Good Practice

Conduct and service

The 'established' client

A question that often perplexes practitioners is: when can they regard a client as 'established' for the purposes of Law Society practice rule 6? It is important because it can enable them to act on both sides of a conveyancing transaction.

This is especially significant in isolated rural areas, where the community's choice of solicitors may be very limited.

A complaint recently arose that raised this very question, and, by so doing, gave the opportunity for the issue to be considered at an official level.

The solicitors had acted on one occasion only for the proposed sellers of the house, in which they lived.

Then they were also asked to act for the proposed purchasers, for whom they had also acted when they bought their own house, which now also fell to be sold.

The solicitors considered that, as they had acted for both potential clients before, albeit only once, they nevertheless fell under the heading of 'existing clients' and decided they could act for both.

Unfortunately, the sellers formed a view that, by giving certain advice to the buyers, the solicitors were showing them preference and complained that they were acting improperly.

When the Office for the Supervision of Solicitors considered the matter, the adjudicator at first instance upheld the complaint, expressing the view that 'established' meant something more than merely having acted on one occasion for the clients in question.

The view was that 'established' implied some degree of continuity of instruction and the likelihood that the clients would instruct the solicitors again in the future - in other words, that there was some degree of permanence in the solicitor/client relationship.

The matter went to appeal where the appeals committee took a different view.

It decided that the fact a client had instructed the firm previously was enough to make that client an 'established client', which would normally have exempted the solicitors from the provisions of rule 6.

However, what the solicitors had forgotten was the requirement of rule 6(2)(a) to obtain the parties' written consent to enable them to act for both.

Fortunately for the solicitors in this example, the committee was able to conclude there was no evidence of actual conflict and that no prejudice had arisen to either party.

The result was that the committee expressed regret at the solicitors' breach of the rule, but took no further action.

l Every case before the adjudication panel is decided on its individual facts.

These case studies are for illustration only and should not be treated as precedents.

Risk management

Who's to blame?

It is understandable that many firms are primarily interested in risk management to influence and moderate their professional indemnity costs.

It is also often said that while management accepts responsibility to analyse and implement systems and techniques to reduce the scope for error and enhance efficiency, it is the staff that actually take the risks.

Successful risk management is not limited to compliance with formal methods and procedures.

It is also about infusing the firm with a risk management culture, where every member of staff thinks about what they do.

Involving the staff in the development of the risk management strategy is invaluable and more than likely will result in a positive reaction.

Imposing new working methods in the absence of consultation will invite a hostile response and resistance to change.

Equally important is the development of a no-blame culture.

Law firms need to adopt an 'open door' approach to problems so that employees feel secure enough to report concerns or mistakes in the first instance without fear of recrimination.

However, this has to be balanced against the ethos that anything is forgivable whatever the cause or ramifications.

Creating a risk management culture sometimes requires learning new skills.

Most departmental heads are highly skilled and experienced legal professionals, but this is not always matched with equal skills in managing change or people.

In many cases, department heads will need help in implementing new procedures and encouraging their staff to think about improvement rather than adopting a 'that's the way we've always done it' approach.

The key is making sure that all staff within the firm are fully aware of, and kept up to date with, the firm's systems.

For example, if staff members have been away for a prolonged period, it is essential that they be fully updated on the firm's procedures if these procedures have been refined or modified.

The same applies to new members of staff.

All firms should have an induction programme for staff, which should also include an insight to the firm's risk management guidelines.

Don't think that risk management applies to solicitors alone - paralegals, legal executives and administrative staff are the eyes and ears of the firm and have a major part to play in eliminating mistakes.

The rewards of developing a successful risk management culture are not only improvements in efficiency and profitability, but also staff contentment, as staff at all levels within a firm who are empowered to make improvements will work better and think harder about what they are doing.

While legal practices may not see immediate measurable savings, underwriters will look at a whole firm and its attitude to risk, and over time the winners will be those firms with the most effective risk management culture.

l This column was prepared by Alexander Forbes professions' risk management team

Question Of Ethics

Q My firm has a wholly owned secretarial services company.

Do we need to apply for recognition for this under the Solicitors' Incorporated Practice Rules 2001?

A Your firm has two alternatives.A secretarial services company can apply for recognition by the Law Society and become a recognised body.

It will not need separate indemnity cover as it will be covered under your firm's indemnity cover but you should of course inform your insurers.

The company will require top-up cover under rule 18 of the Incorporated Practice Rules.

On the other hand, the company could continue as a separate, non-lawyer business.

You would still be covered under the firm's indemnity insurance, as above, but would not need compulsory top-up cover.

However, there are disadvantages in that you would have to comply with all the restrictions in the Solicitors' Separate Business Code 1994 and this may make this option unattractive.

Please note

The Solicitors' Publicity Code 2001 replaced the Solicitors' Publicity Code 1990 on 16 November 2001.

It also repealed Law Society practice rule 11 (names used by a firm).

The new code requires all firms to put 'regulated by the Law Society' on their notepaper.

Practitioners can postpone this until 1 January 2003 but only if they continue to comply with the 1990 code and the old practice rule 11.

l Question of ethics is compiled by the Law Society's professional ethics guidance team.

Send questions for publication to Austin O'Malley, the Law Society, Ipsley Court, Berrington Close, Redditch B98 0TD; DX 19114 Redditch;tel: 020 7242 1222.