Privy Council Ruling: Lawyers must investigate power-of-attorney 'red flags' or risk ethics breach

In a ruling reinforcing the duty of lawyers to guard against fraud, the Privy Council has dismissed an appeal by Jamaican attorney Fay Chang Rhule over her handling of a disputed power-of-attorney property sale in St Catherine.

On Tuesday, the London-based Privy Council, Jamaica's highest court, affirmed the Jamaican Court of Appeal's decision that Rhule breached professional ethics by failing to investigate “red flags” suggesting a forged power of attorney (PoA) in the 2011 property sale.

The ruling underscores the obligations of attorneys in Jamaica to scrutinise powers of attorney and avoid inadvertently facilitating fraudulent transactions.

A power of attorney is a legal document that lets someone appoint someone else to act on their behalf in certain matters.

The dispute concerned Lot 393, Orange Way, Linstead, co-owned by Denton McKenzie and his wife Angella Smith.

Carolyn Alexander, who was in a relationship with McKenzie, retained Rhule to handle the sale of the property and produced a power of attorney dated March 6, 2011, purportedly signed by McKenzie, the Privy Council recounted.

Title checks by Rhule revealed that Smith was also a co-owner, prompting Rhule to make further enquiries.

Alexander falsely claimed that both owners were incarcerated in Canada. Smith was never incarcerated anywhere, the Privy Council said. A Jamaican Court of Appeal judgment had noted that Mckenzie indicated that up to April 2015, he was serving a five-year prison. He also denied granting the PoA.

The Privy Council noted that Rhule asked for evidence from Alexander that she was authorised to sell the property on Smith’s behalf.

Alexander produced a second power of attorney “apparently signed by" Smith, and dated November 21, 20211.

“Having satisfied herself that both PoAs were regular on their face and complied with relevant statutory requirements, the appellant proceeded with the sale, paid off the mortgagee and accounted to Alexander for the net proceeds of sale,” the Privy Council said. “Unfortunately the November PoA was a forgery and had been used by Alexander and probably also McKenzie as the instrument of a fraud upon Smith, who had not signed it nor otherwise done anything to authorise Alexander to undertake the sale. She was thereby deprived of her share in Lot 393 and in its net proceeds of sale. ”

Smith later lodged a complaint with the General Legal Council (GLC), asserting in a June 2015 affidavit that she had not signed the November 2011 power of attorney and had not consented to the sale. Both she and McKenzie filed affidavits denying the authenticity of the powers of attorney. The GLC regulates the legal profession in Jamaica.

In January 2023, the GLC’s Disciplinary Committee cleared Rhule, finding no sufficient risk factors requiring further investigation and concluding her actions did not breach professional ethics.

Smith appealed, and in May 2023, the Jamaican Court of Appeal set aside the disciplinary committee’s decision.

It found Rhule guilty of professional misconduct under Canon I(b) for failing to investigate “red flags” suggesting potential fraud. It said these included Alexander’s failure to disclose that Smith was a co-owner, her false claim that Smith was in custody, and unusual similarities in witnesses and addresses on both powers of attorney.

Canon I(b) of the Legal Profession (Canons of Professional Ethics) Rules states: “An Attorney shall at all times maintain the honour and dignity of the profession and shall abstain from behaviour which may tend to discredit the profession of which he is a member.”

The Court of Appeal also said a claim of alleged negligence brought against Rhule failed because she owed no duty of care to Smith, who was not her client.

Rhule appealed to the London-based Privy Council, which on Tuesday dismissed her appeal and upheld the Court of Appeal’s finding of professional misconduct.

The Privy Council acknowledged the “well-presented submissions” of King's Counsel Caroline Hay, who represented Rhule. She was joined attorneys Kimberley McDowell and Neco Pagon.

The respondents, Smith and the GLC, were represented by King's Counsel Georgia Gibson Henlin and attorneys Shanique Scott, and Lemar Neale.

Hay argued that while attorneys may need to investigate red flags affecting their own clients, warnings concerning third parties to whom no duty of care is owed should not trigger a finding of professional misconduct.

The Privy Council accepted that Rhule owed no private law duty to Smith but emphasised that this did not absolve her from professional responsibilities under Canon I(b).

The top court clarified that a breach of Canon I(b) does not require the complainant to have suffered a loss or possess a private law claim, noting that the professional standard “does not depend upon the existence of any duty in private law owed to the complainant.”

“Canon I(b) speaks of the honour and dignity of the profession, and of behaviour which may tend to discredit the profession. That language is far removed from conduct Page 9 which must necessarily invade the civil rights of the complainant,” said Lord Briggs who wrote unanimous 10-page judgment.

Citing the Jamaican Court of Appeal judgment, the Briggs said Justice Kissock Laing accurately stated that an attorney “does have a duty to be on guard against fraud or dishonesty, and to make additional checks in order to satisfy himself or herself that all is in order, and that he is not unwittingly facilitating dishonesty, fraud or illegal conduct”. Justices Carol Edwards and Nicole Simmons were the other two appellate judges.

The Privy Council explained that warnings, or “red flags,” regarding the validity of a power of attorney fall into two class: one involving risks unknown to the donee, such as the donor’s mental capacity, and another, as in the Rhule case, involving a risk that the power of attorney may be a forgery, with the donee knowingly attempting fraud.

In such cases, an attorney owes a duty to herself, the profession, and the public “not without further enquiry to become a facilitator of, or participant in, a transaction which may be or involve a fraud.”

A donee is someone granted power of attorney, authorising them to make decisions on behalf of another.

The Privy Council said that its ruling should not be read as endorsing all aspects of the Court of Appeal’s reasoning. Its decision focused on upholding professional standards under Canon I(b), rather than confirming a pre-existing duty of care to the complainant.

“There having been no challenge by the respondents to the finding of the Court of Appeal that the appellant owed Ms Smith no duty of care, the Board will necessarily assume for the purposes of what follows that there was no such duty of care. But it should not be thought that the Board would, if that question had been in issue, have agreed with the Court of Appeal.”

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