Lawyers Duty of Care in Torts PDF

Preview

Summary

Summary of Lawyers' Duty of Care in Torts ...

Description

Lawyers’ Duty of Care in Tort Dal Pont Ch 5 A. Liability / Responsibility in Tort as Compared to Contract Hawkins v Clayton (1988) 164 CLR 539 at 574–588 per Deane J In 1970 a testatrix made a will appointing an executor and leaving him the residue of her estate. The will was retained by the solicitors by whom it was drawn. The testatrix died in January 1975, but the solicitors made no attempt to locate the executor and inform him of the will until March 1981. In October 1982 the executor obtained a grant of probate. Between the testatrix's death and March 198 I the main asset of her estate, a house, was permitted to fall into disrepair and to lie vacant for a substantial time. The trend of modern authority endorses a tortious duty of care that “prima facie transcends that contained in the express or implied terms of the contract”. Astley v Austrust Ltd (1999) 197 CLR 1 (contributory negligence by client) (but now see Wrongs Act 1954 (Tas), s 4) The court rejected the view that a tortious duty to take reasonable care ousts the need to imply a term that effect into the retainer. Both causes of action remain: the mere fact that a contractual duty to take reasonable care is implied in law does not restrict reliance to solely a tortious cause of action. Inquiries arising out of a claim in tort: 1. the first inquiry made by a client against a lawyer is the scope of the lawyer’s duty of care. 2. Then it must be ascertained whether or not, in acting as he did, the lawyer met the requisite standard of care. B. To whom is the Duty Owed?

C. Liability to Client 1. The duty of care  

restricting the scope of the duty of care danger of giving unqualified advice

The scope of the lawyer’s duty of care in tort is prescribed by the scope of the retainer. The scope of the lawyer’s duty of care in tort can be limited by the retainer. Can liability in tort arise outside the scope of the retainer? Generally, matters which fairly and reasonably arise in the course of carrying out those instructions must be regarded as coming within the scope of the retainer. Hawkins v Clayton: the tortious duty of care may require a lawyer to take positive steps beyond the specifically agreed professional tasks or function where necessary to avoid a real and foreseeable risk of economic loss being sustained by the client. The scope of the duty of care is influenced by the client’s need for advice.







An inexperienced client will need and be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties than will be the case with an experienced client. Therefore, more will be expected from the lawyer regarding a client suffering a disadvantage or who is temporally fragile if this is likely to cause the client to place greater trust in the lawyer’s judgement. The duty of care here requires the lawyer to carefully explain the incidents of the representation and may dictate active steps that would not have been required had the client not been at a disadvantage.

Davies v Camilleri The D borrowed money on the security of her home, having been led to believe by a mortgage broker that the money would be safely invested by and through him at a high return. The solicitor who drafted the mortgage document also acted for the lenders (the plaintiffs). The moneys advanced were lost and the plaintiffs sought to enforce the mortgage against the D’s home. The D’s attempt to have the mortgage set aside as against the plaintiffs for unconscionable dealing failed because she was under no special disadvantage. Her claim against the solicitor succeeded. This was because the D was uneducated or commercially uneducated and needed more explanations of transactions. He took no steps to satisfy himself that the D had an understanding of the transaction/ She asked no questions during the conference and that should have alerted him to her lack of knowledge and the actions that he needed to undertake. Leda Pty Ltd v Weerden (No 2) (2006) 62 ATR 100 [affd (2007) 63 ACSR 636] A tax adviser’s negligent failure to qualify the terms of advice to a client was held to not have been causative of the client’s loss because the client was a sophisticated operator aware of the risks of the transaction the subject of the advice. 2.

Factors influencing the scope of the duty of care 

the extent to which the lawyer is retained to advise

“The [law] distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.” (Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 at 214) 

the nature of the client

Lawyers should err on the side of stating the obvious and fully apprise experienced clients of their legal entitlements and obligations, even for legally trained clients, unless the client has clearly instructed otherwise. Talbot & Olivier v Shann [2005] WASCA 34

A lawyer was found negligent for failing to advise a lawyer-client of the likely impact of fiduciary law and the presumption of undue influence on a transaction in which the latter was involved. 

the circumstances within which the advice is given or sought

The urgency or time pressure surrounding the circumstances in which the lawyer’s advice is sought can influence the scope of the duty of care. It relates mainly to qualifying the advice supplied and properly apprising the client of the risks attached to the intended course of action. May v Mijatovic (2002) 26 WAR 95 A solicitor was instructed to apply for an injunction on short notice. The injunction was subsequently dissolve and the client held liable on his undertaking as to damages, when the evidence proved insufficient to support the injunction. The client sought to recover the damages from the solicitor. Held: there is a need to strike a balance between a lawyer acting with sufficient resolution to achieve a result in an urgent matter and acting with due care so as not to expose the client to liability. Where the claim has no merit, or the lawyer lacks the necessary skill or experience to handle it, the lawyer must say so, regardless of the client’s demands for immediate action. Otherwise, the lawyer may follow the client’s instructions having first made the client aware of any real and foreseeable risks of loss that might stem from the contemplated action. The solicitor was held to be negligent because he did not advise the client of the risks of loss from the course of action that the client wanted. The general principle: when engaged as the plaintiff’s solicitor, the solicitor is under an obligation to alert the plaintiff to the possibility of adverse consequences. 



