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A Different Concept of Law Richard Tur 1-85941-641-1 Cavendish Publishing Limited
The author seeks to make a major contribution to legal theory. Two ideas are central: (1) the notion of a recourse role: (2) the idea of rules of law as presumptive or defeasible, at least in some circumstances and always for good, even compelling, reasons.

 

 

 

Expertise and Ethics in the Legal Profession

BY

Richard H S Tur

Oriel College, Oxford

Exeter College, Oxford

25th March 1997

 

( more of Richard Tur's work is mirrored here: Mr Tur)

 

 

From a large stock of adverse news items about lawyers, the following samples may amuse or shock in about equal measure. First, "QC faces jail after 'liquid lunch’’[1].  A barrister who failed to give a second breath specimen after the first had indicated that he was nearly four-and-a-half times over the limit was warned that he could face imprisonment.  His defence counsel explained that his client "had lunch" on the day in question to which the magistrate apparently retorted, "He hadn't just had lunch he had an enormous amount of alcohol. It was a forbidding liquid lunch. The amount here was absolutely enormous.  The court must therefore consider a custodial sentence".  Secondly, "Lawyer's violence drove wife to run over child”[2].  A solicitor's wife drove her car over a girl aged six while escaping from her husband, who had punched her after drinking heavily at a party.  She realised what had happened when she stopped the car to try to shake her husband off the bonnet where he was hanging on by the windscreen wipers.  The court took the view that all this was totally improper conduct for a solicitor of the Supreme Court, attributed blame chiefly to the husband (who was not present in Court) and imposed only a conditional discharge on the wife who admitted willful neglect causing actual bodily harm, the prosecution having dropped a charge of inflicting grievous bodily harm.  Thirdly, in the notorious "green condom case" a solicitor was sentenced to three years imprisonment, reduced to two years on appeal, for attempted rape[3]  For some readers what outraged and bemused was not so much the crass suggestion to the police (though not precisely in these words) that an expensive ticket for a St. Andrew's Night Ball generated sexual entitlement, but the professional stupidity thus displayed.  Fourthly, under the headline, "Solicitor gets life for hammer murder of wife"

a story unfolds of “probably the most premeditated murder in decades" in the course of which a Crown Prosecution Service solicitor "prompted by sex [an infatuation for a law student] and money [£120,000 insurance]" clubbed his wife to death using at least sixteen blows with a lump hammer and then took "determined and sophisticated" steps to mislead the police into believing that she had been the victim of a frenzied attack by an intruder[4]. Finally, in this list of general human frailty, the Scott inquiry into arms-to-Iran heard evidence that a senior Government lawyer tried to prevent vital evidence from falling into the hands of defence counsel in the Matrix Churchill trial[5]

Shocking or amusing as these facts may be, the conclusions that they warrant are merely that, like other walks of life, the legal profession includes some very unpleasant specimens among its members, and that no one should entertain any foolish notions about the virtue of individual lawyers, simply because they are members of a learned and ethical profession.  In reality, lawyers are particularly well situated to become involved in dishonest dealings, criminal activities, embezzlement, and fraud.  Large sums of money are involved and the temptations are great.  Crimes of dishonesty and massive frauds have occurred on an increasingly large scale.  Thus in 1993 the Law Society paid out £25,000,000 as against £15,000,000 the year before and it was reported that a further £15,000,000 was paid out by insurance companies in 1993  One firm fell into such public odium as a result of Law Society investigation that a first division football team replaced its strip so as no longer to be explicitly associated with its former sponsor[6].  In 1993, one solicitor alone generated a compensation bill of £8,000,000 for the Law Society by a series of ''simple and unsubtle" mortgage frauds and another, when bankrupted with liabilities of £7,200,000, had generated payments of £3,600,000 with up to a further £6,000,000 in claims pending. 

