Common risk themes, common solutions

A sample of intimations to the Master Policy insurers over a period selected at random confirms that very few claims are down to lack of technical legal knowledge and the vast majority arise through oversights and omissions most of which could be avoided by operating simple systems, procedures and disciplines.  A few of the recurring themes are considered here with an eye to how problems could have been avoided.

Partnership matters

There are cases where allegations are made that the firm has failed to protect the interests of a partner leaving a partnership.

The firm has prepared a Dissolution Agreement on instructions received from both partners in the firm which was ending on an amicable basis.  One of the partners was continuing the business as sole proprietor.  The business failed and both partners were pursued by the landlord of the business premises for arrears of rent.

What has gone wrong here?  As far as the solicitor was concerned, he was drafting a Dissolution Agreement on an ‘execution only’ basis since he had received assurances from the parties that their split was amicable; that they had agreed the terms of their split and simply needed a formal document to ‘make it legal’.

Whatever the claimants original instructions, he seeks to allege that he was relying on the solicitor to protect his interests.

What could have been done differently?  It is suggested that, irrespective of assurances the parties may give you, you should proceed on the basis that the interests of partners joining or leaving a partnership are liable to conflict in some respect.  It may be safer therefore to decline to act for more than one party rather than having to withdraw at a later stage only when it becomes clear that you cannot continue to act for both or either.

If you are not representing the interests of a particular party and there is a risk that he or she might believe that you are, you should issue the clearest communication(s) to that party to the effect that you are not representing their interests, that they have interests that require to be protected and that they should seek separate legal advice.  Your checklist should prompt you to issue appropriate ‘non-engagement letters’.

Building Warrants

Situations arise where, on the resale of a property, it emerges that there is no building warrant for alterations carried out by one of the purchaser’s predecessors.  The typical allegation is that, in the purchase of the property, the client’s solicitor has either failed to identify the requirement for a building warrant in respect of the alterations or failed to obtain delivery of the building warrant and, presumably, a completion certificate.

How could that situation have arisen?  There are various possible scenarios.  Omissions in a survey report; misleading information from the client; oversight on the part of the solicitor.  The incidence of claims suggests that there is a good argument for operating a checklist which prompts you to ensure that the alterations position is established authoritatively and that the appropriate documentation is obtained.

Drafting Errors

A particular provision in documentation drafted by the practice is alleged not to reflect the terms of the agreement reached between the parties to the detriment of the firm’s clients. There is the possibility of curing the error by rectification, however that will involve significant cost and delay.

How did the error occur?  Could be any one of a number of reasons.  The documentation in some cases is highly complex and concluded in a short period of time in the face of intense pressure from clients.  Is that the explanation?  We’ll never know; however pressure and extended working hours must increase the risk of errors.

What can be done to avoid this?  There is no easy answer to this.  Controlling styles and proformas by ensuring that they are up to date and that there are no ‘rogue’ or unapproved documents in use is part of the answer.  Styles and proformas need to be carefully ‘labelled’ to ensure that they are not used for inappropriate circumstances.  Beyond that, there simply needs to be a recognition of the risks so that, for instance, interruptions are avoided when involved in complex drafting.  In an ideal world, all documentation would be thoroughly double checked by a colleague, however that is clearly unrealistic or uneconomic in most cases.

Tax planning

There are cases where clients allege that arrangements intended to achieve Inheritance Tax savings failed to achieve this result.

In some cases, solicitors had understood that the clients’ accountants had undertaken principal responsibility for the tax advice and that the solicitors’ responsibility was for documenting the arrangements.

What could be done differently?  Whenever there are other professional advisers involved, you should be alert to the risk of misunderstandings about the extent of each party’s role and responsibilities.  The terms of engagement of the solicitors and accountants should make it clear who has responsibility for what.  If you are not undertaking responsibility for advising your client on the taxation implications, you need to make this clear to the client in your engagement letter or otherwise in correspondence with the client.

Roof Burdens

The re-sale of a top floor flat in a tenement property falls through when the purchaser’s solicitors noted the fact that there is no valid allocation of roof repairing obligations on the lower flats in the tenement.  This situation still occurs reasonably frequently.

Why does this happen?  Is it because of ignorance of how the common law of the tenement operates in relation to roof burdens?  Is it because of failure to examine all necessary burdens and break-off writs?  Is it even a failure sometimes to appreciate that the property is at the top of a divided building and that the common law will allocate full roof repairing responsibility in the absence of valid allocation on those parts of the building underneath?

Whatever the explanation, a simple checklist could operate to prompt you to consider whether this is a property which could have an inequitable burden for common repairs and prompts you to examine the relevant burdens and break-off writs.

Matrimonial – Pension rights

A client alleges that she has not been advised of her entitlement to a share of her ex-husband’s pension.  A situation that has given rise to a number of intimations and could be addressed by a simple aide memoire or checklist.

Delay

The circumstances in which the substance of the allegation is delay on the part of the solicitor are many and varied.  They include failed sale/purchase transactions resulting from alleged delay in concluding missives; claims from disappointed beneficiaries on account of Wills remaining unsigned at the testator’s death; reduced proceeds on the delayed sale of investments.

Many of these allegations are without foundation and the claims have been successfully defended, however there is a real risk of claims and client dissatisfaction resulting from delays.  Delay and failure to communicate with clients are causes of client dissatisfaction which feature amongst the highest incidences of complaints to the Society of Inadequate Professional Service.

The challenges here are to do with workloads and complexity of work and, of course, ever higher clients’ expectations.  At least part of the answer must be managing clients’ expectations by agreeing realistic timescales and response times.

Executry Administration - legal rights

It has been alleged in certain cases that an executry estate was distributed without regard to the potential claim for legal rights of a member of the deceased’s family.

How could this have happened?  There are many details to be attended to in a complex executry and there is a risk that some aspect of matters will be overlooked.  There is a strong argument for preparing a checklist of matters to be attended to at an early stage and identifying/diarying timescales/deadlines.

Alistair Sim is Associate Director in the Professional Liabilities Division at Marsh UK Limited.

The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law and (b) is necessarily of a generalised nature.  It is not specific to any practice or to any individual and should not be relied on as stating the correct legal position.