Lawcovernotes December 2019

Often, one of the first questions in a claim against a solicitor is whether the act or subject of the claim was within the solicitor’s retainer. A clearly defined retainer should stipulate the responsibility of the solicitor and the li m itations of that responsibility. Failure to do so leaves the solicitor open to the possibility of carrying a broad general retainer and adopting a “penumbral duty of care” (being a duty beyond that which is contemplated by the solicitor). Issues regarding retainers occur often and a recent claim highlights this issue again. The facts The solicitor had been retained to advise a client on the purchase of a business under a franchise agreement. The purchase was completed but the business failed. The client lost the value of the purchase price, set-up costs and incurred a rental liability. The client brought a professional negligence claim against the solicitor for failing to advise on the commercial viability of the business. Client position The client alleged that the solicitor had taken on a broad retainer to provide not only legal advice as to the terms of the franchise agreement, but also provide advice as to the commercial viability of the business itself. It was alleged that the solicitor had breached this broad retainer and the client sought to make out a “no transaction” case, meaning that the client would not have proceeded with the transaction if proper advice had been provided. Solicitor position The solicitor maintained that the retainer was limited to advising on the leasing arrangements of the premises and did not extend to advising on the terms of the franchise agreement or the commercial viability of the business. Unfortunately, the difficulty faced by the solicitor was that the file did not contain appropriate documentation (such as a clearly defined retainer agreement) or file notes to support this position. In the absence of appropriate documentation or evidence, the client’s allegations were unable to be returned. Solicitors need to remain aware and limit their potential liability exposure by: ^ Clearly defining and properly documenting their retainer with the client ^ Ensuring that there is a clear understanding between the solicitor and the client as to the terms of the retainer. This may include limiting the retainer to exclude legal advice on a certain area beyond the expertise of the solicitor ^ Ensure that advice constitutes the “provision of legal services” and does not venture into financial or commercial advice which should properly be obtained by another relevant professional ^ Where the solicitor advises the client to obtain advice from another professional or legal practitioner, that advice needs to be recorded in writing. The client should also be advised as to the consequences of not doing so. Tony Reynolds Claims Solicitor 15. What does a retainer really say about the advice to be given?