RICS: Too reliant on external lawyers
A QC has heavily criticised City law firm Fieldfisher over the advice it gave the Royal Institution of Chartered Surveyors (RICS) during a governance crisis.
Alison Levitt QC of 2 Hare Court found that the solicitors took a “partisan” approach and either ignored or misjudged potential conflicts of interest.
The firm said it was “disappointed” by the findings.
Ms Levitt was commissioned to conduct an independent review over allegations that RICS had tried to suppress a critical internal report into its finances and then unfairly dealt with four non-executive members of its management board who sought to explore the issue.
The governing council of RICS last week published her report and voted to accept all of her recommendations, including the need to conduct a “wide-ranging examination” of its purpose, governance and strategy.
More specifically, she said the general counsel should not have a pre-existing relationship with RICS’ external legal advisers – here she had qualified and worked at Fieldfisher for 16 years before joining RICS in 2018.
The general counsel placed “excessive reliance” on advice from Fieldfisher, Ms Levitt said. “It may be that her inevitable professional closeness to the firm that trained her was at least partly the cause of this. In any event, it did not serve her well.”
Ms Levitt said RICS’ external legal advisers should be invited to tender every three years, “with a presumption that there will be a regular change of provider”. It should consider replacing Fieldfisher now.
“As part of this process, RICS may wish to scrutinise the involvement of Fieldfisher in this matter, particularly in relation to: possibly unwise decisions, bearing in mind that RICS – not the executive – was Fieldfisher’s client; whether advice was given on legal matters only or whether it strayed into other areas and whether it could be described as non-partisan; [and] the level of spend.”
The 467-page report concluded that the four board members raised legitimate concerns that a treasury management report by BDO had been suppressed, were wrongly dismissed from the board and that sound governance principles were not followed.
Ms Levitt said the origins of what went wrong lay in RICS’ governance architecture, with a lack of clarity about the roles and responsibilities of the boards, senior leadership and management leaving “cracks” within which the chief executive and chief operating officer became used to functioning with little effective scrutiny.
Although they believed they were acting in the best interests of RICS, “they were resistant to being challenged” and so when the board members insisted on seeing the internal audit reports and refused to back down, it became a “them or us” situation.
“Although it looked like one, this was not a cover-up in the traditional sense. What it was in fact was a power struggle,” Ms Levitt said.
Levitt: Power struggle
The QC found that, from the outset of its instruction in this matter, “Fieldfisher took a partisan approach, siding with the executive against the four non-executive members without any objective analysis of the true merits of the situation”.
She continued: “Throughout this episode RICS was not well-served by its lawyers. No doubt those reading this report will think that it is richly ironic that I, a senior barrister, have concluded that RICS has been too dependent on external legal advice.
“I am sure that Fieldfisher and other lawyers have given RICS much sound advice over the years in relation to what I would describe as legitimate legal matters, but the lawyers were seriously over-used here.
“What was needed was not legal advice but judgement, common sense and the courage to stand up to the executive as appropriate.”
Ms Levitt surmised that the executive and senior leadership knew this was right, “because nothing else would explain the extraordinary lengths to which they have all gone to conceal from me the extent of Fieldfisher’s involvement”.
She had thought the firm had provided a sole piece of advice that led to the removal of the board members. Fieldfisher’s file was only disclosed to her in June, when Ms Levitt had been hoping to report, and six months after RICS knew it would be necessary to disclose it.
This showed that, over a period of three months, Fieldfisher was engaged in daily correspondence and 395 meetings.
“What is depressing about this is that all this effort was not to try to understand why the four were so troubled, and find a solution which would allow everyone to move forward, but was in an effort to try to get the four non-executives to drop what was perceived as their challenging behaviour and, subsequently, to remove some or all of them from the management board.
“This caused expenditure over a few weeks of more than £100,000 in legal costs on this issue alone.”
Ms Levitt said RICS was “too quick to consult its external lawyers and overly-reliant upon their advice” – the solicitors’ involvement was “extreme” and they were being asked for advice which went beyond legal matters.
Fieldfisher had “more than one potential conflict of interest which they appear to have either ignored or misjudged”, which was largely down to not seeing RICS as the client so much as various members of the senior management.
Ms Levitt also considered that Fieldfisher’s advice that the president of RICS had the power to dismiss the non-executives was wrong, not balanced and “was not in the interests of their client because it did not give RICS an informed choice”.
In a statement, Fieldfisher said: “We are aware of Alison Levitt QC’s findings following her review on behalf of the RICS. We fully respect that she has provided her views based on her own judgement.
“We are disappointed to note that some of the actions of the firm and the partners who were involved in seeking to help RICS, in what was an exceptionally difficult time for the organisation, have been criticised.
“Fieldfisher is committed to upholding the highest professional standards and believe that our partners did so in the overall context of the events reviewed by Alison Levitt QC.
“We will now carefully review the report and reflect on the recommendations advanced but we will not be making any further public comment.”
RICS’ governing council has formally apologised to the four non-executive directors and offered to reimburse their legal fees, and done the same for a group of members from the governing council who were “incorrectly” threatened with a defamation action.
Another recommendation from the review was that RICS should introduce a framework setting out the parameters for seeking external legal advice and stipulating who can give instructions. Such advice “should be limited to genuinely legal matters and should not extend to matters of strategy”.
RICS’ regulatory work is governed by a separate board, established at the beginning of 2020, with a lay majority and chaired by Dame Janet Paraskeva, who also chairs the Council for Licensed Conveyancers and is a former chief executive of the Law Society.
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