How lawyers can heed the code

The core management rules set out in the Law Society's draft code of conduct may lead to a new type of legal management professional who can thrive in a post-Clementi future, says Jane Jarman

The Law Society's draft code of conduct is currently going through a rule-by-rule process of approval by the Department for Constitutional Affairs. A much more user-friendly volume than the Guide to Professional Conduct, the draft code consists of ten 'core duties' set out in rule 1.


In addition to the mainstays of legal practice, such as integrity, independence and fairness, the role of management makes an appearance as a core conduct duty. The rest of the code, rules 2 to 25, set minimum standards to achieve compliance with the core duties. Rule 5 centres on the role of management.


The code is no 'plain English rewrite' - it contains some surprising obligations. Rule 5 requires practices to 'produce evidence of a systematic and effective approach to management' and ensure that at least one person at the firm is 'qualified to supervise'. Rule 5 also brings an evidence-based 'sting in the tail'. You may think that your firm is well managed but you will need to prove it.


Practice rule 13 put management on the conduct radar in 1999. Rule 5 goes further and focuses on two core duties: law firm management and competence. Core duty 1.09 states that 'you must operate appropriate supervision and management arrangements to meet your duties to clients'. Meanwhile, core duty 1.06 states 'you must act only when you are able to provide a competent service'.


Setting out the minimum standards to ensure compliance with the core duties, rule 5.01 states:


'1) If you are a principal in a firm, a director of a recognised body which is a company, or a member of a recognised body which is an LLP, you must make arrangements for the effective management of the firm as a whole, and in particular provide for:


a) Compliance with the duties of a principal, in law and conduct, to exercise appropriate supervision over all staff, and ensure adequate supervision and direction of client matters;


b) Compliance with the Money Laundering Regulations, where applicable;


c) Compliance with Law Society regulatory obligations;


d) The identifications of conflicts of interest;


e) Compliance with the requirements of rule 2 on client care, costs information and complaints handling;


f) Control of undertakings;


g) The safekeeping of documents and assets entrusted to the firm;


h) Compliance with rule 6 on avoiding discrimination;


i) The training of individuals working in the firm to maintain a level of competence appropriate to their work and level of responsibility;


j) Financial control of budgets, expenditure and cash flow;


k) The continuation of the practice of the firm in the event of temporary absences and emergencies, and the minimum interruption to clients' business;


l) The management of risk.'


The guidance notes make it clear that a firm must produce evidence of a systematic and effective approach to management. Any management arrangements must encompass 'all systems, procedures, processes and methods of organisation' together with a mechanism for the periodic review.


The processes must be 'in place and... operating' rather than in the form of an ossified firm manual gathering dust on a shelf. Management procedures and processes should not simply be works of aspiration in an ideal world, but of practical and consistent application.


Rule 5 also sets out the minimum requirements to be met to be qualified to supervise the practice. In defining 'qualified to supervise', the emphasis is on purely management responsibilities rather than supervision of file work. To be 'qualified to supervise', the individual concerned must attend a minimum amount of management training. Although the type of management training is not specified, it seems likely that most mainstream management training courses would suffice.


The devil really is in the detail, and the new code demands careful study. For instance, many lawyers see risk management as a synonym for professional negligence avoidance, but rule 5 highlights not only client matters, but also data protection, IT failures and business interruption as live issues.


Rule 5 requires that law firms provide evidence of a level of management acuity not previously required. Management structures need to be transparent and consistent, with a clear audit trail of evidence, to ensure compliance.


Many law firms will turn to recognised quality marks such as Lexcel or ISO 9000 to manage the audit trail of managerial rectitude required, appropriate to the size of the firm involved.


However, rule 5 is also a factor to be considered in the context of the changing management model for law firms. While someone has to manage the practice, and have the time, resources and training to do so, many lawyers find themselves promoted away from legal work to a management position, with little or no training, when they feel at the top of their game. It is often assumed that a good lawyer will be a good manager when that may not be the case.


The need for professional management training for law firms will be rendered more acute by the entry of new competitors in the legal market envisaged by the government's legal services reforms. The core management obligations set out in the code may prove a factor in the emergence of a new type of legal management professional, a person best able to design, manage and maintain the audit trail of evidence required and the resources and training and basic interest and motivation to do so.


If rule 5 achieves such a feat, it could perhaps release lawyers to do what they do best - be lawyers.