You receive for signature from another solicitor a final version of a contract from which an important clause previously agreed upon has been omitted. The omission of the clause is inadvertent; but its omission is advantageous to your client.
Do you face an ethical dilemma? What would be your response? Do you have your client sign the contract as delivered to you? Do you seek instructions from your client to bring the inadvertent omission to the attention of the other solicitor? Do you contact the other solicitor to correct the error without recourse to your client?
Rule 30 of the Australian Solicitor Conduct Rules 2012 (ASCR) helps us in resolving this ethical conundrum. The Rule states:
A solicitor must not take unfair advantage of the obvious error of another solicitor or other person, if to do so would obtain for a client a benefit which has no supportable foundation in law or fact.
Where the omission is inadvertent then there is an ethical responsibility upon us to disclose to the other solicitor the error they have made. Where the "final” version of a contract contains a drafter’s error, it would be unconscionable for us to permit our client to take an unfair advantage from the mistake. This is reinforced by our fundamental ethical duties. Firstly, to act in the best interests of our client (Rule 4.1.1 – our client avoids the potential costs of a rectification action); secondly, to be honest in all our dealings in the course of legal practice (Rule 4.1.2) and thirdly, we are to avoid actions which may compromise our integrity (Rule 4.1.4). It is also arguable that if we permitted our client to sign the contract as delivered we could also be in breach of Rule 34.1.3 by using a tactic that could be said to have frustrated another person (because the client had no right to sign a document that did not reflect the parties agreement). In the decision of Philip McMurdo J in Equititrust Limited v Willaire Pty Ltd [2012] QSC 206 a solicitor’s behaviour in not drawing to the attention of another solicitor the insertion of an amendment to an agreed settled draft was characterised as unconscionable. Also note that the solicitor criticised for the conduct had previously represented to representatives of the other party that the mortgage had been executed by the client and was to be returned.
Our duty to fearlessly represent our client is not unlimited. The client does not have the right in this situation to take unfair advantage of the obvious error to obtain a benefit which has no supportable foundation in law of fact. Indeed, for us to suggest to a client that this is an opportunity to take the benefit of the clerical omission would be not only unconscionable but a violation of our fundamental duties. It would be unprofessional to permit exploitation of the drafting error.1
If confronted by this dilemma we should inform our client of the inadvertent omission and urge our client to provide instructions to us to permit us to reveal to the other solicitor the mistake. We are permitted only to follow "lawful, proper and competent instructions” (Rule 8.1). We need to counsel our client as to the potential consequences of attempting to take unfair advantage of the inadvertent omission (the potential for indemnity costs in a rectification action and possibly engaging in misleading or deceptive conduct). A client who refuses to provide instructions to permit correction of the obvious error should be informed that we cannot be a party to that behaviour and will need to withdraw from representation (we can terminate the engagement for just cause and on reasonable notice – Rule 13.1.3).
Do we need the client’s instructions to inform the other solicitor of the drafting error? Rule 9 provides that any information which is confidential to a client and acquired by us during the client’s engagement must not be disclosed unless permitted by the rule. Rule 9.2.1 permits us to disclose confidential client information if "the client expressly or impliedly authorises disclosure”. The American Bar Association in Informal Opinion 86-1518 (ABA Committee on Ethics and Professional Responsibility, Informal Op.86-1518 (1986)) has ruled:
Kentucky Law Journal 1055, 1089.When the lawyer for A has received for signature from the lawyer for B the final transcription of a contract from which an important provision previously agreed upon has been inadvertently omitted by the lawyer for B, the lawyer for A, unintentionally advantaged, should contact the lawyer for B to correct the error and need not consult A about the error.
Informal Opinion 86-1518 expressed the view that the duty of confidentiality did not preclude disclosure because the lawyer was impliedly authorised to make disclosure of information that "facilitates a satisfactory conclusion”.2 The reasoning in Informal Opinion 86-1518 was also supported by reference to a rule that have no equivalent rule in the ASCR. Rule 4.1 of the ABA Model Rules of Professional Conduct, at the date the Informal Opinion was released, provided that a lawyer had an obligation to fulfil "reasonable client expectations”. It was said that a contract based on an obvious drafting error is not part of the client’s reasonable expectation. Another reason advanced for implicit authority to disclose is that there is no informed decision for the client to make; the decision on the contract has already been made by the client. Mann J in Tamlura NV v CMS Cameron McKenna [2009] EWHC 320 (Ch) at [168] (Tamlura) suggests that there may be circumstances where an implicit authorisation to disclose could arise, in that a responsible solicitor gets on with the job of implementing client instructions.
Not all circumstances will suggest an implicit authority to disclose. Tamlura had a number of factors which pointed to such an implied authority: firstly, the instructions the solicitors held had been clear for some time; secondly, there were time constraints which required quick action; and thirdly, the drafted document, if it stood as is, could be seen as tricky and misleading to third parties.
Notwithstanding this view as to implicit authorisation, the better course would be to have a conversation with the client as to the risks of non-disclosure and to obtain express authorisation. If the client provides us with the instruction to inform the other solicitor of the drafting error the dilemma disappears. If our client refuses to give us authorisation to disclose we cannot become a party to the securing of a benefit to our client which has no supportable foundation in law or fact. We must then terminate the client engagement for just cause and provide the client with reasonable notice (Rule 13.1.3). If we withdraw should we disclose the drafting error to the other solicitor? Our duty of confidence binds us even after the engagement has been terminated.
Unless there exists an exception to the duty or we are permitted by the rules to disclose then we are bound to retain the confidences of the client acquired during the client’s engagement.
In summary, we cannot permit a client to take advantage of an inadvertent drafting error of the other solicitor. This is consistent with the purpose of contract law, that the agreement reflects the parties’ actual agreement. It is reinforced by Rule 30 and our fundamental duties.
1 Morning Star Packing Co LP v Crown Cork & Seal Co (USA) Inc. 303 Fed Appx 399.
2 See Nathan M Crystal, ‘The Lawyer’s Duty to Disclose Material Facts in Contract or Settlement Negotiations’ (1999) 87(4) Kentucky Law Journal 1055, 1089.