Lawcovernotes October 2013

Beware, out of office advice might not be covered While solicitors can be held liable for advice they give in social situations, solicitors, particularly employed solicitors, should be aware that they are not always covered by insurance for that advice. The recent Court of Appeal decision in Zakka v Elias [2013] NSWCA 119 is an example of a case in which an employed solicitor gave ‘coffee table’ legal advice to a family member, but did not have insurance coverage for that advice. R was a newly admitted solicitor. R’s brother asked her to provide their relative, Mr Zakka, with legal advice about a loan that Mr Zakka was taking over his house in order to on-lend that money to R’s brother. She reluctantly provided the advice and signed the necessary solicitor’s certificate. At some later time, Mr Zakka entered into a second loan agreement borrowing further money against his house in order to on-lend the money to a local businessman. R again gave advice to Mr Zakka and acted for him on the settlement of that loan. During the course of providing that advice, R told the claimant not to proceed with the loan, because the businessman was a “con”. Nevertheless she signed the relevant documents relating to the loan and corresponded with the lender’s solicitor about the loan from her employer’s office. It was R’s evidence, as well as the evidence of her employer, that R deliberately took steps to conceal her actions from her employer. She knew that her boss would not have consented to her acting for Mr Zakka so she decided not to tell her boss about the matter. Mr Zakka argued that R had given him negligent advice, and that the principal was liable for R’s advice because he was her employer, and as she only held a restricted practising certificate, she could not provide legal advice without supervision. In the Court of Appeal judgment, which upheld the decision at first instance, Ward J confirmed that in order for an employer to be liable for the actions of an employee, the plaintiff would need to show that act was done ‘in the intended pursuit of the employer’s interests’: “R was not acting in intended pursuit of Mr Elias’ interests or in intended performance of her work as an employee in the present case. The fact that some of the types of tasks performed by R for Mr Zakka were of a nature that shemight perform during her employment on client files for the firm is not sufficient in my view to bring what she did within the scope of her employment” Lawcover indemnified the legal practice belonging to Mr Elias, but was unable to extend indemnity to the employed solicitor because the Lawcover policy only provides cover for claims arising from “the provision of legal services by the law practice”. Although the employed solicitor provided legal services, those services were not provided by the law practice. This case demonstrates that while the Lawcover policy provides broad coverage for lawyers and employees, it is important to understand that the policy only covers work performed as part of the insured firm’s l law practice. Elissa Baxter Claims Solicitor