QBE European Operations

Professional practices update

Claims against solicitors - a checklist

QBE Professional practices update - Claims against Solicitors - a checklist/Jan 2013

Claims against solicitors - a checklist

Limitation
Were proceedings issued more than six years after the cause of action accrued? Are there different dates for the accrual of the cause of action in contract and tort? In contract the primary limitation period will be six years from the date of breach, and in tort it will be six years from when the damage was suffered. Claimants may try to argue that the damage was suffered at a later date than the alleged breach of duty by the solicitor following Law Society v Sephton (ie effectively extending the limitation period).

The purpose of this document is to provide a checklist of some of the matters which merit consideration when a claim is brought against a solicitor (and does not include consideration of claims of fraud). It is not intended to be used to conduct the professional liability litigation but as a guide to some of the relevant points that the solicitors instructed to deal with a professional liability claim on your behalf will consider in relation to defence of a claim.

Does section 14A of the Limitation Act 1980 apply? This gives an extended period of limitation of three years from the date of requisite knowledge. Is there any argument that the solicitor owed a continuing duty of care to the client? (Carlton v Fulchers (1997 )).

Identity of the claimant

Is the claimant a client? Common situations where it is sometimes unclear who the client is include: Whether the solicitor is acting for a company and/or the shareholders, for a borrower and/or a lender, or for a husband and/or a wife. If the claimant is not a client could the solicitor none the less owe a duty of care? The tests are foreseeability, proximity and fair just and reasonable; assumption of responsibility; and an incremental approach from decided cases.

Identity of the defendant

Has the claimant brought the claim against the firm, individual partners or employees or both If claiming against the firm, has the claimant named the correct entity? The claimant must sue the partnership that existed at the time the cause of action accrued. This is a point that is often misunderstood, especially where the firm has converted to an LLP since the cause of action accrued.

QBE Professional practices QBE Professional update - Claims practices against update Solicitors - Risk Management/Jan - a checklist/Jan 2013 2013 2

What duties does the solicitor owe the claimant?

Is there a retainer letter and does it cover the work that is the subject of the claim? In most cases a contractual relationship will exist between the claimant and the solicitor either expressly or by implication. If there is a retainer letter, then it is likely that a number of the solicitors duties will be set out expressly. The solicitor will also usually owe implied duties, such as the duty to act with reasonable skill and care. There will also be concurrent duties in tort which will be largely determined by the terms of the retainer but may no be concurrent There is no such thing as an implied general retainer to advise on everything to do with a clients affairs, although claimants can sometimes assume that this is the case. For example, if a solicitor is instructed to advise a company on the tax consequences of a transaction that does not necessarily mean that he is obliged to give an individual director personal tax advice. Are the solicitors fiduciary duties relevant to the claim? The solicitor will also owe fiduciary duties including a duty not to act in conflict, a duty to act in good faith and a duty of confidentiality. What is the scope of the duty of care that the solicitor owes? A solicitor is not, without specific agreement, a guarantor of outcomes.

Was the solicitor instructed to advise in relation to the whole transaction or on a specific part of it. What type of solicitors firm and department and individual within the firm is involved in the matter? If the solicitor or firm is held out as having particular specialist expertise in an area then they will be judged by the standard of a reasonably competent solicitor with experience in that field. (Hicks v Russell Jones & Walker) What is the nature of the client? Is it an individual seeking legal advise for the first time on a private matter such as a will, or is it in-house counsel at a corporate client giving a repeat instruction? An inexperienced client is entitled to expect the solicitor to take a broader view of the retainer (Carradine Properties v DJ Freeman) The solicitor will be expected to be competent in the field that is relevant to the particular matter (Hurlingham Estates v Wilde & Partners) The solicitor is not generally under a duty to advise on the wisdom of the transaction or to provide commercial advice (Pickersgill v Riley) There may be a duty to warn the client about particular issues the solicitor comes across during the retainer (Credit Lyonnais SA v Russell Jones & Walker)

QBE Professional practices update - Claims against Solicitors - a checklist/Jan 2013

