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What’s new in lawyers’ liability in autumn 2024?

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20 September 2024

Returning from the summer break is a good time to take stock of recent developments in professional liability case law. Helen Evans KC identifies some of the core themes emerging from the recent authorities on lawyers’ negligence, as well as some eye-catching costs decisions involving both solicitors and barristers.

Do you pay a lawyer for their doubts?

Two recent cases have considered the extent to which lawyers are required to advise their clients – or potential  clients- about possible but unlikely arguments, or turns of events. Both cases can be seen as part of a wider set of authorities dealing with how broad advice has to be, or what is classed as “reasonably incidental” to a lawyer’s duty. [1]

The first is Miller v Irwin Mitchell  [2024] 4 WLR 27. There, the Claimant rang a legal helpline about an accident she had suffered. She was given high level information relevant to a prospective client, including about the limitation period applying to her potential claim. She was not however advised to ensure that the potential defendant notify its insurers so that it would have resources available to meet a claim. The Court of Appeal held that Irwin Mitchell had no duty to give advice of this nature. Although it had to take reasonable care to ensure that such advice it did give was correct, the insurance position was not of such concern that it was necessary to address it (para [72]).

To similar effect is the Scottish case of Ronnie O’Neill Freight Solutions v MacRoberts LLP [2023] CSOH 75. There, a freight company sought advice following termination of an agreement by a haulier. The lawyers advised that the agreement could be ended on reasonable notice but did not address a potential argument over whether termination was in fact permissible. On the lawyers being sued by their dissatisfied client, the court held that lawyers do not owe a duty to give advice about all potential arguments. Such a duty would be “virtually meaningless and unworkable” (para [52]). Instead, what needs to be addressed was a matter of professional judgment. Too much advice can be bewildering and there is a “respectable body of professional opinion that a client pays for the advocate’s opinion, not her doubts” (para [41]).

No steps forward for “ex turpi

Since 2020’s Supreme Court judgment in Stoffel v Grondona [2021] PNLR 6 there have been relatively few cases debating when a claimant’s own illegality might “taint” the claim so as to provide a defence. This may not be surprising, given the courts’ apparent and repeated reluctance to let these defences succeed.

In Afan Valley Ltd (in administration) v Lupton Fawcett  [2024] PNLR 23 the argument resurfaced. The claimants were both vehicles of and victims of a “Ponzi Scheme”. They sued their solicitors, asserting that if they had been given proper advice they would not have promoted schemes that turned out to the Unregulated Collective Investment Schemes (“CIS”). The promotion of CIS by unregulated bodies is unlawful under the “general prohibition” contained in s. 19 of the Financial Services and Markets Act 2000 (“FSMA”) . The defendant solicitors sought to rely on this illegality to strike out the claim. The argument was unsuccessful. The court explained that the purpose of the restrictions on promoting CIS under FMSA was both to protect investors and to ensure that those who unlawfully promoted CIS did not profit. Here, however, the offending companies were now in liquidation and the purpose of the litigation was therefore to assist investors and other creditors rather than the entities themselves. If the claims were dismissed for ex turpi causa, the purpose of the prohibition would therefore not be served (paras. [131-134]).

Although the ex turpi arguments did not find favour, the strike out application succeeded instead on grounds that the defendants had not caused any loss. This was because the money that the claimants owed to investors being offset by the moneys they had received.

Everyone join in!

Many of 2023’s cases- such as Ashraf v Lester Dominic [2023] EWCA Civ 4- involved classifying and organising the law on duties to third parties. In 2024, the issue has been revisited again in the context of who should sue when an intended financial gift goes wrong. This issue has troubled the courts repeatedly in the context of wills[2], but 2024’s big case involved a lifetime gift and a debate over whether the settlor, trustee or beneficiaries should bring the claim. The message from Lonsdale v Wedlake Bell [2024] PNLR 21 is that if there is doubt about who should sue, it is better that all potential parties should be before the court. [3]