Similar instances are to be found in Scotland and around the common law world.  Thus in one notorious case, a Scottish solicitor spun a web of financial deceit for seven years, thereby defrauding building societies and incurring debts amounting to £4,900,000.  He was convicted and sentenced to ten years imprisonment in 1991 and Scottish solicitors had to find additional monies to contribute to the guarantee fund managed by the Law Society of Scotland for compensating victims of dishonest lawyers.  Over the last ten years or so there has been continuing disquiet among solicitors in both England and Scotland about the apparently unremitting increase in contributions which all solicitors have to pay towards maintaining a compensation fund adequate to the demands being made and likely to be made upon it. 

In another Scottish instance, a Dumphries solicitor became involved in various fund-raising activities subsequently described as ''an offshore money scam which promised high returns for little financial investment and opened a client account with the Nat West Bank on Guernsey.  At the end of April, 1992 the solicitor instructed a credit entry of nearly $3,000,000 in anticipation of receiving payment of that amount.  He then authorised various debits amounting to £1,800,000.  The $3,000,000 never arrived.  The Scottish Solicitors' Discipline Tribunal held that the solicitor had breached accounts rules and was guilty of professional misconduct.  The Tribunal struck hum off.  The solicitor's solicitor (recently himself accused of plagiarising the work of a Scottish professor[7]) was quoted as saying, ''in common with other solicitors worldwide, my client has been the victim of a clever and unscrupulous fraud    [which] resulted in a breach of the accounts rules which he has always readily admitted   My client therefore instructed me not to oppose the petition of the Law Society (of Scotland).  In any event he has already decided not to practice law again''. 

The Dumfries case was described by the then Secretary of the Law Society of Scotland as ''  a catastrophe and a tragedy for the other six partners of the law firm which had been broken up and sold off”.  These partners had been sequestrated or had signed trust deeds to pay off as much of the firm' s debts as possible and although the firm had insurance cover of about £1,300,000 there was also a very large claim on the guarantee fund[8].  This raises three points.  First, what degree of responsibility, if any, do partners share?  On principle, partners are jointly and severally liable for all the debts of a partnership and all are collectively responsible for the management of the enterprise.  Any sympathy that one might have for the other partners falls, therefore, to be tempered by the circumstance that they have some responsibility for ensuring that no partner conducts financial business contrary to the accounts rules.  Good office practice is a professional responsibility.  At this point, there is a confluence of ethics and economics.  An efficiently organised and managed office is both virtuous and profitable, but, more to the point, sound office systems and decision-making structures can reduce the incidence of loss flowing from dishonesty or negligence and underwriters have a keen interest in reviewing the quality of management practices in law firms as an element contributing to the assessment of risk 

Secondly, what kind of insurance cover is contemplated in the Dumfries case?  Presumably loss caused by the insured's own dishonesty, would normally fall outside the scope of cover.  On the other hand, a loss occasioned not by fraud nor by dishonesty but merely by negligence would normally fall within the terms of professional indemnity insurance.  So line drawing becomes important and clearly that is something that the insurance business is familiar with although not all boundary disputes can be settled as easily as that in Dobson v General Accident Fire and Life Assurance (1990)[9] where the plaintiff had insured under the defendant's home insurance policy against, among other things, “loss or damage caused by theft".  He advertised and subsequently sold a Rolex watch and a diamond ring taking, by prior arrangement, a building society cheque which subsequently proved to have been stolen and was worthless.  The plaintiff claimed on his insurance policy for the value of the watch and the ring but the defendant company denied liability on the basis that the circumstances of loss did not amount to theft.  On the resultant legal proceedings the county court found for the plaintiff and that was upheld on appeal by the Court of Appeal holding that although there was a clearly an offence of obtaining property by deception under section 15(1 ) of the Theft Act, 1968, there was also theft because the consent Of the owner to the taking was irrelevant in establishing ''an appropriation''.  So, too, the presence of a voidable contract of sale did not negative the existence of the required definitional element of appropriation.  This decision, happy though the outcome was for the plaintiff, has not been universally applauded by criminal lawyers either on the troubled question of “appropriation” in theft or on the distinction, if any, between offences under section 1 and section 15 of the Theft Act, 1968.  One suspects that the decision was not grounds for unrestrained rejoicing in the insurance industry either in that it retrospectively widened the insurer's risk, extending it to circumstances where the insured's gullibility or lack of business sense contributes significantly to the loss occurring, although the industry has now had time to adjust premiums to fit the widened risk.  Be that simple issue as it may, lawyers, lawyers' tribunals, and perhaps even courts, may well interpret the distinction between negligence and fraud charitably to the insured lawyer, thereby increasing the insurer's risk and introducing a degree of uncertainty into the calculation of risk.  Underwriters therefore have to look behind the labels in the assessing of risk. 

