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Solicitors' duty of care: Free advice

Padden v Bevan Ashford
16 July 2013
Court of Appeal

Alexia Drew looks at two judgments from the Court of Appeal involving solicitors‟ duty of care. In one of the judgements it was held that a trial judge had been entitled to find that the Defendant firm of solicitors had acted negligently in failing to properly advise a client regarding the risks involved when signing documents agreeing to give up her interest in certain assets.   

Facts

In 2003, the Claimant discovered that her husband (who was a financial adviser) had misappropriated substantial amounts of his clients' funds, including £800,000 from one particular client (Mrs Partridge). Upon discovering this his employer obtained a freezing order against his assets, including the family home.

The Claimant’s husband instructed a solicitor, who procured an agreement with solicitors acting on behalf of Mrs Partridge whereby the Claimant’s husband would pay Mrs Partridge £860,000 (plus legal costs), on the basis that she would not seek to instigate criminal proceedings herself.

The Claimant was visited by her husband’s solicitor who told her that the only way to save her husband from going to prison was to sign over her interest in the house, so that he could repay the money. The Claimant agreed to do all that was necessary to prevent her husband from going to prison, for the sake of her children.

The solicitor told the Claimant to seek independent legal advice for the sake of formality, but to ignore any advice given by the solicitor that she should not sign the documents giving effect to the proposed transaction.

In a distressed state, the Claimant visited the Defendant’s offices where she met with a newly qualified solicitor. During the meeting, which last no more than 15 minutes, the Claimant explained her situation and the solicitor advised her not to sign the documents. However, the Claimant said that she still intended to sign the documents. The solicitor did not charge the Claimant for that meeting.

A few weeks later, the Claimant took the documents to the Defendant’s offices, where a partner witnessed the Claimant’s signature and certified that the consequences had been explained.

The Claimant’s husband was subsequently convicted and given a custodial sentence.

The Claimant sued the Defendant, alleging that it had failed to properly advise her of the risks involved.

Trial and re-trial

In the first instance, the Court held that the Defendant had no case to answer; the Claimant appealed to the Court of Appeal, who ordered a re-trial. At the re-trial the Court held that Defendant had breached its duty by failing to advise the Claimant regarding the risks and the fact that there was very little chance of her husband avoiding criminal proceedings. On that basis the Court found that if the Claimant had been given such advice, she would not have signed the relevant documents.

The Defendant appealed to the Court of Appeal on the basis of a causation argument; the Defendant alleged that the Claimant had agreed to do anything possible to avoid her husband going to prison and she would therefore have gone ahead with singing the documents in any event.

Court of Appeal findings

The Court of Appeal held that the Defendant had been negligent in failing to advise the Claimant that the completion of the documentation was very unlikely to prevent the Claimant’s husband from being prosecuted (and ultimately going to prison).

Furthermore, the Court considered that it was clear from the Claimant’s evidence that she would not have signed the documents if the Defendant had advised her correctly and therefore the breach of duty did cause the Claimant’s loss.

Comment

Although many cases depend on their specific facts, this decision highlights the risk of relying on causation arguments in relation to professional advice and specifically the difficulty a professional will have in establishing that a client would have gone ahead whatever the advice.

The case provides even more of a stark reminder of the duties which can be owed by a professional, and in particular a solicitor, even in circumstances where a solicitor has not charged for the advice and has had only limited contact with a client.

For further information please contact Alexia Drew, DWF Fishburns on 0117 301 7395 or at alexia.drew@dwffishburns.co.uk

By Alexia Drew

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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