The importance of the professionals’ retainer
Summary
- A recent case has confirmed that the contract between a professional and his client governs the basis of professional liability, and is the source of the professional duties owed to the client.
- Professionals must always therefore take great care when drafting the terms of their client retainer to make clear:
- the scope of their retainer; and
- the issues on which they are not retained to give advice.
- Equally, professionals need to be aware that in limited circumstances, the courts have been willing to conclude that a professional does owe a duty to give advice outside of the scope of their retainer.
Duty of Care
A duty of care is a legal obligation imposed on an individual requiring adherence to a standard of reasonable care to avoid acts or omissions that could foreseeably harm others. It is the first element that must be established to proceed with an action in negligence.
Duty to advise on matters outside of the retainer
The extent of a professionals’ duty of care primarily depends upon the terms and limits of their retainer. The courts are reluctant to impose a duty upon professionals to advise on matters that are outside the scope of their retainer.
However, the courts have been willing in certain circumstances to decide that a professional does owe a duty to advise on matters that are outside the scope of their retainer. Essentially, a professional can be said to have such a duty if, in the course of performing their retainer, the professional comes across information that would lead any competent professional to perceive and advise upon a risk to which a client is exposed.
When will this duty arise?
The courts are loathed to extend the professionals’ duty far beyond the retainer. The narrow circumstances in which a professional can be held to have a duty to advise on matters outside of his retainer are:
- The matter that the professional ought to have advised upon must be one for which he is being paid and must not entail extra work for which he is not being paid. He must simply be reporting back to the client on issues of concern which he learns of as a result of, and in the course of, carrying out his instructions.
- The sorts of matters that the professional will assume responsibility to advise upon are obvious ones which are closely related to the subject matter of the retainer.
The classic example is that of a dentist who is asked to treat a patients tooth and, on looking into the patient’s mouth, he notices that an adjacent tooth is in need to treatment, it is the dentist’s duty to warn the patient accordingly.
The retainer
In a recent case, the High Court struck out a negligence claim against a pensions adviser on the basis that, under the terms of his retainer, the scope of the advisers duty of care did not extend to reviewing advice given some eight years previously by a different pensions adviser.
The High Court reached its decision on grounds that:
- The professional was not instructed to consider the merits of the historical advice provided.
- The historical advice had no substantive connection to the matters on which the professional was asked to advise upon.
- The alleged defects in the historical advice were not obvious.
- The professional was not given the information that he would have needed in order to be able to advise on the merits of the historical advice.
- The nature of the advice that was required was largely legal in nature and was very different in nature to the subject matter of the retainer.
- It was not necessary, to achieve the desired result, to add an implied term that the adviser should have advised on the merits of the historical advice that had been provided.
Conclusion
Professionals should take care to set out in clearly in their retainer the matters that they are instructed to deal with and the matters that are outside the scope of their retainer. This will place them in the strongest position to rebut an assertion that they had a duty to advise but failed to do so.
Professionals should understand that notwithstanding the express terms of their retainer, they could still be judged in a limited set of circumstances to be under a duty to advise on matters outside of the scope of their retainer.