Thirdly, the compensation fund would be under even greater pressure and the contribution required from individual lawyer even larger but for the policy illustrated by the decision in R v Law Society ex parte Reigate Projects Ltd (1991)[10].  The applicants were property developers who retained a solicitor to act in the acquisition of property.  They paid £250,000 to the solicitor who used £25,000 to pay a deposit for the property and then used the balance for his own purposes.  The solicitor subsequently committed suicide owing large sums of monies to clients whom he had defrauded.  The applicants were faced with substantial additional costs in rescuing their project.  The property had increased in price and development costs, too, had increased.  The applicants made a claim on the Law Society's Compensation fund for £981,991 made up of the balance of the purchase monies, plus £86,292 shortfall on their client account, £4,380 costs, and the losses incurred on the development 

Section 36 of the Solicitors Act, 1974 empowers the Law Society to make a grant out of the Compensation Fund for the purposes of relieving loss or hardship suffered "in consequence of dishonesty on the part of a solicitor".  The legal question at issue was whether on its true construction, section 36 limited compensation merely to the replacement of embezzled money or extended it to consequential loss in the normal sense of that term.  The legal argument was that the Law Society, in adopting guidelines that limited compensation to replacement, was acting contrary to the purpose of the legislation.  The Divisional Court found in favour of the Law Society's narrow interpretation.  One concern was the number of sole practitioners.  If every time one of them is dishonest compensation has to be paid on the basis not merely of replacement but also of consequential loss, the compensation fund would need to be very much larger than it is; indeed "impossibly" large given how heavy the calls on the compensation fund already are.  Even when restricted narrowly to replacement of embezzled money, the court noted that the Law Society had had to impose a one-off surcharge of £515 on each practitioner in 1988.  The point was taken that it would be quite impossible to continue to finance the fund by way of annual contributions from members (plus exceptional surcharges) if grants were to be made not on the basis of replacement only but on the basis of replacement plus consequential loss. Accordingly, the court dismissed the application and Reigate Projects were unable to recover in excess of the monies embezzled, significant though the consequential loss had been.  One question that arises is whether this outcome is satisfactory. 

The compensation fund is regarded as a fund of last resort to ensure that if anyone is unfortunate enough to lose money through the dishonesty of a solicitor that money will be refunded.  The compensation fund, however, does not underwrite the civil liability of solicitors.  It should not be confused with the indemnity provisions of section 37 of the Act which empowers the Law Society to set up an indemnity fund backed by insurance “to indemnify solicitors and their clients against loss resulting from negligence and the like on the part of solicitors and their employees’’[11]  There is a master policy in respect of that fund but no policy in respect of the compensation fund.  Apparently premiums would be very, perhaps prohibitively, high.  Under the Act, rules may be made ''concerning indemnity against loss arising from claims in respect of any description of civil liability incurred - (a) by a solicitor or former solicitor in connection with his practice or with any trust of which he is or formerly was a trustee; by an employee or former employee of a solicitor or former solicitor in connection with that solicitor's practice or with any trust of which that solicitor or the employee is or formerly was a trustee''.  The Act also provides for the making of rules about an indemnity fund and about taking out and maintaining insurance with authorised insurers 

