Claims and insurance premiums for lawyers’ professional negligence are rising sharply, according to figures published yesterday.
One of the main reasons appears to be financially tough times causing people to seek a scapegoat and more lawyers advising people to sue other lawyers.
Often solicitors are being sued after financial institutions seek to sell up a house. People say the witnessing solicitor did not explain the documents. Women, particularly, are saying that at the time mortgage documents were signed, “”the solicitor spoke only to my husband, virtually ignoring me”.
The 14,000 or so solicitors in NSW, the ACT, Western Australia and Tasmania belong to one scheme, Law Cover. The cost of successful claims against lawyers in the scheme have more than doubled from $17.6 million in 1988-89 to $38.4 million in 1991-92. They are expected to be $42,000,000 for 1992-93.
Premiums are now $5500 a year. They were $2650 in 1988-89.
Nearly 20 per cent of lawyers get claims against them or notify a circsumstance likely to give rise to a claim. In 1980, when the scheme began it was only 10 per cent.
The NSW Law Society (which has the carriage of the scheme) is looking at a no-claim bonus. However, would be based on paid-out claims, not mere reportage, so as not to discourage early reporting by solicitors of circumstances that might give rise to a claim.
Details were published in the latest Gazette of the ACT Law Society.
The executive director of the society, Rob Whitten, said yesterday, “”When times are tough, people look for a way out.”
However, there was no way of telling precisely why claims had increased, he said. The society did not see details of claims as they wre confidential between the solicitor and client. A risk management study was under way to find problem areas of practice and suggest improvements.
Lawyers faced great difficulty in witnessing documents when finance institutions required the lawyer to certify that those signing them understood the consequences.
“”With all the time and patience in the world, unless you give a two-hour exam, you can’t tell if they understand,” he said.
The Gazette said, “”Courts were reluctant to throw people out of their homes, particularly if this is in relation to someone else’s debt, as when parents provide their home as security for a son’s business venture.”
In some cases courts were saying solicitors should advise on the commercial wisdom of the transaction, not merely its legal effect, it said.
There were three or four document-signing cases a week. They often ran to a week’s court hearing and cost thousands to defend and hundreds of thousands if lost.
In some cases women were asserting that if the solicitor’s duty to her (as distinct from her partner) had been properly discharged the women would not have signed the mortgage. Results published this week of a separate survey of women’s attitude to people giving financial advice showed women thought they were patronised, not taken seriously or ignored by largely middle-aged men giving the advice.
The Gazette questioned whether couples should be given separate representation, but when the director of Law Cover suggested this in 1987 he had been accused of being anti-feminist.
The Gazette said that other common cases giving rise to claims were missing time limits set by law on beginning court action, failure to protect interests of parties in family law disputes and lack of advice on problems with title to land.
The claims spread proportionately over city, suburban, rural, sole and partnership practice.
Canberra solicitor Rob Barnett, writing to the Gazette, argued that if the risk was increasing, so should the charges to the client. Financial institutions stood to gain by passing liability on to solicitors by getting certificates that clients have understood the documents they are signing, therefore the charges for witnessing, explaining and advising on mortgage documents should go up, to at least $450 and more if large amounts are at stake.
The NSW Law Society has warned: “”The law is becoming more and more complex. The community is becoming more and more demanding. More and more lawyers advise people to sue solicitors. Day by day judges expect higher standards of performance and find obligations that are far removed from what solicitors thought they were retained to do.”