Tasks fall between the cracks when practitioners fail to communicate proactively and effectively with colleagues.
In one claim, the firm was retained by a lender to prepare a loan agreement and lodge caveats over several properties owned by the borrower.
The following year, the borrower asked a consultant at the firm to arrange for the removal of the caveats over two of its properties to allow refinancing to take place. The consultant obtained instructions from the lender to withdraw the caveats to allow the refinance and place a new caveat on title when complete. No advice on the consequences of removing the caveats was provided.
The consultant then had an inexperienced law clerk prepare withdrawals of caveat, which were signed by the principal responsible for the matter. The caveats were removed but new caveats were never placed on the properties.
A few months later, the borrower made the same request regarding the remaining properties. The caveats were again removed and not replaced.
When the borrower was later placed into liquidation, the lender could only recover a small portion of the funds advanced as some properties had been further encumbered resulting in a loss of priority. The lender also lost the opportunity to obtain money from the borrower’s sale of the properties that would have been available after payment of mortgages. The lender then alleged the practitioner failed to advise it of the consequences of removing the caveats and failed to lodge new caveats to protect its interest.
Neither the principal, the consultant or the clerk confirmed whose responsibility it was to re-lodge caveats over the properties. The consultant was seldom in the office, his dealings with clients were casual and he would often contact the clerk asking her to complete tasks for him with minimal or no supervision. The principal allowed this to occur and he also failed to supervise the clerk as is evident from him signing the withdrawals of caveat without question.
The firm should have provided written advice and confirmation of the client’s instructions, and confirmed who would re-lodge caveats over the property. The relevant person needed to delegate the task of re-lodging the caveats promptly to the clerk with clear instructions.
Principals should remain sufficiently involved in matters to be alert to their progress and the critical steps that need to be taken. They should know if a consultant or employee is habitually failing to delegate work proactively and effectively.
