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protracted negotiations over every aspect of C’s disengagement from the business. Eventually, a Minute of Dissolution was concluded and signed and C required to make a modest payment to his former partners in respect of his agreed balance reflecting the level of business borrowings at the date of C’s departure. Some time later, the business failed and the bank called up securities and guarantees for the business borrowings. Because there was a shortfall, the bank looked to C in terms of a Personal Bond which he had signed and from which he had never been released. How would you ensure that no client of yours found himself in this position? Firm Z might have drawn up a list of action points to be attended to in order to achieve C’s objective and these could have been diarised and copied to the client. All of this would have helped to minimise the risk of critical issues being overlooked and to avoid any misunderstanding between solicitor and client. Lenders’ general instructions Firm Y acted on behalf of purchasers of a house and for their lenders in the preparation, execution and recording of a Standard Security. On the face of it the purchase and loan transactions proceeded normally. The purchasers/borrowers defaulted and the property was repossessed by the lenders who incurred a loss. The lenders requested Firm Y’s file and intimated a claim on the basis that, inter alia, Firm Y had failed to comply with certain terms of the lenders’ General Instructions to Solicitors. The letter received from the solicitors acting for the lenders alleged inter alia that, contrary to express terms of the General Instructions to Solicitors, Firm Y had failed to report to the lenders: ■ that the whole purchase price was not passing through the hands of Firm Y as part of the price was apparently paid by the borrowers direct to the seller; and ■ that the party from whom the borrower was purchasing had only acquired the property within the last month or two. The letter intimated that, having repossessed and sold the property, the lenders had sustained a loss and were holding Firm Y liable. While this claim may involve issues of causation and quantification which are less clear cut, if the lenders’ allegations are justified, then it appears, on the facts stated, that Firm Y has omitted to comply with express provisions of the lenders’ instructions which are express terms of the contract between the lenders and Firm Y. Lenders’ general instructions are effectively a checklist of points to be addressed, documented and reported on as appropriate. Unimplemented undertakings Firm Y acted for B in the purchase of a flat. Property Enquiry Certificates produced by the sellers’ solicitors disclosed the existence of an outstanding notice. After discussion, the sellers’ solicitors agreed that the letter of obligation would incorporate an undertaking on behalf of their clients to deliver a receipt and discharge. Following settlement, the file was fee’d up and archived. The sellers’ solicitors were never chased for delivery of the outstanding receipt and discharge. When B came to sell the flat some years later, the notice was still outstanding, the previous owners hadn’t paid the local authority and were now untraceable and B was required to attend to this in order for the sale to proceed. How do your ensure that your clients don’t find themselves in the same situation as B? On the facts stated, it appears there may have been an omission on the part of Firm Y to diary the outstanding undertaking and, if necessary, to make B aware of the situation and B’s options in the event of the sellers’ failure to implement their undertaking. Effective diarying is clearly a critical element of avoiding this sort of situation. Journal Risk Management The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law and (b) is necessarily of a generalised nature. It is not specific to any practice or to any individual and should not be relied on as stating the correct legal position. Alistair Sim is Associate Director in the Professional Liabilities Division at Marsh UK Limited Alistair.J.Sim@marsh.com e: 45 May 2002 Volume 47 No 5
Journal e: In Practice bruceritchie@lawscot.org.uk May 2002 Volume 47 No 5 46 Bruce Ritchie, Director of Professional Practice at the Society, continues his series looking at recent decisions of the Professional Practice Committee, this month focusing on aspects of court work MATRIMONIAL a. Registration of Agreements in Books of Council and Session The Committee considered the question of confidentiality in relation to documents registered in the Books of Council and Session which is a public register accessible by researchers, journalists and others.The Committee agreed that clients’ instructions should be obtained before registering agreements but recognised that in many if not most cases the arguments in favour of registration would outweigh the arguments against. b. Breach of Contact Orders The Committee were asked to consider the conduct of solicitors in breach of contact situations. It was suggested to the Committee that solicitors who simply intimate that their client is withdrawing contact without making any further comment and in particular without indicating that their client had been advised against doing so were acting improperly. The Committee did not agree. A solicitor’s duty is to advise his own client. Such advice is confidential and the Committee felt that whilst a client might be in breach of the Court Order there is no duty on the solicitor to do more than report the factual position to the solicitor on the other side. If in the course of proceedings to enforce a Contact Order there is evidence that a solicitor has advised the client to ignore it, and the solicitor is found in contempt of Court as a result, that would be a matter of conduct which would be the subject of a justifiable complaint. FUNDING LITIGATION a. Duty To Advise On Legal Aid The Committee considered the nature of a solicitor’s duty to advise a client about Legal Aid. They agreed that the duty is to advise a client of the existence of the Legal Aid scheme (including Legal Advice & Assistance) but does not extend to a detailed consideration of whether a specific client may be eligible for Legal Aid unless the client requests such consideration and the solicitor is willing to do so. If the firm does not undertake Legal Aid work, they have a duty to make that known to prospective clients and to advise them that if they wish to apply for Legal Aid they should consult another firm of solicitors. b. Legal Expenses Insurance The Committee considered that legal expenses insurance and other forms of private funding are entirely different from Legal Aid. Legal Aid is a statutory right only available through the solicitor of the client. There is no duty to enquire if the client already has a legal expenses insurance policy, as it is reasonable to expect the client to bring this to the solicitor’s attention. EXPERT WITNESS REPORTS The Committee were concerned to receive a letter from an expert who had been asked for a report.The solicitors had asked for any adverse comments to be sent under separate cover. The Committee felt that to seek a report from an expert in these terms was improper and that the expert was entitled to seek confirmation in writing that the “good” report would not be used to mislead the other party to the matter or their agents or insurers. MINUTE FOR RECALL OF DECREE – DEFENCE “DEBT DENIED” The Committee considered the conduct of a solicitor putting forward a defence of “debt denied” in support of a Minute for Recall of a Decree in absence which had passed against the same firm of solicitors.The solicitors had previously acknowledged the debt, had made part payment by cheque and had offered to pay the balance within a specific period. The Sheriff complained about the solicitors conduct as he felt that the defenders were themselves officers of the Court and had stated a specific defence which was contradictory to the terms of their own letter. The Committee agreed that in relation to a Minute for Recall of Decree the solicitor had knowingly misled the Court by stating “debt denied” as a defence where he had already accepted that the debt was due and payments to account had been made. DEBT COLLECTION – USE OF HEADED NOTEPAPER It was held to be improper for solicitors to allow a debt collection agency to send out letters on the solicitors’ headed paper, although in this particular case the letters bore the registered office and registered number of the debt collection company.The Committee accepted the undertaking by the solicitors concerned to deal with matters themselves in future by electronic transfer of data to their own office before such letters were sent.
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