Breach
Does the error amount to negligence? Not every error a solicitor makes is negligent. The usual position is that the solicitor is required to exercise reasonable care and skill (unless for example the solicitor has agreed contractually to a higher standard of care). For example, if a solicitor advises wrongly on the construction of a document the error will not necessarily be negligent if it is a reasonable construction. However, it may be negligent not to advise the client that the matter is open to interpretation. Did the solicitor take adequate instructions and was the solicitor following the clients instructions? If the solicitor did act on instructions that will usually be a defence unless the clients instructions were a result of inadequate legal advice. Was the solicitor relying on counsels advice? Solicitors are entitled to rely on the advice of counsel properly instructed. The solicitor must however, exercise his own independent judgment and reject counsels advice if it is obviously or glaringly wrong (Locke v Camberwell HA (2002) Ridehalgh v Horsefield ( 1994)). Does the claim involve allegations of breach of warranty of authority? Liability for breach is strict.

What is the correct date on which damages should be assessed? The general, although by no means inflexible rule is that damages are assessed at the date of breach. Loss of a chance issues must be considered where it is necessary to speculate what a third party would have done had the solicitor discharged their duties. For example, if it is alleged that the solicitor should have advised the claimant about the effects of entering into a contract, and it is found that if given proper advice the claimant would have tried to re-negotiate the contract, the courts will assess the value of the lost chance that the counterparty would have agreed to the amendments. Damages for breach of a fiduciary duty will be assessed on a different basis, as they are restitutionary.

Contributory negligence/contribution
Is there an argument of contributory negligence? This is not common in claims against solicitors, although with some exceptions such as claims by lenders against solicitors. The defence of contributory negligence is not available in a claim for breach of fiduciary duty. Can a claim for contribution pursuant to the Civil Liability (Contribution) Act 1978 be brought? Are other professionals responsible for the same loss, eg an accountant, surveyor, counsel or a previous or successive solicitor.

Causation and foreseeability

What would have happened if the solicitor had done as the claimant alleges they should? For example, if the client would have proceeded with the transaction or litigation even if the correct advice had been given there is no causation, as the but for test of causation is not satisfied. Has there been an intervening act by the claimant or third party that has broken the chain of causation? For example, has the claimant been given subsequent incorrect legal advice. Is the damage too remote?

Mitigation
Has the claimant mitigated his loss? Generally speaking a claimant is not obliged to embark on uncertain or complicated and difficult litigation to mitigate his loss (Pilkington v Wood (1953)). However, there are exceptions. For example, a mortgage lender who alleges a solicitor has been negligent has been required to obtain possession of the property and enforce the security (Western Trust Savings Ltd v Clive Travers Co).

Limitation of liability
Is there a limitation of liability contained in the retainer agreement Note that there are limits on the extent to which solicitors can limit their liability and consider whether the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1994 might apply.

Measure of damages
SAAMCo applies to solicitors claims. A solicitor can only be held liable for loss which falls within the scope of his duty (In Haugesund v Depfa the solicitors firm was not held liable for all of the losses flowing from a transaction where the firm was only asked to advise on a specific question on the validity of the proposed swaps). What is the correct measure of damages? The basic rule is that the claimant should be put in the position he would have been in if the solicitor had discharged his duty.

Further advice should be taken before relying on the contents of this summary.
QBE European Operations and Clyde & Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of QBE European Operations and Clyde & Co LLP. QBE European Operations and Clyde & Co LLP is a limited liability partnership registered in England and Wales. Authorised and regulated by the Solicitors Regulation Authority. QBE European Operations and Clyde & Co LLP 2013.

Clyde & Co LLPs Professional Indemnity Team has kindly given us full permission to reproduce this document, information correct as at August 2012.

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4179/Claims against Solicitors - a checklist/JAN2013 QBE European Operations is a trading name of QBE Insurance (Europe) Limited and QBE Underwriting Limited. QBE Insurance (Europe) Limited and QBE Underwriting Limited are authorised and regulated by the Financial Services Authority. QBE Management Services (UK) Limited and QBE Underwriting Services (UK) Limited are both Appointed Representatives of QBE Insurance (Europe) Limited and QBE Underwriting Limited.