The recent High Court case of Denning v Greenhalgh Financial Services Ltd serves as a reminder of the importance of the retainer when considering the scope of the duty of care owed by a professional.
In this case the judge gave summary judgment for the defendant pensions advisor where the claimant alleged that the adviser had acted negligently in failing to review and advise on an earlier transfer of the claimant’s pension plan by a different adviser. It was common ground that the defendant was not instructed to consider the merits of the historical advice provided, the alleged errors were not obvious and it was not necessary, to give the retainer business efficacy, to add any implied term that the defendant should have advised on the historical advice provided.
The Judge distinguished the facts from those in Credit Lyonnais SA v Russell Jones & Walker in which it was established that in unusual cases a professional adviser may owe a duty of care to give advice outside the scope of a retainer, if in the course of performing the retainer, the professional was provided with information that would lead any competent professional to perceive and advise upon a legal risk.
The judge held that for there to be an extended duty to advise, the matter in respect of which the professional had allegedly failed to advise would need to be obvious, and there would need to be a close relationship between that matter and the agreed retainer. The judge found that at the date of the defendant’s instruction, the earlier transfer had no substantive connection to the matters on which the defendant was instructed to advise, nor did the claimant provide the defendant with information which would have enabled the defendant to advise on the earlier transfer. The claim was therefore struck out on the basis that the defendant did not owe a duty of care in contract or tort to advise on the earlier transfer.
This case highlights the importance of clarity in the terms of a professional’s retainer and clarifies the limited circumstances in which a court may permit the extension of a professional’s duty of care beyond the scope of the agreed retainer. This case will be of interest to both professionals and professional indemnity insurers alike.