Risk and negligence: Lessons for will writing and probate
19/08/2009
Recent observations by Martyn Frost reveal how the practice of cutting corners in will writing and probate are creating future minefields
“The business line was more focused on getting a transaction approved than on identifying the risks in what it was proposing. The risk factors were a small part of the presentation and always “mitigated”. This made it hard to discourage transactions.” If a risk manager said no, he was immediately on a collision course with the business line. The risk thinking therefore leaned towards giving the benefit of the doubt to the risk-takers. Collective common sense suffered as a result.”[1]
Failures of risk management in the financial sector have received a lot attention in the past year with much criticism of the banking sector for widespread failure to price risk properly in its financial products.
Too much time was devoted to pricing the work processing element (and looking for a price that the market would stand) and less and less attention was given to the element of how much this will cost if the wheels come off the shiny new product.
Parallels with the legal profession
But does the legal profession behave much differently towards risk? I have some doubts. The pricing of will preparation, for example, has been a perennial problem. A few guineas might have reflected the correct pricing of risk pre-White v Jones, but today’s equivalent fee (frequently a fixed fee) very often does not. Wills have also been allowed to become a strange area where hourly rates are jettisoned in favour of charging on the basis of the client’s perception of risk - which is nil and the client’s perception of the amount of work to be undertaken - which is minimal. This frequently results in corners being cut to save ill-remunerated time and three or four hours work being done for a charge of an hour’s time. It is worth pausing a moment to consider the implications of that view – the work is so ill-remunerated (and by implication lacking any element of risk pricing) that corners are cut thereby making the work more risk. It is course worth bearing in mind that many of the decided will negligence cases involve problems arising out of elementary mistakes in the preparation process.
I have recently met younger members of the legal profession in different areas of the country who admit to being demoralised by their firms’ unwillingness to charge realistically for their will drafting work. Considering time alone, one young solicitor has recently told me that she had calculated that her plumber charged her more for some recent work at her home.
Cutting corners and quality
Pricing is not the only issue. Law firms are required to have risk management policies - see Solicitors’ Code of Conduct 2007 Rule 5(1)(l). Such policies can send a positive message to staff as long as risk management is treated as a positive feature of better practice management.
However, in a number of areas firms are merely paying lip service to the idea of risk management. Recent examples I have encountered include
· a firm creating a satellite office to deliver private client work - with no partner experienced in this work to supervise the solicitor doing the work who was training in wills and probate;
· acceptance of new trust work of considerable value being left to the discretion of a legal executive and in consequence no partner assessment and acceptance of the business risk;
· a senior partner of a firm drafting wills for clients where he had no relevant training and did not usually practice within the area;
· inexperienced staff beginning work on drafting wills without anyone explaining the implications of White v Jones or Carr-Glynn v Frearson to them;
· a cross-border estate (with at least 5 jurisdictions involved for the majority of the assets) being accepted by a firm with no background at all in this area work and then the file being allocated to a very newly qualified solicitor.
Probate litigation
In the past 12 months I have also noticed that talks that I have given on negligence and will preparation for private client lawyers have started to attract litigation solicitors. They have explained that they were attending as they saw will negligence as a growth area of their work and wanted to attend in order to understand what it was that will draftsmen ought to be doing. To my mind this was a stark warning of the increased need for will draftsmen to control their risks as carefully as is reasonable.
Applying risk management policy
What should be better known is the whole idea of management and efficient systems being used not merely to cut costs, but to control risks, particularly in obtaining standardisation of best practices across the work of a practice. This latter point is a key factor in building any risk management policy. The policy is quite pointless without a consistent application of the policy by all those who participate in the area of work. This inevitably means putting some guidance on paper to:
· inform those it applies to;
· be available as a point of reference for the future; and
· be available to train and inform those who join a firm later.
Whilst this can appear bureaucratic, it can prove of great value. For example, having available a firm’s policy for dealing with death-bed wills can be of great assistance when one is encountered for the first time.
Understanding the sphere of control
Risk management is not merely about the possibility of litigation, but about controlling the financial risks also arising from for example:
· loss of chargeable time through complaints
· regulatory breaches
· inefficiencies of work practices (including overloads of work)
· damage to professional reputations
· disasters and disaster recovery
· physical security and IT security.
“Climbers talk of two kinds of danger – subjective and objective. The subjective is the danger that is in the hands of the climber to influence – having the right equipment, maintaining the correct level of fitness or skill, gleaning as much information about a target mountain as possible. Climbers aim to reduce the subjective danger as much as they possibly can. Objective danger is different. This is danger from random storms closing in, or an unpredictable break in a piece of equipment. It is a danger over which climbers have no influence. They accept a certain amount of objective danger when they set about a potentially life threatening route. It is regarded fatalistically. While something can be done about subjective danger, there is nothing that can be done about the second type – it is an occupational hazard”.[2]
Whilst this passage is about the risks of climbing, it takes very little effort or imagination to read this as applying to any legal work.
· The risk that has to be controlled is the subjective, and this is the aim of a risk-management policy applying to a firm’s business.
· The objective risk, arising from outside factors (such as economic or the limitless variety of human conduct), is one that is mitigated to a degree by prudent practice, accepted and lived with, or it is not accepted and the type of work is not then undertaken.
The implication of all of this is that the risk of negligence claims should matter to any well managed firm and the best point to start is by understanding negligence and from that build policies to manage the risk of it.
Martyn Frost FCIB TEP
A Consultant Lane-Smith & Shindler LLP
Solicitors and Trust and Estate Practitioners
Manchester and Zurich
[1] From ‘The confessions of a risk manager’ on the credit crunch, The Economist 9th August 2008
[2] Blood River: A Journey to Africa’s Broken Heart, Tim Butcher, Vintage Books, London 2008.