work being undertaken and to provide updates if there are any changes to these costs;
- To honour any undertakings given.
Lawyers are required to maintain client confidentiality at all times, except where they have been expressly authorised to disclose information or where the information has already entered the public arena.
Lawyers’ confidentiality agreements are very stringent. A lawyer must not disclose information that has been shared with them by a client in the context of performing legal work for the client. This means that solicitors are very limited in their ability to talk about their work and generally may not even disclose that a person has been a client.
There are some exceptions that apply to the duty of confidentiality, including where the law requires that information be disclosed or where the information must be disclosed to prevent the commission of a crime.
Conflicts of interest
A solicitor cannot assist a client if they have a conflict of interest. A conflict of interest may arise in a number of ways.
A lawyer may be unable to take on a matter because the other party in the matter is a current client. For example, person A wants to hire a lawyer to sue person B and person B is already a client of the lawyer. The lawyer cannot take on the matter as it would give rise to conflicting fiduciary duties to the two clients.
A lawyer may be unable to act because the other party is a former client. In this situation, person A wants to sue person B and person B was a client of the lawyer, in an unrelated matter, ten years ago. The lawyer in this situation cannot act against a former client, even though their relationship with the former client ended long ago. This is because they may still have information about person B that would be useful to person A in their case against person B. The solicitor would therefore be unable to act in the best interests of both parties.
A lawyer may also be unable to take on a matter because they have a personal conflict of interest. This may occur where person A wants to sue person B and person B is a friend of the lawyer’s or where person A wants to sue a company in which the lawyer owns shares. In this situation, the lawyer is unable to act because their personal interests conflict with the client’s interests.
Solicitors’ duty to the court
Despite the fiduciary duty owed to clients, solicitors also owe a duty to the courts and to the administration of justice. When this duty conflicts with other duties owed by the solicitor, the duty to the court must prevail. An example of this is the duty not to mislead the court.
Breaches of fiduciary duty
The compliance of lawyers with their fiduciary duties is enforced by the Legal Services Commissioners of the different states and territories.
A breach of fiduciary duty is a tort and a beneficiary may be entitled to damages if fiduciary duty has been breached and they have suffered loss or harm as a result.
If you require legal advice or representation in any legal matter, please contact Armstrong Legal.