The recent High Court case of Denning v Greenhalgh Financial Services Limited held that the extent of the defendant's duty was determined by the terms and limits of the retainer and also made the following important additional findings:
Unless the retainer expressly provides for this, a professional does not ordinarily have a duty to review historic advice given by unrelated advisors to check for mistakes or defects
There may be an extended duty to advise, if, whilst performing duties under the retainer, the professional comes across information which would lead a competent professional to advise upon it (i.e. obvious issues where there is a close connection between the information and the agreed retainer)
Mr Denning acted upon advice from a financial advisor regarding the transfer of his pension in 2000. His advisors updated him on the performance of his pension over the following years, which underperformed, and in 2008 Mr Denning made a complaint to his advisor. Also in 2008, Mr Denning instructed new advisors, Greenhalgh Financial Services (Greenhalgh) in relation to his financial affairs.
Unable to resolve his complaint against the first advisors, he referred that dispute to the Financial Ombudsman Service (FOS) in 2009. The FOS rejected the complaint on the basis it was out of time.
In 2014, Mr Denning issued proceedings against Greenhalgh alleging that it had failed to advise him that the transfer in 2000 was negligent and that he should have considered making a claim against his first advisors.He also alleged that he should have been advised on the time limits of bringing that claim. The essence of his claim was, but for Greenhalgh's negligence, he would have issued proceedings against the original advisors within the requisite time limits and recovered substantial damages.
The Court gave summary judgment and struck out the claim on the basis that Greenhalgh owed no duty to Mr Denning to review the historic advice. The duty depends on the terms and limit of the retainer and what the professional is instructed to do. Here Greenhalgh was not asked to consider the former advice; he was not paid to do so, and indeed was only asked to give prospective advice. The historic advice had no substantive connection with the matters which Greenhalgh was considering and the retainer made it clear that it did not hold itself out as giving legal advice.
The Court noted that there are circumstances where advisors may need to review the merits of old advice, for example when it is an intrinsic part of the prospective advice. The Court also accepted that the duty to advise could extend outside the scope of the retainer where the need to advise is obvious to a competent professional and there is a close relationship between that matter and the agreed retainer.
Whilst the decision concerned the provision of pension advice by financial advisors, the decision is equally important to all professional advisors, and in particular accountants and tax advisors where it is not uncommon for clients to change advisors fairly regularly.
This decision helpfully reasserts the dominance and importance of the terms of engagement. It also highlights what exclusions and limitations professionals may wish to expressly include or exclude in the retainer, particularly if instructed in matters where other professionals have previously given advice. Having clarity about what is and what is not to be done by the professional will significantly reduce the likelihood of disputes arising.