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When is a professional’s duty of care extended?

Solutions / 15 June 2017

The scope of any professional’s duty of care is rarely extended, and will only occur in obvious cases that are closely connected with the purpose of the retainer.

In Denning v Greenhalgh Financial Services Ltd [2017] EWHC 143 (QB) the High Court provided a useful reminder that the terms of a retainer are paramount to determining the extent of a professional’s duty of care to its client.

Introduction

For many years the courts have held that a professional’s duty of care depends on the terms and limits of the relevant retainer.  There have been some rare exceptions to this general position when, for example, the professional comes across a legal risk in performing the work under its retainer that a competent professional should advise its client of (as in Credit Lyonnais SA v Russell Jones & Walker [2002] EWHC 1310 (Ch)).

Mr Denning’s Claim

Mr Denning’s position was that the advice of his former pension advisors was negligent and caused him significant loss.  However, the delay in pursuing his claim meant that it was subsequently abandoned.  Mr Denning did not appear to have made this decision based upon the merits of his claim but because he recognised that the period of time for him to bring that claim (known as a limitation period) was likely to have already passed.

Mr Denning then engaged Greenhalgh Financial Services. Whilst Greenhalgh was not specifically instructed to consider the merits of Mr Denning’s historic pension advice, Mr Denning alleged that:

  1. the scope of Greenhalgh’s duty of care to him was extended beyond the retainer to include reviewing the advice he received from his former pension advisor (which was over 8 years earlier) and advising him if that advice was negligent; and
  2. if Greenhalgh had complied with that extended duty, he would have issued proceedings against his former pension advisor before the relevant limitation period passed and recovered substantial damages.

Mr Denning attempted to rely upon the exception in Credit Lyonnais SA to extend the scope of Greenhalgh’s duty of care to him beyond the retainer.

High Court’s Reminder

The High Court disagreed. It struck out Mr Denning’s claim, and was not prepared to extend the scope of his retainer with Greenhalgh, because his claim was not consistent with the circumstances of the Credit Lyonnais SA case.

The Credit Lyonnais SA case shows the rare exception when a professional’s retainer will be extended because in that case:

  • the totality of the information provided to the professional and the issue that was overlooked was “patent”;
  • the overlooked issue should have been advised upon as it was something that the professional was being paid for (i.e. it was not extra work);
  • the overlooked issue was “obvious… closely linked to the matters the subject of the retainer”; and
  • the judge was not referring to cases where the professional discovered a risk to the client in documents he was not asked to read.

Summary

This case is a useful reminder that a professional’s duty of care will only be extended in limited cases, where (i) the professional comes across a legal risk that any competent professional would advise upon, and (ii) that risk is closely connected with the purpose of the retainer.

The approach taken by the High Court will not be surprising given that the purpose of any retainer (and contract law generally) is to give certainty to the terms that regulate the parties’ relationship and allow the parties to allocate risk accordingly.

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