The solicitor was require to undertake a process of analysis of the claim sought to be brought and to advise the plaintiff of his opinion and of the adverse consequences that could follow. The solicitor is required to exercise his independent judgement to ensure that the client’s desired course of action results in a loss.

Preliminary advice supplied on a single occasion  

 

It is important to identify the moment at which the lawyer is retained. Where a prospective client seeks the advice of a lawyer on a single occasion, and does not retain any other lawyer in the matter, it is legitimate to inquire whether the lawyer has, by giving advice on the single occasion, assumed a duty of care to the client Possible for a D.O.C to be assumed without a formal retainer, even an implied one. Dependent on the facts

Impact of the nature of the transaction or dealing Transaction or dealing with unusual terms or characteristics 

a lawyer retained to effect a transaction must not only follow the client’s instructions but also bring to the client’s attention any aspect or term of the transaction that is unusual or that could generate unexpected liabilities or obligations.



The scope of the duty of care depends on the client’s experience, the nature of the lawyerclient relationship and the risks to which the client may be exposed.

Failure to warn of absence of standard clause  

A lawyer may be liable in negligence for failing to advise clients of the absence of a standard clause in a document and its implications. Littler v Price: the solicitors failed to inform clients who had purchased a unit un a complex on a long-term lease as to the absence of guarantees in a lease by the directors of the lessee. To draw the client’s attention to the absence of the guarantee was a necessary part of the solicitor’s duty to explain the terms of the proposed lease and therefore the solicitors acted negligently.

Where a transaction or dealing is improvident 

Lawyers retained to carry out a transaction that is improvident from the client’s point of view should consider whether the client needs to be warned against pursuing the transaction or at least advised of the risks to which he or she may be exposed.

General principle: if the client is fully informed of the risks attendant on a transaction, and does not lack capacity, the lawyer has fulfilled her or his duty, and may act in the transaction.  

A prudent lawyer would query if the client is exercising free and independent will in respect of; and understands the transaction. The advice should be given in a private meeting with the client, fully documented in writing and signed by the client.

Disclosure of information relevant to the representation Scope of the duty of disclosure and prospects for liability   

The duty of care requires a lawyer to reveal to the client all material information within her or his possession relating to the client’s affairs. This includes keeping the client informed of the progress of the representation: reflected by statute. A client is entitled to the full benefit of the lawyer’s exertions, and it requires the lawyer to “put at his client’s disposal, not only his skill but also his knowledge, so far as is relevant”.

Can the duty of care include giving financial advice? General Principle: no duty to provide financial advice 

Courts do not assume that the retainer attracts a duty to supply financial advice. If the retainer does not impose a duty to give commercial advice, then a lawyer will not be negligent in failing to do so.

Giving of financial advice where contemplated by the retainer 

Tarzia v National Australia Bank: “in certain situations, it may be negligent of a solicitor not to ensure that his client has good financial advice, particularly when the client is at a disadvantage with respect to the other parties to the transaction, and where the results are potentially disastrous to the client.

Carmody v Priestley & Morris Perth Pty Ltd (2005) 30 WAR 318

 

the nature of the transaction the lawyer is retained to effect whether the lawyer has sought specialist advice

Wakim v McNally (2002) 121 FCR 162 3.

Standard of care 

general law compared to statute

“[A professional] accepts the ordinary liabilities of any man who follows a skilled calling. He is bound to exercise due care, skill and diligence. He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among [persons] practising their profession. And he must use due care. If he fails in these matters and that person who employed him thereby suffers damage, he is liable to that person. This liability can be said to arise either from a breach of his contract or in tort.” (Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84 per Windeyer J) 

as a lawyer is only liable for the use of ordinary care and skill, the standard of care provides no guarantee against all mistakes or omissions.

The standard of care dictates that a lawyer is expected to possess the knowledge held by the reasonably competent lawyer of well settled principles of law and the relevant procedure and rules of court that are applicable to the client’s needs. Standards not informed by extraordinary foresight  

generally a lawyer need not advise as to how the law might develop in an area or as to the steps clients could take to address future developments this depends on the scope of the retainer and its terms.

