The legal services market is more competitive now than it has ever been: not only are there more practising solicitors than ever before, but there are also more non-solicitors providing legal services than ever before. For the consumer, this may be regarded as a positive development, delivering greater choice and, comparatively, lower fees. However, for practitioners it has increased the pressure to deliver legal results more swiftly and more cheaply than ever before.
While the need to achieve efficiencies in time and cost may well be championed by those who regard it as a sign that the legal profession has become much more modernised and client orientated in its approach, which it has, it can have adverse implications in the context of risk management.
In recent years there have been a string of negligence claims against solicitors, where clients have complained not of the solicitor’s failure to comply with his or her express instructions, or indeed of the pro-active steps taken by the solicitor in that regard, but of the solicitor’s failure to consider and advise upon incidental issues, for which he or she was not specifically instructed.
One of the leading cases in this area is Credit Lyonnais SA v Russell Jones & Walker (A firm).
Here, the claimant bank wished to exercise a break option contained within a 25-year lease of retail premises in Kent. Pursuant to clause 12, the lease could be terminated by the claimant on the third anniversary of the term (“the Termination Date”) by giving the lessor not less than six months previous written notice and upon payment by the claimant of the sum of £11,500, such payment to be made not later than the Termination Date.
The claimant initially instructed the defendant to seek an extension of the Termination Date for a period of 12 months. However, it later wrote to the defendant advising that it wished to exercise the break option pursuant to clause 12 and instructing it to serve the required written notice.
Meanwhile, the claimant prepared to make the termination payment of £11,500 and requested an invoice from the lessor. However, this was not forthcoming and, in the event, the Termination Date passed without any payment having been made. The lessor then refused to accept late payment.
As a consequence of remaining saddled with the lease, the claimant alleged that the defendant should have realised the risk posed to it by clause 12 and should have warned it of the time critical nature of the termination payment. Had the defendant done so, payment would have been made in time.
In determining that the defendant should have apprehended the risk posed by clause 12 and advised the claimant on it, Laddie J observed that:
‘If a dentist is asked to treat a patient’s tooth and, on looking into the latter’s mouth, he notices that an adjacent tooth is in need of treatment, it is his duty to warn the patient accordingly. So too, if in the course of carrying out instructions within his area of competence a lawyer notices or ought to notice a problem or risk for the client of which it is reasonable to assume the client may not be aware, the lawyer must warn him.’
Since the decision in Credit Lyonnais there has been a steady stream of cases in which the courts have had to consider whether a failure to advise on an issue related to an express retainer can properly be regarded as negligence. While it is not possible to review all of these cases, two may be worthy of note.
The first is Luffeorm Ltd v Kitsons LLP. Here the claimant was the intended purchaser of a public house, the Highwayman’s Haunt, in Devon. It instructed the defendant firm of solicitors to act on its behalf in connection with the purchase of the ‘leasehold business’, for which it had agreed to pay the sum of £130,000. Unfortunately, and although the transaction completed without incident for the claimant, the premises produced a poor return and had to be sold a little over a year later for £69,950. Allegedly, this was as a result of one of the vendors taking over another public house in the next village.
The claimant asserted the defendant had been negligent in failing to advise it of the risks associated with the absence of any covenant from the vendors not to compete with it.
In determining the claim, Recorder Acton Davis QC observed that while as a matter of general principle a solicitor’s duty is strictly circumscribed by his instructions, it must not be taken too far. Here, he found that the solicitor should have noticed the absence of any covenant and drawn it to the attention of the claimant.
The second is AW Group Ltd v Taylor Walton (A firm). Here the claimant was the intended purchaser of an industrial estate located south west of Luton, for £2.8m. It instructed the defendant firm of solicitors to act on its behalf in relation to the purchase, which eventually completed on 2 November 2005. However, less than a year later, planning concerns were raised by the local council over the construction and use of an area of hard standing for HGVs, which eventually led to an enforcement notice being issued against the claimant.
The claimant alleged the defendant had been negligent in a number of respects, including by failing to advise it of the absence of planning permission or to seek detailed planning advice. In a lengthy judgment, HHJ Hodge QC similarly considered that the defendant should, from information in its possession, have been well aware of the claimant’s intended use of the site. He also considered that while the defendant had not been so instructed, it was within the scope of its duty to have advised the claimant on incidental planning permission issues.
In the cut and thrust of the working day, where litigation and transactional timetables can be tight and where practitioners are often required to keep multiple plates spinning, it can be all too easy to become hard-focussed on completing the task at hand. Hopefully, however, the above cases exemplify the danger for solicitors in not taking time to step back and consider incidental issues.
Prevention is usually better than cure and if practitioners wish to avert the prospect of a professional negligence claim in the future, it may be worthwhile taking the time now to review existing files and to consider whether:
- The work undertaken or to be undertaken will achieve the client’s commercial objectives;
- There could be any disadvantages inherent within the client’s instructions, of which it may be unaware;
- There are any legal remedies available to the client, to circumvent any potential pitfalls;
- The client would be wise to obtain advice from another professional discipline in relation to any ancillary issues, such as valuation, planning or taxation; and
- Any original retainer has changed and with it, the scope of duty owed to the client.
Such an exercise could turn out to be time well spent, serving to preserve an important client relationship which might otherwise have become a tale of the unexpected.
This article was first written for and published by Leeds & Yorkshire Lawyer.