This article considers two recent cases concerning solicitor retainers. The fi rst is a Bristol case that was reviewed by the Court of Appeal known as Padden v Bevan Ashford  EWCA 1616 and the second was fought in the Technology and Construction Court known as Shepherd Construction Limited v Pinsent Masons LLP  EWHC 43 (TCC).
The terms of a solicitor’s retainer are important. They are important because the terms set out the rights and obligations of the parties and identify the tasks to be undertaken. In general fi rms have in place fi nely tuned systems ensuring that all its solicitors produce, at the fi rst opportunity, an engagement letter that will incorporate its terms and conditions, scope out the retainer and inform the client how to complain. Nevertheless, however hard a solicitor tries to cater for each and every eventuality, some issues may remain unexpressed. This can add a degree of uncertainty and therefore the better the written retainer the less certainty.
As is well known a retainer does not even have to be reduced to writing. The mere act of authorising or employing a solicitor to act on behalf of a client constitutes the solicitor’s retainer by that client. Terms that have been expressly agreed will be incorporated as well as terms which the law will imply in the particular circumstances. The above two recent cases both raise interesting issues regarding the retainer. In the fi rst there was no written retainer and thus the scope of duty was ascertained from the circumstances, and duties were implied by law. In the second case it was argued that there was a ‘single’ retainer that survived a fi rm’s merger and later conversion to an LLP. The single contract argument was necessary to fi x the LLP with a duty of care to revise and update previous advice provided to the Claimant and revise and update documents drafted by the fi rm and on which it relied in its business dealings.
Padden v Bevan Ashford
The facts of the fi rst case are unfortunate. They concerned a husband and wife and the duty of a solicitor to give advice to the wife when securing her husband’s debt with a charge on jointly owned property. The husband and wife had been married for a number of years and had three children, the oldest of whom was 17. They lived in a substantial house near Exeter and they held a long lease that had been granted by the National Trust. They had a joint bank account, and some shares and endowment policies. The husband appeared to be a successful fi nancial consultant employed by a company called Arbuthnot Pensions and Investments Ltd (‘A’).
One day, apparently out of the blue, the wife was told by her husband that she could not use their joint bank account as it had been frozen by A. He said he would sort it out. A few days later he arrived home with his solicitor who told the wife that the dispute had “turned criminal” as her husband had taken money owned by one of A’s clients. The solicitor, according to the wife, informed her that the only way to avoid criminal prosecution was to sell the house and give the money back. That if she did not her husband may go to prison. He told her to take independent legal advice but that she should ‘ignore any advice that she might be given not to sign’.
A few days later armed with some documents and a consent form drafted by her husband’s solicitor to ‘forego her interest in the house, the endowments, and her interest in Mr Padden’s pension policies’ she attended the Defendant solicitors’ offi ce in Tiverton and explained that she needed to see someone urgently. She saw a recently qualifi ed solicitor who gave the fi rst half hour of her advice free of charge. The solicitor advised the wife not to sign the documents but was told that she was going to sign them anyway. The husband was later prosecuted for taking £2m of client money, a divorce ensued and one year after the divorce the husband died. The wife then sought to set aside the charge on grounds of undue infl uence and after the house was sold subject to a compromise, issued proceedings against the Defendant solicitors claiming damages for negligently having failed to advise her properly in connection with the transaction. Procedurally the case descended into chaos as a result of the Judge treating the matter in a summary way. The result of this was that the Court of Appeal sent the matter back for trial to be heard by a different Judge. However the Master of the Rolls considered the scope of a law fi rm’s retainers and how advice should be provided and having reviewed the relevant cases commented:
- The court must be aware of imposing upon solicitors duties beyond the scope of what they are requested and undertake to do.
- When undertaking the work a solicitor is not bound to say … “if I were you I would do it”; or “if I were you I would not do it”,… [he] should put clearly before the [client] the nature and consequences of the act … [so] that from the clear language of an independent mind they should know what they are doing.
