The Court of Appeal has held recently that the obtaining and receiving of advice after a mistake had been made by a professional did not mean that an obligation to correct the earlier mistake or negligence continued to accrue and give a fresh cause of action against the professional every day after the mistake had been made. Whilst Capita (Banstead 2011) Ltd v RFIB Group Ltd concerned negligent advice and pension services given to the trustees of a pension and assurance scheme and the principal employer under the scheme, the case is of wider interest to PI insurance practitioners and professionals because of the Court of Appeal’s comments in relation to continuing duties owed to clients.
RFIB sold their entire share capital in CHBC to Capita under an SPA in 2004. In the SPA, RFIB indemnified Capita against any claims arising from the services provided by CHBC prior to the 2004 transfer date.
CHBC, a pension management and advisory consultancy, were sued by a client for negligence, alleging that one of CHBC’s consultants was negligent and had made dishonest representations between 2000 and 2008 (both before and after the transfer date). That action was settled and Capita sought to recover from RFIB in subsequent proceedings, arguing that the indemnity meant Capita was not liable for the losses resulting from CHBC’s negligence.
Popplewell J at first instance held that it was appropriate to apportion liability between Capita and RFIB incurred before and after the transfer date, respectively.
Court of Appeal decision
The Court of Appeal decided that CHBC did not owe a continuing duty to correct previous acts of negligence, the pre-2004 negligent acts were separate from the post-2004 acts, and the indemnity therefore resulted in Capita and RFIB both being liable depending on the date of the losses.
The Court of Appeal in Capita v Banstead considered the authorities (most of which arise in the solicitors PI arena) on when a professional’s continuing duty of care can arise. A professional’s duty will usually end at the conclusion of the engagement but the issue is not always clear cut and there are conflicting authorities. In Midland Bank v Hett Stubbs & Kemp (1979) a solicitor was held to owe a continuing duty to take steps to register an option where the solicitor had retained the document, opened (but not closed) a file relating to the option and was consulted by the client from time to time on whether he should exercise the option. In contrast, in Bell v Peter Browne & Co (1990) a solicitor failed to register a husband’s interest in the matrimonial home following divorce proceedings. The Court of Appeal in Bellfound that the husband had a single cause of action accruing at the time of the failure to protect his interests.
The Court of Appeal were not persuaded that Midland Bank could be distinguished on the basis that there was a continuing retainer because the file had not been closed and further advice had been sought and obtained. The Court had to follow Bell and, accordingly, despite the existence of a continuing retainer, the ongoing failure to remedy the previous cause of action did not constitute a fresh cause of action accruing on a day by day basis.