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The informed client

1 July 04

The challenge of ensuring clients are properly informed before they execute documents, give instructions or otherwise commit themselves to a course of action

by Russell Lang

It is one of the elements of the work of a solicitor to seek to ensure that clients are properly informed of the legal implications and risks associated with proposed or alternative courses of action so that the clients’ decisions to proceed with particular courses of action are informed decisions.

An exchange of views in relation to clients’ signature of separation agreements recently featured in the pages of the Journal: see the article “The beginning of the end”, by Tom Quail of Ketchen & Stevens in the Journal, November 2003, and letter by J S Paterson of Stewart & Osborne in the January 2004 issue. This exchange illustrates a range of possible approaches each of which may represent a satisfactory balance of expediency and effective risk management in ensuring that the agreement properly reflects the client’s informed instructions.  

Thought clearly requires to be given to addressing the risk issues effectively – the risk of a client having cause to allege, at some point in the future, that he did not understand what he was being asked to sign. The use of plain English so far as possible in explaining options and implications must play a part in achieving this. If such an allegation is made, the solicitor will want to be in a position to demonstrate the steps that were taken to ensure that the client did understand.

Challenging situations

The objective of ensuring clients are in the position of taking informed decisions is easily enough stated, but there are numerous different circumstances which present particular challenges and make the objective potentially more difficult to achieve. While the objective is precisely the same, the practicalities involved may be different if, for example, the clients are based overseas or more familiar with operating in other jurisdictions. Inexperienced first time buyers may call for a different approach from that appropriate to sophisticated clients for whom the solicitor acts on a regular basis, although be careful to avoid making assumptions about any client’s level of knowledge or understanding.   

The following case studies highlight some of the practicalities involved in a variety of challenging circumstances:

Stressed client

Some clients have such a fixed objective in their mind that, at the time, they seem to be oblivious to all information and advice given to them. Nonetheless, problems can emerge later if the client, with the benefit of hindsight, considers they could have achieved a more favourable outcome, for example:

Solicitors are instructed by Mrs A to act in a matrimonial matter. Mrs A’s husband, a company director, is clearly of not insubstantial means but Mrs A does not have detailed knowledge of his assets. The marriage is very unhappy. There are allegations of verbal abuse and excessive alcohol consumption which leads to threatened physical abuse.

Mrs A is desperate to remove from the matrimonial home. She has seen another property which would be very suitable for her purposes and which she wants to buy. The husband realises the marriage has irretrievably broken down and offers a financial settlement that is not ungenerous. The husband’s proposals would enable her to buy the other property. Mrs A is desperate to proceed with an offer to purchase this property and therefore decides that she wants to accept the financial offer that has been put to her by her husband.

What are the various issues that require to be considered from a risk management point of view?

Issues

  • Client possibly making an ‘uninformed’ judgment
  • Client rushing into a course of action that may not necessarily be in her best interests
  • Can you do anything to buy time to enable the client to make an informed judgment? Exclusion order? Matrimonial interdict?
  • Can you allow client to offer for the purchase of a property without first having crossed all ‘t’s and dotted all ‘i’s regarding the financial situation?
  • If client insists on going ahead – meet with client in person (preferably with colleague present) and make sure she understands that she is acting contrary to your advice. Extend notes of meeting. Confirm views of client in writing within 24 hours. It may be appropriate to have the client acknowledge your advice and recommendations by countersigning a copy of your letter to her.

Snap decisions

Mr B is pursuing a claim against the solicitors who acted for him in a reparation claim for injuries he sustained as a result of an accident at work. Liability had been disputed, there were three different accounts from the three witnesses, Mr B had been reluctant to give evidence and settlement was negotiated with Mr B’s authority at the doors of the court at a sum well below the sum sued for. Mr B now alleges that the settlement was reached against his will. How could this situation be avoided or, if it arises, robustly defended?

On return from court, prepare an attendance note giving details of the discussions at court and confirming that the client’s authority was obtained. Send a confirmatory letter to the client. Ideally, there should have been discussion with the client ahead of the proof rehearsing different potential outcomes and the implications of settling or of fighting on. These discussions ought to be evidenced on the file. In this kind of situation, the client feels under pressure to make a snap decision but, to some extent, you can prepare the client beforehand for that possibility.

