This article was first published on the Lockton website.
A recent regulatory settlement agreement relating to an attempt by a solicitor to cover up a mistake is a useful reminder for law firms of the circumstances where negligence and regulatory misconduct can overlap, and when it may be appropriate for firms to consider self-reporting misconduct to the Solicitors Regulation Authority (SRA) in addition to notifying professional indemnity insurers.
Self-reporting responsibilities
When it comes to negligence, the responsibility of firms and individuals to their clients are set out within the SRA’s principles. In particular, the relevant SRA principles provide that firms and individuals must act:
- In a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons (Principle 2)
- With honesty (Principle 4)
- With integrity (Principle 5)
- In the best interests of each client (Principle 7)
These principles are supplemented by rules requiring, among other things, that firms and individuals do not mislead the clients and third parties, provide services to clients in a competent and timely manner, and have effective systems in place for supervising client matters.
Firms and individuals are required to report to the SRA promptly of any facts or matters giving rise to a reasonable belief that there has been a serious breach of the regulatory arrangements. A serious breach could be a one-off incident involving an individual acting dishonestly or without integrity or a series of incidents which suggest a systemic failure to maintain standards, either individually or collectively.
Where there has been a failure to self-report an incident which is subsequently investigated and prosecuted by the SRA, the SRA will often include as a separate allegation that the relevant individual had breached his/her obligation to self-report. A failure to self-report may also suggest that an individual or firm has failed to demonstrate insight into the seriousness of their conduct, which may result in the SRA or Solicitors Disciplinary Tribunal (SDT) imposing a more serious sanction.
Case study – from negligence to misconduct
A recent regulatory settlement agreement offers a strong example of the consequences of an individual’s attempt to conceal a mistake. In the case, the solicitor had acted for a client in respect of a proposed 999-year lease of a property in 2015, and had provided the client with a report on title which incorrectly stated that the lease contained no prohibition on sub-letting or charging.
In May 2018, the client asked the solicitor for a copy of the report, or any other lease summary provided by the firm. Realising the error, the solicitor amended the report on title to state that the lease contained a prohibition on sub-letting or charging, and sent the amended report to the client stating that it was a copy of the original report.
When the matter was investigated by her firm, the solicitor stated that she had two versions of the report on the file and had mistakenly sent the wrong version. The firm’s investigation found that the report had been altered before being sent to the client.
The solicitor accepted that her conduct had been dishonest, and that she had acted without integrity and in a way which diminished trust in the solicitor’s profession. She agreed to remove herself from the roll of solicitors and not re-apply for a period of 10 years commencing from 2020.
Risk to law firms
Unfortunately, solicitors acting dishonestly in order to attempt to rectify mistakes is nothing new. In February 2022, the SRA published guidance and a thematic review on workplace environments, making clear that they may take action against firms as well as individuals where firm culture has caused or contributed to regulatory misconduct.
In relation to the covering up of mistakes, the SRA has indicated it may act against firms where it finds that the firm has failed to cultivate a ‘speak up’ culture, where solicitors feel able to admit to making mistakes without facing excessive criticism or sanction. When incidents of misconduct do occur, therefore, firms should reflect on whether this was a one-off incident or if it is symptomatic of a wider problem.
Other issues which may emerge during the process of investigating a matter in order to respond to a complaint or notify an insurer include:
- Dishonesty – in a recent case before the Solicitors Disciplinary Tribunal (“SDT”, case reference 12343 – 2022), a firm received a complaint from a client about a partner’s conduct of her personal injury claim. In the course of investigating the matter, the firm discovered that the partner had settled the claim several years earlier without the client’s consent (having missed a procedural deadline) and had been misleading the client about the progress of the litigation. The partner accepted she had acted dishonestly and agreed to be struck off the roll.
- Manifest incompetence – in some cases, a solicitor’s conduct of a matter may be so negligent or careless that it undermines public confidence in the profession. In a recent case (12314-2022) a solicitor was fined £16,000 by the SDT for failing to progress probate matters over several years, including one matter where no work had been done for a decade, and another where HMRC had issued penalties against an estate in the sum of £59,000 for delays in reporting income and capital gains tax liabilities. The solicitor admitted to acting in a way which diminished trust in the legal profession, but successfully resisted an allegation from the SRA that his conduct lacked integrity. The SDT found that the conduct was manifestly incompetent but did not amount to a failure to adhere to the ethical standards of the profession.
- In the most serious cases, solicitors can be struck off the roll where their incompetence indicates that they are an on-going risk to the profession. In a recent case a solicitor was struck off by the SDT for acting in a conveyancing matter where there was a clear conflict of interest involving a vulnerable client (12268-2021), with the tribunal being concerned that his conduct at the hearing suggested a lack of insight into his actions, meaning there was a risk of the misconduct being repeated.
- Lack of supervision – firms have obligations to establish an effective system for supervising client matters, and individual supervisors/managers are responsible for the work they supervise and ensuring that those they supervise are competent to carry out their role. Accordingly, where wrong or inadequate advice has been given or deadlines have been missed, individuals should consider whether this arose from a supervision failure, and firms should consider whether the firm’s systems are sufficiently robust.
- A failure to supervise matters can result in regulatory action. A solicitor was recently rebuked by the SRA for failing to adequately supervise an associate who had conducted a judicial review matter. At the oral permission hearing, the Judge criticised the firm’s conduct of the matter, suggesting that the client had been badly served by the firm and it had failed to provide appropriate advice to the client about the merits of the application. The client suffered loss as they were the subject of a costs order.
- The SRA has recently published guidance on effective supervision, setting out the standards that it will expect the firm to take to supervising matters. The guidance includes suggestions for supervising partner matters and also considers the most effective ways in which matters can be supervised remotely.
- Lack of attendance notes – a failure to document advice given to clients in attendance notes can cause difficulties from a negligence perspective, however it can also be a regulatory matter. In a recent case a solicitor was fined £2,000 by the SRA for, among other things, failing to keep adequately detailed attendance notes about work she had undertaken on 11 client files. The solicitor had used the term “considering” on her time entries, but the lack of an accompanying attendance note meant that it was not always possible to identify what was being considered. The solicitor accepted that the failure to adequately document the work being carried out constituted a failure to act in the best interests of clients and a failure to provide a proper standard of service to clients.
- Large scale service errors – in a recent case (12330-2022) the SDT approved an agreed outcome in which the respondent solicitor was fined £15,000 for providing incorrect advice on ground rent provisions to 115 clients. The error had been caused by the solicitor relying on an outdated precedent. There was no suggestion that the solicitor’s conduct was planned, pre-meditated or deliberate. However, the solicitor accepted that his conduct constituted a breach of the relevant Principles/Rules in the 2007 and 2011 Codes of Conduct requiring that solicitors provide a proper standard of service to clients and behave in a way that maintains the trust the public places in the legal profession.
In the majority of cases, negligence claims will not engage the principles/rules of professional conduct, even where that negligence has resulted in client loss. However, given the regulatory consequences arising from a failure to report serious breaches to the SRA, firms and individual solicitors should keep their self-reporting obligations in mind when investigating negligence claims.
Even if a decision is made that there is no reportable conduct arising from the facts of a matter, it is sensible to document that decision in case it is necessary to justify a position to the SRA at a later date.
This article was first published on the Lockton website.
If you have any questions in relation to SRA self-reporting obligations, please contact Andrew Pavlovic, who specialises in professional discipline and regulatory law.
