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What is conflict of interest?

Conflict of interest, but what could possibly go wrong?

  • Our lawyer, who is amazing and awesome, told me this morning she was considering bidding at the same auction we will bid at this weekend. She hadn't realised until we sent her the contract to look over. Obviously this is a conflict of interest, and my first reaction was that we should find a new lawyer, but on more careful reflection I'm failing to think of how it could really matter. What could actually go wrong here? In this case, she has decided not to go for this house after all (the bedrooms are too small for her kids), so it's not an immediate problem. But I think we are unlikely to be able to get this place, as the expected price is at the high end of our range. So if we are still in the market after Saturday we can expect this issue might come up again. We talked some more about the places we are looking at, and our short lists overlap a bit. My thoughts are that if she were unprofessional, she could tell us there was a legal problem with the contract on a house, so that we wouldn't be bidding against her. I don't think she would do that, but I'd be willing to risk it, as the worst case scenario is that we miss out on a house we might otherwise have bid for. (And if she does tell us the contract is dodgy, we will be asking specific questions about the details, anyway). I can't see why there'd be any advantage to her in telling us a contract was okay when it really isn't, which would be a much more dangerous situation for us. Maybe if we were successful at an auction and she was pissed about missing out, that could be awkward, as she would be doing the paperwork for settlement for us for a house she wanted herself. But I can't see that happening as her budget is higher than ours, so if she wanted a place that much, she'd just overbid us. Is there something I am not considering here? I really want to keep her as she is super responsive (calls me to explain contracts within a couple of hours after I send them to her), willing to look at unlimited contracts within the same set fee, and her fees are also quite reasonable. She has won awards for her conveyancing services. I feel like we struck gold with her, but I'd hate to think this was blinding me to a potential problem.

  • Answer:

    Obviously this is a conflict of interest I am having trouble understanding why this is obvious. It is not a conflict of interest if you and your lawyer want the same thing. If you two happened to be at the local art auction, for example, she doesn't have to let you win or abstain from bidding. It's not a conflict of interest if she gets the last chicken finger at the buffet. It is only an ethical conflict if the thing that you both want to buy is the subject of the representation. For example, if you retained her to close the sale of a property and then she offered a more attractive offer to the seller. It is hard to imagine how the lawyer could use confidential information to win at an auction. Let's say you tell her that you will bid no more than $100k at the auction. Ok, but maybe her maximum bid is $110k regardless of whether you show up. More generally, the auction is open to the public, and anyone else could outbid you. What if some stranger outbids you - is your lawyer allowed to bid then? I'm a little confused about what's going on here when you talk about auctions. Are these public foreclosure auctions to effect a judicial sale of foreclosed parcels? I feel like I am missing something here. In my jurisdiction, there are no contracts before a judicial auction, or afterwards. You go to the auction, and if you win, you pay the full amount of your bid by the close of business that day. No contracts are involved and the sale is unconditional, as-is. So, what's going on here? As of right now, I don't know what you have hired your lawyer to do. How can there be a contract before an auction?

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Wanting to avoid even the appearance of impropriety benefits her as well. She shouldn't hold it against you if you tell her, "Given that our interests may come into conflict, I think it's a good idea if I engage another lawyer until one of us has bought a house." And ask her for a recommendation.

Etrigan

It is an obvious and non-waivable conflict of interest. Your lawyer knows that all infirmities she points out will tend to reduce or eliminate your competing bid. It's not even a close question that she should refuse this engagement.

MattD

Etrigan has it. I'd be surprised if she was offended by this, especially if you frame it as "I like you and don't want to put you in an awkward position". Even if there wouldn't be any actual conflict in the sense of her acting badly, the mere possibility is enough for both of you to want out.

Lemurrhea

What you are proposing would almost certainly go against the law society's code of ethics. Your lawyer would be censured.

Nevin

It seems like you are over-thinking this into a problem. You laud her award-winning services, but your thoughts are if she were unprofessional. You say you have compared short lists, which would have been a time for her to volunteer to remove herself if she thought it was a conflict. By all means ask her about the issue; i expect you will get a reassuring professional reply. But don't mistrust her when she has given no reason to do so. And, unless she ends up actually buying a house you bid on, someone else will outbid both of you...

TDIpod

To be clear, I am not concerned about whether she would be offended or not. I just would prefer to keep using her services if possible. The appearance of impropriety is only really an issue for her, as far as I can see, so if she's okay with this, then I am (from that perspective). It's her professional reputation, not mine. Likewise if it goes against some code of ethics, I expect she would know that, and even if it did, it's not really my problem. You laud her award-winning services, but your thoughts are if she were unprofessional. You say you have compared short lists, which would have been a time for her to volunteer to remove herself if she thought it was a conflict. Well yes, exactly. I am saying that I have come to the conclusion that it should be okay. But I wanted to query the hive mind to see if anyone has thought of something I haven't. (My examples about unprofessionalism are about a worst case scenario, if I have vastly misjudged her.)

lollusc

She could use a tempting but bad-news deal to distract you from something else she wanted. Hopefully she'd swoop back in to rescue you before close and you'd just miss out on the other property, which you seem to regard as an acceptable loss, but if you find a house that seems like it'd be perfect for either party and she doesn't out-bid you, will you be able to trust that she just isn't feeling it?

teremala

Is she reviewing your bids? Knowing your contingencies could allow her to outcompete you without outbidding you.

salvia

In response to Tanizaki's confusion, in Australia at least, since an auction on a house is unconditional, as-is, you are signing the contract of sale within say five minutes of winning the auction on a Saturday when no lawyer is available. So it is usual to get your lawyer to look through a copy of the contract (and site drawings, and sometimes building reports) before you even attend the auction, so that they can advise you if there is any wording in the contract that could cause you trouble later on, or if there is anything in the site plans you should worry about. We won't necessarily be buying at auction, but most sales here are that way. The lawyer does not see our letter of offer in non-auctions. I think you are right that it is not actually a conflict of interest, even though it kind of felt like it could be one at first glance. I looked up conflicts of interests in various legal codes of ethics and specifically in the Australian conveyancing code of ethics and they don't even touch on situations like this. They all specifically mention cases where the same lawyer might represent the vendor and the buyer, and none of the considerations there apply in this case. By the time the lawyer would be representing us in settlement of an actual property, she would no longer have any other interest in that property, so there is no conflict.

lollusc

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