CILEx REGULATION
John Kunzler discusses the unbundling of legal services from the viewpoint of a company providing professional indemnity insurance and assessing risk. See also page 35 of this issue.
The unbundling of legal services generally refers to lawyers accepting a restricted role in a legal process, and performing only part of the series of actions that constitute that process. While there has been some interest in this practice in the legal world – as well as input on this from the Legal Service Board (LSB) and the Law Society – there are concerns, some of which may have been partially addressed by the recent professional negligence case of Minkin v Lesley Landsberg (practising as Barnet Family Law) [2015] EWCA Civ 1152, which we will look at in this article.
Unbundling has, in fact, been going on for many years, often in areas such as probate, where executors ask lawyers to deal with limited elements of a process, such as completing a tax return or taking out the grant of probate.
As many readers may know, the LSB encourages lawyers to innovate in their service delivery, particularly as legal aid continues to be cut back. Unbundling appears to offer some solutions to clients of law firms who are able to deal with part of a legal process; however, there are some key factors to consider in addition to the case mentioned above.
Legal processes are generally a series of gateways and critical paths through which the lawyer helps a client navigate. The lawyer, through training and repeated experience, has built up expertise in successfully completing a given process, and is aware of the various pitfalls that may arise.
Ideally, the unbundled steps should be routine and capable of being repeated correctly if defective. Some legal processes are ‘all or nothing’ in that, if any single step is incorrect, the overall process fails, and often this is only apparent when tested by a court. For example, consider an action for possession under a lease. Relatively minor oversights in documentation (such as rent demands) at the outset can prove to be disastrous. Such errors are sometimes only spotted by the court at the final hearing, after significant cost and effort has been expended. Despite this, it may be reasonably safe for a client to use a self-help pack provided by a lawyer (for a fee) to complete some of the steps in the process, and only involve a lawyer for court hearings.
Whether the client would be required to pay for those steps in the process that they completed to be checked by the lawyer is another issue. In the Minkin case, the issue of what a lawyer may be required to check or advise on was considered ‘incidental to the retainer’ . At the outset of a process, it should be made clear whether or not work completed by a client will be checked, and, if not, the client should be made aware of the fact that minor errors can undermine the entire process with cost consequences.
Although not without risk, unbundling may be suitable for those clients who properly understand the risks they are running and have relevant experience of business or of operating within procedural frameworks. The LSB is supportive of unbundling; however, commenting on a recent report by Ipsos MORI, a leading market research company in the UK and Ireland, it commented: ‘Concerns were raised around assessing consumer capability, giving advice based on limited information and ensuring there is clarity on agreements about the scope of work.’1 The Law Society also published a note on the issue, which refers to not acting where there are concerns about the client’s ‘intellectual or emotional capacity’ .2
Unless formally trained in law or familiar with legal processes, few clients seem to be in a position to decide what elements of a service should be unbundled. By contrast, a lawyer is in a relatively strong position to assess what an individual client can safely carry out themselves. However, advising on what should be unbundled places the lawyer in a diÿcult position: acting in a client’s best interest, it may sometimes be necessary to tell them that their case is not suitable for unbundling. This then involves a judgment call about a given client, and although the duty of care may be restricted by the retainer, there is still a significant risk that if something were to ‘fall through the cracks’ , a client could later claim that the lawyer should have realised that the client was not adequately competent to undertake those steps.
Overall, assessing a client’s ability to undertake unbundled steps, and deciding as to whether or not those steps will be checked, must be carefully documented and agreed to beforehand by the client.
The Law Society recommends that a lawyer inform their firm’s professional indemnity insurer about any unbundling services that are undertaken. Generally, insurers have not been known to refuse coverage for law firms that undertake unbundled services; however, on at least one occasion, they have requested evidence of how retainers are restricted.
Insurers’ concerns arise from their belief that arguing for a restricted retainer is not favoured by the court. Moreover, historically, this approach has not been successful when applied to individual consumer clients. However, in Minkin, the court accepted a restricted retainer and duty. In that case, the claimant was relatively sophisticated, but may have experienced a different outcome if the reverse had been true.
The court, partly for pragmatic public policy reasons, stated that a wider retainer should not be implied because, without the narrow duty, such services will not be offered. Given the current position, with the courts overburdened with litigants in person, a reduction in such services would only worsen matters, per Lady Justice King:
There would be very serious consequences for both the courts and litigants in person generally, if solicitors were put in a position that they felt unable to accept instructions to act on a limited retainer basis for fear that what they anticipated to be a modest and relatively inexpensive drafting exercise of a document (albeit complex to a lay person) may lead to them having imposed upon them a far broader duty of care requiring them to consider, and take it upon themselves to advise on aspects of the case far beyond that to which they believe themselves to have been instructed (para 76).
Another notable feature of the case was that the advice not being given was not specifically identified (which is best practice); however, this was not suÿcient to result in liability again per Lady Justice King:
... the defendant, as identiÿed by Jackson LJ, did not observe best practice having failed to set out with precision the limits of the retainer in the client care letter. Notwithstanding that error, I too am entirely satisÿed that the defendant was acting under a limited retainer and carried out the work which the claimant had instructed her to undertake (para 77).
As mentioned earlier, normally if a lawyer has not been involved in a given process from the beginning, it is generally good practice to check that there are no mistakes in the prior steps taken, as these can cause the overall process to fail at the end. This is not as important in cases where a lawyer has conducted the process themselves. However, in those instances where a client has undertaken a step or steps themselves, which then requires a high level of scrutiny and associated cost, this will erode some of the cost benefits of unbundling services.
For example, failure to claim costs or interests in litigation would be a significant detriment in many cases and a mistake easily made by a client, but would a lawyer on a limited retainer be expected to apply to amend pleadings or proceed with what they were given? Would they be negligent for not advising or taking this step? Is this ‘incidental’ to the retainer? Again, in Minkin, it was argued that several steps were incidental to the retainer (which was to draft the consent order only): to warn that there was no advice about merits; to warn that the agreement might be unfair and that there was possible duress; and to warn that no investigation of the husband’s assets had taken place.
When considering causation in the case, the court found that these steps were obvious to the client and there was no duty to take them. Interestingly, those warnings had been given to the client by another firm that previously acted in their interest, and were subsequently ignored.
In conclusion, when considering offering unbundled services, Lady Justice King in Minkin states that if a lawyer: ‘acts upon a limited retainer, the supporting client care letters, attendance notes and formal written retainers must be drafted with considerable care in order to reflect the client’s specific instructions’ (para 77).
Professional negligence claims often show failure to perform those very steps; therefore, it is essential that unbundled retainers, and their progress, are very carefully monitored, so that the recommended level of care is achieved.