UK: Three Steps To Limiting Liability

Last Updated: 12 August 2003
Article by Richard Dedman

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.


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 advice, without a clear agreement putting responsibility for such advice elsewhere (Hurlingham Estates v Wilde & Partners (1997)).


The Guide provides in relation to clients:- "Although it is not acceptable for solicitors to attempt to exclude by contract all liabilities to their clients, there is no objection as a matter of conduct to solicitors seeking to limit their liability provided that such limitation is not below the minimum level of cover required by the Solicitors Indemnity Rules." (Paragraph 12.11).

However, there are legal constraints upon a solicitor’s ability to limit liability by contract. Limitation is not permissible at all in a "contentious business agreement" under section 60(5) Solicitors Act 1974 (though this does not necessarily extend to all work carried out by "contentious" departments, such as most tribunal work) or in cases of fraud.

Attempts to limit liability for negligence in respect of non-contentious work are governed by s2(2) of the Unfair Contract Terms Act 1977 ("UCTA"). The contract term must satisfy the requirement of reasonableness taking into account the resources which the solicitor could expect to have available to him for the purposes of meeting the liability and how far it was open to him to cover himself by insurance. The fact that the solicitor could theoretically have obtained insurance above the cap is probably not fatal if the cost would have been disproportionate. In various cases, the court has considered in relation to both parties the ease and cost of obtaining insurance.

Most businesses – including professional firms – seek to protect themselves in this way. However, solicitors have been very slow to follow suit (see the Commercial Law Sub Committee of the City of London Law Society Survey 1999). For those who do, paragraph 12.11 of the Guide makes the point that "it is preferable that the client’s acceptance of the limitation should be evidenced in or confirmed by writing". In practice this should be dealt with in the engagement letter.

Paragraph 12.11(6) of the Guide says in relation to third parties: "As to the solicitor’s liability to persons who are not his or her clients, … it may be reasonable in some circumstances for a solicitor to seek to limit or exclude altogether the liability he or she might otherwise incur to such persons under the principle in Hedley Byrne & Co Ltd v Heller & Partners Limited [1964] AC 465".

Again, solicitors in the UK appear to make only limited use of such disclaimers to third parties (which are probably subject to UCTA) although they are seen, for example, in the context of opinion letters (e.g. Henderson v Merrett (1994)).


Paragraph 3.17 of the Guide allows solicitors to practise in corporate form, subject to compliance with the Solicitors Incorporated Practice Rules 2001 and rules of conduct applying to solicitors’ incorporated practices and to individual solicitors.

Although limited liability vehicles have not historically proved attractive to firms of solicitors (presumably because of taxation issues), the position may now be changing with the advent of LLPs under the Limited Liability Partnerships Act 2000 which provides a more favourable tax regime than that for limited liability companies.

A key issue for law firm LLPs is whether a negligent member of the firm may be subject to unlimited liability, even though the remainder, by virtue of its limited liability status, will not be. For both directors of a limited liability company and members of an LLP, the relevant question is whether they have assumed personal responsibility towards the Claimant, following the doctrine which originated in Hedley Byrne.

The House of Lords in Williams v Natural Life Health Foods Limited (1998) suggested that such assumption of personal responsibility by directors will be rare. However, current Law Society Guidance states that it "would be dangerous to assume that LLP status will protect solicitors from the consequences of personal negligence" as there is an argument that "a solicitor or other fee earner would often or always be liable to clients in tort, because the courts would regard legal advice given in the course of a solicitor-client relationship in a different light from representations made (as in the Williams case) in the course of arm’s length negotiations". Support for this view can be taken from Merrett v Babb (2001), in which the Court of Appeal held that an employee in a partnership of valuers was personally liable to the firm’s client for his negligent valuation.

However, Merrett was distinguished by Mackinnon J in Bradford & Bingley plc v Hayes Dunphy & Hayes Ltd (2001) where the negligent valuer’s employer was a limited liability company of which he was a director. Moreover, the government made it clear during the passage of the LLP Bill that it intended a "level playing field" for limited companies and LLPs alike.

In order to strengthen the argument that their members should not be personally liable, it is advisable for professional partnerships which decide to become LLPs to stipulate clearly in their engagement letters to clients that no personal responsibility is intended to be assumed by individual members of the firm.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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

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

In association with
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (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

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’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.


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.


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 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.


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.


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.


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.


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

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

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

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