Loose ends can lead to claims

The date of entry may be the end of a conveyancing transaction as far as the purchasing or selling clients are concerned but not for their solicitors. It may be the clients’ perception that, having moved into their new home and/or received the net proceeds of their old one, there is nothing more to be done, nothing that could possibly go wrong. However, there is still plenty for their solicitors to do to bring the transaction to its ultimate, successful conclusion and experience shows that there is scope for errors or omissions in post-settlement matters to result in a claim.

You can understand how it happens.  All the title queries have been resolved, the missing documentation obtained, etc. etc..  After all the usual hiccups, hassles and apparent impasses have been overcome, the clients have achieved their objective and the pressures of that particular transaction are behind you.  But other hiccups, hassles and pressures are already upon you and all too easily a blind spot can develop in relation to the tail ends of the concluded transaction.  

The ‘Keeper’s Checklist’ in the Client Care manual, for example, lists a number of points to be checked prior to deeds being submitted for recording/registration. An oversight in any of these matters could result in deeds being returned and recording/registration being delayed.  In addition to completing these checks and submitting the deeds for recording/registration, there is plenty more to be done post-settlement, including : 

• matters concerning the client’s funding – eg. bridging to pay off
• outstanding matters in the missives – documentation to obtain/exhibit within a time limit
• guarantees to be assigned?
• any external selling fee to be settled
• life policies to be dealt with appropriately
• undertakings to be implemented
• deeds to be dealt with after recording, in accordance with instructions

What could go wrong?

If these tail end matters are not dealt with timeously or are overlooked altogether :

• critical time limits may be missed
• outstanding points may be overlooked altogether, creating problems when, for instance, the client comes to re-sell

Example

The purchase of a flat in a tenement was concluded to the clients’ complete satisfaction.  It was only when the purchasers came to sell the flat a few years later that they discovered that the Charging Order which had been outstanding when they bought the flat was still outstanding now.

When they had bought the flat, the Charging Order had been disclosed in the property enquiry certificate.  The solicitors who acted in the purchase established that the common repairs to which the Order related had been completed but the sellers’ share of the total bill never paid.

The sellers’ solicitors had given an undertaking at settlement to deliver a receipt confirming payment of the outstanding bill and to deliver a discharge of the Charging Order, all within six weeks of settlement.

The undertaking had evidently been overlooked by both the sellers’ and the purchasers’ solicitors and the oversight only came to everyone’s attention at the time of the purchasers’ sale of the property years later.  In this particular case the situation was resolved speedily, however it could have resulted in the sale falling through.

Risk management points

Considering the pressures of work and the competing demands of clients - checklists, diaries and a file review system are indispensable.

Remember, there are ‘post completion’ tail end matters to deal with in most types of work.  Whether it’s a litigation matter, the administration of an executry estate or establishing a trust, there will be critical matters that need to be dealt with timeously and ought to be on a checklist and in a diary system to ensure they don’t become overlooked loose ends.

E-mail instructions

The particular dangers of accepting e-mail instructions for the preparation of a will or power of attorney have been flagged up previously, however a solicitor has flagged up more general points arising out of the receipt of new instructions by e-mail.

The solicitor concerned recently received an e-mail from an individual whose name he didn’t immediately recognise.  The e-mail asked for advice on the prospects of pursuing a claim against an architect in respect of the allegedly deficient design of the house belonging to the sender’s mother.

The tone of the e-mail suggested some existing or prior connection with the solicitor or his firm.  There was certainly no hint that he had no connection with the firm at all and that he had found the solicitor’s name in a newspaper article and had been given a direct e-mail address by the firm’s telephonist.

As it happened, the solicitor was very familiar with the type of problem described in the e-mail and had considerable experience of acting for claimants in these matters.  It would have been tempting to fire off an e-mail response setting out the issues which would require to be established in order for any claim to succeed.

However, the solicitor correctly responded explaining that he could not assist the sender until he could establish whether it was the sender of the e-mail or his mother who required advice and until he had completed client identification checks.

In some respects the receipt of an e-mail may not be materially different from receiving a letter or fax from someone who is not an existing client except that it is probably more difficult to identify the sender and any conflict of interest in the absence of a postal address and a signature.  That makes it more difficult to detect fraud or dishonesty on the part of the individual giving instructions masquerading as someone else.

Risk management points

As with all new clients, you need to go through the usual client engagement process of verifying the person’s identity and establishing whether this is a client you can and wish to act for.  As with all new instructions, you need to consider whether you have the capability and capacity to take the work on.

There are risks associated with preparing wills and powers of attorney where there is no opportunity for you to verify the identity and capacity of the granter as this creates opportunities for dishonesty or deception.

If you decide not to take on the new client or the new instructions, you will want to be able to demonstrate that the client has been left in no doubt at all that you are not acting.  You will therefore need to have a record that the client has been advised that you are not acting, that there are likely to be time limits to be complied with if the client wishes to pursue the matter and that they would be advised to seek advice as soon as possible.

Footers and headers in confidential documents

Ever considered the risks associated with footers on letters?  While this may appear to be taking practical risk management to extremes, a situation (not a claim) arose recently which suggests that one cannot be too careful.  Marsh received a letter asking for some guidance on how to pursue a claim.  The letter explained that it was inappropriate to disclose any details of the client or the party against which the claim might arise.  The footer on the letter was along the lines of the following:

• :\docs\clientsm\annamcglumpher\claim against bloggs and co.doc

In this situation, no harm was done but had the identity of the client and/or the other party been confidential or commercially sensitive, the footer could have given the game away.  It is definitely worth taking care that footers and headers on letters and other documents do not disclose information that is intended not to be revealed.

Master Policy renewal – early warning

Cover under the Master Policy falls due for renewal as at 1 November.  The renewal papers will be issued at the end of September and those who have responsibility for renewal of their practice’s cover, might plan ahead by considering the following points:- 

• make a diary note in case the renewal papers don’t arrive by, say 5 October
• consider whether the holiday absence of a colleague, or colleagues, during the early part of October could hold up any part of the process and call for forward planning
• the information required to complete the proposal form is fairly standard and doesn’t tend to change from year to year claims and circumstance matters to be reported – start making enquiries of colleagues towards the end of September, particularly if colleagues are going to be on holiday when the proposal form is ready to be submitted
• information is requested regarding breakdown of fee income according to areas of work.  The work categories will be the same as last year so it might be worthwhile looking at a copy of last year’s proposal form and starting to collate the information for this year’s form

Computer thefts - alert

A major insurance company has recently issued a Customer Alert warning of an increasing volume of computer theft.  Apparently, high powered servers in particular are being targeted by professional criminal organisations.  The June 2001 issue of this page discussed the potential consequences of theft of computer equipment and suggested some risk controls, including – review of security arrangements, system back-up procedures, insurances, contingency planning.

Mobile phone scam - alert

It has come to light that a new mobile scam is being operated in the UK.

The user will receive a text message stating “Please call me on [number] Urgent” and, when the user rings the number, all they will hear is an engaged tone. However this is not a real engaged tone but a recording of the tone which is charged at £5 pounds per minute. The caller will ring again and again, mounting up a sizeable bill.

The information on these pages 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.

Alistair Sim is Associate Director in the Professional Liabilities Division at Marsh UK Limited (e-mail: Alistair.J.Sim@marsh.com)