Faculty of Advocates tribunal upholds unsatisfactory conduct finding against advocate who failed to inform fellow counsel of success fee

Jonathan Brown had been instructed to act for a Cayman Islands company, A&E Investments, involved in high-value litigation in the Court of Session. The Committee found that, in not informing lead counsel of a “success fee” payable to him by the company’s controller, Robert Kidd, he had not acted in his best interests and his behaviour amounted to unsatisfactory professional conduct.

The appeal was considered by the Faculty of Advocates Disciplinary Tribunal. It was noted by the tribunal that the legal validity of such success fees was the subject on ongoing litigation at the time the decision was made. For the purposes of the appeal, it was assumed that such a fee would have been payable.

Conflict of interest

Under the terms of the negotiated success fee, Mr Kidd was required to pay the appellant a fixed percentage of any sum awarded to A&E in excess of £10 million. This was calculated at 1 per cent for every £100,000 received above £10 million, discounting any sum awarded as expenses. Following Mr Brown’s instruction, senior counsel was also instructed to act for A&E; however, the appellant was instructed by the instructed solicitors not to inform him about the existence of the success fee.

Immediately before proof, the parties to the case entered into settlement negotiations, with senior counsel taking the lead for A&E. It was argued by the appellant that it was not his responsibility to inform senior counsel of the success fee and that his unawareness would not have had a deleterious effect on Mr Kidd’s interests during negotiations. However, the Committee took the view that the different feeing arrangements had the potential to cause a conflict of interest in the event that an offer to settle was made.

It was further held by the Committee that the appellant should have noted that there was a possible conflict of interest between the instructing solicitors and Mr Kidd if, as was likely, their success fee was calculated in a manner similar to his own. The appellant did not, however, ensure that the conflict was removed or inform the client about the conflict.

The appellant contended that the findings of the Committee did not establish the complaint, as it did not find that he was obliged to tell senior counsel about the feeing arrangement. He had not done so based on a perception that it was in the client’s best interests to preserve harmony within his legal team. It was also argued that a finding of unsatisfactory professional conduct was unreasonable and inappropriate in the circumstances.

Proper and informed manner

In its decision, the tribunal observed: “The Committee held that for counsel to act in a situation of conflict of interest between his own financial interests and those of his client amounts to conduct that would fall below the standard reasonably to be expected of a reputable and competent member of the Bar. That, it seems to us, is clearly correct. Although not technically in a fiduciary relationship with the client, counsel is at all times expected to act in a similar manner to those who are subject to formal fiduciary relationships.”

It continued: “If evidence is led relating to a complaint that discloses unsatisfactory professional conduct (or professional misconduct), we consider that the disciplinary body is entitled to take account of such evidence and conclude that there is unsatisfactory professional conduct, or professional misconduct, provided that the evidence can be described as reasonably related to the complaint.”

Addressing the appellant’s arguments on appropriateness, the tribunal said: “We consider that it was essential that senior counsel should have a knowledge of the success fee arrangement in order to conduct the negotiations regarding settlement in a proper and informed manner. The success fees of both the solicitors and the appellant would form a major deduction from the principal sum received by the pursuers, and the amount of those fees would depend on the manner in which the settlement was structured. Senior counsel was obviously in charge of the settlement negotiations.”

It continued: “His lack of knowledge of the success fee arrangements meant that he conducted those negotiations without knowing of an important consideration in the calculation of the ultimate sum that would be paid to his client. That in our opinion is a clear disadvantage; the client’s primary interest is in the amount that he actually receives for his own benefit. It is equally clear that it was therefore essential that the existence of the success fee arrangement should have been disclosed to senior counsel.”

On the relevance of the solicitors’ instructions not to tell senior counsel about the arrangement, it added: “We do not think that that instruction is material for present purposes. Counsel is expected at all times to behave in a manner that is both independent and objectively justified. If necessary, an advocate can obtain independent advice. This is typically obtained from a Faculty Officer. In our opinion, standing the instruction not to inform senior counsel of the success fee arrangement, the obvious, and indeed the only, satisfactory course would be to take advice from a Faculty Officer.”

The tribunal therefore rejected the appeal, concluding: “The need to avoid conflicts of interest, and in particular financial conflicts of interest, is of great importance professionally, and we therefore consider that in a case where such a conflict has been allowed to emerge, without taking obvious remedial measures, a substantial penalty must be imposed. In all the circumstances we see no reason to interfere with the decision of the Complaints Committee.”