Notices

Notices

Law Society consultation

Rules on relations with third parties and relations with the Law Society The Law Society's regulation review working party is reviewing and rewriting the rules and principles of conduct in The Guide to the Professional Conduct of Solicitors.

Here it invites comments on proposed changes to rules on relations with third parties and relations with the Law SocietyThere are two sets of draft rules.

They are: rules on solicitors' relations with third parties, including other solicitors, covering most of chapters 17 to 20 of The Guide to the Professional Conduct of Solicitors which deal with obligations to others and current Law Society practice rule 6A; and rules on solicitors' relations with the Law Society, covering some aspects of the principles in chapters 19 and 30 of the guide.

These rules are important to the way solicitors are expected to conduct themselves.

This article outlines the general scheme the Law Society is working towards with a brief commentary on the thinking behind the various provisions.The Society welcomes comments by 31 May 2002.

These should be sent to Jacqui Davis in the Professional Ethics Department of the Law Society at Ipsley Court, Berrington Close, Redditch, Worcs B98 0TD or DX 19114 or e-mail jacqui.davis@lawsociety.org.uk.

There will be a further opportunity to comment once the final draft is placed before the profession and others.The big pictureThe rules would sit under two of the core duties proposed by the working party:l Core duty 1 - integrity: 'As a solicitor you must act with integrity towards clients, the courts, lawyers and others.

This will include never knowingly giving false or misleading information and honouring professional undertakings', and;l Core duty 10 - profession: 'As a solicitor you must, in your professional work, not behave in a way which damages the reputation or integrity of the profession.'It is expected that there be guidance relevant to this area attached to these core duties and to the rules.

The working party has not fully drafted the guidance layer.

However, there is a number of issues we know we will want to cover and these appear after each rule.Draft 'relations with third parties' rulesThe draft rules aim to make it clear to solicitors, clients and third parties alike that a high standard of conduct is expected of solicitors.

This stems from the central role they play in upholding the rule of law and the administration of justice.

The rules cover areas where it is necessary to be specific about the standard of behaviour required.There are seven rules (shown here in italics) each followed by a discussion.

The discussion illustrates working-party thinking and highlights issues on which it would like comments.

This is followed by outline guidance.

Rule 1 (fairness) Solicitors must not use their position as solicitors to take unfair advantage of anyone either for themselves or for another personDiscussionThis is drawn from principle 17.01 of the current guide.

The solicitor's overriding duty to the client should never be pursued unfairly at the expense of a third party or in a way which compromises the reputation of the solicitor or the profession.Outline guidanceCare to be taken when dealing with unrepresented third parties.

Rule 2 (agreeing costs with another party)Where a solicitor is negotiating the payment of their client's costs by the other solicitor's client or a third party, the solicitor must give sufficient opportunity for the amount of those costs to be agreed or assessed.DiscussionThis is drawn from current principle 17.03.

This is effectively an example of where a solicitor could seek to take unfair advantage.

However, in this case the solicitor could be using the client's bargaining position, rather than their position as a solicitor, to take unfair advantage of another person.

This situation occurs often enough that it was considered desirable for a specific rule to cover the subject.Outline guidancel This rule applies to all types of work.l 'Sufficient opportunity' can relate to a breakdown of how the costs have been calculated, and to an indication of the nature of the work to be undertaken.l Care should be taken when using undertakings to guarantee payment of another solicitor's costs; for example, where a lessee agrees to pay the landlord's solicitor's costs.

Ideally, a fixed sum or a cap on the costs payable should be agreed.

It would also be wise to take money on account of the costs payable before giving the undertaking.

Rule 3 (administering oaths)When administering oaths or affirmations or taking declarations, solicitors must ensure the giver:(a) Is present;(b) signs the document in the solicitor's presence or, if the document is already signed, confirms that the signature is that of the giver, and;(c) appears to understand what they are doing and that the purpose is to confirm that the contents of the document and any attachments are true.DiscussionThis rule is drawn from principles 17.06 and 17.07 of the guide.

Solicitors' authority to administer oaths and their accompanying legal obligations, derive from law.

