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Memorandum of Advice

To: SUPERVISING PARTNER- STEVIE ROSE

From: Junior Lawyer

Date: 18 September 2020

Re: Legal advice to David Brewer- Equity Rights and Agreements

This particular memorandum shall set out the legal advice and research that has been conducted in the matter of David and the breach of his equity rights. He seeks remedy for the same under the provisions of Principles of Equity. The laws of equity are used to bring both the parties to a same standing before the law is applied to them. Else, one party may be in huge losses and the other enjoying unjust enrichment.

Executive Summary of Equity And Trusts 

  • Equity rights. David Brewer has a strong chance of winning and claiming remedies against a majority of the parties included in the transactions that have been made in the various situations. It may be advised to all the parties to settle their claims outside court.
  • Liability for lease. Ray Butani might succeed in a claim against David on the basis that the lease agreement signed subsequent to the purchase of the property was a new agreement as the old agreement was void due to breach of contract. There is no law which says that the new agreement has to concur to the clauses of the old agreement.

Was There a Negligence on Part of David?

The only negligence that can be attributed on the part of David was that of not conducting a due diligence before he signed the sale deed to purchase the business called ‘The Apothecary’. However, he has appointed a legal practitioner, who was supposed to conduct a due diligence of behalf of David. Thus, David cannot be held liable for negligence.

Has the Principle of ‘conflict of Interest’ Been Violated?

The provisions specified in rules 8-11[1] hold that no legal practitioner shall take part in any transaction or suit or agreement where a situation of conflict of interest arises. The provisions of the Australian Solicitors Conduct Rules (ASCR) identify three kinds of conflict that might be faced by any legal professional. They are:

  • Rule 10: conflicts between a current client and a former client;
  • Rule 11: conflicts between two or more current clients; and
  • Rule 12: conflicts with a lawyer’s own interest.

In the current scenario, Johnny represents two clients- Twyla and David. Both are current clients and have been represented by the same lawyer in the sale agreement that was made. In a situation of this sort, the lawyer cannot practically come up with an agreement which maximises the benefit of both the clients. One of the clients has to suffer a minor loss compared to the other. It is due to this reason that the professional ethics do not allow a situation of this sort to arise and prohibit a single lawyer to represent both the parties in a transaction. According to the principles of Equity laws, it is essential that all the concerned parties must have acted in good faith. Johnny, having acted as a solicitor for Twyla for the last 10 years had to have the information that was specified in clauses 30-32 of the lease agreement with Ray Butani under which the land for business had been leased for 10 years. The act of not informing David of the same is evidence of the fact that Johnny was not acting in good faith for David. Thus, Johnny is in breach of the rules of professional ethics as prescribed by Professional Conduct and Practice Rules, 2005 and Australian Solicitors Conduct Rules (ASCR).

Has Any Principle of Equity Been Violated?

  • By Twyla Schitt- The owner of any property is under an obligation to make a full and complete disclosure before the sale deed is signed. It is a moral obligation as well as a principle of equity to make such disclosure. Although there is no contractual agreement with respect to statement of disclosure, but if the court feels that non-disclosure has caused substantial loss to the buyer, it may repudiate the contract.[2] In the current scenario, complete disclosure of facts has not been made. The lease agreement entered into by the owner of the property contained a clause which stated that the consent of the lessor had to be obtained before the assignment of the lease to a third party. The client (David) had not been informed about such conditions and as a result the lease agreement was terminated by the lessor and the client had to enter a new lease agreement which increased the rates of lease of the land.[3] This caused David substantial loss as he has to go through the mental stress of having to enter a separate new lease contract apart from the monetary losses faced by him. Under the laws of equity, the owner may be asked to make good the losses suffered by David due to non-disclosure or to repudiate the contract altogether.
  • By Johnny- The owner and his solicitor may be held liable jointly, as both were under the duty to disclose full facts of the agreement.[4] Acting on behalf of the owner, Johnny should be held equally liable as he was acting as an agent for the owner.

Is Moira Guilty of Making Personal Gain?

The information with regard to the transactions of Moira Levy- the stockbroker is incomplete and a decision with regard to her personal gains can only be made after information if given by the client. The decision to invest in the particular Motel-SCML was an independent decision that was taken by David without any influence of Moira. However, she acquired the required percentage of shares from her own holdings or of holding of her relatives. Thus, if the shares have been sold at a price higher than the market rate at the time of purchase, she made personal profits out of it. If such personal profit is proved, she would be held guilty of unjust enrichment. If such personal profits are not proved, then Moira would not be held guilty as she had no intention to harm to client. The decision to sell her own shares of SCML was a personal decision for which she cannot be held liable. The subsequent downfall of the prices of the shares could not have been anticipated by her as it was due to a sudden pandemic and she could not have warned David or any other customer about such an event. By the time she was made aware, she did pass on the information to all her clients, including David. This can be proved by the fact that other clients of Moira sold their shares on time and received profits out of it, while David forgot to put up his shares for sale. Moira cannot be held liable for the losses caused due to the personal acts of David. Thus, the decision with regard to the liability and claim against Moira should be kept on hold till full information is received about the market standards at the time of purchase of the shares.

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