I'm interested in…

  • Strategy & Procedure
  • Catastrophic Injury
  • Professional Indemnity
  • Motor
  • Fraud
  • Disease
  • Liability
  • Commercial Insurance
  • Costs
  • Local Authority
  • Scotland

The scope of a professional's duty – the importance of a properly drafted retainer

In Denning v Greenhalgh Financial Services Ltd [2017] EWHC 143 (QB) the High Court was asked to consider the scope of a professional's duty of care owed to a client and the extent to which the written retainer between the parties might define that duty. 

Factual background

In 2000 the Claimant, Mr Paul Denning, instructed Alexander Forbes Financial Services Limited ("AF") to provide advice in relation to the transfer of his deferred employment benefits from one provider to another ("the 2000 Transfer").

After becoming dissatisfied with the service provided by AF, Mr Denning instructed Greenhalgh Financial Services (the "Defendant"), in place of AF, to provide advice on the management of his investments.

The Claimant was asked to, and did, sign a 'Client Agreement', which sought to define and limit the scope of the Defendant's retainer. Specifically, the Client Agreement expressly stated that the retainer was limited to advising and arranging deals in investments and contracts of insurance, and the Defendant made is clear that it was not authorised or qualified to give legal advice.

In 2009/2010 the Claimant made complaints to the Ombudsman in respect of AF's advice. The Ombudsman found in the Claimant's favour in respect of some complaints but found that the 2000 Transfer complaint was made out of time.

In the light of the dismissal of his complaint and a subsequent failed legal claim against AF which was abandoned on the basis that it was statute-barred, the Claimant commenced legal proceedings against the Defendant alleging that the Defendant had failed to (i) review the advice given by AF in respect of the 2000 Transfer and (ii) advise on a potential claim against AF in respect of that advice. It was the Claimant's claim that but for the Defendant's negligence, it would have pursued a claim against AF in respect of the 2000 Transfer, which claim would have been successful. The Defendant resisted the claim, not least on the basis that it owed no duty to the Claimant to review and advise on the 2000 Transfer, that being outside the remit of its retainer.

It was common ground between the Claimant and the Defendant that the Claimant did not expressly instruct the Defendant to review the 2000 Transfer. The Claimant pursued its claim on the basis that the Defendant had acted negligently, and in breach of a duty or implied duty in contract and tort to provide its services with reasonable care and skill. The Claimant relied on authority which has established that a professional may owe a duty to give advice outside the scope of a retainer if, in the course of performing the retainer, the professional comes upon information which would lead any competent professional to perceive and advise upon a legal risk (Credit Lyonnais SA v Russell Jones & Walker [2002] EWHC 1310). 

Decision

Mr Justice Green held that the Defendant did not owe a duty of care to review and advise on the 2000 Transfer as alleged. He examined various authorities which establish that any professional duty depends upon the terms and limits of the retainer; that the extent to which the parties have sought to regulate their relationship and to allocate risk by contract is an important factor; and that there is no such thing as a 'general retainer'. 

In distinguishing the present facts from Credit Lyonnais, Mr Justice Green highlighted that i) it was common ground that the Defendant was not instructed to consider the merits of the advice given by AF in respect of the 2000 Transfer (ii) the Defendant was not paid to advise on the 2000 Transfer (iii) the 2000 Transfer was, at the date of the Defendant's instruction, history and context only; it had no substantive connection to the matters upon which the Defendant was expressly instructed to advise (iv) the Claimant did not provide the Defendant with information which would have enabled the Defendant to advise upon the advice given by AF in relation to the 2000 Transfer and the alleged 'errors' were not obvious (v) the nature of the advice it is alleged the Defendant should have provided was different in nature to the subject matter of the retainer; the former being a hybrid of financial and legal expertise requiring a knowledge of the law of tort and limitation (vi) it was not necessary to imply such a duty in order to give efficacy to the retainer. 

Commentary

This case serves as a useful reminder of how important it is for professionals to set out in writing and in unambiguous terms, the scope of the retainer at the outset of any instruction. This takes on an even greater importance for those instructions that have a particularly complex historic background and in respect of which other professionals may have advised previously. It also serves as a timely reminder to those professionals that act for longstanding clients and who may have 'ongoing', 'background' retainers, to keep the written retainer under review and, as and when a matter develops, to consider if the retainer is adequate and if not whether it needs updating or a new, separate retainer altogether.

Ultimately, this case should provide some comfort to professionals that if parties have taken steps to regulate the scope of a retainer, it will only be in exceptional circumstances that a Court will seek to extend a professional's duty beyond the scope of an agreed retainer. At the very least, there must necessarily be a close and strong nexus between the retainer and the matter upon which it is said the professional should have advised, but omitted to do so. Such cases would, in Mr Justice Green's view, be 'obvious'. 

Contact

For further information please contact Vikki Courtney, Senior Solicitor on +44 20 7220 5236 or at Vikki.Courtney@dwf.law

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.

Top