Confidentiality and disclosure — SQE1 Legal services question
A worked single-best-answer question on confidentiality and disclosure, with why each wrong option is wrong — the way SQE1 traps candidates.
Isla, a solicitor, acts for Tom on his purchase of a house for £400,000 and also for Northway Bank, which is lending Tom £320,000 on mortgage. The bank's instructions require her to report any arrangement that reduces the price actually paid. Shortly before exchange, Tom mentions that the seller has privately agreed to give him a £20,000 cash 'allowance' after completion, which will not appear in the contract. Tom tells Isla not to mention this to the bank.
What should Isla do?
- ATell the bank immediately without informing Tom, because her duty to the lender overrides her duty of confidentiality to Tom.
- BContinue acting for both clients without telling the bank, because her duty of confidentiality to Tom prevails.
- CContinue acting and report the allowance to the bank only after completion, once Tom's purchase is secure.
- DStop acting for Tom, continue acting for the bank and tell the bank about the allowance.
- EAsk Tom to consent to her telling the bank; if he refuses, stop acting for the bank without revealing the information, and consider whether she can properly continue acting for Tom.
Show answer and reasoning
Rule: Where a duty of confidentiality to one client conflicts with a duty of disclosure to another, the solicitor must obtain consent to disclose or cease acting for the client to whom disclosure is owed.
- A The duty to disclose does not override confidentiality; the solution is to seek consent or cease acting for the bank. (wrong rule)
- B Continuing for the bank while withholding material information breaches the paragraph 6.4 duty of disclosure. (wrong rule)
- C Delaying disclosure until after completion breaches the duty to the bank while still acting for it. (wrong rule)
- D Telling the bank without Tom's consent would breach the continuing duty of confidentiality owed to Tom. (wrong rule)
Source: SRA Code of Conduct for Solicitors, RELs and RFLs, paras 6.3 and 6.4; SRA guidance, Confidentiality of client information