Law Society of Scotland - The Journal Online

Journal
Risk Management
Risk Management
Roadshow Review
This month, ahead of the 2003 series of the Society’s Risk Management Roadshow,
Alistair Sim takes a look at some of the topics considered as part of last year’s Risk Management Roadshow
The 2003 Risk Management Roadshow series
gets underway in Edinburgh on 24 April. As
before, these events will concentrate on group
discussion of case studies aimed at identifying risk
issues and practical risk management points.
Some of the case studies from last year’s Risk
Management Roadshow appear here with a note
of some of the risk management points to be
considered. It is clear from the group discussions
which took place last year, and in previous years,
that there is no definitive ‘correct answer’ to the
questions posed and no authoritatively correct
response to the issues raised by the case studies.
The appropriate response will always involve
an element of judgment on the facts and
circumstances as they present themselves to the
individual solicitor.
Breakdown in communications
Mrs Rich rang her solicitor, Mr Rush to tell him
that she wished to withdraw from a house
purchase because she had just received
notification that an old family friend had died and
quite unexpectedly left her a substantial legacy;
she would now be in a position to consider a
rather more expensive property.
Following a discussion the previous afternoon,
Mr Rush was about to issue a final acceptance
concluding the bargain.
Mr Rush was busy, so a message was left with the
receptionist which Mrs Rich said was urgent. The
message was to the effect that Mr Rush should
not conclude the deal and should phone Mrs Rich
urgently.
Somehow or other, Mr Rush did not receive,
certainly did not act upon Mrs Rich’s message.
He concluded the bargain and Mrs Rich was
obliged to proceed.
Risk management issues to be considered:
■ All members of staff, including support staff,
to appreciate importance of their role in
Risk Management
April 2003 Volume 48 No 4 34
■ Training in basic Risk Management awareness
for all personnel including support staff
■ Standard procedure for passing on messages
■ Consider the relative risks/reliability of
e-mail, voicemail etc.
Family funded purchase
Following her husband’s death, Ailsa Craig was
contemplating the prospect of selling the family
home and moving to something much smaller and
more manageable. Out of the blue, Ailsa’s son-inlaw,
Ken More, came up with an alternative plan.
Ken and his wife,Yvonne, would buy a house big
enough to accommodate Ken and Yvonne and
their teenage family with enough space to create
a separate granny flat for Mrs Craig. Ken and
Yvonne would contribute the equity from the sale
of their own house plus whatever they could
borrow. The balance of the purchase price plus
the cost of creating the granny flat would come
from Mrs Craig.
A letter from Ken provides this brief description
of what is planned, encloses sale particulars for a
substantial townhouse in which he has noted an
interest and asks you for a meeting with him and
his mother-in-law in a couple of days’ time.
What are the risks that you reckon need to be
addressed?
Risk management issues to be considered:
■ what are the principal risks for the various
interested parties? what happens if -
■ Ken and Yvonne divorce?
■ Ailsa has to go into a nursing home?
■ Ken and Yvonne do not keep up repayments
on the loan?
■ where are the potential conflicts?
■ who could you act for? Ailsa? Ken?
Yvonne? Lender?
■ who would you be content to act for?
■ is Ailsa’s contribution a loan or a gift?
■ how is Ailsa’s position secured?
■ what happens to Ailsa’s loan in the event of
her death, the sale of the property, default
on the loan?
■ how should title be taken?
See article ‘Family Funded Purchases’, JLSS July
2002.
Uncommunicative client
Zoltan was the perfect client as far as Scott was
concerned. Zoltan never pestered Scott, as most
other clients did, with constant phone calls and
questions about progress or lack of it.
Scott had presevered with the negotiation and
drafting of the Agreement documenting Zoltan’s
withdrawal from the public relations consultancy
partnership he had resigned from nine months
ago when he got his big break and took up a plum
job with an international PR agency. The terms
were all agreed when a new but relatively
insignificant issue was raised on which Scott
needed Zoltan’s instructions.
Scott’s letter and a reminder went unanswered.
For some reason, the file was not re-diaried and
over the next three months, either Scott did not
conduct a file review or else Zoltan’s file got
overlooked. Either way, the months went by with
no action being taken.
This period of inactivity was interrupted when
one of the other partners contacted Scott for
advice in connection with the insolvency of the
partnership and Zoltan was in touch at the same
time to ask for Scott’s urgent confirmation that a
mistake had been made by the partnership’s
lenders and landlords who had written to him
intimating that they were holding Zoltan liable for
the partnership’s debts/lease commitments.
Scott felt aggrieved that Zoltan’s failure to respond
to his requests for information had brought about
this situation. Zoltan’s explanation was that he had
been on secondment abroad for an extended
period and had not received Scott’s letters.