Lawyers, heal yourselves

With SIF premiums rising solicitors must examine their contracts, says Sarah Ahmed. Sarah Ahmed is a partner at Anthony Gold Lerman Muirhead.

All practising solicitors should be familiar with the basic steps which lead to the conclusion of a contract: offer and acceptance and its various permutations. However, judging by a number of claims against solicitors for negligence, in which my firm has recently obtained substantial compensation for clients, some solicitors do not appear to consider its significance in terms of their own retainer and specifically, how that retainer may be analysed by the court if its scope is in issue.

Therefore, while practitioners routinely urge clients to ensure that their business agreements are translated into legal documents which protect their position and reduce the scope for ambiguity in a business relationship, not all of us practise what we preach.

In cases in which my firm has recently advised, clients have sought their solicitors' advice generally in relation to the acquisition of a business. In each case, it has been the clients' first experience of acquiring a business. Inevitably, they have relied heavily on their solicitors and it is relevant to note that the courts have recognised that “an inexperienced client will need and will be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties than will be the case with an experienced client” – Carradine Properties Ltd v DJ Freeman & Co 1989 Cons LJ.

In none of our cases did the solicitors discuss with the client what they were and were not doing for them. Nor did they confirm in writing what they would do on the clients' behalf.

In each case, this meant that the solicitors failed to address and advise on matters which, had they done so, would probably have resulted in their client not proceeding with an acquisition which was manifestly disadvantageous to them given their objectives and financial resources.

In the case of Griffiths v Evans 1953 1 WLR 1424 at 1428 Lord Justice Denning warned “if the solicitor does not take the precaution of getting a written retainer, he… must take the consequences”. Therefore, while the clients bore the initial brunt of the solicitors' failings, each losing their life-savings in the venture, the solicitors in question and ultimately Solicitors Indemnity Fund and the profession generally took the consequences.

It is common sense that advisers should make clear what they will and will not do for their client. This will ensure that solicitors correctly focus their efforts, and clients understand what their solicitor is doing for them and the extent to which they must rely on themselves. An accurate summary of the solicitors' role manages clients' expectations and prevents disappointment and loss on the part of clients for which the solicitor may be liable.

As the excess payable on claims covered by professional indemnity insurance steadily climbs, it becomes increasingly important to mitigate the risk of claims by clearly stating the legal rights and obligations of each party to the contract. In particular:

ensure you understand what the client requires you to do;

if the client lacks experience in the relevant area consider with them whether or not their instructions are an adequate brief to enable you properly to protect their position;

analyse the client's instructions – can you do what they require you to do – spell out what you are offering to do and on what terms;

do not assume your client understands what role you will play, and what role they will be required to play – record any agreement in writing and specify what you require of them;

if you consider the services which you are performing for a client are limited, put it in writing to avoid misunderstanding.

It is now clear from the decision of the House of Lords in Henderson v Merrett Syndicates 1951 2 AC 145 that a contractual analysis of a solicitor's duties is not the end of the story since liability can be concurrent in contract and tort.

Clients do ask for advice which is beyond the scope of the agreed retainer. Since liability in tort centres on the concept of a voluntary assumption of responsibility, unless the solicitor is prepared to take responsibility for so advising, he or she should state in terms that it is not an area for them to advise the client and, if appropriate, advise them to go elsewhere.

It is very dangerous not to make this clear and even more dangerous to comment on such matters. This may lead the client to rely upon the solicitor and assume that they are advising on areas outside the retainer.

There are words of comfort to be found in Lord Browne-Wilkinson' s speech in the Henderson case at 544 where he states “…the nature and terms of the contractual relationship will be determinative of the scope of the responsibility assumed and can, in some cases, exclude any assumption of legal responsibility to the plaintiff for whom the defendant has assumed to act”. This suggests that such an approach might not present such difficulty if a clear retainer has been agreed at the outset or if the solicitor has clearly warned of the limitations of his or her role.

However, be warned that there are authorities to the effect that the concurrent duty in tort can be more extensive than contractual obligations – Pryke v Gibbs Hartley Cooper l991 1 Lloyds Rep 602 and Holt v Payne Skillington 1995 77 BLR 51 at 71-74.

The challenge for a profession which is often perceived to be pedantic is to manage clients' expectations by ensuring that the process of advising is clear and effective. The obvious starting point from which to achieve this end is a genuine consensus, confirmed in writing, as to what the solicitor is to do on the client's behalf.