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LPLC: Resist work outside expertise

Every Issue

Cite as: (2008) 82(7) LIJ, p. 86

Exceptions made for valued clients continue to generate claims.

As the practice of law becomes more specialised and firms make business decisions about which areas they will practise in, claims caused by lawyers acting outside their area of expertise should be on the decline.

However, the Legal Practitioners’ Liability Committee (LPLC) has experienced a cluster of claims where lawyers have acted completely outside their area of expertise because they have made a well-intentioned exception for a valued client.

The wealthy individual

A firm had acted for an elderly “high nett worth” client for many years. The client was contemplating a second marriage to a woman many years his junior.

The most striking thing about the couple was not their disparity in age but their disparity in wealth. He was extremely rich and she owned some personal effects and a second-hand car.

Among other things, the client wanted the firm to draft him a binding financial agreement under the Family Law Act1975 to protect his position.

The partner who was the contact point for the client knew nothing about family law. The firm did not even practise in family law. The partner decided to refer the matter, not to another firm with the appropriate family law expertise, but to a junior wills and estates lawyer within his firm.

Presumably, he reasoned that this was really about the client’s financial affairs, not about family law issues.

The wills and estates lawyer drafted an agreement which addressed some of the client’s concerns but was invalid on a threshold issue: there was no solicitor’s certificate as to independent legal advice. This meant, of course, that the agreement was not binding.

The husband and wife separated two years later. The husband claimed he was obliged to pay his ex-wife a greater sum than would have been the case had there been a valid, competently drafted binding financial agreement in place.

So here was a case of a firm with no expertise in family law acting in what LPLC considers to be one of the most perilous aspects of family law: a pre-nuptial agreement.

It is an example of the well-established matter-acceptance policies of the firm being ignored to “assist” a valued client.

The special favour

In another matter, a firm was instructed to draft a complex agreement on behalf of a corporate client.

It was a long-term agreement and payment for services during the initial term and under the options was subject to a CPI escalation clause.

The agreement was negotiated and drafted in a tight timeframe and subject to multiple rounds of amendment.

Early drafts of the CPI escalation clause were clear. Uncertainty crept in when, at the last minute, an amendment was made to “clarify” that the adjustment was on an annual basis and the CPI figure current at 31 December was to be used.

Unfortunately, this meant it was no longer clear whether the CPI adjustment was to be made annually and cumulatively (as intended) or just annually (as drafted). The result for the client was less money for the service it was providing, plus the potential for future losses.

In this case the “relationship partner” was responsible for the drafting error that occurred.

Not long before the agreement was finalised, inhouse counsel for the client had called the relationship partner about a number of issues and discussed this transaction.

Inhouse counsel asked the relationship partner if he wouldn’t mind having a look at the CPI clause as inhouse counsel was not convinced it currently met the company’s objectives. If the relationship partner was able to “tidy it up”, inhouse counsel would really appreciate it.

The relationship partner did exactly as he was asked. He had a look at the clause and made some amendments.

No doubt he had his reasons. Partly, he wanted to oblige inhouse counsel. Partly, he was probably flattered to be thought of as a troubleshooter. And partly, he may well have felt he was charged with a non-delegable task and could not ask for help.

The professional indemnity partner in the firm later described the relationship partner as fantastic with people, but “not a great mathematical mind or a good draftsman”.

In other words, he was the wrong person for the job. Or put another way, he was acting outside his area of expertise.

This was a case of failing to relinquish work to other lawyers in the firm who were better placed to do it.

In many cases, this behaviour is underpinned by reward mechanisms within the firm that operate as a disincentive to refer work to others.

In other cases, the behaviour is underpinned by cultural issues: the barriers, perceived or real, to asking for help.

The lesson

Do not be tempted to do something which is outside your area of expertise, even as a “one-off” for a valued client. Matter-acceptance policies and specialised practice groups are there for the protection of lawyers and clients alike. Being willing to help and being able to help are two very different things.

This column is provided by the LEGAL PRACTITIONERS’ LIABILITY COMMITTEE. For further information ph 9670 2001 or visit http://www.lplc.com.au.

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