Taking the plunge

In the first part of a three-week series on the new Solicitors Code of Conduct, Peter Camp highlights key issues for practitioners


On 1 July, the Solicitors Code of Conduct 2007 will come into force. The code has been a long time in preparation. Following a regulatory review of conduct and other issues, the Law Society’s editorial board prepared a draft of the code which was submitted to the Law Society’s Council in September 2004.



This was approved by the council and, in accordance with schedule 4 of the Courts and Legal Services Act 1990, the approved code was sent to the Secretary of State for Constitutional Affairs (the Lord Chancellor). His consultative panel required some amendments to be made to the original draft, and these issues were finally resolved in December 2006.



In the meantime, significant changes had occurred at the Law Society, with the Solicitors Regulation Authority (SRA) taking over responsibility for regulating the profession (including the code). The amended code was approved in January 2007, and comes into force following the further approval of the Master of the Rolls Sir Anthony Clarke and the Lord Chancellor.



Currently, a solicitor’s obligations derive from several different sources. Some are statutory by way of direct imposition of regulation (such as the Solicitors Act 1974). Other obligations arise from rules made under statute, including the Solicitors Practice Rules 1990; and a number of codes have also been made under the statutory rules, such as the Solicitors Costs Information and Client Care Code 1999.



There are also non-statutory sources of conduct obligations. These include those arising from common law, the Law Society’s (now the SRA’s) guidance on conduct matters, and decisions of the Solicitors Disciplinary Tribunal, the Master of the Rolls and the court.



Historically, information about and commentary on most of these obligations has been provided in The Guide to the Professional Conduct of Solicitors. The guide, however, contained a mixture of obligation and good practice. It was not always clear whether specific principles in the guide amounted to an obligation or were simply an indication of good practice. By codifying a solicitor’s conduct obligations, this problem has been resolved. The code sets out, clearly, the obligations applicable. Guidance is provided on those obligations and gives some examples of how to comply with the rules.



However, the code, unlike the guide, does not purport to cover the obligations laid down in statute. The code concentrates on solicitors’ obligations arising in conduct. It repeals many of the rules made by the Law Society and replaces the conduct obligations imposed in the guide.



Not all of the rules made by the Law Society have been repealed. The rules relating to accounts, indemnity insurance, financial services and the compensation fund remain in force.



FORMAT OF THE CODE

The code is divided into three sections:



l The core duties. The six core duties (contained in rule 1) are fundamental rules. A breach may ultimately result in the imposition of sanctions.



l The rules. Rules 2 to 25 arise from the core duties and give more detail of the minimum standards required to achieve the core duties. A breach may result in the imposition of sanctions.



l The guidance. Guidance is provided after each of the rules. The guidance is not mandatory and does not form part of the code.



APPLICATION OF THE CODE

The code applies to solicitors and recognised bodies (such as limited liability partnerships (LLPs) or companies) practising from offices in England and Wales; to registered European lawyers (RELs) in relation to practice as lawyers from an office in England and Wales, Northern Ireland or Scotland; and to registered foreign lawyers (RFLs) in relation to practice as foreign lawyers as partners in a multi-national partnership or as directors or members of a recognised body (a company or LLP). It also applies to overseas practice.



Core duties

Rule 1 contains six core duties. ‘These form an overarching framework within which the more detailed and context specific rules in the rest of the code can be understood’ (see the guidance to rule 1). A breach of rule 1 may result in disciplinary proceedings.



The core duties replace most of the provisions of rule 1 of the Solicitors Practice Rules 1990 (SPR). Like its predecessor, rule 1 can assist in situations not specifically covered by the other code rules.



Core duty 1 – Justice and the rule of law

This duty requires you to uphold the rule of law and proper administration of justice. This covers the duty owed to the court (SPR 1(f)) but the duty in the code extends to relations with clients and third persons dealt with on behalf of clients.



Core duty 2 – Integrity

This duty requires you to act with integrity. This replicates the requirement of SPR 1(a).