- The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession. This test is not altered as a result of the advice being free.
- In relation to wife guarantees the core minimum a solicitor should do is set out in Royal Bank of Scotland v Etridge (no 2)  2 AC 773.
- The core minimum includes a duty to understand the nature, effect, and potential consequences of the transaction, and that the wife is not under a misapprehension or undue infl uence.
- Merely advising a person in the position of the wife that she should not enter into the contemplated transaction, falls well short of the duty imposed on a solicitor when called on to perform the Etridge duty.
- The standard of care owed was not affected by reason of the relationship being ‘for a very short period of time’, or the advice was provided in ‘a short, free session’ and was a meeting with ‘a client who had just come off the street’.
- If faced with a situation where there was insuffi cient time the solicitor should inform the client that there is insuffi cient time to properly advise.
- In such circumstances the proper course for a solicitor is to explain that full advice is needed and that requires an investigation as to the facts.
Shepherd Construction Limited v Pinsent Masons LLP
In the second case, the Claimant pleaded that there was a single retainer starting when they engaged Masons, covering the period when Masons merged with Pinsent and remaining in place when the fi rm became Pinsent Masons LLP. Although it was accepted that the retainer itself would have had to have been renewed on the occasion that the fi rm changed status the single contract argument was based on the notion that the retainer in the last fi rm was the exact same as the fi rst fi rm and therefore there was a duty on the last fi rm to review and check work done by the predecessors on a continuing basis to ensure that advice and contracts were not out of date or obsolete. The Court found that it was unsustainable to argue that there was a single contract (“the Single Contract) even if renewed by each successor fi rm. Each retainer with each fi rm had to be considered separately. Focusing on the retainer issues the court found:
- A solicitor’s functions and responsibilities must primarily be determined by his or her retainer.
- There was no suggestion or assertion that there was any express agreement, oral or otherwise, by which the Single Contract between the Claimant and each of the three fi rms had been concluded.
- A key indicator was that the Claimant was billed for the provision of individual pieces of work by the respective fi rms and such billing was not pursuant to a Single Contract.
- The fact that the respective fi rms of solicitors sent out unsolicited briefi ngs or invited the client to breakfast meetings or seminars or even sought to solicit more work from the client does not give rise to a general retainer.
- The same goes for the argument that the same people within the respective solicitor fi rms had contact with and generally gave advice to the Claimant.
- The court suggested that there could be no implied retainer to the effect that a professional person had to review all previous advice or indeed services provided on a continuing basis.
- However there is nothing that prevents an agreement or specifi c retainer or commission which imposes a continuing duty on a professional to keep earlier advice or services under review and some sort of obligation which requires the professional to review and revise previous advice given or services provided on commissions or retainers.
- The position could also be different in a family solicitor context. As an example, a solicitor may draft a will for a long-standing private client and later handle his divorce; knowing that an impending re-marriage would invalidate the earlier will, it may be incumbent upon the solicitor at least to advise his client of this consequence.
These cases emphasis how important it is to ensure that a written retainer is in place from the outset. The dangers and perils of providing incentives to new clients whereby they obtain free advice in a short period of time can be a risky strategy. Whether or not the retainer is in writing and whether or not the advice is free or given in a limited time the full force of a duty of care comes into play, and the standard of care does not vary as a result of the advice being free.
These cases also demonstrate how the courts are not keen to uphold general retainers. In the second case the Judge said that “the Single Contract relied upon by Shepherd is in effect a general and continuing retainer by which the relevant fi rm was required to review all advice and drafting which it had previously done. One has only to summarise this position to realise that it is hopelessly wide.”
However there is a word of warning. The court specifi cally did not deal with the position where the solicitor who remained under a valid retainer had knowledge that advice previously given or documents previously drafted had become obsolete (for instance by reason of a new act of parliament coming into force) or commercially imprudent. In these circumstances (commercial context circumstances) it is arguable that a duty arises to advise the client that there is a known problem or potential problem.