A straightforward approach?
It is well established that a solicitor should not begin to act where he or she lacks the competence, knowledge or skill to pursue the matter with due diligence. In fact, practice rule B1.10 specifically states: “You must only act in those matters where you are competent to do so. You must only accept instructions where the matter can be carried out adequately and completely within a reasonable time. You must exercise the level of skill appropriate to the matter.”
All sounds pretty straightforward… or does it?
Most solicitors would agree that dabbling is a “bad thing” for lawyers to engage in. So the simple risk avoidance action would be not to do it! However, it may not be that easy to identify or avoid. The very existence of this risk may not even be recognised within the profession as significant. A delegate on a recent risk management event was heard to voice the opinion that the risks of dabbling in areas of law were now so well understood by practitioners, from large to small practices, that no one would countenance dabbling in an area in which they were not well versed.
Regrettably, that is not supported by Master Policy claims, which tend to show that dabbling still occurs, often with serious adverse consequences for insured firms.
Why does it happen?
There are a number of reasons why solicitors create these risks and end up dabbling in unfamiliar areas of the law – very often inadvertently.
Client pressure – for example, the private client expert who feels obliged to review the small shareholder agreement on which the existing client wants advice; the conveyancing practitioner who is asked to give some related advice concerning a will.
Case study 1
Solicitor A was asked to prepare a shareholders’ agreement for X, Y and Z’s new company. A had previously given advice to X (the majority shareholder) in relation to property matters. X wanted matters resolved with minimal cost while giving the minority shareholders some reasonable protections. Y and Z were not taking legal advice. A’s suggestion of another solicitor was overruled by X on cost and speed grounds. A prepared the shareholders’ agreement. However, both the agreement and the articles of association were silent on the effects of a minority shareholder employee leaving employment with the company. When Z unexpectedly left the company on bad terms, there was no ability to recover Z’s shareholding and further changes to the company required Z’s consent.
Financial pressure – the lure of the fee or not wanting your client to use another solicitor. There is no need for a case study in relation to this heading. This is perhaps the most obvious” risk. The practice is taking a commercial view on whether to accept the risk. This is fine if the practice’s core competencies are understood. However, on many occasions the insurers see practices trying to overreach their competencies simply because the fee is so attractive.
Transactions that “grow arms and legs”
This is where part of the work touches on an area outside the solicitor’s expertise (e.g. specialist tax issues in a conveyancing matter, or wealth management issues in a family law case). The other scenario is where matters change and expand beyond the original instruction. In both of these circumstances, it is not always easy to identify and avoid areas where specialist advice or expertise is necessary.
Case study 2
The solicitor was dealing with a will where an individual left legacies to distant relatives and a share of the residue to be split amongst various charities. Inheritance tax was deducted proportionally from the shares due to all the beneficiaries and payment made to HMRC. As legacies to charities are exempt from IHT they should have received their shares gross of tax. Recovery from the overpaid beneficiaries was, as always, fraught with problems and complete recovery could not be achieved, leading to a loss by and a claim from the charity beneficiaries.
Case study 3
Solicitor J dealt with commercial matters and was asked to undertake a straightforward internal reorganisation of a company. One matter at issue was the performance targets set out in the paperwork associated with the employee share option scheme. The HR director of the client indicated that these were completely outdated and would become even more so following the reorganisation. Helpfully, a new sheet detailing the performance targets had been created and agreed with the affected employees. J duly amended the paperwork and issued new documentation. On a later review, it was found that there was no specific statement in the documentation identifying these options as enterprise management incentive (EMI) options (which they were supposed to be). On the assumption that these could be identified as EMI options, the manner of the amendments had placed their tax status in jeopardy. J ought to have realised that the proposed amendments to the share option scheme meant straying into a related, but very different, field of work.
Acting for family and friends
It goes without saying that all solicitors will be familiar with the scenario where they are regarded as an expert on every field of law – from crime to commerce to neighbour disputes. Coupled with a desire to help others out, this can make for a (unrewarded) foray into the unknown.
Picking up a colleague’s file
As a matter of good risk management, firms should plan for how to deal with matters in the event of a solicitor’s absence or departure from the office.
Case study 4
Partner M was dealing with a lease of licensed premises. A public house was being leased and terms had been agreed with a prospective tenant. The tenant had acknowledged that supplies of beer had to be purchased from the landlord (who in turn was obligated to purchase his supplies from the brewery). In M’s absence on holiday, solicitor W (who had some limited experience of licensing matters in the hotel trade) progressed matters. The clause binding the tenant to the landlord’s supply chain was omitted in the lease.
Dabbling, or stretching from core competencies?
One dictionary definition of dabbling is “take part in an activity in a casual or superficial way”. It is unlikely that many (or indeed any) practitioners would approach work in that manner. Perhaps “dabbling” is not how this risk should be termed. “Dabbling” is, after all, a rather pejorative term. It may be better to think about these risks in terms of core competencies, with the practice being exposed to higher risk the further it drifts from those core competencies.
This helpfully emphasises the problematic nature of the risk and why practices may fail to see the potential for problems until it is too late.
There is often a blurred line between stretching core competencies to legitimately encompass what could be a related or ancillary piece of work and undertaking a service that is a definite non-core matter. The difficulty for the lawyer is knowing (without the benefit of hindsight) at what point the drift into non-core activities presents an unacceptable risk to the practice.
Drawing the line
Whatever we call it, acting in unfamiliar fields can be a risky business for firms. Key to avoiding this is being aware of the core competencies within your firm and ensuring that you (a) use the best expertise you have available within the firm, and (b) are clear with your clients on what you will and won’t advise them on. Don’t be afraid to say no and direct them to a more specialist practitioner if appropriate. The risk created by straying into uncharted waters can often outweigh the rewards of the exploration.
In this issue
- Brexit: looking to the future
- Trusting the specialist tribunal
- The single surrogacy saga
- Payment notices and strict forms
- Land registration errors: an owner's view
- Reading for pleasure
- Opinion: Mhairi Snowden
- Book reviews
- Profile: Caroline Court
- President's column
- Discharges made simpler
- People on the move
- Taking on all comers
- Crowdfunding: changing the legal landscape
- Salaried but not employed
- Putting customers at the heart
- Interviews and the minimum criminal age
- Data breaches and the damage test
- Steering away from breakdowns
- IT: the great leveller
- Admissible hearsay?
- Vicarious liability and the vindictive employee
- Upholding copyright or breaking the web?
- Smallholdings are different
- Avoiding bias in sports law disputes
- Scottish Solicitors' Discipline Tribunal
- Progress at the expense of accuracy
- In-house for initiative
- Have you completed your AML certificate?
- Public policy highlights
- A blurred vision
- Millennials: a new age for managers
- Into uncharted waters
- Lost will – what then?
- 2018: a paralegal view
- ... and the SPA looks back, and ahead
- Ask Ash