Three Steps To Limiting Liability

How can solicitors before starting a client assignment take steps to limit the risk, or consequences, of being found in breach of duty? Richard Dedman focuses on three important approaches.

LIMITING THE SCOPE OF WHAT THE SOLICITOR AGREES TO DO

The engagement letter records what client and solicitor have agreed to be the solicitor's assignment. Equally important it can help to remove dispute or ambiguity as to what the solicitor is not required to do.

Best practice is set out in paragraph 12.08(1) of the Law Society Guide to the Professional Conduct of Solicitors (8th Edition) ("the Guide"):- "It is essential at the outset for a solicitor to agree clearly with the client the scope of the retainer and subsequently to refer any matter of doubt to the client. If a solicitor limits the scope of the retainer it is good practice for the limits of the retainer to be precisely defined in writing to the client." Where this practice is not followed, the solicitor is exposed to the risk that he will be found to owe a wider duty to his client going beyond the discrete task on which he is instructed. In simple cases the solicitor is under no duty to go beyond his instructions by offering unsought advice on the wisdom of the transaction, (Clark Boyce v Mouat (1994)). However during the course of many instructions the solicitor will become aware of information or form views which might cause the client to revise the instructions. The solicitor has a duty to advise his client of risks which should be obvious to him but which the client may not appreciate (Boyce v Rendells (1983)) and it is especially difficult to argue successfully that a matter is not the solicitor's responsibility when the client is inexperienced (Carradine Properties Limited v D J Freeman & Co (1999)); he also has a duty to pass on information he learns during the course of the instructions which may be important to the client (Mortgage Express v Bowerman (1996)). Even if the level of fees agreed reflects a limited task this will be unlikely to let the solicitor off the hook.

The courts can also be unsympathetic even if the client had other professionals involved, for example accountants, on whom the solicitor understood the client also to be relying. In many commercial transactions, the solicitor performs a coordinating role and is regarded as the lead advisor. The Courts will frequently hold the solicitor responsible in such circumstances, for example for failure to give tax...