Joint owners selling: one co-owner's instruction to pay all the proceeds to her (Code 3.1 and 6.2)
A firm acts for Dev Malhotra and Fiona Grey, the registered proprietors of a flat, on its sale. They hold the beneficial interest as tenants in common in equal shares under a declaration of trust. They have recently separated. The day before completion, Fiona emails the firm instructing it to pay the whole net proceeds of sale into her sole bank account, because Dev owes her money. Dev knows nothing about this instruction.
Which of the following best describes how the firm should proceed?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: It must not act on Fiona's instruction alone; it needs instructions from both clients and, as they now conflict over the proceeds, must consider whether it can act for both.
THE RULE TO REMEMBER
Where a firm acts for joint clients, it must not act on one client's instructions against the other's interests; once they disagree on an aspect, the firm must not act for both on it.
Joint owners selling: one co-owner's instruction to pay all the proceeds to her (Code 3.1 and 6.2)
Paragraph 3.1 of the Code requires a solicitor to act only on instructions from the client, or from someone properly authorised to give instructions on their behalf. The firm's clients are Dev and Fiona jointly, and the proceeds are held for both of them. Fiona alone cannot authorise a payment that would defeat Dev's beneficial share. The firm must not follow her instruction without Dev's authority. Her email shows that the clients' interests now conflict over how the proceeds are distributed. Under para 6.2 the firm must not act on that aspect for both while there is a conflict or a significant risk of one. The 'substantially common interest' that justified acting for both in the sale does not extend to a dispute between them about the money. Each client is entitled to information material to their matter (para 6.4), so the firm should tell both of them about the position. It should hold the money pending joint instructions and consider whether it can continue to act for either or both.
Why A is wrong: Para 3.1 requires instructions from the client; where the firm acts for both co-owners, one cannot instruct it to act against the other.
Why B is wrong: Dev has given no such instruction either, and the firm cannot simply prefer one joint client over the other.
Why C is wrong: Payment into court is not the immediate step; the firm must first seek joint instructions and assess the conflict.
Why D is wrong: Acting without instructions and keeping both clients in the dark fails the firm's duties to act on instructions and keep each client informed.
A little more practice done.
Related questions
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Which of the following best describes how Laura should proceed under the SRA Code of Conduct for Solicitors?
Acting for clients competing for the same objective (SRA Code 6.2)
Which of the following best describes whether the firm may act for both clients?
Selling a house on the instructions of the owner's attorney under a registered LPA (Code 3.1)
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