The purpose of this practice note is to provide guidance to the profession on the succeeding practice rule for the 2013/2014 indemnity period. This information is intended as general guidance and does not constitute a definitive statement of law.

Ceasing firms

Where a firm ceases practice, valid professional indemnity insurance (PII) claims made against the firm are covered in one of two ways:

1. If the ceased firm has a succeeding practice or succeeding practices, the insurance of any succeeding practice(s) covers the risk.
2. If the ceased firm does not have a succeeding practice or succeeding practices, the firm enters the Run-off Fund, which covers the risk.

Whether or not a firm is a preceding practice or a succeeding practice in relation to any other firm will depend on a detailed analysis taking account of the facts of the particular case. No generalised practice guidance can be given, and each case must be individually examined with reference to the definitions of preceding and succeeding practice as set out in the regulations.

Definitions

‘Preceding practice’ means a practice that has ceased and has a succeeding practice or succeeding practices.

‘Succeeding practice’ means a practice that satisfies any one or more of the following conditions in relation to another practice (with such other practice being a preceding practice for these purposes):

1. The practice is held out as being a successor to the ceased practice, or part thereof,
2. The practice is conducted by a partnership where half or more of the principals are identical to the principals of any partnership that conducted the ceased practice,
3. The practice is conducted by a sole practitioner who was the sole practitioner conducting the ceased practice,
4. The practice is conducted by a sole practitioner who was one of the principals conducting the ceased practice,
5. The practice is conducted by a partnership in which the sole practitioner conducting the ceased practice is a partner and where no other person has been held out as a successor to the ceased practice,
6. The partnership that, or sole practitioner who, conducts the practice has assumed the liabilities of the ceased practice.

Notwithstanding the foregoing, a practice shall not be treated as a succeeding practice pursuant to conditions 2 to 6 above if another practice is or was held out by the owner of that other practice as the succeeding practice.

Regulation amendments

In the Solicitors Acts 1954 to 2011 (Professional Indemnity Insurance) (Amendment) Regulations 2013, the definitions of succeeding practice and preceding practice have been changed from the definitions set out in the Solicitors Acts 1954 to 2008 (Professional Indemnity Insurance) Regulations 2011 as follows:

1. The definition of preceding practice was amended to clarify that a preceding practice must be a ceased firm.
2. The succeeding practice definition was amended to state that a practice held out as being a successor to the ceased practice, or part thereof, would be considered to be a succeeding practice. Under the previous definition, the practice had to ‘expressly’ hold itself out as a successor.
3. The succeeding practice definition was amended to state that any firm conducted by a partnership where half or more of the principals are identical to the principals of any partnership that conducted the preceding practice would be considered a succeeding practice. Under the previous definition, a majority, rather than half or more, of the principals were required to be identical.
4. The succeeding practice definition was amended to include any firm being conducted by a sole practitioner who was one of the principals conducting the preceding practice as a succeeding practice. This type of firm did not fall under the previous definition of succeeding practice.

Any firm that ceases practice on or after 1 December 2013 will be subject to the 2013 regulations, including the new definition of succeeding practice.

Any firm that ceased practice on or before 30 November 2013 will fall under the previous definition of succeeding practice as set out in the 2011 regulations. Further information on this definition of succeeding practice can be found in the ‘Other PII resources’ section on the Society website at www.lawsociety.ie/PII.

Multiple succeeding practices

Depending on the precise circumstances, more than one firm can be a succeeding practice, and a number of factors may need to be taken into account to identify the succeeding practices that meet the definition in the regulations.

For example, the definition of succeeding practice refers to the practice being held out as being a successor to the ceased practice or any part thereof. In this context, the ‘part’ of the practice that the succeeding practice is being held out as a successor of may mean a recognisable part of the practice, such as all the conveyancing or litigation or probate files, or all of the residential conveyancing or personal injury or debt collection or family law files, or all the files of a branch office, depending on the context and structure of the practice. However, this is not an exhaustive list. Therefore, the preceding practice could be broken into a number of succeeding practices holding themselves out as specific parts of the preceding practice.

It should be noted that firms may take on the files of a ceased practice without being deemed to be a succeeding practice so long as they do not meet any of the conditions in the definition of succeeding practice, including holding themselves out as a successor to all or part of the ceased practice.

Determination of whether a firm is a succeeding practice

It is clear from the definition of succeeding practice that the determination of whether a firm is or will be a succeeding practice depends on the particular circumstances in question. While the Society will seek to assist firms in the general definition of preceding and succeeding practices, the Society will not and cannot provide advice, declaration, or ruling as to whether a firm would be considered to be a succeeding practice. The Society would also consider that it is best practice for the relevant firm to liaise with its broker and/or insurer with a view to ascertaining its views on whether the firm would be considered to be a succeeding practice and to discuss generally the impact on its PII.

Further information

Further information on the succeeding practice rule, including guidance on when a firm is not a succeeding practice, liability for files taken over, what is meant by a practice being ‘held out’ as a successor and how to avoid this, and what to say to clients of the ceased firm can be found in the Run-off Fund Guidelines (2013/2014) on the Society’s website at www.lawsociety.ie/PII.