It is easier and less painful to learn from other firms' mistakes

Were English and Welsh law firms on the Organisation for Economic Co-operation Development's radar instead of schoolchildren, the OECD might have sought to measure the extent to which firms are ready to learn lessons from case law.

Three cases over recent weeks in the County Court, High Court and Court of Appeal have thrown into stark relief the duties owed by solicitors. A common thread is the advice that they gave to a range of clients. What aspect could be more central to the role of a solicitor?

Learning from your own mistakes is important but why wait until something goes wrong at your firm, when it is both easier and less painful to learn from others? And in this respect near-misses can be as valuable a learning tool as mistakes. After all, this week's narrowly averted disaster, or near-miss, may be next week's catastrophe.

Breach of duty

In all three of the following cases, breach of duty was established (albeit only in relation to one of two retainers in Mathieson) but two of the three firms avoided liability on a technicality (classic examples of the near-miss).

• In Procter v Raleys 2013 90L03967 in Leeds County Court, the claimant, a Yorkshire miner, successfully claimed that his solicitors had under-settled his personal injury claim. It was held that the firm should have done more to ensure that he understood the advice he had received.

• In Mathieson v Clintons 2013 EWHC 3056, the firm was held in breach of duty for failing to explain the operation of a key clause in a shareholder agreement to its far from unsophisticated client. The advice should ideally have been in writing, or confirmed in writing, although this is not mandatory. Limitation came to the firm's rescue.

• In Newcastle International Airport Limited (NIAL) v Eversheds 2013 EWCA Civ 1514, the airport instructed the firm to draft new service agreements for its two executives but all instructions came from one of the executives. Despite a clear breach of duty, the Court of Appeal awarded only nominal damages due it said to a failure of causation.

The quality of advice, or lack of it, came in for judicial scrutiny in each:

In Procter, the firm had streamlined its processes to such an extent that the only advice was contained in three long standardised letters, with no evidence that any advice had been given in meetings or by telephone. The client had left sections in the original questionnaire and in letters blank-even solicitors are not always the best at completing pro forma documents; professional indemnity proposal forms, accreditation scheme applications and SRA regulatory returns spring to mind.

In Mathieson, the firm's managing partner accepted that he should have understood the shareholders' agreement and ensured that his client understood it too. The attendance notes of meetings with, and advice given to, the client were sparse and at times non-existent.

In NIAL, the Court of Appeal was scathing of what it accepted may have become widespread practice in relation to the negotiation of executives' service agreements. At paragraph 70, Rimer LJ said:

"… the only advice given in relation to the drafting of the service agreement is that given to the executive who has provided the instructions for it.... no advice, whether oral or written, is separately provided by the solicitors to [the client] as to the nature, terms and effect of the draft agreement ... Oral advice given to the executive in the course of taking the instructions from him cannot, in my view, sensibly be regarded as advice given also to the [client]… Eversheds' evidence … was also that, before this case, no problem had ever arisen. As to that, my instinct is that they may have been fortunate."

Applauding innovation

Rather than sticking to what you did last time, innovation, creativity and the streamlining of processes are to be applauded. The world is changing. Clients of all types are expecting more for less, often but not always with some justification. While this undoubtedly creates pressures, firms must still ensure that the basics are covered.

Boil it all down and, whatever the service for whatever type of client, the advice has to be appropriate, well communicated and well documented. In two of the judgments, it was noted that the facts should have rung alarm bells, but didn't.

In these cases, the service provided by the firms fell short when it really mattered. Hopefully your firm has nothing to learn when it comes to giving advice but if it does, do it now before your firm has its name 'up in lights' for the wrong reason.

Tim Prior is director of niche training and consultancy company PNCR legal

www.pncr.co.uk