The scope of a solicitor’s duty to warn a client about issues and risks on which he or she has not been specifically instructed, can be difficult to determine. Nevertheless, duty to warn claims are not uncommon and Cathal Anthony Lyons v Fox Williams LLP is the latest example to be decided by the courts.
The claimant was the Chief Financial Officer and Managing Partner of Operations for Ernst & Young (“EY”) in Moscow. In 2006, and while riding his motorcycle, the claimant was involved in a serious road traffic accident, which resulted in most of his right foot being amputated and the replacement of his right shoulder with a metal prosthetic.
At the time of the accident the claimant benefited from two types of insurance policies. The first were Accidental Death and Dismemberment (“AD&D”) policies underwritten by Colonial Medical Insurance Company Ltd, while the second were Long-Term Disability (“LTD”) policies underwritten by AGF Insurers.
In 2007 the claimant instructed the defendant firm of solicitors to advise him on whether EY had misrepresented the scope of cover that was available to him under the AD&D policies, with a view to commencing a compensation claim against it. At the same time, and through EY, the claimant pursued his policy claims under both the AD&D and LTD policies.
In the event, and while arguments continued as to the availability of insurance cover for the claimant’s injuries, any legal claim the claimant could pursue in relation to the AD&D and LTD policies became time-barred.
In turn, the claimant commenced legal proceedings against the defendant firm alleging, amongst other matters, that it had been negligent for failing to advise him to bring a legal claim against the LTD insurers or otherwise to protect his claims and prevent them from becoming time-barred.
In doing so, the claimant contended that from the outset he had expected the defendant to advise him on his LTD claims, that he had discussed the LTD cover with the defendant and that, in the course of acting for him, the defendant had been supplied with a copy of the relevant LTD policies.
Decision of the High Court
At first instance, the judge rejected the contention that it was ever part of the defendant’s retainer to advise the claimant about the claims under the LTD policies. He found that the original letter of engagement did not include advice on this issue and he largely rejected the claimant’s evidence that it had been expanded to include these matters.
The judge also found that the defendant was under no duty to warn the claimant of any risks associated with the LTD policies. This is because the defendant did not become aware of any risk or potential risk to the claimant and, in turn, it was not objectively unreasonable for it to omit to flag any such risk to the claimant. Accordingly, he dismissed the claimant’s claim.
Decision of the Court of Appeal
The claimant was granted permission to appeal to challenge the judge’s dismissal of the claim based on the absence of any duty to warn. In doing so, the claimant alleged that either the defendant had a duty to warn him in substantive terms about his rights under the LTD policies and what needed to be done to prevent them from becoming time-barred, or that it had a duty to warn him that he needed to obtain legal advice about the LTD claims.
In his leading judgment, and having recorded the events that had given rise to the claim, Patten LJ observed that:
‘…the solicitor’s obligation to bring to the client’s attention risks which become apparent to the solicitor when performing his retainer does not involve the solicitor in doing extra work or in operating outside the scope of his retainer. The risks in question are all matters which come to his attention when performing the tasks the client has instructed him to carry out and which therefore as part of his duty of care he must make the client aware of.’
Patten LJ went on to find that the advice that the defendant was allegedly under a duty to give was co-extensive with its retainer and that here, it had already been found that the defendant was never instructed to advise on the LTD policies, nor otherwise required to examine them. Further, and contrary to the claimant’s assertion, the defendant had not advised him to ‘postpone’ dealing with the LTD claims, which were ongoing and which were being handled on his behalf by EY.
Accordingly, and unanimously, the Court of Appeal determined that the defendant had not been under a duty to warn the claimant about his rights under the LTD policies, nor under a duty to warn him of the need to obtain legal advice about the LTD claims. Therefore, the appeal was dismissed.
This decision reaffirms that in assessing whether or not a solicitor (or other professional adviser) is under a duty to warn a client about a potential risk, the starting point will be to consider the terms and scope of the retainer under which the professional was originally engaged. Of course, those terms can change over time, either by agreement or by conduct, and so subsequent events can be important too.
This decision also recognises that any assessment of liability is fact sensitive and some of the interesting, and case specific, features here include the fact that the claimant was a sophisticated individual, that another professional party, EY, was already acting on the claimant’s behalf in relation to his LTD claims and that by the time the claim came to trial the claimant had already received substantial compensation by virtue of a payment under his AD&D policies.
What this decision does not do, is establish a general rule which absolves professional advisers of any duty to warn their clients about risks of which they may not be aware and there will undoubtedly be more professional negligence claims based on the duty to warn in the future.
For examples of other cases in which the courts have found that a duty to warn not only existed, but was not suitably discharged, please see our previous article: A tale of the unexpected