Quinn were the professional indemnity insurers to a two partner firm, South Bank Solicitors. Quinn found themselves in a situation that will be only too familiar to Qualifying Insurers of solicitors. They discovered that South Bank were the subject of numerous claims arising out of allegedly fraudulent conveyancing transactions and that there were likely to be more similar claims on the way.

As indicated, South Bank was a two partner firm. Mr O was a conveyancer and Mr I was an immigration lawyer. The claims that Quinn were being asked to deal with were being brought by lenders who alleged that their advances had been paid away fraudulently by Mr O who had, in the case of one transaction, paid away as much as £2.7m worth of the lender’s money.

Quinn was understandably concerned as there were a raft of potential claims waiting to happen. They had apparently declined against Mr O but, under the Minimum Terms and their policy, they were obliged to indemnify Mr I unless they could show that he had been involved in dishonest acts with Mr O or, alternatively, that he had condoned Mr O’s dishonesty.

South Bank was the subject of an SRA intervention and Quinn clearly decided that they would instruct separate lawyers to investigate the coverage position as it related to Mr I. 

Against that background, Quinn, through its solicitors, began to correspond with the SRA with the aim of trying to obtain all of the documents that the SRA held following its intervention in South Bank. 

When Quinn’s attempts were unsuccessful, they made an application in the broadest possible terms seeking the release of all documents held by the SRA. 

Ultimately, Quinn’s attempt to obtain wide ranging disclosure of all documents held by the SRA was robustly rejected by the Court and Quinn’s application dismissed. 

Quinn’s argument in support of its application were essentially twofold, namely:

1.         That, under the terms of South Bank’s policy with Quinn, the former was required to notify circumstances that "may give rise to liability".  If the SRA had not intervened in South Bank then, it was argued, this clause would have allowed Quinn to call for South Bank to provide the documents Quinn now sought from the SRA. They argued that the fact that the SRA had intervened in the practice should not make any difference to the insurer’s right to inspect them.  In this context, they argued that, because of the compulsory nature of solicitors’ insurance, Quinn, as a Qualifying Insurer, formed part of the same statutory regime as the SRA and that there were public policy issues which militated in favour of a release of the documents. 

2.         Issues such as confidentiality and privilege should not preclude Quinn’s access to the documentation firstly because there was fraud on the part of South Bank. In any event, because some of the actions were sham transactions, there were, in fact, no clients in whom privilege could vest. Secondly, Quinn argued that claims made policies such as this relied upon insureds notifying claims and insurers being able to investigate those notifications at an early stage before a claim had actually been made. Accordingly, any insurer, and in this case Quinn, was entitled to see the documents and this ability on the part of solicitors’ insurers formed an exception to the general position in relation to confidentiality and privilege. 

The Judge rejected both arguments. 

As far as Quinn’s argument that it formed part of the statutory regime in place, given that it was a Qualifying Insurer and therefore held a similar position to the SRA, the Judge had no hesitation in dismissing that argument. The Judge distinguished the supervisory role of the SRA from the attempts by Quinn to obtain evidence to enable it to decline to cover either Mr O or indeed Mr I. Whilst the SRA’s role, in part, is to protect the public, as the Judge observed "the public at large would be worse off if the exercise is carried out as [Quinn] believes it will be as there will be no indemnity." 

Secondly, the Judge held that "the fact that solicitors are required as a matter of compulsion to obtain insurance does not mean that the clients of those solicitors would expect that insurers would be able to go through any of the confidential and privileged documents when they [the clients] are not involved in any claim or dishonesty unless they agree."

Peter Smith J’s Judgment in this case at best leaves the position of Qualifying Insurers and their right to examine documents upon the notification of a circumstance uncertain. It means that no Qualifying Insurer can afford to assume that they can ignore issues of privilege and confidentiality when trying to access such documents before an actual claim has been made. 

In addition, it casts serious doubt upon the ability of those lawyers instructed to investigate coverage who have traditionally and for obvious reasons, attempted to progress their coverage investigations by "sampling" a cross section of files. 

Once a claim has been made by a former client then there will be no issue about access to documentation. Until such a claim has been made, however, those insuring solicitors cannot now assume that they are entitled to any special treatment as far as access to documentation is concerned simply because they hold the position of a Qualifying Insurer providing compulsory insurance to the profession.

As Peter Smith J commented in his Judgment "privilege of the client remains paramount."