Strangled by red tape?

This month, ahead of the 2002 series of the Society’s Risk Management Roadshow, Alistair Sim takes a look at some of the topics considered as part of last year’s Risk Management Roadshow

The 2002 Risk Management Roadshow series gets underway in Edinburgh on 25 April.  There will be certain changes to the format of the 2001 format reflecting the fact that this year these events are being (principally) targeted at those who have been nominated as the risk management contact in their practice.  As before, these events will concentrate on group discussion of case studies aimed at identifying risk issues and practical risk management points.

Some of the case studies from last year’s Risk Management Roadshow appear here with a note of some of the risk management points to be considered.  It is clear from the group discussions which took place last year, and in previous years, that there is no definitive ‘correct answer’ to the questions posed and no authoritatively correct response to the issues raised by the case studies.  The appropriate response will always involve an element of judgment on the facts and circumstances as they present themselves to the individual solicitor.

Unrecorded deeds

A new secretary comes to you in tears clutching various unrecorded deeds and unsure what should have been done with them last month.  How do you resolve the immediate problem and avoid it recurring?

Risk management points to be considered:

Immediate corrective action should of course include checking the deeds and arranging to have them stamped and submitted for recording/registration without further delay.  In addition, it may be appropriate to consider asking solicitors to re-issue letters of obligation; conducting searches to check for any adverse entries arising prior to (delayed) recording date; reporting/explaining the delay to any lenders adversely affected.  Make colleagues aware of the problem.  

Preventive action should include raising awareness of the importance of deeds being stamped and sent for recording/registration timeously.  This should include not only fee earners but also secretaries and juniors and all should be made aware of the consequences of delay in stamping and/or recording of deeds.

Reference is made to the Keeper’s Checklist in the Society’s ‘Better Client Care and Practice Management’ manual which itemises the points to be checked before submission of deeds for recording.

Critical dates should be diarised including a prompt to check that a Keeper’s acknowledgement letter is actually received timeously.

Money laundering  

A colleague tells you over coffee all about a novel he has read where a law firm gets involved in a money laundering racket, with a partner being blackmailed into continuing the racket and keeping silent.  Could it happen to you?

Risk management points to be considered:

Check that everyone concerned understands what money laundering means and what form it may take.  Leslie Cumming, Chief Accountant at the Society, has issued guidance on various aspects of money laundering and, for example, in his article in the August 1999 issue (p35) of the Journal (and re-produced in the September 2000 issue at p38), he describes certain indicators of suspicious transactions, eg. new clients with abortive transactions requesting funds repaid to a different party. Ensure that all concerned are conversant with the procedures and are clear who is the practice’s Money Laundering Reporting Officer. Review the practice’s client engagement procedures to ensure that files may not be opened without money laundering/client identification checks being completed.

Where independent file reviews/audits are conducted, these should include a check that all money laundering checks and other procedures are being complied with.

Letters of Obligation

You know that there must be hundreds of Letters of Obligation in your office which have not been implemented.  What systems have you in place to ensure that these are regularly reviewed and action taken?

Risk management points to be considered:

Arrangements need to address the risk that outstanding undertakings received/given are overlooked and are inconvenient, problematic or impossible to implement/enforce, eg. because of the operation of prescription or because the outstanding issue is identified only when a property is being re-sold.

One approach is to maintain a separate file of (copy) letters of obligation (issued and received) for ease of administration.  Consider at the outset the date when each undertaking ought to be implemented.  Indicate the date on the (copy) letter of obligation and file them accordingly.

Have a standard, documented procedure to be followed for diarying and following up outstanding undertakings. In the case of undertakings received from other firms, indicating the various courses of enforcement action and timescales culminating in action for implement.

Conflict of interest

Mr and Mrs Auld are moving to a smaller house and have agreed to sell their Morningside villa to their son at the upset price, the price being payable by ten annual instalments without interest.  In your absence, Mr Auld and his son meet with your assistant and tell her to proceed forthwith.  When she reports this to you what do you do?

Risk management points to be considered:

Consider whether you should agree to represent both the parents and the son in this matter.  Consider the potential conflicts of interest and compliance with the Conflict of Interest Rules.  Even if the Rules permit you to proceed to represent both the parents and the son, do you consider it safe to proceed?

What warnings/advice would require to be given to the parties and in what form?  What terms of engagement will you establish with the clients?

If you decide you cannot or do not wish to act for either the parents or the son, or if you initially act but subsequently withdraw from acting, do you need to issue a non-engagement letter?

Should the parties be advised of the importance of a survey/valuation and the risks of proceeding without a survey/valuation?

Should the parties be advised of the consequences of any of the parties dying or becoming insolvent ot incapax prior to the arrangements being fully implemented?  What protections should be considered?  Standard security?  Deed of Trust?

Particular care clearly requires to be taken in documenting the instructions received and the advice being tendered.

Claim for negligence against another firm

You are asked to act for a new client in a claim against another firm, A & Co., who appear to have allowed the client’s personal injuries claim to become time barred.  For a short time, a third firm of solicitors, B & Co, were acting for the client but for some reason B & Co, had decided to withdraw from acting.  What are the issues you would want to address before agreeing to act for the client and what are the issues you need to address with the client at the outset if you do decide to act?

Risk management points to be considered:

In the usual way, your client engagement criteria should be considered before agreeing to take on this new client/new piece of work.  Do you have the capability and capacity to undertake this piece of work and to satisfy the client’s expectations? Consider of course whether any conflict of interest prevents you from acting.  

Consider what may have prompted B & Co, to withdraw from acting.  Consider whether the client’s expectations are realistic or, if not, whether the client will be amenable to modifying his/her expectations in accordance with advice from you.

What special provisions is it appropriate to include in your terms of engagement?  How do you assist yourself in managing the client and the client’s expectations by establishing at the outset the input required from the client (eg. documentation vouching the claim) and the relevant timescales?

Ascertain the relevant dates for the operation of prescription in relation to any claim against A & Co.  Have the critical dates double checked and diarised reliably.

Consider whether there may be the possibility of an application to the court to allow the personal injuries action to proceed late. This may not have been considered fully.

Other issues

Risks associated with internet and e-mail use at work
A recent survey of employees from a sample of leading UK companies suggests that employers are failing to provide guidance to their work-force on the risks associated with internet and e-mail use at work.

The survey suggests that, while employers may have (communications) policies in place to regulate the use of work e-mail and internet facilities, employees may not necessarily know about them.

Any communications policy will only be effective if everyone concerned is aware of it and it is enforced and ideally there should be continuous education and training in the application of the communications policy.

January 2002 article
Reference is made to James Bauld’s letter (‘Explanations sought’) in the March 2002 issue of the Journal in which Mr Bauld is critical of certain aspects of the Risk Management article in the January 2002 issue.

A response to Mr Bauld’s letter appears in the letters section of this issue.

As the important caveat/disclaimer which appears at the end of every article is intended to make clear, these articles are about practical Risk Management, they are not about professional negligence and nothing in the articles should be regarded as establishing what constitutes negligence or the standard of the competent practitioner.

Feedback, comments and other contributions of any sort are always welcome.  

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