The working party had to decide whether there should also be a rule of conduct covering this point.

It concluded that it was important that the Law Society may sanction solicitors failing in their obligations since, in almost all cases, they derive their authority to administer oaths from their position as solicitors.Outline guidancel The need for a practising certificate for solicitors and others entitled.l Solicitor not responsible for the content of the documents.l Do not administer if good reason to believe the contents of the document are false.l Section 81(2) of the Solicitors Act - must not administer an oath where the solicitor or firm are acting for any party in the matter.l The effect of section 81(2) of the Solicitors Act also prevents a solicitor administering an oath for their spouse where it arises out of a personal matter.

Rule 4 (contacting other party to a matter)A solicitor must not communicate with any party who to the solicitor's knowledge has retained a solicitor to act in the matter, except:(a) To request the name and address of their solicitor;(b) where the other solicitor has refused for no adequate reason to pass on messages to their client and has been warned of the intention to contact their client directly, or;(c) with that other solicitor's consent.DiscussionThis is drawn from principle 19.02.

The working party took the view that this was an important protection for clients.

This rule deals with represented third parties, whereas the guidance to Rule 1 (Fairness) deals with how solicitors should treat unrepresented third parties.

Although their positions are fundamentally different, they both deserve a measure of protection and should be able to expect to be treated fairly by a member of the solicitors' profession.Outline guidancel Enquiry agents may serve documents but not take statements.l Solicitor estate agents may contact the buyer to discuss estate agency matters.l Consent may be implied when a protocol is in use.l Refusal to accept service is subject to the court rules.

Rule 5 (undertakings)1.

A solicitor must perform an undertaking:(a) If given in the course of practice by the solicitor or, if the solicitor is a principal of the firm, or any member of that firm, or;(b) if given outside the course of practice by the solicitor as 'solicitor'.2.

If an undertaking is given which is dependent upon the happening of a future event, the recipient must be notified immediately if it becomes clear that the event will not occur.3.

When a solicitor gives an undertaking to pay another solicitor's costs, the undertaking will be discharged if the matter does not proceed unless there is an express agreement that the costs are payable in any eventDiscussionThis is drawn from chapter 18 of the guide.

The first paragraph contains the main part of the rule which mirrors the current position.

The working party considered an alternative where the Law Society would only require performance of undertakings given in the course of practice.The argument in favour of retaining the current position revolves around the need to maintain the good image of the profession.

Therefore, if a solicitor assures someone that a personal debt will be paid because he is a solicitor then the Law Society should be able to sanction such a solicitor if he does not pay the debt.

Should 'trust me, I'm a solicitor' be the subject of disciplinary proceedings?The alternative argument is that this obligation is outdated and that the public is not likely to rely on such a statement in any event.

The commercial environment has changed enormously over recent years and the professional rules should reflect this.

Furthermore, there are problems with the detail.

For example, is it sufficient that the person owed the money is told that the solicitor is a solicitor or should that person have some additional evidence of the fact? Such arrangements are unlikely to be written down.

The second and third paragraphs are currently dealt with in guidance.

Because the essence of these paragraphs expand upon the basic rule, it is necessary for them to form part of the rule.

However, the question arising is whether it is still necessary to incorporate these obligations.Outline guidancel Define 'undertaking' and 'principal'.l May be oral or in writing and need not use the word 'undertaking'.l Cannot be unilaterally withdrawn.l Implications of breach in conduct.l Office for the Supervision of Solicitors notice to recipient of undertaking to take steps.l Costs amount to 'proper costs'.l Role of the court.l Fraud, deceit, innocent misrepresentation.l Indemnity issues.l Ambiguous undertakings construed in favour of the recipient.l Undertakings 'on behalf of' clients.l Implications for employed solicitors.l Client's instructions expressed as irrevocable.l Undertakings in conveyancing.l Application to LLPs, etc.l Reference to the Law Society smart card.

Rule 6 (seller's solicitor dealing with more than one prospective buyer)1.

