How did that claim arise?
A Master Policy panel solicitor and member of the pursuers’ panel identifies the 10 most common underlying causes of claims against solicitors
In 2002 the Law Society of Scotland established a pursuers’ advisory panel to handle professional negligence claims against solicitors. As one of the founding members, I handled a huge variety of claims over the 12 years in which I was on the panel, and have come up with a “top 10” of most common underlying causes of claims.
Failure to ensure clear instructions
An extraordinary number of claims arise at root from a failure properly to clarify the scope of the engagement with the client. Is the client looking for advice on negotiation of terms, or is the instruction “execution only”? Does the client expect you to diarise and check up on future critical dates (e.g. option dates)? Are you agreeing to provide tax advice? What you are agreeing to do for the client (and what you are not agreeing to do) should be specified clearly in the initial scope of engagement letter, and that should be updated if the scope changes.
Delay manifests itself in many different ways in relation to claims. On the simplest level there are still many claims dealt with under the Master Policy every year arising out of claims, complaints and applications which are time barred. The answer to this is, of course, to have a system which clearly records the earliest potential time bar date as soon as an instruction is received and provides adequate reminders before that date is reached. However, often the problem is not an administrative one but a legal one. Is there a “specialist” time bar period (e.g. in the case of carriage of goods claims), or indeed has the law changed regarding commencement of the prescriptive period? It is necessary to keep up with the law to keep on top of the time bar.
Failure to check background documents
This manifests itself particularly in relation to property claims, e.g. failure to report adequately on title and highlight problems arising from searches or property enquiry certificates. If there is a desire to limit the obligation to report, that should specifically be covered in the scope of engagement.
The obligation to check and report on background information applies to all practice areas. If a court action is raised in the name of the wrong company within a group, that may be a problem arising from background searches and reporting to the client.
Conflict of interest/client registration checks
As with the scope of engagement, another prolific area giving rise to claims emanates from the work done right at the outset of an instruction. There are still a significant number of claims and complaints that arise from acting in conflict of interest. All firms now have systems in place for checking for conflicts of interest, but as well as the automated checks which are carried out, consideration should also be given to the potential conflict of interest among family members, for example, in a trust or executry matter or between a company and individual directors in a corporate setting.
Sometimes thought and an element of caution are required to avoid the potential for future claims. Likewise, we are all now required to do AML checks on clients. Again, the important point here is that in addition to providing the formal identification for the client, it is often necessary to scrutinise a bit more carefully where the funds are coming from for the transaction and whether there is any cause for suspicion arising from that (and this applies to third party funds as well as client funds).
Failure to register
Many claims still arise from failure to register deeds. This really is a systems problem. There is usually some explanation (personnel having left the firm or been on holiday or IT systems having failed etc), and the answer to this is to have backup systems which will ensure that work is covered during absences and any individual error is picked up.
Failure to advise properly on risk
In a surprising number of cases there is nothing substantively wrong that the solicitor has done. It is simply that the transaction or claim or whatever piece of business has been carried out has not gone as the client intended and wanted. It is rare that any solicitor will guarantee the outcome of any particular piece of work, but in many circumstances it is necessary to go beyond that and actively to advise the client of the level of risk involved in the work.
Inaccurate service of notices
Although, in general terms, the courts have become more liberal in their approach to interpretation of contract and to reading and interpreting words used in a “commercially sensible” way (which can mean effectively “correcting” clear errors made in contractual documentation), legal notices still require a high degree of accuracy. Making sure the names of the parties are correctly typed and spelled and the correct group companies referred to, etc, is critical to the effectiveness of a notice when served, and the importance of this is accentuated if the requirements for service are time-sensitive.
Acting outside area of expertise
As specialisms have grown within the profession, it has become increasingly important not to stray outside one’s own specialist area. This is a particular challenge for smaller firms which simply may not have the specialist resource to handle particular types of work, although even in larger firms this presents an increasing problem when dealing with the scale of the larger firms in London. The Hunter v Hanley test will be formulated for specialist areas of work by a court to reflect the standard of the ordinary competent practitioner in the specialist area concerned.
Interface with other advisers
As a follow-on from growing specialisation, it is also true to say that in an increasing number of situations we are as a profession being asked to provide advice which runs parallel with advice from other professionals. For example, in commercial transactions or indeed on tax and trust matters we are often working alongside accountants, and in property matters alongside surveyors. Recognising where the boundaries lie in relation to what we are doing is important.
Communications and records
The variety of methods by which we communicate with clients and other solicitors, and the ease with which we can now communicate, have made life easier for us in some ways but have also created increased risk in other ways.
Out of office messages not activated, voicemails not checked, wrong email addresses, and emails or notes not properly filed crop up in one form or another in the context of many claims, even if they are not always the principal head of claim. The answer here is systems and ensuring that responsibility rests with individuals to check systems.
The focus on risk management over the last 20 years or more by Marsh and by the Society continues to deliver better standards in relation to all these areas of potential claim. The challenge is to keep that moving forward.
What is the pursuers’ panel?
The panel consists of nine solicitors selected by the Society on the basis of their expertise in dealing with professional negligence claims, to assist members of the public with advice about negligence claims against solicitors and, where appropriate, to assist solicitors already advising members of the public in connection with the handling of negligence claims against other solicitors.
Each member of the panel is available to deal with negligence claims against other solicitors on an individual basis. However, where a claimant is already represented by a solicitor in relation to the claim, members will not provide advice to or act for that claimant, unless the existing solicitor refers the matter to a panel member. It should be emphasised that members are happy to receive referrals from other solicitors, either to handle the whole claim, or to assist with advice in relation to any aspect of a claim.
Tim Edward is a partner and head of commercial dispute resolution at Maclay Murray & Spens LLP, specialising in insolvency and company litigation, accredited by the Law Society of Scotland as a specialist in professional negligence, a member of the Master Policy solicitors’ panel, and a former/founding member of the pursuers’ panel.
The information contained in this article provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisers regarding specific coverage issues.