This case arose as a consequence of William Hare Limited v Shepherd Construction Limited (See Bulletin 63). In that case, the Court of Appeal held that Shepherd, the main contractor, could not withhold payment from William Hare, a sub-contractor, under a "pay when paid" clause in a 2007 contract following administration of the developer under a new type of administration introduced in 2002. The clause had not been updated to include this type of administration and the Court of Appeal was not prepared to extend the clause to cover it. Its standard sub-contract clauses for this type of contract were drafted by Masons (a predecessor firm of Pinsent Masons LLP) in 1998. The firm was not involved in drafting the sub-contract itself in 2007.
The relationship between Masons and Shepherd started in about 1990 and continued over the years with about 70 separate items of work. Between 1998 and 2008, the firm (and its successor firms) drafted thirteen separate sub-contracts or sets of sub-contract amendments for Shepherd. The question which arose was whether Pinsent Mason should, in light of the new insolvency procedure introduced in 2002, have advised Shepherd that a review be undertaken of "pay when paid" clauses in its sub-contracts.
Shepherd argued that because instructions were given informally (usually over the telephone), there was a single contract or retainer comprising a range of specific instructions and commissions. The single contract was based upon the ongoing and close relationship between the parties, and upon the conduct of the parties over a number of years. It went on to argue that a term was necessarily implied into the single contract that included an ongoing duty on Masons (and its successors) to review the suitability of drafting amendments and/drafting advice previously provided to Shepherd. (Shepherd conceded that if there were multiple separate contracts, there was some difficulty in arguing that Pinsent Masons had an obligation to review earlier advice, so it had to argue that there was an over-arching contract).
The High Court, Mr Justice Akenhead, rejected the argument and held that there was no obligation on a firm of solicitors to review previous advice. His reasons were as follows:-
- A solicitor's functions and responsibilities must primarily be determined by his or her retainer. There was no suggestion or assertion that there was any express agreement by which the single contract between Shepherd and Pinsent Masons was concluded.
- It was accepted by Shepherd that it was billed for the provision of individual pieces of work. There was no suggestion that Shepherd ever made payments in relation to the single contract.
- The Judge did not see how the placing of specific commissions on a more or less informal basis, even if there were a large number of them, could give rise to a necessary implication that there was some over-arching general retainer by which the solicitor was required to keep under relatively constant review all advice and drafting previously done. The very fact that there were specific commissions suggested that that was all that they were.
- The fact that Pinsent Masons sent out unsolicited briefings or invited the client to breakfast meetings or seminars or even sought to solicit more work from the client did not give rise to any such implication. The fact that the same people within Pinsent Masons had contact with and generally gave advice to Shepherd again did not give rise to there being some general retainer.
It was not alleged that anyone at Pinsent Masons actually knew that the advice previously given in 1998 had become not only obsolete but commercially imprudent in light of the 2002 amendment. However, the Judge did say:-
"Whilst it might (arguably) be possibly to imply into that obligation within the 1998 retainer to exercise reasonable care and skill that, if Masons had actually become aware at a later stage that the advice given earlier had become redundant and gave rise to potential commercial problems, it should so have advised the client, that this is not the allegation here".
The Judge went on to say that:-
"There is something commercially and professionally worrying if professional people are held to be responsible for reviewing all previous advice or indeed services provided. There is a difference to be drawn between a specific retainer or commission which imposes a continuing duty on a professional to keep earlier advice or services under review and some sort of obligation which requires the professional to review and revise previous advice given or services provided on commissions or retainers which are complete....... "
The Judge raised other problems with the Shepherd's argument – how long should the retainer last, what happens if the partners who were originally involved retire and move on, what the payment arrangements are, what happens if the solicitors receive no more commissions from the client. The Judge did however "see some force in the argument" that where there was a longstanding relationship and a review of one standard form which leads to the view that fundamental revisions of other standard forms may be required, then the solicitors should advise their clients that such other revisions may be required. It may well be a matter of fact and degree.
At the moment, there is no news on whether the decision is being appealed by Shepherd, but the decision appears to be sensible. It places the onus on companies to ensure that there standard terms are regularly reviewed. For instance, they are unlikely to have any cause for complaint if their solicitors send out a briefing note with advice on a change in the law that affects previous terms drafted by the solicitors. It would be "a matter of fact and degree" if solicitors advising on a set of terms should consider whether changes needed to be made to other terms previously drafted – so it would be prudent for company to include the needs for a review of previous terms when instructing solicitors to review a set of terms.
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