Rules duly made under the Act include provision for contributions to be paid to the fund by solicitors and Paragraph (7) of Sch 3 to the 1987 rules states that “the Fund shall not afford any indemnity in respect of any loss arising out of any claim in respect of any dishonest or fraudulent act or omission but nothing in this exclusion shall prevent any particular member of the Practice or any successor practice who is not concerned in such dishonesty or fraud being indemnified in accordance with these rules in respect of any loss arising out of any claim in respect of any dishonest or fraudulent act or omission by any other such member   ”  From this it would appear that on facts such as in the Dumfries case partners of a rogue solicitor who suffer direct or consequential loss caused by the rogue's activities or omissions could recover under the indemnity rules, notwithstanding the rogue's dishonesty or fraud whereas a client on facts such as in the Reigate case cannot.  Of course opinions differ but it might appear that the partners of a rogue solicitor have more responsibility for the rogue's activities and omissions than does the client and that the client's claim for consequential loss has no less merit than the similar claim of a partner.  One can therefore understand the "reluctance" with which the Divisional Court dismissed the application in the Reigate case and the judicial remark that protecting or reimbursing such people in the future "is something the society may wish to reconsider".  Any such reconsideration provides an opportunity for and a challenge to the insurance industry. 

In the standard case of professional negligence, the insured solicitor and the indemnifying insurers will usually have harmonious interests.  The following case is illustrative.  In ordinary divorce cases the fact that the wife might lose her widow's pension was not usually treated as significant.  The event was a long way off and the sums comparatively small.  Occasionally however a solicitor might be consulted by a wife late into middle age who had been married for many years to a man in pensionable employment and who was being divorced against her will on grounds of separation.  The practical question is how a competent solicitor should proceed.  One course is to make an application before decree absolute under section 10 of the Matrimonial Causes Act, 1973 which provides for “special protection for respondent in separation cases".  Such applications did not normally lead to a hearing but did have the effect of delaying proceedings while the circumstances, such as the rules of the husband's pension fund and a wife's rights under it, were investigated.  Some lawyers, however, dispense with filing a section 10 application on various grounds such as unnecessary delay, unnecessary expense, or simply as ''unsporting'' in the context of professional relationships.  Griffith v Dawson & Co (1993)[12] demonstrates the risks involved in neglecting to file such an application.  Here, Mr Justice Ewbank sitting as an additional judge in the Queen’s Bench Division held that such failure was negligent and awarded Sigrid Griffiths £19,512 plus costs.  No evidence was forthcoming as to accepted professional practice but, as Professor Cretney remarks in his shrewd ''comment'', the decision in this case may have come as a surprise to ''many''.

However, hostilities sometimes break out between insurer and insured. Brown v Guardian Royal Assurance[13] is illustrative.  Brown was insured with GRA under a professional indemnity policy with an exclusion for dishonesty or fraud and a clause requiring solicitor's reports to be submitted directly to GRA.  A claim arose against Brown which he referred to GRA who consented to the appointment of solicitors to act for Brown.  After some negotiations in the claim against Brown, GRA repudiated the insurance and the solicitors ceased to act for Brown.  In arbitration proceedings under the policy GRA pleaded Brown's dishonesty and sought discovery of the solicitor's file for the period they acted for Brown, including Brown's communication with the solicitors and instructions for counsel.  The trial judge ruled that these documents were privileged (it was in any event accepted that these documents were privileged against everyone except GRA) but on appeal by GRA the Court of Appeal held that clause 8 was controlling and that GRA were entitled to any communications which the solicitors received from Brown or from third parties.  Suppose insurers concluded on the basis of such documentation that the conduct of the insured solicitors appeared efficiently unprofessional to warrant reference to the Law Society, would they be free so to refer?  Well, the Law Society's Guide to the Professional Conduct of Solicitors includes the principle (16.04) that “a solicitor is under a duty to report to the Solicitors Complaint Bureau, where necessary after having obtained his client's consent, any conduct on the part of another solicitor which he believes falls short of the proper standard of conduct of the profession”  Dishonesty is always contrary to the proper standards of the profession.  If this is something that a solicitor professionally ought to do, it is certainly something that a third party morally may do.  One suspects that standards in the legal profession would be improved if insurance companies routinely reported to the Law Society that an insurance contract had been repudiated because of the solicitor's dishonesty, and it would be better if economic imperatives drove ethical standards up, rather than down-n.. 

