Lawcovernotes October 2013

Duty extends to all clients, including friends One of the background factual scenarios fromwhich Lawcover has experienced claims with some degree of regularity is that in which the solicitor has acted for clients who are friends. This usually arises in the context of conveyancing and related borrowing transactions. The clients are often thought to be sophisticated or knowledgeable in that they have entered into similar transactions previously. The difficulty arises in that the solicitor may tend to provide advice in an abbreviatedmanner in an endeavour to reduce costs and on the assumption that the clients understand the documents and the detail of the matter. One such matter was investigated recently by Lawcover and, as with most property transactions, involved a very significant amount of money. The facts were that the insured solicitor acted for husband and wife clients with whomhe was friendly and for whomhe had acted previously. The transaction in question involved the purchase of a property to be used for the husband’s business operations. In order to fund the purchase, a loan was required to be undertaken by the husband and the company, with the wife being guarantor of the loan. The purchase and borrowing transactions were completed but ultimately the loan fell into default. Proceed i ngs were then commenced to recover the funds and these included a claim against the wife as guarantor. The wife joined the solicitor to those proceedings, alleging that he had failed to provide proper and detailed advice to her as to her obligations under the guarantee and the legal effect of it. The allegations by the wife were also that she would not have provided the guarantee had it been properly explained to her. Upon investigation of the facts it was apparent that the solicitor had adopted a rather minimalistic approach to advising the clients and, in particular, in relation to the guarantee. While thismay have beenwell intentioned in that the charged costs were low, there was an assumption on his part that the clients were familiar with the obligations being undertaken and that they did not require comprehensive advice. A view was formed by Lawcover, and indeed conceded by the solicitor, that his standard of advice fell short of what was reasonable and appropriate and that a finding of liability on his part was likely. The claim was accordingly resolved on a compromised basis at mediation. The risk management “lesson” arising from these types of claims is that the relationship or friendship between the solicitor and clients should not compromise the standard of advice and service. Further it should not be assumed by a solicitor that the client is thought to have particular knowledge of a legal nature on the basis that they may have been involved in legal transactions previously Tony Reynolds Claims Solicitor