Remote Working and Unstaffed Registered Offices | Griffiths & Armour

Remote Working and Unstaffed Registered Offices – Could You Be Caught Unaware?

One of the most obvious changes to the working environment since the start of the COVID-19 pandemic is the shift away from office based working to a more flexible model. Most of us now spend at least some of our typical working week working from home under some form of hybrid model. This has aligned with the move to working with less paper and we are increasingly reliant on digital technology for our communications both with colleagues and clients.

1. Remote Working and Quality Control

The positive aspects of these developments are obvious and are well rehearsed elsewhere, but there are also risks. One of these is the challenge of maintaining quality control, especially where less experienced employees work away from the office – they may be less inclined to ask for guidance or there may be less opportunity for a second pair of eyes to be cast over a particular piece of work, and/or they may fail to recognise what a more experienced individual would regard as a red flag. Beyond the actual technical work itself it is conceivable that a lack of experience and proximity to a more wisened head could leave individuals more likely to make an assumption about, for example, the meaning of a slightly ambiguous wording, and to continue with their work on that basis.

Most of the time the assumptions of a professionally trained individual will probably be correct, but our professional indemnity claims team are now starting to see the consequences of those occasions where the initial assumption was slightly skewed or wrong and led to an entirely avoidable error, whether through misunderstanding a client’s instructions or failing to query inconsistent or ambiguous information provided by another member of the design team.

In our series of Risk Matters Roundtables, many clients quite correctly pointed to the improved and enhanced technological developments that mean that the potential for such questions to arise is perhaps significantly less than in the previous decade.

Where these errors have crept in, a number of clients have attributed them to the home working model, perhaps during the strictest lockdown periods – many have already proffered that in the office environment it is far more likely either that they would have been prevented altogether, through better and more immediate communication within the team; or that they would have been identified and corrected under the closer watchful eye of a line manager.

This risk is one that we and various other informed commentators previously identified, and we believe is likely to remain a challenge for the foreseeable future.

2. Remote or Unstaffed Registered Offices

A different but related risk is now starting to emerge as the business world uses less and less paper but hasn’t yet abandoned conventional post or ‘snail mail’ altogether, especially in the context of legal disputes.

Companies and LLPs are required under relevant legislation to have registered offices, the basic intention being that a corporate entity (which ultimately only ever exists on paper) always has a physical address so that official hard copy correspondence can be delivered to it. The rise of the virtual office, with the pandemic as a further catalyst in that process, has led to a perception that any requirement for a registered office address is merely a technical formality: a box that has to be ticked for statutory purposes but which has no real implications for management.

Unfortunately, it isn’t always that simple. Our claims team are now seeing evidence of this, particularly where small businesses have adopted that view and important documents have slipped through their correspondence net as a consequence. This has most commonly caused problems where the registered office is either unstaffed because the firm’s employees all work from home most of the time, or where the registered office address is, for example, the firm’s accountant’s office (none of the firm’s own employees routinely visit the premises, so the firm is entirely reliant on the accountant’s own staff for taking prompt action when post is delivered there).

Service of Legal Proceedings

In some instances claimants have served legal proceedings on our client at the registered office address without prior warning and in hard form only, as they are perfectly entitled to do. Failure to take appropriate action on receipt of those documents has meant that the claimant has been able to obtain judgment against our client in default of any defence being served. In that instance, clients’ (and potentially their insurers) have therefore lost the battle before it was even known to have started!

Notifiable Claims or Circumstances

Similarly, we have seen instances of solicitors’ letters (or other formal correspondence giving first notice of claims) being delivered to an essentially unstaffed registered address. If senior personnel were aware of that correspondence then it would have prompted them to notify their insurers, but if they are not aware of what has arrived at the registered office address then they cannot do so.

This can lead to problems where the recipient’s policy requires them to notify matters “as soon as reasonably possible”, a form of words which naturally turns on whether reasonable action was taken given the surrounding circumstances. Since checking hard copy post on a daily basis is something that is probably always within the control of any competent management team, it can be relatively straightforward for an insurer to argue that failure to do so amounts to a breach of this policy condition. Needless to say, each case turns on its own individual facts and some negotiation may be possible, but the point is that the problem is easily avoidable (as is the embarrassing conversation with insurers that might otherwise ensue).

Similar comments apply in relation to pre-renewal presentations to insurers where parties are obliged under the Insurance Act and similar legislation to disclose material information which they know or ought to know (emphasis added). A letter from a potential claimant threatening legal action is undoubtedly material for underwriting purposes, and post arriving at a registered office is undoubtedly something that the business ought to know about.

The importance of promptly notifying insurers of potential PI claims cannot be overstressed, particularly in the context of changing insurance provider from one policy period to the next. That is especially pertinent in the current PI market climate.

Preliminary Conclusions / Some Points to Consider

As remote working models continue to evolve, it is clear that all businesses need to evolve working practices to safeguard their resilient position. That evolution should include:

  • Stress testing their quality control systems and keep them under ongoing review. What might have worked reliably in the past may no longer be watertight. By the time the loopholes are discovered it may be too late to avert disaster.
  • Making sure that your office procedures stipulate that any post delivered to your registered office address promptly finds its way to senior members of staff.
    • For certain purposes the business is deemed to have knowledge of the relevant letter from the date of physical delivery – this can be fatal if the content is time sensitive and requires a response before a given deadline. It can also have consequences for insurance purposes if the business fails to share relevant information with its insurers because senior staff were in fact unaware of its existence.
    • This point is important for both underwriting purposes (in the interest of making full disclosure to an insurer) and for satisfying policy conditions in relation to claims.
  • An acknowledgement that aside from its significance in statutory law and as outlined above, a registered address will often be the designated address for any formal notices which are to be given under appointments agreements on live projects. That constitutes a further reason for making sure that the relevant post box is closely monitored.

The move to agile or flexible working is likely here to stay and the benefits are plentiful. As with any substantive change, there will likely be lessons to learn and best practice will be established over time. For the moment, it is important to assess today’s practice against ‘what’ was considered good practice three years ago – and challenge that against ‘why’ we did what we did. Times change but what was a sound risk mitigation measure previously is unlikely to be redundant.

For more information or to discuss any aspect of this guidance, please contact your usual contact at Griffiths & Armour or click below to submit your enquiry to Professional Risks Director, Stephen Hargreaves.

Steven Hargreaves | Griffiths & Armour