Are Your Insureds Exposed To Greater Risks By Ill-Defined Retainers?

• Jurisdiction: European Union
• Law Firm: Weightmans
• Subject Matter: Employment and HR, Insurance, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Insurance Laws and Products, Professional Negligence
• Author: Deborah Sullivan
• Published date: 11 April 2023

We discuss a recent case, which explored whether the professional was under a continuing duty to detect a pre-existing error.

The scope and duration of retainers are recurring themes in professional negligence claims. The stakes are often high - where a claimant establishes that a duty of care spanned several years, it can operate to defeat a limitation defence. We consider the recent case of Honda Group-UK Pension Scheme Trustee Ltd v Mercer Ltd [2022] EWHC 3197 (Ch), which explored whether the professional was under a continuing duty to detect a pre-existing error and which serves as a helpful reminder of the importance of firms effectively delineating the boundaries of retainers.

Continuing duty of care: a recap

The general position adopted by the courts is that, ordinarily, professionals have no continuing duty to review their completed work for latent errors.

Honda Group-UK : an overview

In Honda Group-UK, the Claimants were the trustee, current principal, and participating employers of the Honda Group-UK Pension Scheme ("the Scheme"). The Defendants were pension advisers tasked with providing consultancy services to the Claimants. The Defendants recommended the drafting of a consolidating deed, to replace a deed drafted in 1986 by the Claimants' previous advisers ("the 1986 Deed"). The Claimants accepted the Defendants' proposed fixed fee of '12,000, for producing a first draft of the consolidating deed and having it checked by their in-house barrister. By a letter dated 29 April 1994, the Defendants attempted to limit the scope of their retainer, by specifically excluding the production of further drafts, attendance at meetings or lengthy negotiations but acknowledged that ".. a reasonable amount of negotiation..." would be included.

The first draft of the deed was sent to the Claimants in October 1994 and considered at a meeting of the Scheme's trustees in March 1995. The Defendants were asked to make a number of amendments, for which a time cost could be charged. The drafting then continued at a leisurely pace until ultimately, the third draft of the deed was executed on 10 December 1998.

The Claimants alleged that, during the course of drafting, the Defendants failed to notice an error in the 1986 Deed, which resulted in certain Scheme members receiving more generous benefits than intended ("the Error").

The primary limitation periods in contract and tort had expired by the time that the Claimants issued proceedings. Therefore, the parties...