UK: Duty Bound: Shepherd Construction Ltd V Pinsent Masons LLP

In a recent decision, the Queen's Bench Division held that a long-standing relationship between solicitors and a client involving many instructions over time did not give rise to a duty to keep under review the suitability of advice and drafting it had previously provided.

This judgment should be of interest to all professionals and their insurers in its consideration and rejection of any such general ongoing duty as "hopelessly wide" and "commercially and professionally worrying".

The alleged general retainer

The claimant began to retain Masons solicitors from 1989 on various matters and in mid-1998 instructed the firm to advise on and draft various amendments to standard forms of construction subcontract.

Masons' advice and drafting correctly reflected the law then in force regarding "pay when paid" clauses in construction contracts ie, clauses which make payment by B to C conditional on B first receiving payment from A. Statute provided that such clauses were ineffective unless, inter-alia, A had an administration order made against it under the Insolvency Act 1986.

In late 2007, a developer engaged the claimant as a main contractor on a shopping centre project and the claimant entered into subcontracts with three parties based on Masons' 1998 drafting. In March 2009, the developer went into administration by way of a directors' resolution. This alternative route into administration had only been added to the Insolvency Act 1986 by way of amendment in 2002 and was therefore not covered by Masons' 1998 drafting.

As a result, the "pay when paid" clauses in the subcontracts were ineffective and the claimant had to pay the subcontractors, even though it had not received any payment in from the developer. Its total losses were over Ł10.6 million

Masons' advice and drafting was not negligent when the work was done in 1998. So the claimant sought to argue that its relationship with Masons was in the nature of a single contract or retainer, comprising various specific instructions/commissions, under which Masons had an ongoing duty to keep under review the suitability of the advice and drafting it had previously provided. Masons allegedly breached that duty by failing to identify that its 1998 drafting needed updating to reflect the 2002 statutory amendment.

In contending for the single retainer, the claimant relied on the extensive and long lasting relationship between it and Masons (and its successor partnerships), involving over 70 pieces of work between 1998 and 2009, including advice on 13 subcontracts. The claimant also relied on the consistency as regards the individual lawyers involved in the different pieces of work and broad consistency as regards the type of work undertaken and the terms of fees charged.

The judgment – no general retainer

The judge rejected the claimant's contention that there was a single general retainer. There was no suggestion that any express single retainer had been agreed or that the claimant was ever asked to make payment in relation to a single retainer rather than for individual pieces of work. The placing of specific commissions, even a large number of them, does not give rise to a necessary implication of an overarching general retainer. Indeed, the very fact that there were specific commissions suggested that that is all that they were. The fact that a law firm sends out unsolicited briefings, invitations to seminars and marketing materials does not change things, nor does the fact that the same individual lawyers may have been involved in many of the matters. It was not alleged that any of the lawyers involved were aware that the earlier contracts had become outdated and/or gave rise to potential commercial problems.

The judge therefore concluded that the general retainer allegation was "hopelessly wide". He commented that "there is something commercially and professionally worrying if professional people are to be held responsible for reviewing all previous advice or indeed services provided" in the absence of a specific retainer. Imposing such a continuing duty would, in effect, turn solicitors into insurers against future legal or other changes impacting on work they had previously done for their clients. This would be unworkable: how long would obligations imposed by an implied retainer continue? Would the obligations survive the departure or retirement of the relevant solicitors? What payment terms would apply? Simply asking these questions shows how difficult it would be in most cases to define a general retainer.

Successor firms - general retainer even less likely

There was an added complication in that Masons had merged to become Pinsent Masons in 2004, which in turn became Pinsent Masons LLP ("PMLLP") in 2008.

The claimant accepted that a single general retainer spanning all three firms was unarguable (not least because the successor firms did not assume responsibility for the services provided by its predecessor(s)). Instead, the claimant argued that there were three general retainers, one with each successive firm, based on correspondence sent at the time of the merger/LLP formation and conduct of the parties which was alleged to be suggestive of continuity of service.

The judge had no doubt that these matters did not give rise to a general retainer to review the advice and drafts of the predecessor firms and he commented that it was highly unlikely that such an obligation would ever be implied.

Circumstances which might give rise to a duty to review previous work

Although the judge rejected the claimant's general retainer analysis, he did identify certain situations which might result in the implication of a duty to reconsider advice given under previous retainers. He said he could "see some force", for example, in an argument that

(i) an instruction to solicitors to review a subcontract may carry with it a duty to revisit previous related advice concerning the same document; and similarly

(ii) a retainer to review one standard form document may lead solicitors to conclude that other standard forms require revision and impose a duty to alert that client to that need.

The judge also gave the example of a private client solicitor retained to advise first on a will and then later on a divorce. That solicitor should expect to be under a duty to advise that remarriage would revoke the earlier will. A duty to look backwards under those circumstances is not surprising and goes to show that the existence or otherwise of a duty to review previous work is fact specific. Wisely, the judge did not attempt to set out any general principles although he did acknowledge that the passage of time would be an important factor. The key consideration in each of the above examples is the knowledge of the solicitor (actual or constructive) of earlier work for the same client which the subsequent retainer bears upon. These may not be issues unique to a solicitor who has acted before: they may be matters which any solicitor, whether or not previously instructed, ought to regard as relevant issues for investigation in carefully carrying out his instructions.

Conclusion

Although this case was in the field of construction law, the issues it addresses are relevant across the professions and to their insurers. The finding that there was on the facts no general retainer to review and revise previous work, and that such a retainer will rarely be implied, was unsurprising but welcome all the same. The fact remains, however, that there can be scope on particular facts for claimants to contend that a professional owed a duty to reconsider earlier work, usually as an incident of a new retainer.

A suitable disclaimer may help to dispose of some potential claims and firms may wish to revisit their terms of business in light of this judgment. The only circumstances in which a disclaimer is likely to be over-ridden are where it should have been reasonably obvious in the context of new work that previous advice needed to be revisited or a warning issued to that effect. As a consequence, a common sense approach to risk management should avoid most problems. In particular, although engagement letters should always be drafted tightly, advisers should not take too narrow a view when considering the knock-on effect of a particular set of instructions in the context of what they know or might reasonably be expected to find out about a client's business and previous work undertaken for that client. Continuity in client relationships will always help to flag up connections between different pieces of work and even if no duty arises it may help to create opportunities for further work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.