Core duty 3 – Independence

This duty requires you not to allow your independence to be compromised. Again, this replicates the requirement of SPR 1(a).



Core duty 4 – Best interests of clients

This duty requires you to act in the best interests of each client. This replicates the requirement of SPR 1(c).



Core duty 5 – Standard of work

This duty requires you to provide a good standard of service to your clients. This replicates the requirement of SPR 1(e).



Core duty 6 – Public confidence

This duty requires you not to behave in a way that is likely to diminish the trust the public places in you or the profession. This partly replicates SPR 1(d) (doing nothing which might impair or compromise the good repute of the profession), but the guidance note makes it clear that any behaviour within or outside professional practice which undermines the trust can give rise to a breach of this duty.



The core duties do not make significant changes to the obligations of a solicitor, recognised body, REL or RFL. The code does, however, omit the SPR 1(b) duty not to impair or compromise ‘a person’s freedom to instruct a solicitor or his or her choice’. This should not be taken as a major change in principle. Any such restriction could be in breach of core duty 3 (a solicitor’s agreement with a third party’s restriction on client choice could compromise the solicitor’s independence) and in breach of core duty 4 (such restriction may not be in the best interests of a client).



However, the omission of the SPR 1(b) obligation does suggest that, in exceptional circumstances, where it is in the client’s best interest and where there is no compromise of a solicitor’s independence, it might be appropriate for a client to agree with a third party that they will use the services of a particular solicitor only. The solicitor’s knowledge of such agreement will not automatically represent a breach if instructions are accepted.



THE RULES

The rules contain the detailed obligations. Some impose additional obligations compared to the current conduct requirements; others relax the position. However, the impact of the code is not as great as originally anticipated. As a result of the delay in implementation, many of the rule changes recommended by the regulatory review task force have already been brought into effect (for example, the new conflict and confidentiality rules came into force in April 2006). There are, however, still some areas which will have an impact on practice and which will require practitioners to review their procedures.



Significant changes

The rules imposing the most significant changes are: rule 2 (client relations), rule 5 (business management) and rule 6 (equality and diversity). These rules are likely to give rise to necessary changes in procedures and policy.



Rule 2 contains a number of requirements which replicate previous obligations. Included are rules for taking on clients, client care, information about cost, contingency fees, complaints handling, commissions, and limiting civil liability by contract.



While most of the obligations relating to these topics remain unchanged, practitioners must review their policies arising from the areas of client care, costs information and complaints.



Additional client care disclosures are required by rule 2. In particular, after 1 July, information relating to the following must be provided to new clients at the outset (in some cases, a continuing obligation to provide the information is imposed):



l Identification of client’s objectives;



l Explanation of options available to the client;



l The next steps to be taken;



l The appropriate level of services;



l Explanation of your responsibilities; and



l Explanation of the client’s responsibilities.



The section of rule 2 dealing with costs information is simplified (compared to the old code). Providing there is continued compliance with the provisions of the old code, only the following disclosures need to be additionally made:



l Advise the client of the circumstances where you may be entitled to exercise a lien;



l In the case of conditional fees, indicate whether you will seek payment of costs from the client, if entitled to do so; and



l In the case of publicly funded clients, indicate that they may be liable for your costs.



Further changes in rule 2 relate to complaints handling. These changes include requirements that information must be given in writing; clients must be told of their entitlement to complain; and that following a complaint, the complainant must be told in writing how the complaint will be handled, and be given a time-scale within which they will be given an initial and/or substantive response.



Rule 5 makes significant changes to the management framework under which firms must operate. These changes can be grouped into three categories.



First, you must ensure that there is evidence of a systematic and effective approach to management in relation to at least the 12 heads contained in rule 5.01:



l Supervision and management responsibilities;



l Compliance with money laundering regulations;



l Compliance with key regulatory requirements;



l Identification of conflicts of interests;



l Compliance with rule 2;



l Control of undertakings;



l Safekeeping of documents and assets;



l Compliance with rule 6;



l Training;



l Financial control;



l Practice continuity; and



l Risk management.



