Lawyers urged not to enter into business deals with clients
Court of Three Judges says in grounds for decision that this often leads to conflicts of interest
The Court of Three Judges, the highest disciplinary body in the legal profession, on Friday urged lawyers to steer clear of entering into business transactions with their clients as this will often lead to a conflict of interest.
The remarks were made in the court's detailed grounds for its decision last month to disbar Mr Malcolm Tan Chun Chuen, a lawyer of 20 years' standing who also provided investment services, for three charges involving dishonesty.
Mr Tan, in persuading a client to invest money with him, had falsely claimed that profits of 12 per cent per annum would be "guaranteed" by the professional indemnity insurance that he held as a practising lawyer.
The client eventually put $150,000 into this "guaranteed returns" investment scheme and another $100,000 into a "non-guaranteed" scheme.
"As a general rule, it is inadvisable for solicitors to enter into business transactions with their clients since this will often have a real potential to give rise to a conflict of interest," said the judgment, written by Chief Justice Sundaresh Menon.
"A solicitor who invites a prospective client to consummate a solicitor-client relationship with him in order to then deal with that client as a principal in a separate business transaction is courting professional disaster."
The court said Mr Tan's conduct was particularly "disgraceful and appalling" because he had used his professional status to give the client false assurance that the client's interests will be safeguarded.
In 2017, Mr Tan, who was then practising at Keystone Law Corporation, met Mr Kuek Yak Yeon and promoted various investment products to him.
Mr Kuek signed two letters of engagement under Keystone's letterhead, stating that the law firm would oversee his investments.
He then issued a cheque for $250,000 to Bluesky, a business consultancy firm owned by Mr Tan.
Mr Kuek said Mr Tan had assured him that his money would be protected and that issuing the cheque to Bluesky was "the same" as paying Keystone.
Mr Kuek filed a complaint with the Law Society after he asked Keystone for an update on the money and was told by the law firm that it had not received any funds from him or done any legal work for him.
Mr Tan argued that Mr Kuek hired him not as a lawyer but as a business adviser.
This contention was rejected by a disciplinary tribunal, which referred him to the court to mete out punishment.
FAVOURING OWN INTERESTS
The court said a striking off was warranted, as this was a case in which Mr Tan acted dishonestly in favouring his own interests over those of Mr Kuek.
Mr Tan had used his standing as a lawyer to make false representations to Mr Kuek and constructed an elaborate hoax using the letters to convince Mr Kuek that the law firm would supervise his investments, said the court.
The court also said it will refer the case to the Public Prosecutor to consider whether any criminal charges should be brought against Mr Tan.
A spokesman for the Attorney-General's Chambers said it will be looking into the matter.