Risk Management Focus
Date: 16 March 2007
Authors: Simon Young
Issue: Vol 157, Issue 7264
Categories: Features, Legal services, Profession, Risk management
What’s all this about a new rule book I’m supposed to learn? You know what they say about old dogs and new tricks…
Yes, there is one coming. It’s going to be called the Solicitors’ Code of Conduct, and will replace the Solicitors’ Practice Rules 1990. Latest information suggests it will come into force on 1 July 2007, or shortly after that.
It shouldn’t trouble you as much as you might think. Quite a lot of it is merely a codification of what you are already familiar with, and some of what is new is a relaxation, rather than a tightening up.
So I needn’t really bother with it?
You should certainly study it, and work out where the changes are that will make a practical difference to you. There are quite a lot of courses out there to help you.
What if I haven’t got the time for that? How on earth do I find out about it?
You can go to the website for the Solicitors Regulation Authority (SRA)—an offshoot of the Law Society that now controls our rules. You can download each rule as a pdf file from www.sra.org.uk/code-of-conduct.page.
That seems a lot of hassle. Can’t I get a printed copy of the rules?
Not yet. I’m not sure at the moment how the SRA aims to distribute written copies. I don’t think it’s made its mind up yet. To be fair, it would be expensive to send a copy to every single solicitor and trainee solicitor. It may be that it just goes out on the basis of one copy per firm. Part of the problem is that, in printed form, it’s likely to be out-of-date quite quickly.
Is it just rules? There used to be all sorts of layers of statement about what you could and couldn’t do.
That’s been simplified. Now it’s just the rules, which are mandatory; and guidance, which is not. One of the results is that you may find in future that when changes are needed, unless they are fundamental, they are effected through the guidance rather than the rules. The point is that whereas the SRA can change the guidance by itself, if it wants to change the rules it has to get the consent of the Department for Constitutional Affairs, and possibly the Master of the Rolls, and then get approval from the Law Society Council.
OK, so tell me what’s new.
Well, some of what is ‘new’ has actually been with us for a year or two already. So, for instance, the rules on fee-sharing and referral fees (now rr 8 and 9 respectively) have not changed substantively since the decisions in late 2004; and the updated rules which cover conflict, and the clash between duties of confidentiality and disclosure (rr 3 and 4) have been in place since April 2006.
You’d better take me through the main bits at least.
To start with, there are some core duties, which constitute r 1. These are high-level statements of principle; but designed to stand alone and be enforceable in their own right. You should always have these at the forefront of your mind. You can think of them as a prism through which you view all the other rules, but don’t fall into the trap of thinking you are compliant if you can’t find a more detailed rule which you are in breach of. Breach of these principles, which are designed in the public interest, is of itself professional misconduct.
Fair enough: can’t argue with that. What’s next?
Rule 2 deals with lots of client care and costs information issues. It’s deliberately placed second, to emphasise its importance; and it pulls together a lot of the previously applicable rules and codes.
Some of this is quite simple, but important, as you are liable to be penalised if you get it wrong. For instance, you are obliged to tell the client, at the outset, the name and status of the person dealing with their matter, and the name of the person they can contact if there’s a problem. If you fail to do so, you may not be able to recover any costs at all.
I remember hearing that. Costs is a big issue here, isn’t it?
It certainly is. One of the problems is simply ensuring that you cover all the options, especially in litigation. Where you have to consider before-the-event insurance, after-the-event insurance, public funding, trade union help, and conditional fee agreements, and explain all that to the client, it could take you a couple of hours. One practical tip is to have a checklist of all the different possibilities. That way you should not only remember everything you have to go through, but be able to prove later that you were as thorough as the rule
requires. There’s a simple version in the back of the Law Society’s office procedures manual you could adapt.
When you’re dealing with any insurance policies, don’t forget your responsibilities under the Solicitors Financial Services (Scope) Rules 2001 and Solicitors Financial Services (Conduct of Business) Rules 2001, with regard to the provision of information to the client, and steps like producing a demands and needs statement.
It’s providing an initial estimate of costs I hate. How do I know what the bill is likely to be when I haven’t even started?
Not only are you going to have to get used to that, you’re going to have to get much better at it. There have been a number of cases on this, and the upshot is that if, without amending your initial estimate, you later exceed it by more than 15%, then not only can you not recover any more if the client objects, but you may even have to pay back any excess the client has paid on an interim basis.
You have to ensure that your management information service is giving you good information on the average cost per case of all sorts of tasks. That should give you the necessary base figure to work from. Then make sure you remember what the estimate was, and keep an eye on it to check if it needs updating.
OK—what’s next?
Well, I need not deal with rr 3 and 4, on conflict, confidentiality and disclosure, in any depth. We spoke at length about them some months ago (see 156 NLJ 7233, pp 1130–1131), when there were amendments to the old rules.
Isn’t there something about new management requirements?
That’s r 5. You know there’s been a debate for some years about whether or not Lexcel should be compulsory? Well, it looks as if this will happen in the near future. What it sets out to do is to ensure that principals—sole practitioners, partners, members of an LLP or directors/shareholders of a company—play their part in ensuring that the firm has effective arrangements in place for various aspects of the management task. There’s no particular template for this, and the rule does not attempt to be prescriptive about how the stipulated end is achieved. What suits each firm will depend on its culture, size, set of people, mix of worktypes etc.
What does it cover?
There are too many limbs to the rule to go into detail here. You’ll have to read it carefully. What you have to remember is that the emphasis is on designing proper systems, making sure they are working, and periodically reviewing them to see what lessons can be learned and what changes need to be made. Another important general point is to ensure that there is always someone suitably senior to take responsibility for these tasks.
Didn’t I see that there were also some changes on the discrimination front?
Well spotted—that’s r 6. The main thing to remember is that you must not discriminate on any of the prohibited grounds, which of course now includes age, in anything you do. That includes not only dealing with your staff—and all other people, including partners—but also the delivery of your services, even in a few remaining areas where the general law does not extend the prohibition on a particular type of discrimination to service provision.
I should have some sort of policy on this. Still, at least I can fall back on the Law Society’s model policy, can’t I?
Yes, you must; and no, you can’t. A last minute change has done away with the concept of a model policy. Now, the rule requires that you have, communicate and operate a policy, but it doesn’t give you a model. It tells you a minimum of factors that must go into the policy, but it is your job to write it. What the rule requires is that the policy is implemented, and actively monitored and reviewed to ensure compliance and effectiveness.
Is that it?
In terms of what has changed, those are the major matters.
What future changes can we expect?
That’s guesswork, of course, but I think we can safely say that the passage into law of the Legal Services Bill will be likely to force some changes. For instance, one of the first changes which seems likely to come into play will allow other lawyers to come into equity with solicitors, so there will need to be provisions for that. Looking further ahead, when alternative business structures come into effect, which is currently predicted for 2011, there will presumably be the need for a major overhaul of the rules on separate businesses and recognised bodies.
But until then?
Who knows? We have a new regulatory body, and it is in the nature of regulators to make rules…
There seem to be lots of rules we haven’t talked about.
Quite right. Don’t forget we’re only talking about what has been known as the Solicitors’ Practice Rules, and we haven’t covered all of those in detail. But it’s only a part of the jigsaw. You still have to consider the rest of the package, such as the accounts rules, the rules dealing with indemnity insurance and the compensation fund, and the rules regarding incidental work where the Financial Services Authority is the ultimately responsible regulator. There’ll be plenty to keep you going for a while yet.
Simon Young MBA is a solicitor and a legal management and training consultant. Email: simon@syoung.co.uk
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