Professional Negligence and Liability
Chapter 9
SOLICITORS
I. COMMON LAW DUTIES
1. Duty in contract
9.1 When a solicitor provides services to a client, he will do so pursuant to a contract. Hence the starting point for considering the scope of a solicitor’s duty must be the contractual retainer. As Oliver J observed in the case of Midland Bank Trust Co Ltd v. Hett, Stubbs & Kemp 1: “The extent of [a solicitor’s] duties depends upon the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do.”(a) Creation of the retainer
9.2 Old authorities suggested that, in contentious business, it was the duty of a solicitor to obtain a written authority from his client before issuing proceedings.2 This was stated as good law as recently as 1988.3 However, there is no general rule that a solicitor must obtain a written retainer and oral retainers are common.4 Although, as a matter of professional conduct, a solicitor must achieve the outcomes required in Chapter 1 of the Solicitors Regulation Authority Code of Conduct 20115 which necessarily involve the issuing of a client care letter, such letters frequently set out the basis of the solicitor’s remuneration and a complaints procedure only. Often they do not set out in detail the nature and scope of the work being undertaken. Hence, while it may be imprudent to commence work without obtaining written instructions from the client, there is no rule that the client must instruct the solicitor in writing. On the contrary, in cases of extreme urgency, a decision to delay action pending written instruction might itself be culpable. 9.2.1 It may be critical to know when a solicitor was retained. In Aroca Seiquer & Asociados & Anor v. Adams & Ors 6 Spanish solicitors acted for the purchasers of holiday homes. There was a dispute as to whether the retainer was before or after the purchasers had paid the final instalment of the purchase price. The Court of Appeal upheld the trial judge’s finding that a retainer had come into being prior to the payment constituted by the solicitors’ offer of services and the purchasers making of appointments with the solicitors, which constituted unequivocal acceptance. 9.3 Even if there is no duty to obtain a written retainer, the importance of recording instructions in writing so as to define the solicitor’s retainer is obvious.7 Especially where lay clients are involved, the solicitor should be very careful in ascertaining precisely what he is instructed to do. Although the case was directly concerned with the imposition of a duty of care in tort, Gray v. Buss Murton 8 is relevant. The testator made a “home-made” will replacing an earlier will drawn by solicitors. He intended to bequeath an absolute interest of his home and his chattels to the claimant but in fact the will only conferred a life interest. He went to see the defendant solicitors and asked whether the will was valid but did not specifically ask whether it was effective to confer an absolute interest in the property and chattels to the claimant. The solicitor confirmed that the will was valid but did not address the question whether it was effective to carry out the testator’s intentions. The will was executed and the claimant did not receive the property and chattels absolutely. Rougier J held that the solicitor was negligent in failing to clarify adequately the extent of his retainer. He approved and applied two old decisions9 to the effect that, where there is any dispute between a solicitor and his client as to the terms of the solicitor’s retainer, the client’s version is likely to be preferred.10 The cases relating to the scope of a solicitor’s retainer were reviewed in Mason v. Mills & Reeve,11 where it was held that a solicitor who seeks to delimit his area of responsibility must take care to do so in clear terms. 9.4 Solicitors who do not define their retainer clearly and in writing can expose themselves to the imposition of a retainer the existence and extent of which may be implied from their own conduct. The solicitor may also find that he owes contractual duties to persons other than those directly providing his instructions. In Madley v. Cousins Coombe & Mustoe 12 solicitors acted for the purchaser of a property. The loan which had been offered for that purchase was to be secured over both the property to be purchased and another property owned by the purchaser and the claimant. By preparing a charge over the jointly owned property and giving it to the purchaser for transmission to the claimant for signature the solicitors were held to have offered to act for the claimant as well as the purchaser, and by returning the charge signed to the defendant the claimant was deemed to have accepted that offer. 9.5 In Dean v. Allin & Watts,13 solicitors acting on behalf of borrowers arranged for title deeds to be deposited as security for a loan. The security was ineffective for failure to comply with the Law of Property (Miscellaneous Provisions) Act 1989. The lender sought to establish that he had by implication retained the solicitors to act for him. This contention was rejected both by Arden J and by the Court of Appeal, though on appeal it was held that on the facts the solicitor assumed a duty of care to the lender.14 In A & J Fabrications v. Grant Thornton 15 it was held that solicitors retained by a liquidator of a company were not to be regarded as retained by the company’s creditors or those who were funding the liquidator. In BDG Roof-Bond Ltd v. Douglas 16 Park J held that a solicitor who had frequently acted for a company in the past but was retained by a departing director who was selling his shares back to the company did not act for the company in addition to the director, notwithstanding that the company was footing the bill. It is important to note that an implied retainer can only come into existence where (as with an express retainer) the parties intended to create a legal relations. In the absence of clear indicia of that intention the court will scrutinise the facts said to give rise to the retainer to see if they give rise to the inference of a contract as a matter of necessity. As Arnold J put it in Caliendo v. Mishcon De Reya 17 “was there conduct by the parties which was consistent only with Mishcon being retained by the Claimants.” 