Professional Negligence Round Up Of 2018

Introduction

2018 was another significant year for professional liability cases. The key developments have fallen into two broad areas. The first is liability. A wide range of questions relating to the responsibilities owed by professionals has come before the courts this year. To whom do professional people owe duties? For whose acts can they be held to account? What is the proper scope of professionals' responsibilities and who is to judge the appropriate standard? The second area is "loss of a chance." Aspects of this issue went before the Supreme Court in late 2018 but it is likely to remain a "hot topic" for the foreseeable future.

The first area of development - liability

When do professionals owe duties to non-clients?

There is nothing new in the courts being called upon to decide when a professional person owes a duty of care in tort to a party that has not in fact engaged him. However, the 2018 cases were notable for their clear focus on assumption of responsibility in preference to the other potentially available tests. In Steel v NRAM [2018] 1 W.L.R. 1190, the Supreme Court considered whether a solicitor acting for a borrower owed a duty of care to a mortgage lender.1

The case was unusual in its facts. The defendant solicitor, who acted for the borrower, had sent an email to the lender (Northern Rock) that was peppered with obvious errors. It led to the lender releasing all its security when it was only supposed to be releasing a charge over one unit. However, Northern Rock could easily have detected the solicitor's mistakes if it had only checked its own files.

Having considered the potential routes to holding the borrower's solicitor liable, Lord Wilson, with whom the other Justices agreed, concluded that the concept of assumption of responsibility was the "foundation of the liability...The concept fits the present case perfectly."

However, the Supreme Court decided that the solicitor had not assumed responsibility to Northern Rock on the facts. The transaction was at arm's length and between two commercial parties. It was not reasonable for Northern Rock to have relied on what the borrower's solicitor said, and it was not reasonably foreseeable that it would do so. The facts had been at Northern Rock's fingertips: Lord Wilson pointed out that there was no authority for the proposition that there could be an assumption of responsibility "for a careless misrepresentation about a fact wholly within the knowledge of the representee."

Steel v NRAM was not a promising case for the claimant on the facts, but there are other circumstances in which a party to a transaction often relies on the solicitor for the opposing party doing a proper job. This often occurs in conveyancing transactions, where purchasers depend on the vendor's solicitors checking that the vendor is who he says he is, or lenders depend on borrowers' solicitors ensuring that the mortgage monies end up in the right hands. Is this type of case enough to lead to a recognition that a solicitor for an opposing party owes a duty of care in tort?

This question was considered in the conjoined appeals of Dreamvar v Mishcon de Reya and P&P Property v Owen White & Catlin [2018] EWCA Civ 1082. Both cases involved purchases of property where the buyers were duped by the vendors. In both cases, the vendors' solicitors had carried out inadequate money laundering checks.

The duped buyers argued that the imposters' solicitors had owed them a duty of care in tort to verify their clients' identity. They pointed to the reliance that they necessarily placed on the imposters' solicitors to do their job properly. Nonetheless, the claim in negligence failed. As in NRAM v Steel, the focus was firmly on assumption of responsibility. Patten LJ highlighted that the imposter vendors and the buyers were engaged in a transaction at arm's length. Notwithstanding the convention of buyers not checking their vendors' identity, there was nothing to suggest that the imposters' solicitors had assumed any duty to the buyers to carry out any due diligence on their behalf. It would have been open to the purchasers' solicitors to seek some form of undertaking from the imposters' solicitors about whether the money laundering checks had properly been completed.

By contrast with NRAM v Steel, the claimants in Dreamvar were not merely confined to a claim in tort. They were also able to bring claims for breach of warranty of authority and breach of undertaking.

By acting for a party to a transaction, a solicitor...