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Residential property dealings are the basis of more than a third of all
professional negligence claims. Most commonly, claims arise because
of missed charges – despite the fact that charges are clearly marked on
official copies. This suggests that many solicitors simply fail to read
what is in front of them.
Against a purchaser’s solicitor, the typical claim
is for failing to identify all the charges (eg renovation grants, LA
discounts) and as a result failing to obtain an undertaking from the
seller’s solicitor to discharge all such charges. Against the seller’s
solicitor, the main claims relate to sloppy undertakings given in general
terms without sufficient investigation of, or reference to, the identity,
nature and value of the charges on the property. Giving an undertaking
is effectively pledging your firm’s credit. Partners would generally balk at
the idea of giving all fee-earners credit cards and cheque books, but it
then seems surprising that so few firms seem to have appropriate
controls on who can give undertakings (and the nature of those
undertakings).
It is all incredibly simply stuff. But, it costs the profession a lot of money
in negligence claims. Most of this can be avoided – and it is easy to
blame the individual solicitor for having made the error, but the real
issue will often be a failure of underlying management procedures. The
reality is that many firms still lack fundamental risk management
strategies. But, remember that the new Solicitors Code of Conduct
comes into force in July and 5.01(1) requires there to be effective
management of the firm as a whole, and that specifically includes ‘the management of risk’. The guidance to this provision says that ‘firms
should have arrangements in place for assessing the risks attaching to
each area of their operation. The Rule is aimed at insuring risk is
addressed in the firm’s overall management framework… Risk
management arrangements are unlikely to be considered adequate
unless they include periodic reviews of the firm’s risk profile.’ So, as of
July, these will not just simply be matters of good practice (and
increased insurance premiums), but they will become part of
Professional Conduct. The key point, of course, is that all humans make
mistakes – and individuals and solicitors are no exception. But, the way
to dramatically reduce those mistakes is to have sound procedures in
place, and that is where risk management plays its part. Source:
Zurich@risk.
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March 2007 |
