Where the practice of "unbundling" legal services is becoming increasingly common, so too are reported cases on the potential pitfalls. The recent case of BPC Hotels Limited (1), Bala Perampalam Chandra (2) and Maria Perpetua Chandra (3) –v- Wright Hassall LLP (1) and Max Mallin (2) provides a further reminder of the importance of defining the scope of a professional's retainer.
The First Claimant company (BPC), which operated a hotel business, was owned by the Second and Third Claimants, a husband and wife (the Husband and Wife). BPC bought an office building with the intention of converting it into a luxury hotel (the Development) and obtained finance from RBS with complicated default provisions
Brooke North / Brooke North LLP (BN) advised the Claimants in relation to the funding of the Development.
After the Development foundered and RBS "pulled the plug" the Claimants instructed Wright Hassall LLP and Max Mallin (the Defendants) to act for them in respect of a professional negligence claim against BN.
The Claimants alleged that BN should have advised them to commence proceedings against RBS and that had that been done then this would have allowed the Development to be completed without any further exposure to BPC (the Hostile Strategy Claim).
Proceedings against BN were issued shortly before primary limitation was due to expire. After the service of proceedings on BN, the Defendants terminated their retainers because of the Claimants' failure to pay money on account of costs.
Acting in person, the Claimants sought to amend the Particulars of Claim to remove the Hostile Strategy Claim and substitute an allegation that BN should have advised them of an alternative approach whereby they worked with RBS to ensure that the Development was completed (the Co-operative Strategy Claim).
The amendments were disallowed by the Court of Appeal on limitation grounds. The Hostile Strategy Claim proceeded as originally drafted and was settled by way of a payment by BN to the Claimants of £371,875.
In January 2016, the Claimants served proceedings on the Defendants, seeking the difference between what they had recovered from BN and what they had hoped to recover. The Claimants alleged professional negligence in respect of the failure to identify that there was an arguable claim against BN in respect of the Co-operative Strategy Claim. The Claimants sought damages of c.£50M.
The Defendants sought summary judgment.
Mr Justice Soole, sitting in the Technology and Construction Court, applied the principles set out by Lord Justice Jackson in Minkin v Landsberg  EWCA Civ 1152 at para 38, in relation to the extent of the duty of a solicitor to advise, namely that:
- The starting point in every case was to ascertain what the client had engaged the solicitor to do or advise upon;
- It was implicit in the retainer that the solicitor would proffer advice which was reasonably incidental to the work being carried out;
- In determining what advice was reasonably incidental, it was necessary to have regard to all of the circumstances of the case, including the client's character and experience; and
- The solicitor and client could, by agreement, limit the duties which would otherwise form part of the retainer. It was good practice to record such an agreement in writing.
Applying those principles, the Court determined that the relevant questions to be considered in the present claim were whether there were real prospects of a successful argument that:
- the Defendants were instructed to identify further claims to be made against BN, or whether this task was incidental to their instructions (the First Question); and
- if the answer to 1) was yes, whether the Defendants should have identified the Co-operative Strategy Claim (the Second Question).
The first question
The Court construed the Defendants' retainers narrowly, finding that the Defendants were asked to specifically advise in respect of the Hostile Strategy Claim, and not to advise generally.
Further, it could not be said that identifying the Co-operative Strategy Claim was incidental to the Defendants' retainers; the Co-operative Strategy Claim was completely at odds with the Hostile Strategy Claim.
The second question
The Court held that the information provided to the Defendants would not have led them to identify the failure of BN to advise as to the Co-operative Strategy Claim.
The Court also considered whether the failure to identify the Co-operative Strategy Claim was causative of any loss. It held that the Co-operative Strategy Claim was not a tenable one in light of there being no evidence of any alignment of interest between BPC and RBS which could have resulted in a substantial prospect of RBS agreeing to enter into such an agreement.
The case provides two useful reminders to practitioners
Ensure that the scope of the retainer is properly defined in writing and is kept under review.
The fact that the Defendants' instructions were clearly set out in writing and that subsequent instructions were properly recorded, appears to have been highly persuasive to the Court when considering the scope of the retainers, and stopped the Claimants from being able to argue that there was a general duty to advise.
Practitioners instructing counsel should also give careful thought to what they are asking counsel to advise upon and ensure that this is aligned with their instructions so as not to inadvertently widen the scope of their retainer.
The importance of evidence when applying for summary judgment
Although the Court was careful to record the fact that a summary judgment application should not turn into a mini-trial, it noted that account was to be taken not only of the evidence put before the Court in support of the application, but of any evidence which could reasonably be expected to be available at trial.
It was persuasive to the Court in this case that the evidence which it was provided with was not supportive of the allegation that RBS would have been willing to work with the Claimants to complete the Development, nor was there any realistic prospect of any such evidence being provided.
Had the Claimants overcome the scope of duty difficulties, the lack of any statement from RBS (or the possibility of one) as to what RBS would have done, may still have been fatal to the claim.