Costs attacks

Claimants are increasingly reaching for a patchwork of laws requiring fair dealings to mount attacks on lawyers’ costs. A good example of this is the attention-grabbing case of Glaser v Atay [2024] PNLR 8. This was a costs dispute involving a consumer law challenge to fees charged by directly instructed counsel in a family law case. Counsel’s terms required the client to pay fees in advance, including a substantial brief fee for a hearing. The court held that this involved the consumer client paying disproportionately high sums for services that were not actually supplied when the hearing did not take place.  Most startingly of all, under s. 62 the Consumer Rights Act 2015 (“CRA 2015”), the effect of the unfair term was that counsel was not permitted to charge any fees at  all, and there was no room for a quantum meruit fall back. [4]

An interesting companion piece to Glaser is the judgment of the Supreme Court of Western Australia in Stevenson v Zafra [2021] WASCA 181. There, the Legal Profession Act 2008 requires costs agreements to be “fair and reasonable”. A client argued that a lawyer had acted in breach of fiduciary duty by failing to advise on ways of charging other than the 6 minute increment basis. The court held that there is no positive duty to offer costs on terms acceptable to a client but that since charging in 6 minute increments had the effect a client would pay for time not spent:

  • It was a serious matter for a client to consider;
  • The method of charging could be contrary to the interests of a client, and the client would therefore need to make an independent and informed judgment about it;
  • Merely recommending that the client obtain independent advice may not be sufficient to avoid a finding that an agreement is unfair under the relevant legislation (para. [268])

Although both cases arise out of specific and disparate pieces of consumer legislation relating to costs fairness, they might be seen as part of a broader line of cases disapproving unfair or inadequately disclosed charging arrangements, which also has also recently manifested itself in disapproval of partial disclosure of commissions in other professions (see the investment claim of McHale v Dunlop [2024] PNLR 26).

No need for a negligence claim?

Rounding off this brief update, one recent case has made clear that it is not always necessary for clients to bring a separate negligence claim to recover costs from a negligent professional. In Pead v Prostate Cancer UK & Ors (also known as Re McKay) [2024] PNLR 13 there was a dispute over the meaning of a will. This had led to litigation in which it became apparent that the solicitors’ drafting of the clause in question had caused problems. Since he was sufficiently apprised of what had gone wrong and the solicitors who had done the drafting had been involved in the case, the master required them to pay costs of the rectification dispute without the need to issue a separate negligence claim against them.  This was an unusual route to cost recovery[5]– but one that itself kept costs down.

© Helen Evans KC 4 New Square Chambers, September 2024

This article is not intended as a substitute for legal advice. Advice about a given set of facts should always be taken.

Helen Evans KC was called in 2001 and appointed silk in March 2022. Helen specialises in professional liability, regulatory, fraud, contempt of court and insurance work. A large part of her practice focuses on lawyers’ and accountants’ matters. Helen is a co-editor of the solicitors and barristers chapters in Jackson & Powell on Professional Liability and the chair of the appeal panel of the Chartered Institute of Management Accountants. Prior to taking silk, in November 2021 Helen was named “Professional Negligence Junior of the Year” and in April 2022 was named “Times Lawyer of the Week.”

[1] For the issue of “reasonably incidental”, see my 2022 article at https://www.4newsquare.com/blurred-boundaries-just-how-far-do-solicitors-duties-extend/

[2] See eg. Daniels v Thompson [2004] PNLR 33.

[3] You can read more about this case- including the limitation defence run by the solicitors in an article I wrote with Amanda Savage KC at https://www.4newsquare.com/wheres-the-limit-a-recent-contrasting-pair-of-lawyers-liability-cases-on-duty-and-limitation/

[4] The CRA 2015 was passed in order to bring European consumer directives into effect. European consumer legislation also gave rise to a successful legal challenge in the Lithuanian case of  DV v MA [2023] PNLR 16.  The Court of Justice of the European Union held that a letter of engagement merely providing a lawyer’s hourly rate was not sufficiently clear to allow the client to make a prudent decision about likely costs.

[5] See also Marley v Rawlings (No 2) [2014] UKSC 51.

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