9.6 Any decision to decline instructions must be made promptly and the decision communicated clearly or the solicitor will run the risk that a retainer will be inferred.18 However, a solicitor is entitled to make payment of a sum on account of costs a condition precedent to the acceptance of any retainer.19 9.7 Determining the identity of the client will usually pose no difficulty. However the receipt of instructions from an agent or intermediary is an area of particular danger. Acting on instructions from someone other than the client gives rise to the risk that the solicitor incurs liability to the client for failing to implement his wishes, or to a third party for acting without the client’s authority. The Guide to Professional Conduct advised that written confirmation should be obtained from the client,20 and that, in any case of doubt, the solicitor should see the client or take other appropriate steps to confirm the instructions. Failure to do so could amount to negligence.21 The SRA Code of Conduct 2011 now warns that one of the activities which may indicate a failure to achieve the mandatory outcomes is “acting for a client when instructions are given by someone else, or by only one client when you act jointly for others unless you are satisfied that the person providing the instructions has authority to do so on behalf of all the clients.”22 There is no requirement that the solicitor obtain evidence of actual authority and it would be commercially inconvenient in many cases, but acting on the basis of implied or ostensible authority carries particular risks, Generally, a solicitor may take instructions from, and provide advice to, one partner of a firm who will be treated as acting on behalf of his partners.23 He may act on the instructions of a company director as long as those instructions do not appear inimicable to the company’s interests24. Such cases are fact specific and should not extent to situations where the interests of the agent and the client might conflict. In Newcastle Airport Ltd v. Eversheds LLP 25 the Court of Appeal overturned a finding that solicitors were entitled to rely on instructions provided by a company’s executive directors as to the terms of their draft employment contracts even though the company had authorised the agents to procure draft contracts for its consideration. It was not enough that the executives had implied authority to give the instructions; the solicitors retained a duty to explain the proposed changes to chair of the company’s remuneration committee.26 9.8 Where a solicitor represents a number of clients it is essential that he takes instructions from all of them, or ensures that those giving instructions have authority to give instructions for all. What is appropriate authority will differ according to the facts, but particular caution should be employed for less sophisticated clients such as a family group or private individuals acting in concert27. This is especially the case where the instructions concern a commercial transaction in which each client has an important interest. It is not open to the solicitor to assume that because clients appear comfortable to let one of their number take the lead in discussions and communications that the same person is authorised to give instructions. It is not safe, for example, for a solicitor to assume that a husband who provides instructions on behalf of himself and his wife can be relied upon to provide accurate instructions or to relay to his wife advice which has been tendered orally. Nevertheless evidence in a particular case may entitle a judge to conclude that the solicitor was entitled to accept instructions from an intermediary.28 9.8.1 Where the client is elderly, the solicitor will wish to be satisfied that the client has the capacity to give instructions. The solicitor will only come under a duty to make inquiries as to capacity where the circumstances are such as to raise doubt in this respect in the mind of the reasonably competent practitioner: Thorpe v. Fellowes Solicitors LLP. 29(b) Duration and termination of retainer
9.9 The duration of the retainer is largely a question of fact and will depend on the nature of the work to be carried out by the solicitor. Questions as to continuing duties arise in the context of arguments about limitation periods.30 In Midland Bank v. Hett, Stubbs & Kemp 31 the claimant was granted an option to purchase a farm from his father in 1961. He instructed the defendant solicitors who failed to register the option. In 1967 the claimant’s father conveyed the property to his wife and thereby rendered the unregistered option worthless. Oliver J held that the solicitors were under a continuing duty to register the option until such time as registration became impossible in 1967, although much emphasis was placed on the fact that they held the option and continued to be consulted about it in the intervening years. By contrast, the Court of Appeal rejected the claimant’s arguments in favour of a continuing duty in Bell v. Peter Browne & Co.32 The solicitors were instructed by the claimant in 1977 following the breakdown of his marriage. As part of the divorce settlement, the claimant transferred the matrimonial home to his ex-wife, albeit on the understanding that he would receive one-sixth of any proceeds of sale. The solicitors failed to draft a trust deed or register a caution and, in 1986 the ex-wife sold the house and spent all of the proceeds. The claimant sued the solicitors and sought to rely on Hett, Stubbs & Kemp, arguing that they remained under a continuing duty to protect his interest in the property until such time as that was impossible. The Court of Appeal rejected those arguments, holding that the imposition of a continuing duty to act would require exceptional circumstances, as had been the case in Hett, Stubbs & Kemp. On the facts of Bell, the solicitors had ceased to have any contact with the claimant after his divorce proceedings were concluded in 1978 and their relationship with him had come to an end at that time. The approach taken in Bell was followed in Morfoot v. W F Smith & Co, 33 where the solicitor was retained to obtain a deed of release as soon as possible. The court held that this retainer was breached once and for all at the moment that it was first possible for the deed to be obtained. Any subsequent effort to obtain the deed was to be treated as an attempt to mitigate the consequences of a single breach which had already occurred. In Capita (Banstead 2011) Ltd & Anor v. RFIB Group Ltd 34 (a case involving a share purchase dispute) the Court of Appeal considered whether Midland Bank remained good law in the light of observations by the Privy Council in Maharaj & Anor v. Johnson & Others.35 Both Longmore LJ and Gloster LJ doubted that it was36 and it is very unlikely that it will be followed in future cases. 