UK: Fighting For Principles? The New Solicitors´ Code Of Conduct

Last Updated: 3 August 2007
Article by Andrew Horrocks and Andrew Tuson

The new Solicitors' Code of Conduct has retained much of the old Guide to the Professional Conduct of Solicitors but has made some changes, some of which may result in uncertainty and even give claimants additional material to attempt to infer liability against solicitors.

The Law Society has long had in mind a review of the solicitors' profession's conduct rules. It set up a working party to re-examine the principles set out in the Guide to the Professional Conduct of Solicitors ("GPCS") even before it was published in 1999. The process is now finally complete, and the GPCS was replaced on 1 July 2007 by the new Solicitors' Code of Conduct ("the Code"). Much of the GPCS is retained but there are some significant changes.

The Code is enforced by the Solicitors Regulation Authority ("SRA"), which was set up in January 2007. The SRA replaces the Law Society as the body responsible for professional conduct. Following the Clementi review, the Law Society decided that the regulation of the profession should be carried out by an independent body, thereby separating its regulatory function from its role as the solicitors' representative body. Its stated aim is to increase public confidence in the profession.

In drafting the new Code, the SRA has tried to establish a clear set of professional principles, the aim being to move to principle-based regulation, avoiding a Code which attempts to deal with every situation. The SRA say they have tried to simplify the structure of the rules (there are 25 mandatory rules followed by non-mandatory guidance). They have also tried to express a clear purpose for each rule, use clear and simple language, target risk, deregulate where possible, raise standards of service to clients and identify and maintain essential client protections.

Core Duties

Rule 1 contains new core duties and tells solicitors that they must:

  • uphold the rule of law and the proper administration of justice. (This first core duty is intended to be wider than the duty to the court and include obligations to third parties);
  • act with integrity;
  • not allow their independence to be compromised;
  • act in the best interests of each client. (This is a fundamental duty but does not prevent solicitors acting against a client provided there is no conflict as defined in Rule 3 and confidential information is not put at risk by acting);
  • provide a good standard of service to their clients. (See Rules 2 (Client relations) and 5 (Business Management in England and Wales)); and
  • not behave in a way that is likely to diminish the trust the public places in them or the profession. (This rule is intended to cover behaviour within and outside a solicitor's professional life.)

The core duties underpin the Code. The SRA state that they "define the characteristics of a solicitor and act as a yardstick against which you can measure your conduct when the more detailed rules are silent". There is a school of thought at the SRA that no other rules are necessary apart from Rule 1 as these stand alone rules should be enough to regulate the profession.

It is likely that the core duties will result in regulation based more on the core duties than specific breaches of the more detailed rules, as each of the core duties can be enforced in its own right. This appears to be similar to the FSA's principle-based approach to regulation but the boundaries of some of the duties will inevitably be uncertain, at least initially. What, for example, is a "good" standard of service and how does this differ, if at all, from the common law duty to carry out work with reasonable skill and care?

Client Relations

Rule 2 concerns client relations and requires solicitors to provide their clients with details of costs at the outset of a matter and as it progresses, when appropriate. Any material breach of this will result in a client being able to complain to the Legal Complaints Service with the result that a solicitor may not be able to recover fees and might have to pay compensation to the client. Negligence claims brought by clients because of costs issues were not uncommon even before the Code and may become more frequent as a result of this new requirement. However, if solicitors can demonstrate that it was inappropriate in the circumstances to meet some or all of these requirements, they will not breach this rule, e.g. if there is a general level of agreement from an informed client as to terms and conditions. In this event, specific agreements on each transaction may not be necessary.

The principles relating to limiting liability are unchanged but, under Rule 2.07, the solicitor must specifically draw the limit to the attention of the client: it is not sufficient (professionally - different considerations may affect enforceability as a matter of contract) for the limitation to be included in a firm's standard terms and conditions without being expressly agreed.

