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Risk Management & Practice Of The Law - Conveyancing

This article is a continuation of the previous article, Risk Management & The Practice Of The Law - Litigation.

Some Possible Risks in the Practice of the Law as a Conveyancing Lawyer

A. Duty of Solicitor to Make Searches

It is incumbent upon the solicitor instructed to attend to agreements in the nature of a sale and purchase of a property, or the preparation of security documents, such as a legal charge over a piece of immovable property or for that matter, even a guarantee to be executed by a guarantor to ensure that such sale and purchase agreement and/or the security documents prepared by him, are attended to with reasonable care and skill as is required of a practitioner on his calling.

There is a plethora of local cases on point but due to time constraints, it is intended herein to make references to only one decision.

In the case of Ngeoh Soo Oh & Ors v G. Rethinasamy (1984) 1 MLJ page 126, the Court was concerned with a claim for negligence and breach of contractual duty of a solicitor who had been engaged by a client in the purchase of a piece of land.

As part of the advice given by the solicitor, and this was not denied by the solicitor in Court, the solicitor was called upon to advise on the title to the land, and in particular that the title was clear from any sort of encumbrance.

It however turned out that the very land had been acquired by the government under the Land Acquisition Act and the acquisition had indeed been gazetted.  The client’s intent in purchasing the land was to put up a factory on the land.  Needless to add, things of course went wrong and the client then sued the solicitor for negligence.  The Court, after having had the benefit of hearing evidence from three conveyancing lawyers, held that the defendant’s solicitor was negligent in tort and that he was also liable for breach of his contractual duty to his client and ordered damages as against the solicitor.

In the judgment handed down by the Court, the Court had this to say:

The defendant had failed in his duty to use reasonable care and skill in giving his advice and taking such action as the facts of this particular case demanded of a normally competent and careful practitioner here.  Apart from a search in the Interim Register he should have also like other normally competent and careful solicitors, made a search at or an enquiry with the land office concerned.”

What this case clearly demonstrates is the sort of duty entrusted with the solicitor to settle a conveyancing document ie a sale and purchase agreement.

How does one address the question of risk management in such instances?

The answer, it is suggested, is for one who is engaged in the practice of law as a conveyancing practitioner to familiarise himself with the types of searches that he is required to carry out prior to the settling of the sale and purchase agreement and/or any security document related thereto.

Perhaps it will not be a bad idea at all for the solicitor concerned to draw up a checklist, if one is not made available by the firm in which he is practising, listing out the searches that require to be attended to by him, in order to ensure that the document prepared by him and relied upon by his client, will not expose him to an sort of professional liability.

B.  Solicitors Undertaking

This is a common feature in the conveyancing practice.

The undertaking will usually be in the form of an undertaking given by the solicitor to pay a certain sum of money and/or to provide some form of guarantee upon registration of a transfer of a property in favour of a transferee.

The law is that the Court could exercise summary jurisdiction over solicitors who gave an undertaking in such capacity and order the solicitors to perform the undertaking straight away.

This is what happened in the case of Tunku Ismail Bin Tunku Md Jewa & Anor v Tetuan Hisham, Sobri & Kadir (1989) 2 MLJ page 489.

In that case, a legal assistant had given an undertaking, the exact details of which undertaking need not been gone into for this purpose.  The position taken by the firm in defending the claim brought against it for a breach of the undertaking was, inter alia, that the legal assistant who gave the undertaking did not have authority.

The Court however did not buy this argument but it went on to hold that the undertaking given was within the ordinary course of a solicitor’s business and as such the legal assistant had the authority to give the undertaking.

Quare - How does one manage such risk?

Given the very serious nature of an undertaking and the ensuing consequences which could turn out to be a claim for a very substantial amount of money, it will be prudent for solicitors to be rather cautious and indeed avoid giving such undertaking.

Legal assistants in a firm can be directed by a proper policy direction handed down by the firm that no undertaking of any nature ought to be given by them without the prior approval of the partner under whom they are working.  Such partner on his part will be well advised to refer the undertaking requested of the firm to the other partners so that a decision can be taken by all the partners of the firm as to whether such undertaking should in the first place be given and if so, in what manner and form it should be given.

The giving of undertakings, although commonly met with in the conveyancing practice, is not necessarily limited or confined to such practice.  At times, litigation lawyers can also be faced with a situation where some form of undertaking is required of them.  At times this can occur when they are in Court and before a Judge, when the Judge could pose a question to one of the advocates appearing before him, be it the advocate representing the Plaintiff or the advocate representing the Deendant, if he will be prepared to ensure that certain things are attended to between that date and the next date given for the commencement of the proceedings or the continuation thereof, as the case may be.

The advocate concerned may very well not be prepared at all for such a poser by the Judge and yet at the same time, he has a duty to conduct himself before the Judge with full decorum and respect.

How does one manage the risk of such assurance given to the Judge in Court and which is no different from a normal undertaking?

While appreciating the predicament of the advocate concerned, it is suggested that in such instances, the Judge be addressed with full respect that there is a need for clients instructions to be sought simply because any undertaking or assurance given, will be that of the client.  The proper thing then to do will be, to seek a short adjournment to enable the advocate concerned to refer the poser by the Judge to the client and to get clear instructions from the client and that too, in writing.

The advocate, if he be a junior in the firm, will also be advised to bring to the attention of the partners of the firm in which he is practicing, the Judge’s poser to him, so as to afford the partners an opportunity to decide if the assurance or undertaking as sought by the Judge, ought to be given, in the circumstances of the matter and if it is to be given, what form the assurance or undertaking should take to ensure adequate and sufficient protection to the firm.

C. Aide-memoires

Aide-memoires or what they are popularly termed, attendance notes on clients, are useful in the legal practice because the advocate or even the solicitor, as the case may be, is in a position to refresh his memory at any subsequent point in time on what was discussed as between himself and his client and what the clients instructions were on any point.

This can apply to both the litigation practice as well as the conveyancing practice.

The importance of aide-memoires is highlighted in the decision of the High Court, in the case of SM Othaman Chettiar v Ang Gee Bok (1971) 1 MLJ page 91 and the very instructive judgement on point by Chang Min Tat J (as His Lordship then was, later a Federal Court Judge).

It is perhaps significant to mention here that His Lordship was himself in active practice as an advocate and solicitor before his elevation to the bench.  In the light of the importance of the statement of the Learned Judge on the matter, the need to read the same verbatim is felt.

This is what the Learned Judge said:

“Apparently this solicitor did not appreciate the clear advantages of keeping written aide-memoires of attendances on clients and other parties, to which he could make reference by way of refreshing his memory to recall the events of any particular transaction.  Attendance-slips as they are usually called in the profession must be seen to be of the utmost importance not only in recalling past events to mind but also for purposes of taxation of costs.  It is, I realize, not part of my duty nor should it be my presumption to advise solicitors on how they should or should not carry out their work but I would venture, with some diffidence to suggest that solicitors would do well to bear in mind the possibility of their being called to the witness stand.  In the particular instance, the solicitor not only did not keep any attendance slip but also did not use the pro-note beyond identifying his signature which was on it, to refresh his memory.  He, as I noted, categorically stated that he could not recall anything about this particular transaction.”

This then concludes what I have got to say on the subject with full realization that there is much much more to say on the topic.  Due to time constraints I have got to limit myself to what I have been talking this far.