One general question that arises is whether there are any negligence reducing mechanisms that insurers could deploy in order to minimise liability for professional negligence.  Since professional negligence sometimes coincides with professional misconduct[14], one thinks of the troubled history of complaints handling by the Law Society as a fruitful source.  The numbers of complaints have steadily mounted and criticisms have increased.  The discredited Solicitors Complaints Bureau has been succeeded by the rather ominously Orwellian sounding Office for the Supervision of Solicitors and its first annual report is expected at the end of April, 1997.  The Annual Reports of the Legal Services Ombudsman however provide much useful. information: ''20,000 complaints about lawyers   each year ... 95% ... about solicitors''[15].  About 10% of these complaints are referred to the Legal Services Ombudsman's Office and on the Law Society' s own research findings over two-thirds of complainants to the Bureau are left “very dissatisfied”.  As against this finding, the Legal Services Ombudsman recorded no criticisms or recommendation in 721 of the 972 investigations completed in 1995 concerning complaints against solicitors; and recommended the solicitor to pay compensation in only 68 cases.  In most cases the sums involved are likely to be modest though in one case the Legal Services Ombudsman recommended payment of £57, 809[16].  It is not at all clear whether such a payment could ever fall to be met from a solicitors' professional indemnity insurance but the Legal Services Ombudsman’s role and reports are clearly of some interest to underwriters. 

It would also be interesting to know what type of complaints concerning solicitors are most prevalent and how serious they are.  For example, it would be very interesting to know whether the 19,000 complaints annually are spread fairly evenly over the profession or if they cluster around a relatively small number of firms.  Of course if one is operating a global, generalised social fund, the spread is less important than the number, the type, and the seriousness but if there is any element of local, individualised insurance cover, then an insured's track record of complaints is material in assessing risk.  Ethically lawyers have a duty of competence and should not take on work that they are not capable of completing satisfactorily within a reasonable time.  Complaints may be evidence, albeit far from conclusive evidence, that all is not well in the running of a firm.  Contracts of insurance of every kind are subject to the principle of uttermost good faith which calls for full disclosure of  factors that bear upon assessing risk.  So underwriters are entitled to ask about individual firm's complaints records and ethics audits 

Another area of interest is the wasted costs jurisdiction of the courts which has been given a new statutory impetus by the Court and Legal Services Act, 1990.  Here the leading case, actually six separate appeals taken together, occupying some 65 pages in the law reports, is Ridehalgh v Horfield (1994)[17].  Section 4 of the 1990 Act substituted a new section 51 in the Supreme Court Act, 1981 which empowers the court to “disallow (or as the case may be) order the legal or other representative concerned to meet the whole of any wasted costs or such part of them as may be determined in accordance with rules of court”  ''Wasted costs'' are defined as "any costs incurred by a party - (a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such representative, or (b) which, in the light of any act or omission occurring after they were incurred, the court considers it unreasonable to expect that party to pay''. Although the Court of Appeal allowed all six appeals and refused to make any wasted costs orders, it affirmed the meaning of the section that “'improper” applies to conduct which amounted to any significant breach of a substantial duty imposed by a relevant code of professional conduct and included conduct so regarded by the consensus of professional opinion; ''unreasonable" describes conduct which does not permit of a reasonable explanation; and ''negligent’’ is to be understood as a failure to act with the competence reasonably to be expected of ordinary members of the profession.  Furthermore, orders should only be made under section 51(6) where and to the extent that the conduct so characterised has directly caused costs to be wasted.