Conflict Of Interest And Confidentiality

Rule 3 on conflicts of interest and Rule 4 on confidentiality are almost identical to the GPCS rules as recently amended. There is one minor change to the confidentiality rules: where a firm sets up a Chinese wall, a solicitor has to comply with the additional requirement that "wherever possible you should try to ensure that the clients are advised of the potential risks arising from your firm acting before seeking their consent."

Management And Supervision

One of the major changes to the conduct rules is the creation of Rule 5, which differs notably from the GPCS equivalent. Rule 5 has two new aspects:

1 The Supervision And Management Framework Of The Firm

A firm must have suitable "arrangements for the proper supervision and management of the practice". "Arrangements" will include a firm's procedures for identifying conflicts, controlling undertakings and training of staff, complying with money laundering regulations and also the provisions for the financial control of budgets, business interruption and risk management.

The Code does not set out specific guidance on what kinds of procedures will be required. These are up to the firm to decide, but when investigating a firm's management, the SRA will take into account "the size and complexity of the firm; the number, experience and qualifications of staff; and the nature of the work undertaken".

2 The Minimum Standards Applying To The Supervision Of Clients' Matters

Firms are required to have suitable supervision systems in place for the supervision of all aspects of work undertaken for clients to check the quality of the work on a reasonably regular basis. There is a new specific requirement that staff expertise should be matched with relevant work.

It is not clear how rigorously the SRA will investigate the management of firms, but if a firm is investigated, the onus will be on the firm to produce evidence of its management structures and show that the procedures are adhered to in practice. There are no model procedures in the Code, unlike the GPCS, consistent with the SRA's new principle-based approach. Although the SRA has confirmed that firms with recognised quality standards such as "Lexcel" accreditation could be expected to satisfy the criteria of Rule 5, there is no requirement for firms to do this.

Equality And Diversity

Rule 6 contains new rules on equality and diversity, which require firms to have their own equality and diversity policies, so that it is now a matter of professional misconduct to discriminate in the firm's "professional dealings" with employees, partners, members, directors, barristers, other lawyers, clients or third parties.

The words "Professional dealings" in rule 6 includes all dealings in running a professional practice and so covers, for example, dealings with a firm's suppliers.

Rule 6 has a broader definition of discrimination than under the GPCS and covers discrimination on the basis of age, civil partnership status, gender reassignment, pregnancy, maternity, paternity, race, religion and disability. Firms also need to be aware of discrimination-related employment issues, such as the requirements for flexible working.

Litigation And Advocacy

Rule 11 repeals the Code for Advocacy and sets out basic duties for all advocates and litigators such as not misleading the court, and complying with court orders.

In relation to not misleading the court, rule 11.01(2) states:

'You must draw to the court's attention...to

(b) the contents of any document that has been filed in the proceedings where failures [to do so] might result in the court being misled...'

Guidance to the rule states that solicitors do not have to assist the opposition. However, this new rule is (possibly unintentionally) wider than the previous version, covering all documents "filed" other than just affidavits and statements. The SRA has stated that it will be considering this issue at its next Rules and Ethics Committee meeting.

Sanctions And Claims

Clients who wish to complain about the service they have received from their solicitor can complain under the Code to the SRA, but under the Legal Services Bill, which is expected to come into effect two to three years after Royal Assent (which at the time of writing is thought will be achieved by October 2007), could also complain to the Office of Legal Complaints, which can result in a compensation award of up to £20,000. With the possibility that civil proceedings could also be commenced, there is potential for solicitors to face attack on three fronts at the same time. Our article in the last edition of this newsletter considered the extent of the overlap.

Contrary to what some claimants think, breach of the conduct rules does not of course, in itself, give rise to civil liability nor prove negligence. The new Code, while generally to be welcomed, may nevertheless (particularly the general core duties) give claimants additional material from which to attempt to infer civil liability, and solicitor defendants will need to stay on their guard to resist this.

The Code can be accessed at www.sra.org.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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