Each time a seller of land, other than in sales by auction or tender, either:(a) Instructs a solicitor to deal with more than one prospective buyer, or;(b) to the solicitor's knowledge,(i) deals directly with another prospective buyer (or their conveyancer), or(ii) instructs another conveyancer to deal with another prospective buyer,the solicitor, with the client's consent, must immediately inform the conveyancer of each prospective buyer, or the prospective buyer, if acting in person, of this decision.2.

If the seller refuses to agree to such disclosure, the solicitor must immediately stop acting in the matter.3.

A solicitor must not act for:(a) More than one of the prospective buyers, or(b) both the seller and any of the prospective buyers.DiscussionThis is intended substantially to mirror the current rule 6A.

The working party took the view that the restriction should remain because to fail to disclose the existence of alternative buyers would appear to the general public to be shabby behaviour.

It is also contrary to the current spirit of legislation which is intended to minimise the time and expense of conveyancing.Outline guidancel Explain 'deal'.l The rule does not define the terms of the 'race'.l Explain how the decision should be communicated and define 'immediately'.l Cross refer to guidance about unqualified conveyancers.l Explain how to end a 'contract race'.

Rule 7 (fees of foreign lawyers)A solicitor who instructs a lawyer of a jurisdiction other than England and Wales is liable personally to pay that lawyer's proper fees, unless:(a) It is not the custom in that lawyer's jurisdiction; (b) that lawyer is practising in the United Kingdom, or;(c) there has been an express agreement to the contrary.DiscussionIt is necessary to retain a rule dealing with payment of the fees of foreign lawyers because of our obligations under the Council of Law Societies and Bars of Europe code of conduct for lawyers carrying out cross-border activities within the EU.

Also it is common practice for such fees to be guaranteed and it would be unacceptable for this jurisdiction to be out of line with many of the others we deal with.However, the working party decided that it was no longer necessary to retain the requirement that solicitors guarantee the payment of agents fees as is currently found in principle 20.01 of chapter 20 of the guide.

At present this principle is being used by agents as a debt collecting service and placing additional pressure on the OSS.

The appropriate place to deal with such matters is the court.Outline guidancel What are 'proper fees'?l CCBE code (article 5.9).Draft 'relations with the Law Society' rulesThese draft rules are designed to set a standard of behaviour for solicitors when they are dealing with the Law Society.

This standard, if complied with, is intended to protect the image of the profession as well as ensure that dealings between solicitors and their regulator are constructive.There are three rules (shown here in italics) followed by a discussion.

The discussion shows working party thinking and highlights issues on which it would like comments.

This is followed by outline guidance.

Rule 1 (duty to co-operate with the Law Society)Every solicitor and firm must deal with the Law Society in an open, prompt and co-operative way.DiscussionThis new rule sets the basic standard for communications between solicitors and the Law Society.

A regulatory body such as the Law Society - with statutory powers to regulate in the public interest - needs and expects the co-operation of its members.Outline guidancel The duty involves dealing promptly and substantively with correspondence from the Law Society.

Failure to answer correspondence on regulatory matters from the Law Society commonly results in disciplinary proceedings.

Failure to give a sufficient and satisfactory explanation of the solicitor's conduct may make the solicitor subject to sections 12 and 13A of the Solicitors Act 1974.l Abusive communications and unreasonable attempts to delay an investigation or enquiry are inconsistent with the co-operation required by the rule.

Rule 2 (reporting serious misconduct)A solicitor must report to the Law Society any known or suspected serious misconduct in their firm or in another firm of solicitors.DiscussionThis obligation is central to the intelligence gathering function of the Law Society, particularly to investigations concerning dishonesty or incompetence.

The working party decided to widen its scope by using the words 'known or suspected'.

This protects a solicitor who wants to report serious misconduct where there is no actual proof, and prevents a solicitor from evading their obligations by claiming they only had a suspicion.Outline guidancel Define 'serious misconduct'.

l It includes theft by members of a firm, whether solicitors or not.

Orders against unadmitted staff, etc.l Where a solicitor believes that another solicitor is in financial difficulty, this should be reported to the Law Society.

