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While caution is laudable in certain circumstances, it could prove costly if you’re later found to have failed to give appropriate advice under the terms of your retainer.
A £400,000 damages payment to a firm’s former divorce client for professional negligence should prompt all lawyers to rethink their approach to client retainers. The claim prompted the judge to examine the nature of the retainer and its scope, as well as limited retainers.
What led to this case1?
In 2013, Braintree firm Cunningtons Solicitors was instructed by a divorce client (W). The retainer letter was a general retainer headed "in relation to your divorce and financial matters..”. The following year, W agreed with her husband (H) to settle financial matters, although no financial disclosure had yet taken place (she told the court she felt pressurised by H).
W agreed to taking a £62,000 lump sum on a clean break basis; and to sign over an endowment policy which was in both their names. Her solicitor told W that though she could agree a settlement directly with H, the solicitor would not be able to comment on whether the terms were fair and reasonable in the absence of financial disclosure.
W was asked to sign a disclaimer confirming she understood she had been given no advice on financial matters.
Before the consent order was signed and sealed (in summer 2014), an exchange of statements of financial information revealed the cash equivalent transfer value of H’s pension was £540,712.60 – substantially more than W had thought.
Even so, the lawyer sent off the consent order knowing it was unfair. W successfully brought proceedings against for professional negligence.
The retainer
At the heart of the dispute was the scope of the firm’s retainer. Cunningtons argued that its retainer was limited in scope to the implementation of the consent order and denied it owed W a duty to tell her what to do.
The legal principles on the scope of the duty of care in a solicitor’s retainer were previously summarised by Jackson LJ1 and helpfully set out in Coe HHJ’s ruling thus:
“A solicitor’s contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake.
ii. 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.
iii. 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.
iv. 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.
v. 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.”…. “In respect of proposition (v), I am somewhat more cautious in my formulation of the principle …There are many situations in which the client cannot afford to pay for all the relevant research and advice that the solicitor would be competent to provide. In those situations, the choice may be between a limited retainer or no retainer at all”.
So what were his conclusions on the retainer in this case? Coe HHJ soundly rejected the limited retainer argument. Right up to the point W was asked to sign the disclaimer, the retainer was clearly not limited and the firm owed a clear duty to advise her appropriately on financial matters.
This included the duty to warn or report and advise on matters of which the solicitor was aware – the solicitors knew about the pension. The judge commented: “Any reasonably competent solicitor would have advised the claimant that the proposed settlement order was obviously and exorbitantly one-sided in the husband's favour, giving the claimant less than 15% of the disclosed matrimonial assets and leaving her with an inadequate financial provision…”.
The options open to W should have been explained in “the clearest possible terms” to enable her to properly weigh up the pros and cons. In other words, she had not been given the opportunity to make an informed decision.
The firm was in clear breach of their duties to W. The ruling should be welcomed, clarifying the nature and extent of general and limited retainers and the scope of duty in each. If any alarm bells are ringing, it may be prudent to review advice given and to check you have properly discharged your duty of care.
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1Joanne Lewis v Cunningtons Solicitors [2023] EWHC 822 (KB)
2Minkin v Landsberg [2016] 1 WLR 1489
