Solicitors can learn several lessons from last year on how to avoid being accused of professional negligence.

One of 2007’s hot topics was money laundering. The case of Attorney General Republic of Zambia v Meer Care & Desai provided an insight into this dark area of criminality and negligence. It also made fascinating reading for those interested in the corruption of officialdom.

The claim arose from an alleged conspiracy to defraud the Zambian government of around $46 million. Meer Care & Desai, a UK-based law firm, was one of the defendants. The firm was accused of participating in the conspiracy by providing dishonest assistance to the Zambian-based defendants, allegedly by receiving and paying illegal funds in and out of its client accounts.

The court accepted that a breach of the Solicitors Accounts Rules and money laundering regulations did not in itself determine dishonesty. However, the court indicated that failure to comply with these rules and regulations would add to the evidence in the case against a solicitor. The court would have little sympathy for solicitors who failed to adhere to money laundering regulations if allegations of dishonesty were subsequently made against them.

The lesson to be learned here is that solicitors should always carry out the necessary money laundering checks, even when they have known a client for a long time — in this case, 20 years.

Aside from money laundering, solicitors’ retainers are a very important part of a client/solicitor relationship. Clients put their trust in their solicitors and rely on solicitors to tell them all the information that they ought to be told. It follows that if solicitors want to limit their retainer in any way then it would seem elementary that they should let their clients know about it.

Last year’s case of Phelps v Stewarts confirmed this point. The case concerned a specialist trusts lawyer who was retained to advise on the setting up of a discretionary trust. The lawyer, Rosemary Phelps, had failed to give relevant advice on the tax consequences of the discretionary trust, which resulted in her client losing £181,000. Phelps argued, in her claim for contribution from the firm that had instructed her, that she had been asked to advise on a specific aspect of discretionary trusts and not discretionary trusts in general.

The case highlighted the need to clarify the scope of a solicitor’s retainer as soon as instructions are received; any limitations on a retainer should be in writing, whether or not given orally as well. As one may expect, this is even more necessary where the client is an unsophisticated business client and has not had experience in the kind of transaction being entered into.

Solicitors’ bills are as certain in life as death and taxes. Clients do not like to be surprised by bills and it is therefore very important that they are kept up to date with the costs being accumulated in a case.

The decision in Mastercigars Direct Ltd v Withers LLP affirmed this point. It did, however, give solicitors a degree of leeway in estimating how much proceedings were likely to cost. The case concerned a company that imported Cuban cigars and a dispute over a costs order given by the court. It was found that costs estimates given by a solicitor were not a fixed quotation and did not operate as an upper limit. In fact, the estimate of costs should be seen more as a useful tool with which to measure the reasonableness of the final bill, as opposed to being a definitive sum.

The key lesson from all these cases is that solicitors should try to avoid disputes altogether. This is best achieved by communication and regular updates. Mastercigars was a close shave for Withers, and for solicitors in general, but proved that professionals are entitled to reasonable remuneration for their work done.

Nick Bird is a partner and Henry Kennedy is a trainee solicitor in the Lawyers’ Liability Group at Reynolds Porter Chamberlain LLP

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