Heydon v NRMA Ltd Held: the respondent’s counsel and its solicitors were not liable for the consequences of advice given as to the state of the law pending the hearing of a case before the High Court. When the advice was given, nothing within existing legal principle would have led a competent and skilled lawyer to foresee or warn against the possibility of the High Court substantially changing the relevant legal principle. Civil Liability Act 2002 (Tas), s 22 (1) A person practising a profession (“a professional”) does not breach a duty arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice. (2) Peer professional opinion cannot be relied on for the purpose of this section if the court considers that the opinion is irrational. (3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purpose of subsection (1). (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted.

(5) This section does not apply to liability arising in connection with the giving of (or the failure to give) a warning, advice or other information in relation to the risk of harm associated with the provision by a professional of a professional service to a person. 

can the standard be reduced?

Impact of urgency May v Mijatovic: the standard of care can depend on the urgency of the situation, taking account of time constraints in determining what a lawyer exercising reasonable care and skill could be expected to do. 



this does not involve a reduction in the standard in urgent matters, but what reasonable care and skill requires may be affected by the circumstances. Where action is urgent, the lawyer may lack the time to properly assess the situation. raising the standard of care?

The standard of care may be raised where a lawyer specialises, as reflected in civil liability legislation. Yates Property Corporation v Boland (1998) 85 FCR 84 at 105 







where a firm has developed a particular expertise in some area of the law, it is difficult to see why as a matter of principle, the standard of care in accordance with which the firm should carry out its professional work should be judged by reference with the standard of care of an ordinary practitioner. When a client retains a firm that is or professes to be specially experienced in a discrete branch of law, that client is entitled to expect that the standard of care with which his retainer will be performed is consistent with the expertise that the firm has or professes to have. The standard of care should reflect that within any one calling, practitioners have or profess to have varying degrees of expertise. The standard of care should bear some relationship to that expertise. A solicitor who is an expert in a particular branch of the law, should be held to the same standard of care as the solicitor who carries out his retainer as would a reasonably competent solicitor who is an expert in that area of law.

Heydon v NRMA Ltd (2000) 51 NSWLR 1 

For lawyers professing to have a special skill in a particular area of the law, the standard of care is that of the ordinary skilled person exercising or professing to have that special skill.

Reliance on advice of counsel  

Generally, a solicitor is entitled to rely upon the advice of counsel properly instructed; in this case, the solicitor is not negligent if counsel’s advice proves to be wrong But there is no reduction in the solicitor’s standard of care.

Boland v Yates Property Corporation Pty Ltd 

the solicitor retains a legal duty to the client, separate, independent and personal: due to the general law of negligence and the contract of retainer. The solicitor must exercise independent judgement to the extent that it is reasonable to demand this having regard to the solicitor’s reputed knowledge and experience, the complexity of the case and the skill and experience of the barrister who has been retained.



If the solicitor reasonably considers that the barrister’s advice is wrong, it is his duty to reject that advice and to advise the client independently.

Standard of care in settlement advice Curial reticence to find negligence in settlement advice Traditionally, courts have been reluctant to find lawyers negligent in reasonably giving advice as to the settlement of a dispute or in exercising that dispute. 



Advice to settle is not negligent merely because a court later considers a more favourable outcome may have prevailed had the dispute proceeded to judgement (because of public policy favouring the settlement of disputes) Courts inquire into whether the settlement advice was within the range that in the circumstances, could reasonably and properly be given.

Circumstances where advice as to strength of care can attract liability A solicitor is liable in negligence for committing a fundamental error or making a misstatement of fact Seamez (Australia) Pty Ltd v McLaughlin the solicitors breached their duty of care to their clients in advising that they settle. The considerations that led the clients to settle:    

Statements that the clients could not win, even though the solicitors believed that there was a better than even chance of winning Statements, that an application for adjournment would be unsuccessful or futile, whereas an adjournment would very likely have been granted Statements that both counsel had withdrawn from the case whereas one had not Incorrect statement that a threatened injunction would prevent the clients from continuing in business.

Danger of supplying unqualified advice Generally, lawyers should be wary of bold and confident assurances to the client. Hall v Foong: 



the lawyer advised his client that the contract he had entered into as a purchaser was void, but did not disclose that his advice was contrary to both a recent Full Court decision and counsel’s advice. On the lawyer’s advice, the client did not complete the contract and was successfully sued by the vendor for damages.

Held: the lawyer had been negligent. A reasonably competent lawyer would have disclosed to the lawyer that the advice had been tendered on a preliminary basis and that until counsel’s opinion was received, it was impossible to assess in any final way the prospects of success. 4.

Concurrent / separate liability under statute?

Australian Consumer Law, s 18 D. Liability to T...