To be in financial difficulty is not in itself misconduct, but might indicate more fundamental problems.l If reporting another solicitor would involve disclosing confidential information about the reporting solicitor's client, the client's consent must be obtained first.l Guidance on MIU (monitoring investigation unit) and fraud intelligence officers receiving confidential information.l The OSS should be informed where a solicitor is charged with an offence involving dishonesty or deception or a serious arrestable offence.

Solicitors should consider their duty to protect the public and advise the Law Society if they believe that such protection is compromised.l Where a solicitor is instructed by another solicitor, then client confidentiality is paramount.

The duty to report would not arise without the client's consent (for example, solicitors advising under the Solicitors' Assistance Scheme).

Rule 3 (obstructing complaints) A solicitor must not improperly try to hinder or prevent any person from reporting them to the Law Society.DiscussionIn a modern consumer oriented society, clients' right to complain must be protected.Outline guidancel This includes not accepting instructions which involve any agreement preventing the OSS from investigating the conduct of the solicitor or the solicitor's staff.

However, genuine attempts by a solicitor to compensate an aggrieved client, in a matter involving inadequate professional service, will not breach this rule.l This includes not improperly demanding or accepting payment in return for not reporting alleged misconduct.l This includes not harassing or bringing improper pressure to bear on a complainant or potential complainant.l Issuing proceedings for defamation against a client in relation to material contained in a complaint to the Law Society, would be misconduct unless the solicitor alleged malice.For additional information about the background to the rules review or to look at previous consultations, visit www.lawsociety.org.uk.

Law Society notices

Paying for the cost of complaintsFor many years solicitors who have not been the subject of complaints have asked why they should shoulder the burden of paying for the cost of dealing with those who are.

A perfectly fair question.

After all complaints should have been sorted out by the firm.

Despite the toughening of Law Society practice rule 15 in 1999, it is clear that some firms still do not have adequate complaints procedures in place, or are not operating them properly.

The profession handles millions of transactions each year, and the majority of solicitors clearly deal promptly and fairly with any concerns raised by their clients.

But the postbag from dissatisfied clients is still worryingly high.In January this year, the Council of the Law Society decided that it was time to give firms a compelling incentive to deal effectively with clients' concerns.

Where complaints of inadequate professional service are received on or after 1 May 2002, and are found to be justified, a fixed costs order of around 840 will be imposed in addition to any other sanction.

The same provision applies to complaints about conduct but for those cases the start date was 1 February 2002.

A policy statement explaining the measure in greater detail appeared recently (see [2002] Gazette, 7 February, 40).There may, of course, be circumstances where the costs requirement can be reduced, if, for example, the cost of dealing with a complaint is less than 840, or if only one allegation of many is upheld and that allegation is relatively minor in comparison to the others.Nevertheless, where solicitors continue to fail to deal with complaints adequately, they will now contribute to the cost of dealing with them.Firms that adopt a responsible approach have nothing to fear.

Where firms have anxieties, perhaps a review of the firm's complaints procedures may be in order.

The Law Society's practice standard unit, is ready to provide advice and support.

Telephone the unit on 01527 883264.

Solicitors seeking advice on how to deal with a service complaint can telephone Lawyerline on 0870 6062588.

But the message to firms that disregard the importance of resolving complaints fairly and promptly in-house is clear: from now on, disregard for clients will cost the firm.

Mortgage code compliance board - renewalThe Mortgage Code Compliance Board (MCCB) is inviting solicitors who act as mortgage intermediaries to renew their registration for the year 1 May 2002 to 30 April 2003.Registration fees have been increased owing to an increase in the VAT burden borne by the board on its fee income.

However, law firms are eligible for a 5 discount per adviser which should be deducted from the total payment sent on renewal.

Solicitors should quote the Law Society's group consumer credit licence no.

G900001 on renewal forms.

The section on professional indemnity insurance is not applicable.

Renewal forms with the discounted fee should be returned by 31 March 2002 to enable solicitors' details to be included on the first lender disk for 2002/03, which is issued at the beginning of May.

Solicitors registered with the board are subject to the new qualification scheme.

For details, contact the MCCB's David Daniels on 01785 218200.