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Winning the game of risk

1 August 03

No area of practice is free from risk, but solicitors can all take steps to manage the risks they face

by Spencer Kennedy

Frane Selak might be considered either very lucky or very unlucky.  He narrowly escaped death in six separate serious accidents but has now won the Croatian lottery and is about to embark on his fifth marriage.

Of course, philosophers have debated for centuries whether every event is predestined.  Unless one subscribes unreservedly to the doctrine of determinism, one must recognise that we all have an element of free will.  Mr Selak could have stayed at home on the days in question and avoided all six accidents.

Similarly, all solicitors would recognise that they have an element of control over their own business and that therefore they can manage the risks and reduce the likelihood of their being negligent and claims against them arising.  It would be foolhardy to suggest that every negligent act or omission could be predicted and thus prevented.  It would be equally wrong of a solicitor to accept meekly that accidents will happen and thus that no risk management procedures are worth undertaking.

One of Mr Selak’s accidents occurred when he was a pedestrian and the others involved a train, a plane, a bus, a car and a lorry.  It is thus too simple to suggest that one should adopt the safest means of transport or restrict one’s legal practice to the area involving lowest risk.  Claims arise across the spectrum of legal business.  

Very few of us are careless enough to miss the plane taking us to our holiday destination.  Yet routinely, claims arise because time limits of one kind or another have been missed.  Diary systems are obviously necessary but their effectiveness is naturally dependent upon the date entered being right in the first place.  It is worth double checking the date your client provides to you for the accident.  If he has got it wrong, it may still prove to be your fault for not checking.  Foreign jurisdictions impose different time limits and the practitioner should be alive to that possibility, even if he is not expected to know offhand what limitation is imposed by the Law of Croatia for aviation accidents.

Even those who do not handle personal injury claims must of course be aware of time limits.  The quinquennial prescription can operate more quickly than you might think.  It is important to identify when time starts to run.  There seems to be a common, and fatal, misconception that time does not run until the loss can be quantified.

Mr Selak did encounter a series of disasters but he survived them.  A solicitor can do likewise if he records contemporaneously the advice he gave or the instructions he received at a crucial meeting.  It is surprising and depressing to find all too often that a file has become quiet when it should have been noisy, just when the transaction in question was obviously going wrong.

Most practitioners have adequate diary systems and file review procedures which work perfectly well on a good day.  What really matters is whether the systems work when you have a splitting headache, your child is sick at home and you are held up all day at Court.  That is where uniform procedures applied by everyone across the firm become important.

If a colleague has to cover for you in your absence, it must be easier if he finds everything in the right place rather than being confronted with a desk looking like a Balkan bomb site.  It is said that insurance claims inspectors reduce the amount they offer in proportion to the degree of chaos evident in the solicitor’s office!

Recent reforms in Court procedures, particularly for personal injury cases in the Court of Session, lay emphasis on early preparation.  It will no longer do to leave things until the last minute and then have a Summons prepared on minimal information.  It becomes important that the process of preparing a case for Court starts much earlier, particularly if reports from experts are going to be required.  

Diary entries are equally important for chambers practitioners.  There may be a two year time limit imposed in conveyancing transactions.  Since in the majority of cases that will not be of relevance, it is easy to overlook it in the case where it does matter.  Perhaps the best safeguard is to make your client aware of the time limit and its significance.  

Faced with transactions requiring immediate attention, it is all too easy to leave aside the post-settlement housekeeping.  Letters of Obligation facilitate settlement of conveyancing transactions.  It is amazing how often these remain unimplemented for far longer than they should.  If one remains outstanding for more than five years, the solicitor who has granted the obligation may find that it has been extinguished, leaving a problem for the purchaser and particularly his solicitor.

As a profession, we have been reluctant to set out for our clients our terms of engagement.  A client is likely to get much more by way of paperwork when he takes out a £7000 ISA from an insurance company than when he buys a £700,000 house through his solicitor.  The solicitor who protects himself protects his client.  It must be sensible to make clear to our clients at the start of any piece of business what we undertake to do and, equally important, what we are not going to do.  Misunderstandings can thus be avoided and problems are less likely to arise.  

It is difficult enough to suggest risk management solutions which would prevent a recurrence of past problems.  The more challenging task is to attempt to predict where professional negligence claims may arise in the future and take steps to prevent them.

There have always been instances of delays in winding-up executry estates.  In the years when share prices were increasing, such delays did not usually lead to the beneficiaries suffering financial loss.  All that has changed in the last two or three years.  

Solicitors acting for executors ought to be very conscious of the primary duty on the executors, namely to realise the assets as promptly as possible.  If there is delay in doing so and the stock market plunges, the solicitors can expect their handling of executries to be scrutinised rigorously.  Already claims of this kind are emerging with substantial sums involved.  

There do seem to be more claims arising from commercial transactions and these tend to be expensive to resolve. When things have gone wrong, one gains the impression that the transaction has been controlling the solicitor rather than the other way round.  All too often a solicitor is faced with an unrealistic time schedule for dealing with a major transaction.  It becomes all the more necessary for the solicitor to define what his responsibilities are to be.  

Traditionally, solicitors and advocates enjoyed immunity from civil suit when “on their feet”.  That immunity in both civil and criminal cases has been drastically curtailed.  We perhaps cannot assume that these areas will continue to be relatively low risk for professional negligence purposes.  A client who is convicted and imprisoned because a solicitor mishandled his defence may well have a claim for damages which could be substantial.  A father who is deprived of contact with his child may be almost as distressed as a child who is forced to have contact with an abusive parent.  In either situation, there seems no reason in principle why a claim for damages should not be available against a solicitor who acted negligently in dealing with the contact dispute.

In short, there is no area of practice which can be considered free of risk.  For most of us, staying at home is not an option. However, if we all believe that we have the free will to influence events and we take steps to manage the risks we all face, then claims are less likely to occur.  If we achieve that, we will be able to afford future professional indemnity premiums without needing to win the Croatian lottery.  

Spencer Kennedy is a senior litigation partner with Balfour & Manson.  He has been a member of the Master Policy Insurers’ panel of solicitors since 1990 and has extensive experience in defending negligence claims brought against solicitors.  He is the co-author of the risk management publication ‘Ensuring Excellence, Even Better Practice in Practice’ (1998) and has had a substantial involvement in the Society’s annual Risk Management Roadshows, as a co-presenter and facilitator for several years.  

The views expressed by the author are his own.