Reminder of routine risk issues

A range of issues this month, some of which are more topical issues but starting with a further reminder of the importance of having a thorough record of instructions received and advice given.  

File notes

In many negligence claims, the central issue is inadequacy of documentation on the file that records the terms of instructions received and advice tendered.  The lack of confirmatory correspondence or attendance notes can often compromise the ability to defend a claim even when the solicitor has acted entirely in accordance with his client’s instructions and given the right advice.  There is a real risk in the event of a dispute that the client’s version of events will be preferred to the solicitor’s unsupported version.

The making of attendance notes is ultimately a matter of establishing a discipline to ensure consistent recording of the salient elements of discussions with clients and others.  This discipline can be encouraged by having a standard form of note which has headings including

• date, time, place, persons present
• instructions received
• advice given
• action agreed
• timescales and deadlines

Ideally, you want to ensure that your version of the discussion accords with the client’s. That might be done by sending the client a confirmatory letter, a copy of your file note or a note of action points arising from a discussion.  

Auditors’ enquiry letters

It seems that some auditors may be including an additional question in their letters to solicitors seeking information for company audits.  

The additional question requests details of any actual or potential non-compliance with the laws and regulations which are central to the conduct of the company’s business and of which the solicitors’ firm is aware.  This raises particular risk management issues for solicitors.

Firstly, the solicitor needs to maintain records of incidents of actual/potential non-compliance in order that matters which may be relevant are not omitted.  Secondly, the solicitor is required to make a judgement.  Is a particular matter ‘central to the conduct of the company’s business’?  Has there been non-compliance?

In order to minimise the risk of, for instance, innocent non-disclosure in responding to such enquiries, it is suggested that you ought to -

• establish a method of logging incidents of actual/potential non-compliance
• ensure that the log is kept up to date
• consider whether the firm is in a position to respond to such an enquiry
• establish a procedure for preparing and ‘signing off’ the audit letter including any appropriate qualifications

Solicitors should not respond to such enquiries without the client company’s express agreement.

As a more general point, it is always necessary to consider carefully the terms of questions posed in auditors’ letters before giving any response.  For instance, you may be prepared to provide a response, perhaps subject to some qualification, to a request for confirmation that amounts that the directors suggest should be provided in respect of specifically identified contingent liabilities of the company are reasonable, in your  opinion.  On the other hand, you should arguably be declining to answer requests which would involve you in -

• compiling the list of contingent liabilities and/or the estimated amounts on the company’s behalf
• confirming that there are no material claims made or threatened against the company other than those itemised by the company/auditors
• specifying any other matters which you are aware of   

It is impracticable and may be risky for solicitors to produce a comprehensive list at any particular point in time of all matters which might give rise to claims with an estimate of the liability.  Omission to refer to a particular claim could give rise to a claim against your firm.

Conclusion

Aim to avoid answering non-specific enquiries.

Remember that you may disclaim detailed knowledge of particular matters and that you should consider adding qualifications where they are appropriate.

Web-sites

Concerns have been expressed in some of the legal press about the possibility of increased claims and complaints against solicitors arising out of solicitors providing legal services over the internet.  Particular concerns have been voiced about the lack of warnings and caveats in sites offering advice and style documentation; the risk that information on web-sites is not kept fully up to date; and the opportunity for fraud and undue influence in relation to the preparation of wills.

Before offering legal services on-line -

• seek confirmation that there is cover under the Master Policy
• ensure that the proposed activity doesn’t infringe any practice rules etc. by referring to the Law Society of Scotland
• establish a system for reviewing the content of your website on a regular basis and ensuring that the content of correct and up to date
• establish a system for approving changes to the website and having them ‘signed off’ at the appropriate level
• ensure that you include appropriate disclaimers and caveats

If wills are being produced ‘over the internet’, instructions for wills must be taken orally by a solicitor in person unless the client is well known to the solicitor concerned.

Companies house direct

The author’s attention has been drawn to the facility offered by Companies House making searches in the Charges Register and Company File available on-line.  The risk issues which arise in using this facility appear to be similar to the risks in using the REGISTERS DIRECT facility and reference is made to the author’s article in the February 1999 issue of the Journal.

Firms using these facilities would be well advised to consider very carefully the terms and conditions on which these services are provided, particularly the terms of any disclaimers of liability.

Fraudulent schemes - a reminder

From time to time, solicitors are unwittingly ‘used’ by criminals to facilitate fraudulent schemes against third parties or the firm’s client bank account.  In his article in the August 1999 issue of the Journal (p. 35), Leslie Cumming, Chief Accountant at the Law Society of Scotland identified four main types of scheme and suggested ways that solicitors can help themselves avoid becoming the victims of such schemes.

Please read or re-read that article.  Familiarise yourself and colleagues with the warning signs identified by Leslie Cumming and responses recommended by him.    

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