This reasoning has been applied in a number of recent cases, including Tolstoy Mioslovsky v. Aldrington (1995)[18] where the fact that lawyers supplied service pro bono did not exempt them from being required to meet 60% of the defendant's costs because their conduct was properly to be characterised as ''unreasonable'' in the sense defined in Ridehalgh.  Another recent instance is in re A Company (1996)[19] where the court held that a solicitor who swore in an affidavit in support of a winding up petition that a company was insolvent acted improperly if he did not have that belief, and he acted unreasonably if there were no grounds upon which a competent solicitor could reach that view on the material available to him.  Thus the solicitor was required to pay the whole of the wasted costs incurred by the company since he knew or must be taken to have known that if the petition was fought out on its merits, it would be bound to fail.  In Mastin v Blanchard and Motor Insurers ' Bureau in Mold County Court on October 17, 1994 and also in Mills v Toner and Motor Insurers Bureau in Liverpool County Court in a judgment implausibly dated January 1, 1995, wasted costs orders were made against solicitors for unreasonably involving the MIB; in the first case because the claim did not appear the MIB property damage excess of £175 and though put on notice of this the solicitors would not concede the point; and in the second because the Eagle Star Company had confirmed that they were the relevant insurers.  One issue that such cases gives rise to is whether a firm of solicitors is covered under its professional indemnity insurance for the amounts awarded against it in wasted costs.  Clearly such liability {for another's costs incurred by one's improper, unreasonable or negligent conduct) is not excluded by ''fraud or dishonesty'' clauses in indemnity insurance contracts and clearly, too, where a wasted costs order is made expressly on the basis of ''negligence'' it is seductively easy to think of it as falling under normal negligence liability.  That being so underwriters may need to address the issue although the sums insured are likely to be small.  However the following example[20] counsels caution.  Mrs J owned a noisy cockerel.  Her next door neighbour applied for an injunction.  The judge found for the rooster and ordered Mrs J to pay costs of some £20,000.  Her own costs came to £9,000.  These are staggering costs for such an action and had a wasted costs order been appropriate and made, a solicitor might well have been seeking to set off some or all of the liability against professional indemnity insurance. 

To summarise, the legal professions contains some morally questionable members and lawyers are inevitably subjected to great temptations.  The compensation fund operates so as to exclude liability to clients or third parties for consequential loss suffered in cases of solicitor dishonesty or fraud but innocent partners may better placed under the indemnity fund in that they are indemnified fully, including for consequential loss, and may even recover not merely monies embezzled but also for consequential loss in legal proceedings against the rogue partner or the insurer standing in the rogue's shoes.  Solicitors and their insurers usually have harmonious interests but this is not always so, and insurers should consider to what extend solicitor dishonesty is a matter for report to the Law Society and, conversely, should also consider complaint statistics and like data as a source of useful information in the assessing of risk.  Finally the development of wasted costs subjects lawyers to additional civil liability of which insurers ought to be aware


[1] The Times, December 21 1996

[2] The Times, December 21 1996

[3] R V Diggle (Angus) (1995) 16 Cr. App. R. (S) 163

[4] The Daily Telegraph, March 17, 1993

[5] The Times, February 18, 1994

[6] The Sunday Times, February 2, 1994

[7] Electronic Herald, March 18, 1997 (http://www.cims.co.uk/herald/NEWS/news3.html)

[8] The Scotsman, January 6, 1993

[9] (1990) 1 QB 274

[10] (1992) 3 All ER 232

[11] R v Law Society ex p Reigate Projects Ltd (1992) 3 All ER 232, 236 per Watkins LJ

[12] (1993) Fam Law 476, The Times April 5, 1993

[13] (1994) 2 Lloyd’s Rep 325

[14] McCandless v General Medical Council, The Times December 12, 1995

[15] Fifth Annual Report of the Legal Services Ombudsman 1995 (June 11, 1996), p6.

[16] Fifth Annual Report, p30.

[17] (1994) Ch 205

[18] The Times, December 27, 1995

[19] (1996) 1 WLR 491

[20] Fifth Annual Report of the Legal Services Ombudsman 1995, Case 1, p26.

 

 

 

 

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