In relation to each head, the evidence indicating a systematic and effective approach may be by reference to an appropriate standard or guidance issued by the Law Society, SRA or an external provider. The standard or guidance should be clearly documented.



Second, changes have been made to the requirement requiring each practice to have at least one principal who was a solicitor ‘qualified to supervise’ and each office of the practice to have at least one solicitor ‘qualified to supervise’, for whom that office was his or her normal place of work (the old SPR 13).



Under rule 5, it will no longer be necessary for each office of a firm to have at least one solicitor so qualified in full-time attendance. The requirement is now that the following persons must be ‘qualified to supervise’: a sole principal; one of the partners of a partnership; and one of the members or directors of a recognised body. (There are additional requirements relating to in-house practice and law centres.)



Consequently, firms practising in partnership need only one partner in the whole firm who is ‘qualified to supervise’. Similarly, firms practising as, for example, an LLP require only one member in the whole firm who is ‘qualified to supervise’.



The definition of ‘qualified to supervise’ appears in rule 5.02(2). To be so qualified, a person must have completed the training specified from time to time by the SRA for this purpose; and must have been entitled to practise as a lawyer for at least 36 months within the last ten years; and must be able to demonstrate this if asked by the SRA.



Training for these purposes is attendance at or participation in any course(s) or programme(s) of learning on management skills for a minimum of 12 hours. The courses do not have to attract accreditation under the continuing professional development scheme. Any management courses taken after 23 December 1999 will count towards the necessary 12 hours management training.



Third, the firm must adopt appropriate procedures to satisfy the requirements of rule 5, including checking the quality of work undertaken for clients with reasonably regularity by a suitably experienced and competent person within the firm.



Rule 6 deals with equality and diversity. The duty not to discriminate remains unchanged. However, the rule requires principals to adopt and implement an appropriate policy for preventing discrimination and harassment, and promoting equality and diversity within their firm.



The former rules contained a similar provision. However, this rule provided that solicitors in private practice who had not adopted and implemented their own policy dealing with discrimination and equality would in any event be bound by the provisions of the Law Society’s model policy in effect at that time.



There is no model policy issued under rule 6. Consequently, this option is not open to practitioners after 1 July. Practitioners may use the old model policy as a starting point to develop their own policy but they must appreciate that the old model policy does not satisfy, in all ways, the requirement for an ‘appropriate policy’ necessary under rule 6.



The other rules (see the article on page 26) provide detailed obligations on other aspects of your conduct requirements. Although some contain minor changes, the majority of these rules repeat and replace obligations in force prior to 1 July.



While the changes in the code are not as great as envisaged, firms must, nonetheless, consider their internal procedures as a matter of urgency to ensure that the necessary changes are adopted by 1 July.



Peter Camp is a solicitor and visiting professor of legal ethics at the College of Law. He is principal of his own training consultancy, Educational & Professional Services



Understanding the code
l The code can be accessed via the Solicitors Regulation Authority’s website – www.sra.org.uk. It will be updated on a three-monthly basis.

l The printed edition of the code will be published in late June. It is priced at £29.95 and can be ordered from Prolog (Law Society Publishing’s distributors), tel: 0870 850 1422.
l The Companion to the Solicitors Code of Conduct, written by Peter Camp, provides commentary and guidance. It will be published in August and is priced £34.95 (discounted to £29.95 if ordered together with the code before 31 August via Prolog).

l The SRA’s professional ethics guidance team is available, tel: 0870 606 2577, to help with enquiries.

l The Law Society has designed an online training course to help lawyers understand the code and get up to speed on the impact of the changes that it will introduce. The course is accredited for two hours of continuing professional development by both the Law Society and Bar Council and is priced at £60 + VAT for individuals, discounted by £10 if booked before 1 July. Discounts are also available for group bookings. To register and pay, go to http://cpdcentre.lawsociety.org.uk/.



Next week

l Countdown to the Code will look in detail at rule 2 – client care, costs information and complaints