When an error is made and discovered by a solicitor, then the instinct is to try and rectify the position; especially, where there is an ongoing commercial relationship with the client. However, should solicitors be reticent about attempting to rectify mistakes, errors or omissions made which disadvantage their clients?
The position following the Solicitors Disciplinary Tribunal (SDT) decision in the case of Howell Jones LLP (11846-2018) suggests that they should be. This recent decision has firstly posed problems for solicitors trying to protect their reputation and maintain client relationships and secondly for professional indemnity insurers, as costs inevitably increase when independent solicitors get involved and a professional negligence claim is inevitably pursued.
The SRA Standards and Regulations (STaRs) came into effect on 25 November 2019, replacing the SRA Handbook. It was hoped that these updated regulations may provide comfort to solicitors who would prefer or like to assist their clients in circumstances where an error or omission has been made, rather than immediately flagging a conflict of interest and ceasing to act, but do the STaRs achieve this?
The Position for solicitors following Howell Jones
The facts of Howell Jones LLP are well known. In summary, Howell Jones (HJ) considered that they had made a mistake advising their client to settle divorce proceedings. With agreement from their professional indemnity insurers, HJ admitted the mistake to the client, explained the entitlement to seek independent advice, but proposed that HJ would continue to act and would seek to overturn the settlement at no cost to the client.
HJ was not successful in having the settlement overturned.
The SRA brought the case to the SDT on the grounds that HJ acted in breach of Outcome 3.4 of the SRA Code of Conduct, which imposes an absolute bar on solicitors continuing to act in circumstances where there is a potential conflict between a solicitors’ interest and the duty to their client.
In its judgment, the SDT concluded that HJ “…had not ceased acting when it should have done and this was fairly described as an error of judgment.”
As a consequence of the decision in Howell Jones LLP a solicitor may no longer feel that they can attempt to resolve mistakes, errors or omissions, even in situations where their client agrees to the proposed rectification strategy, and consequently that solicitor is forced to stop acting. As a result, there is likely to be increased legal cost (due to the involvement of independent solicitors) and an increase in the volume of professional negligence claims.
Certainly, as a result of Howell Jones LLP, the logical and cautious advice to a solicitor in such circumstances should be that the client/s must be advised to obtain independent legal advice and the solicitor should cease to act.
SRA Standards and Regulations 2019
So, have the STaRs changed the position? The STaRs are shorter and less prescriptive than the rules in the SRA Handbook they replaced, and the SRA believes that this will offer solicitors greater flexibility in this area.
Under Paragraph 6.1 of the STaRs there remains an absolute bar on solicitors acting where there is an own-interest conflict.
“6.1 You do not act if there is an own interest conflict or a significant risk of such a conflict.”
However, paragraph 7.11 of the STaRs potentially offer a more flexible approach:
“7.11 You are honest and open with clients if things go wrong, and if a client suffers loss or harm as a result you put matters right (if possible) and explain fully and promptly what has happened and the likely impact. If requested to do so by the SRA you investigate whether anyone may have a claim against you, provide the SRA with a report on the outcome of your investigation, and notify relevant persons that they may have such a claim, accordingly.”
The two provisions are not easy to reconcile. Whilst the STaRs are clear that a solicitor should not act in the face of a conflict, there is also a positive obligation on a solicitor to attempt to put matters right where no such conflict exists. However, in the context of professional negligence, it is difficult to contemplate circumstances where such a conflict does not exist. After all, when a mistake has been made, it is arguable that a conflict will always exist as the solicitor attempts to avoid any potential negligence claim.
Where does a solicitor stand now?
Whilst the STaRs appear to show a dilution of the inflexible position set out in the decision in Howell Jones LLP, encouraging a positive obligation on solicitors to try to rectify mistakes, errors or omissions, significant care should be taken by any solicitor who wishes to do this.
It is clear that further clarification from the SRA or, indeed, by the SDT is needed to provide some guidance on what a solicitor is permitted to do to “put matters right”. The safest approach that a solicitor can take remains the restrictive and cautious approach that has been adopted following the decision in Howell Jones LLP – advise the client to obtain independent advice and cease to act.
In an effort to try and maintain any commercial relationship and/or keep costs down for all parties involved when a mistake, error or omission occurs, a solicitor may identify a potential strategy for putting things right. Although, following the position set out above, the solicitor will probably not be able to implement the strategy, this will certainly assist the client in mitigating any loss and could help to preserve any future relationship. For now at least this appears to be as far as a solicitor can go and unfortunately a claim in professional negligence appears a likely outcome.
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Paul Metham, Partner
T: 0161 244 6930 | M: 07790 341 720 | E: firstname.lastname@example.org
Richard FitzGerald, Associate Solicitor
T: 0113 223 8345 | M: 07500 781 169 | E: email@example.com