When unbundling your Private Client service may make sense

 In Practice Management

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Can a limited retainer save you from a professional negligence claim?

Unbundling of services & professional negligence – Minkin v Landsberg [2015] EWCA 1152

Although this case concerned a professional negligence claim by one divorcing party against her solicitor, the central issue was the scope of the solicitor’s retainer. Not only is it common for divorcing parties to negotiate their own financial agreements and then to instruct solicitors for the limited purpose of drawing up the consent order for approval by the court, but solicitors in all areas, including private client, are increasingly being asked to provide unbundled services limited to distinct aspects too.

Case Summary from LawSkills | Private Client specialist trainers

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Here the Court of Appeal agreed with the decision at first instance that the solicitor’s duties were limited to the extent claimed by the solicitor. It was fortunate for the solicitor who had not followed best practice and had not expressly set out the limited extent of the retainer in a letter to the client, that the first instance court had found that the limitation of the retainer was communicated sufficiently to the client at a meeting. The judge also held that there was no duty on the solicitor to have given broader advice incidental to the limited retainer. Others may not be so fortunate.

The facts

Gary and Sharon Minkin filed for divorce after separating in November 2007. Early in 2009 they reached agreement as to the division of their assets and ongoing financial arrangements and recorded this in a homemade document.

Sharon then had second thoughts about the agreement and initially sought advice from Tilley & Co, a firm of solicitors in St Albans. Following a meeting, the solicitors wrote to Sharon giving their advice that on a preliminary review the offer did not look satisfactory, but they would need further disclosure of Gary’s financial position in order to back this up. They advised her that her alternatives to the agreement were further negotiation, mediation and litigation with full disclosure by both parties.

Despite Sharon‘s reservations, she and Gary then presented their agreement as a draft consent order for approval in March 2009. At the hearing on 4 March the deputy district judge refused to approve it: he wanted details of Gary’s debts which were to be repaid on the sale of the house before the net proceeds were then divided between Gary and Sharon.

Sharon then sought advice from a women’s refuge who recommended she get advice from Lesley Landsberg, practising as Barnet Family Law. Sharon met Lesley on 9 March and at Sharon’s request, Lesley agreed to put the consent order into proper form so that the court would approve it. Lesley sent Sharon two letters later that day. In the first she explained that she was acting under a legal aid scheme which would cover the costs of one meeting and a modest amount of work. In the second letter she gave her advice that the homemade agreement would need to be amended in several ways, the main one being that the recitals didn’t match the body of the agreement on how the net proceeds of sale were to be divided and she had written to Gary for details of his creditors so that this missing information could be added.

Sharon replied on 10 March confirming that Lesley had understood her instructions correctly and that despite the possible risk which Lesley had pointed out of not being able to enforce the maintenance payments if Gary moved to America to work there, she wanted to bring the matter to an end as quickly as possible.

Lesley then corresponded with Gary’s solicitors and between them they drew up a consent order reflecting the matters agreed between Gary and Sharon in a form likely to be approved by the court. On 7 April 2009 Gary and Sharon attended a hearing without either of their solicitors and the draft consent order was approved by the court.

There were then many problems between Gary and Sharon and much litigation between them. Sharon regretted her agreement to the consent order, blaming Lesley for her advice or lack of it. In October 2011 Sharon claimed damages for professional negligence against Lesley as Lesley had not advised her on or warned her against entering into the consent order.

Lesley argued that the scope of her retainer had been strictly limited. She had not been asked to advise on the merits of the agreed settlement and if she had been, she would have needed full details of the parties’ financial resources which she was unaware of. Lesley had been told by Sharon that Tilley had already advised her on her financial position and the agreement between her and Gary reflected Tilley’s advice. Sharon had led her to believe that the agreement had been approved by the court at the March 2009 hearing, but for the poor drafting. She had been merely asked to redraft the poorly drafted agreement in a suitably legal form and add in the missing creditors’ information.

The law

On appeal LJ Jackson reviewed the authorities and summarised the relevant principles as:

  1. “A solicitor’s contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake.

  2. It is implicit in the solicitor’s retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out.

  3. In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client.

  4. In relation to (iii), it is not possible to give definitive guidance, but one can give fairly bland illustrations. An experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client.

  5. The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor’s retainer. As a matter of good practice the solicitor should confirm such agreement in writing. If the solicitor does not do so, the court may not accept that any such restriction was agreed.”

LJ Jackson quoted Lord Denning MR with approval from Carradine Properties Ltd v DJ Freeman & Co [1999] Lloyds Law Rep. P N 483 that “an inexperienced client will need and will 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.”