Similar considerations can arise in other time-pressure situations – for example, where decisions have to be made during, or at the end of, hours of intensive negotiations, often in the middle of the night, when ability to concentrate and make decisions may be affected by tiredness. Again, it is essential to find a way of recording information and advice given (sometimes not easy to do) and confirming that in writing to the client. That is particularly important if, as sometimes occurs in these situations, clients have a desperation to complete a transaction come what may, and may be inclined to act contrary to your advice.

Difficult clients

A local builder is a valued long-standing client whom you meet socially two or three times a week. On such occasions or in a hurried telephone call he tends to give you instructions on half a dozen current matters and he becomes irritated if you insist on sending letters confirming these instructions. How do you arrange matters to ensure there is no doubt about the instructions you have been given and that the advice you have given has been understood?

There may be a client vetting/client engagement issue if a (prospective) client, like the builder client, maintains that he is too busy to ‘waste time in lengthy meetings’, producing detailed instructions or reading ‘lengthy letters’ and reports on title. You may be dicing with disaster with this sort of client, living in fear of a problem arising because of incomplete/inadequate instructions or because the client hasn’t taken on board some issue that you have reported to him. How could you change things so that you feel more in control of matters?

  • Explain the importance of legal compliance – perhaps at a lunchtime meeting (he needs to take time off to eat anyway!).  Explain you are being paid to look after his interests. Trying to minimise contact will save front-end fees but will lead to problems and expense for him
  • Send out summaries of current position on various transactions to bring him up to speed
  • Ensure file notes are extra detailed: proceed on the assumption every call could be disputed
  • Follow up in writing, regardless of client’s attitude
  • Avoid sending high volume of letters – try to summarise issues in bulk
  • Review the position in six months. If no improvement, consider whether you wish to continue acting for the client – is the client worth the hassle and the risk?
  • Ask a colleague to take over the client (different approach may produce results)?

Wilfully ‘blind’ client

There are many examples of situations where the client has little or no interest in being advised on the risks associated with a particular course of action and is focused solely on achieving a particular outcome, at all costs – the eager prospective house purchaser who wants to hear nothing of the (adverse) significance of inequitable allocation of roof  burdens; the idealistic entrepreneur who cannot conceive of falling out with his prospective partner and dismisses his solicitor’s advice regarding the terms of the partnership agreement drafted by his prospective partner’s solicitors.
In all of these situations, it may be appropriate to consider the courses of action suggested earlier.

Undue influence?

How best to deal with a situation where there is a “shadow client”, another party exerting undue influence on or pressuring your client?   
Mrs C purchased, jointly with her daughter and son-in-law, a house in which they could all live. Mrs C provided the bulk of the purchase price, the balance being met by the daughter and son-in-law funded by a mortgage. Following a major family fall-out, Mrs C claimed that her interests hadn’t been properly protected – she reckoned she should have been in a position to have the property sold straight away and that she should have been assured of getting back ‘her share of the value of the house’. Solicitors instructed by the daughter and son-in-law had handled the purchase and Mrs C had been presented with a fait accompli with no provision being made to secure Mrs C’s contribution or to cater for a fall-out or other eventualities.
When Mrs C contacted her own solicitor at the time of the purchase, she wanted to put no obstacles in the way of her daughter and son-in-law’s plans and had dismissed her solicitor’s warnings about her putting her savings at risk. The solicitors’ file noted that the son-in-law had accompanied Mrs C to all meetings and had appeared to exert influence in relation to all the key decisions.
Helpfully, the solicitors’ file carefully recorded the advice and risk warnings that they had raised with Mrs C. There was the clearest possible letter on file and a copy countersigned by Mrs C acknowledging the risks she was taking by proceeding without any security, minute of agreement or other contractual provision protecting her interests and securing her stake in the property.

Professional practice issues

Whatever may or may not be correct professional practice in any particular situation is beyond the scope of this article.