Courts protect lawyers against commercial negligence claims

The courts have delivered a severe blow to businesspeople who sue law firms for negligence on the grounds that solicitors have given them inadequate commercial advice.

The provision of commercial advice is a grey area for solicitors, and many negligence claims rest on the fact that a solicitor gave commercial advice and got it wrong.

A judgment just handed down by the Privy Council in Pickersgill v Riley has stated that solicitors are not responsible for commercial mistakes made by experienced businesspeople.

The case centres on Jersey lawyer Barry Pickersgill of Pickersgill & Le Cornu, whose former client, publisher Michael Riley, did a deal with a company that he had not realised had no assets.

The Privy Council said the lawyer was not to blame and set out new rules stating when a solicitor should advise on the commercial aspects of a client’s deal.

“What the judges are saying is that, if your client is an old lady who wants to invest in a dodgy trust, then perhaps you should say, ‘Are you sure that’s right?’ But if you’re acting for ICI on a deal, you probably have no duty to say, ‘Do you think this deal is a good idea?’” said Reynolds Porter Chamberlain partner Nigel Faulks, who won
the case alongside 4 New Square’s Bernard Livesey QC.

Sarah Clover, head of the solicitors’ group at Barlow Lyde & Gilbert, said: “Something goes wrong commercially, people cast around for someone to blame – and it’s usually the lawyers.”