9.10 While the retainer is still in existence, the client may terminate it at will. However, the solicitor does not have the same freedom in terminating the retainer as his client. In considering the means by which a solicitor can terminate his retainer, a distinction must be drawn between litigation and non-contentious work. The former is said to give rise to an “entire contract” and the solicitor will be obliged, in the absence of a clear agreement to the contrary, to see the case through to its conclusion. He will only be entitled to terminate the retainer upon reasonable notice and for good cause.37 “Good cause” for these purposes will include the specific statutory ground entitling the solicitor to cease to act in the event of the client failing to make payment following reasonable requests.38 By contrast, retainers for non-contentious work will be terminable on reasonable notice.39 9.11 As a general rule, once the initial retainer comes to an end, the relationship between solicitor and client will cease and there will not be any continuing retainer to watch out for and act upon new sources of danger or interest to the client. In exceptional circumstances, such a retainer may exist,40 but it would require very clear evidence for a court to impose such duties on the solicitor. In Gold v. Mincoff Science & Gold 41 Neuberger J indicated that it would be relatively unusual for the court to find that a solicitor, having been negligent, was guilty of a further act of negligence in failing to advise the client at a later stage of his earlier negligence. He observed that the acceptance of an argument of this kind would have two unsatisfactory consequences. First, it would enable the provisions of the Limitation Act 1980 to be evaded in a somewhat artificial way. Secondly, it would effectively impose upon a solicitor some sort of implied general retainer. 9.11.1 In Ensor v. Archer 42 the judge treated as arguable the proposition that a solicitor may in certain circumstances remain under a continuing duty to advise the client (or ex-client) even though his retainer has been terminated. The position contemplated by the judge was that arising where a solicitor’s retainer is determined close to the expiry of a limitation period. If the solicitor has not previously given appropriate advice on limitation, he should recognise that a failure to give such advice may mean that the client loses a right of action before he comes to take further advice.(c) The nature and forms of contractual liability
I. EXPRESS TERMS AND EXPRESS INSTRUCTIONS
9.12 In many cases the solicitor’s retainer will be created by words, whether written or spoken, which do not have the precision to be expected of a contract, and the solicitor may have to be very careful to ensure that he clarifies any uncertainties and ambiguities in his instructions.43 But some clients, in particular commercial institutions, will retain their solicitor by means of detailed written instructions. Such instructions unquestionably define the scope of the retainer, sometimes to the advantage of the solicitor44 and sometimes in ways which impose onerous obligations which the solicitor may not have appreciated.45 9.13 Even where written instructions are set out the court will, in an appropriate case, adopt a purposive approach to construction so as to provide business efficacy to the arrangement between the parties. In Hypo-Mortgage Services Ltd v. David Parry & Co,46 the written instructions to solicitors acting for the lender and the borrower required confirmation in the report on title that the borrower had “no other mortgage”. The solicitors were aware that the borrower had other mortgages on other properties. The Court of Appeal upheld the decision of Sir John Vinelott at first instance that the instruction should be construed as applying only to mortgages on the property which was to be charged, because to construe it as applying to any mortgage of any asset would make the solicitor’s task impossible. A purposive approach was also adopted by Chadwick J in Bristol and West Building Society v. Fancy and Jackson.47 In the case brought against Colin Bishop the claimant lender’s standard instructions imposed a duty on the solicitors to inform the lender if the transaction was proceeding by way of sub-sale. The solicitors argued that they were not under a duty to inform the lender where the borrower’s purchase was part of a “back to back” transaction which was not, strictly, a sub-sale. Chadwick J rejected the argument, holding that, though there is a technical distinction between a sub-sale and a “back to back” transaction,48 the instructions were sufficient to impose a duty on the solicitor to inform the lender where the transaction was “back to back” in nature because it “would have been obvious that the lender was concerned to know whether the intermediate vendor was selling on to an associate at a profit”.49 9.14 The retainer may set out not only what work is to be done, but also who is to carry out that work. If a client has expressly retained a practice on the basis that his instructions will be performed by a solicitor, the practice will be in breach of retainer if the instructions are delegated to a clerk or legal executive.50 If the client is at the outset under a misapprehension as to the status of the individual who is acting for him, but the misapprehension is corrected during the course of the retainer, the firm will normally be entitled to payment of its fees.51II. NO SUCH THING AS A GENERAL RETAINER
9.15 In Midland Bank v. Hett, Stubbs & Kemp,52 a claim arising out of a failure to register an option, Oliver J said:“Mr Harman sought to rely upon the fact that Mr Stubbs was Geoffrey’s solicitor under some sort of general retainer imposing a duty to consider all aspects of his interest generally whenever he was consulted, but that cannot be. There is no such thing as a general retainer in that sense. The expression ‘my solicitor’ is as meaningless as the expression ‘my tailor’ or ‘my bookmaker’ in establishing any general duty apart from that arising out of a particular matter in which his services are retained. The extent of his duties depends upon the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do.”53