The decision at first instance

In November 2014 DJ Jackson dismissed Sharon’s claim against Lesley for the following reasons:

  • Lesley had acted under a limited retainer: to draw up a consent order for approval by the court of the matters agreed between Gary and Sharon;
  • Sharon had instructed Lesley to draw up the order swiftly before Gary left the country to work in America;
  • Until 7 April 2009 Sharon had not told Lesley that she had agreed to the terms of the financial settlement only under duress from Gary and that she wanted to change her mind;
  • The first intimation Lesley had that Sharon wished to withdraw her agreement to the financial settlement was when she read Tilley’s file after receiving it on 6 April 2009. She did not read it that day;
  • Sharon did not appear subservient to Gary, but was intelligent, knew her own mind and understood the legal issues;
  • Lesley performed her duties under the retainer and was not under a duty to advise on the merits of the agreement reached between Gary and Sharon; and
  • If Lesley had been negligent, Sharon’s claim would still have failed as the damages claimed were speculative.

Sharon appealed this decision, arguing that Lesley’s retainer had not been limited to the extent held by DJ Jackson. She also argued that Lesley was under a duty to give broader advice, which she had failed to do.

The decision on appeal

LJ Jackson stated that the central issue in the appeal was “the extent of the defendant solicitor’s duty to advise in circumstances where the parties had reached agreement and solicitors were being asked to put that agreement into proper form for approval by the court.”

Looking at the facts of this case, LJ Jackson stated that Sharon had received advice from Tilley on the merits of the agreement she and Gary had reached. They had warned her that the offer did not seem satisfactory and on her alternatives. Despite that advice Sharon had then chosen to stick with the agreement and had changed solicitors. Sharon had instructed Lesley to put the agreement into a form which the court would approve.

LJ Jackson pointed out that contrary to good practice, Lesley had not expressly confirmed the limited extent of her retainer in either of her 9 March 2009 letters to Sharon. However, at first instance the judge had heard evidence of what was agreed at the 9 March 2009 meeting and had accepted the limited nature of Sharon’s instructions to Lesley. The court of appeal could not go behind that finding of fact.

LJ Jackson did not agree with Sharon that despite the limited retainer Lesley should have warned her that she was not advising on the merits of the agreement, that the agreement might have been unfair and that there had been no investigation of Gary’s means and assets. In all the circumstances of the case the giving of such advice was not reasonably incidental to the limited work Lesley was carrying out under the retainer. This was because:

  • The matters Sharon claimed Lesley should have advised her of were obvious to Sharon;
  • Sharon was an intelligent woman. She was a qualified and practising chartered accountant. Her competence and grasp of the issues had been amply demonstrated in court;
  • Sharon had already taken legal advice from other solicitors about the agreement and Lesley knew this; and
  • Sharon had expressly written to Lesley confirming that despite the risks of unenforceability if Gary moved to America, she wished to conclude the consent order ‘as swiftly as possible.’

LJ Jackson agreed with the decision at first instance and held that Lesley had been operating under a defined and limited retainer to redraft the financial agreement reached between Gary and Sharon in a form likely to be approved by the court. There was also no duty on Lesley to warn Sharon about the matters claimed by Sharon. Sharon’s appeal was therefore dismissed with LJ King and LJ Tomlinson agreeing .

LJ King went on to recognise that solicitors specialising in family and other areas, may offer bespoke or unbundled services where they undertake a discrete aspect of work. She added that “there would be very serious consequences for both the courts and litigants in person generally, if solicitors were put in a position that they felt unable to accept instructions to act on a limited retainer basis for fear that what they anticipated to be a modest and relatively inexpensive drafting exercise of a document (albeit complex to a lay person) may lead to them having imposed upon them a far broader duty of care requiring them to consider, and take it upon themselves to advise on aspects of the case far beyond that to which they believe themselves to have been instructed.”

LJ King finished by pointing out that the client care letters, attendance notes and written retainers must be carefully drafted where the retainer is limited. She recognised that precedents might be used for these.

Practice points

  1. ALWAYS provide a client with a retainer letter fully detailing the extent of the work you have been asked to undertake and have agreed to undertake.
  1. If the scope of the work is limited in any way ALWAYS set this out expressly in your retainer letter. You do not want to be arguing in court on if your retainer was limited or not.
  1. If you are not given clear instructions by the client, perhaps due to the urgency of the matter, or are unsure whether your retainer is limited, discuss this with a colleague and if necessary, clarify your instructions with the client before sending your retainer letter out and undertaking any work.
  1. Consider creating precedent letters specifying the different aspects of the services in your department to assist in streamlining the drafting of retainer letters, particularly for use where the services are unbundled. This can also assist with consistency between fee earners in the department.
  1. Even with a limited retainer, consider whether any further advice is incidental and should be provided in any event. The less intelligent, less experienced or perhaps more vulnerable the client is, the more likely this will be. Would your duty nonetheless be extended to provide incidental advice despite a limited retainer where the client was intelligent and experienced, but affected by grief and so was vulnerable?

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