Risky Business: Handling Professional Responsibility Complaints and Claims

Zakka v Elias [2013] NSWCA 119: This is an appeal commenced by Mr Zakka about the dismissal of a claim made against Mr Elias (sole practitioner who traded as Cadmus Lawyers) regarding advice provided by Ms Rahe (a solicitor employed by Mr Elias). While holding an unrestricted practising certificate, Ms Rahe provided advice to Mr Zakka, a relative who was lending money to third parties. She concealed her actions from her employer. Issues arose and Mr Zakka sued Ms Rahe; one of the issues on appeal which Jennifer refers to is whether Mr Elias was vicariously liable for Ms Rose’s negligence. The Court found that this was “a clear case of a solicitor engaging in a frolic of her own or at her own whim…. It is an act Ms Rahe was not authorised to take as an employed solicitor of the firm. There was not, in my opinion, a sufficient connection between that unauthorised conduct and Ms Rahe’s employment to bring this within the scope of the doctrine of vicarious liability…” at [142].

Legal Services Commissioner v Michael Vincent Baker [2005] LPT 002

• Around 26% of claims are conveyancing related. The next biggest area is litigation which could include issues around limitation periods and claims around settlement offers. The latter being a very tricky area; sometimes clients will settle a claim and experience “settlement regret” and seek to improve their position by suing their lawyer.
• Of conveyancing claims, those made against lawyers acting for the purchaser often include a failure to advise on easements. In a falling market, claims against the solicitor acting for vendors usually relate to an omission of prescribed documents to the contract. Other causes include drafting errors, document control issues and a failure to manage systems, such as managing calendars correctly (which result in missed deadlines).
• The most common underlying cause of claims is a lack of communication; this can include where instructions were not followed, or an omission of advice or failing to clarify the extent of the retainer.
• The LawCover policy excludes instances where a solicitor has acted fraudulently and/or dishonestly.
• The LawCover policy does not cover solicitors who are subject to disciplinary proceedings for:
  • “Unsatisfactory professional conduct” as defined in section 296 of the Legal Profession Uniform Law (conduct of a lawyer that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer)^[1]; and/or
  • “Professional misconduct” is defined in section 297 of the Legal Profession Uniform Law (including unsatisfactory professional conduct where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and conduct whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice^[2],

but may in some stances respond to claims for compensation.

• Lawyers must be supervised in their first two years of practice, a failure to adequately supervise will increase the risk of a claim. The stand of supervision required is set out in Rule 37 of the Australian Solicitors’ Conduct Rules 2015 which provides: ‘[a] solicitor with designated responsibility for a matter must exercise reasonable supervision over solicitors and all other employees engaged in the provision of the legal services for that matter.’ The legislation does not define ‘reasonable supervision’. In Legal Services Commissioner v Michael Vincent Baker [2005] LPT 002 at [42] it was held: “The supervision required however varies according to the employee’s experience, qualifications and role and with the type and complexity of the work”.

• Take file notes! It’s the best way for a lawyer to document the advice that has been given. For some, COVID-19 has challenged the common practice of taking file notes; as people are working remotely in different environments often providing more advice over the phone or by video conference and using technology more than they even have, the hand written (or even typed) file note can be forgotten.
• How does a Law Cover policy work? The policy covers the firm, employees and employees of a service company related to that firm. The base level of cover is $2m per claim. Claims cover civil liability including:
  • Contract, breach of retainer
  • Breach of duty of care
  • Misleading and deceptive conduct
  • Claims for compensation
  • Personal costs orders
• Can I be the subject of a claim where there is no retainer and no payment for services? Yes, if sued in tort, you can be the subject of a claim. Remember the example of advice given off-hand at a dinner party? The provision of any legal advice, however and wherever provided, can result in a claim in negligence.
  
• What’s the first thing a lawyer should do if they think there may be a claim?  Call LawCover and speak to an experienced claims solicitor; they can assist in explaining the next steps, some of which may be difficult such as speaking to the client to explain the mistake, as well as sharing strategies on how to mitigate the risks of a claim. A majority of notifications to LawCover don’t go anywhere, so don’t be afraid to pick up the phone and speak to a claims solicitor.
• How do you explain a mistake to a client? It is recommended that you be frank, but also conscious of the fact that a LawCover policy will include a clause that precludes lawyers from admitting liability without LawCover’s consent. Another reason why you should consult with a claim’s officer who can provide guidance on this communication. When informing the client of a mistake, it is recommended that you inform the client that they should seek independent legal advice.

The Law Society of New South Wales v Gathercole [2016] NSWCATOD 27

Zakka v Elias [2013] NSWCA 119

Legal Services Commissioner v Michael Vincent Baker [2005] LPT 002