Conduct and service

Tale with two morals

One thing that frequently causes problems for solicitors in dealing with complaints is a failure to appreciate that clients can put complaints only as they perceive them to be.

If clients' perceptions are wrong, possibly because they are unfamiliar with legal procedures, they are highly likely to put their complaints wrongly.

The practice rule 15 partner who handles the complaint should always be aware of this possibility and be prepared to look at wider issues that may not have been put as a complaint, but which could be its real cause.

An instance where this was relevant arose in a case which also illustrated the sometimes fine line between negligence allegations and service complaints.

The solicitors were instructed on a purchase by a first-time buyer.

The property concerned had suffered some damage that was the subject of an insurance claim that was still to be determined.

The client's complaint was that he had instructed the solicitors to write into the contract a clause that would protect them from financial loss in the event of the claim failing.

The solicitors failed to do so and the claim failed.

Fortunately, the loss was small, running to only a few hundred pounds.

The client complained to the solicitors that they had failed to follow instructions.

Unfortunately, there was no evidence that any such instructions had been given and the complaint was rejected.

However, what had been overlooked was that, having been made aware of the problem, there was similarly no evidence that the solicitors had advised the client about what could be done to safeguard the position.

There being no such evidence - and the solicitors should have had a record of it if it had been given - the presumption operated against them.

This was something the rule 15 partner should have picked up and addressed.

It might not have been the subject of a specific complaint, but it was the real cause of the one that had been made - and certainly was an inadequacy in the service.

It might be argued that that aspect of the matter was, in reality, an allegation of negligence.

However, even if it were, it was something the firm should have dealt with within its complaints procedure, particularly as the potential cost fell well below the firm's insurance excess.

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

Acquiring a firm

With law firms having to compete in a more competitive and global world, we are seeing a lot of merger talk at the moment.

Mergers or acquisitions are all well and good for increasing partnership size, or ensuring that a firm has the global reach demanded from some of the larger clients, but how do they impact on professional indemnity premiums?

Insurers are sensitive to any change in the 'risk profile' of the firms that they insure.

It may well be that a merger, or lateral hire, looks attractive from a financial point of view, but you need to consider the full ramifications of the new team.

For example, your firm (firm A), comprises eight partners practising commercial litigation and family law.

Firm A decides to merge with a local practice (firm B), which also specialises in commercial litigation.

However, in addition to the commercial litigation team, firm B insists that its claimant personal injury team is included in the merger.

From your insurer's point of view, the risk profile of firm A has now changed dramatically.

Therefore, firm A, which previously had an insurance premium of 100,000, has now acquired firm B, which the insurer sees as a bad risk, and the insurance premium rockets to 500,000-plus, negating any extra fee income brought in by the new partners.

At worst, your newly merged firm is suddenly deemed uninsurable as the risk is too high for your underwriter to take on.

In assessing your risk profile, the insurer will also look at indemnity claims made over the last few years against both firms.

Therefore, you need to have frank discussions, not only regarding claims which have been made against firm B's professional indemnity insurance, but any potential claims that could be made in the future.

You need to make sure you know about all possible notifications against your indemnity cover that could arise once the newly merged practice is running.

Another area you would need to consider is the consolidation of current risk management systems between firm A and firm B.

This is an excellent opportunity to bring together the good risk management procedures from each side while getting rid of any areas which are not working properly.

Just as essential, are the staff members themselves.

It will be detrimental to your new risk profile if your new staff practise one risk management strategy and your old staff are following a completely different strategy.

Once good risk management procedures have been agreed, all staff (old and new) need to be properly advised and trained on your firm's new strategy.

The best advice we can give a firm thinking of merging or acquiring another practice is to speak to your professional indemnity broker early on in the negotiations.

It is far better to be proactive and cover all eventualities at the earliest convenience, than trying to react to a huge hike in your professional indemnity premium after the merger or acquisition has taken place.

l This article was prepared by Alexander Forbes Professions' risk management team.

Question of ethics

Q I am the partner responsible for investigating complaints.

I presume I can charge for this work, which can be time consuming and is for the client's benefit after all?

A Law Society practice rule 15 imposes the professional duty to operate an internal complaints handling procedure.

This is not a service for which you can properly charge the client.

It will involve you in extra work at the client's instigation.

However, it is not work for which the client has retained your firm and for which you are entitled to charge.

If you try to charge, you may be at risk of a finding of 'aggravated' inadequate professional services.

Q I have just started acting for a client under a legal aid certificate.

Do I have to give any information about costs?

A Paragraph 5(a) of the Solicitors Costs Information and Client Care Code 1999 sets out the information that should be given.

You must advise the client about the statutory charge and its likely amount; the client's obligation to pay any contribution assessed and the consequences of failing to pay; the fact that the client may be ordered by the court to contribute to the opponent's costs if the case is lost, even though the client's own costs are covered by legal aid; and the fact that, even if the client wins, the opponent may not be ordered to pay or be capable of paying the full amount of the client's costs.

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.