The scope of a solicitor's remit and the age-old issue of retainer drift have been the focus of a number of reported decisions in the last 12 months. The good news for solicitors is that judicial attention has centred on the sanctity of the engagement letter and the Courts' underlying concern that solicitors will increasingly refuse to act on limited retainers if the Courts seek to impose duties of care which are far broader than those agreed by the parties. In this context, solicitors and their professional indemnity insurers can take some comfort from the recent decision in Cathal Anthony Lyons v Fox Williams LLP  EWHC 2427 QB which indicates that the Courts will be reluctant to "stretch" the scope of a retainer beyond duties set out in the engagement letter in the absence of clear and unambiguous evidence to the contrary. The decision also reinforces the Courts' willingness to rely on a client's commercial experience and sophistication in limiting a solicitor's duty to warn.
The Claimant Mr Lyons was Chief Financial Officer and Managing Partner of Operations for Ernst and Young (CIS) BV, Moscow. He suffered significant injuries following a motorcycle accident in 2006. By virtue of his employment, Mr Lyons had the benefit of accidental death and dismemberment (AD&D) and long term disability (LTD) insurance policies. Although both policies are concerned with the consequences of serious injury, they provide different cover. An AD&D policy provides for the payment of a one-off lump sum assessed by reference to the level of disability. LTD policies serve to replace or top up salaries which have been lost or reduced as a result of accident or illness.
Mr Lyons retained the Defendant solicitors to advise on a claim under the AD&D policy. The Defendant's advice was based on its interpretation of the Members’ Booklet and not on a review of the policy (which the Defendant failed to undertake). As it turned out, the policy provided for more generous cover than terms set out in the Booklet. The Defendant did not advise on the LTD policy.
Some considerable time after settlement with Insurers Mr Lyons brought proceedings against the Defendant. He argued that he had not been advised about a potential claim under the LTD policies and that, in the event the Court found there was no express retainer to do so, the Defendant had a duty to warn him about the scope and validity of the LTD policy.
Mr Justice Turner dismissed Mr Lyons' claims, applying the following rationale:
The Defendant's retainer did not extend to advising Mr Lyons on issues relating to LTD cover. The engagement letter had clearly identified the scope of the retainer to include advice inter alia on the AD&D claim. The Court had no doubt that, if the parties had intended for LTD issues to be included, the engagement letter would have been unambiguous on the issue. It was common ground that the scope of the retainer had expanded in some respects but the extent of the expansion was in dispute. The Court concluded that subsequent references to LTD in exchanges between Mr Lyons and the Defendant were only by way of background. The Defendant had not been expected to analyse the scope and contents of the LTD policies.
Duty to warn claim
The Court concluded that a duty to warn did not arise on the facts of this case. Although in certain circumstances a solicitor might come under a duty to warn his client of particular risks which may not fall squarely within the retainer, no duty to flag any such risks arose here as the Defendant had not become aware of any risk (or potential risk) to Mr Lyons arising out of the LTD policies. The Court found that "mere knowledge of the existence of the LTD policies against the limited background context of which [the Defendant] was aware would not have put him on the alert that there was a problem or risk which ought to have been pointed out." It is also worth noting that, in making its decision, the Court took into account Mr Lyons' background as an "astute, focussed and commercially minded business man". As is clear from other recent decisions, the Courts will rely on a client's commercial sophistication and previous experience to limit the scope of a solicitor's retainer.
One of the core aims of an engagement letter is to delineate the scope of the retainer. Clients will occasionally attempt to circumvent limitations on scope by suggesting there has been retainer drift. The decision in Cathal Anthony Lyons v Fox Williams LLP  confirms that, in the absence of clear unambiguous evidence to the contrary, the Courts will look to take a firm line in favour of the professional. As Mr Justice Turner pointed out “defendants in professional negligence claims do not necessarily enjoy a monopoly of happy hindsight”. A welcome acknowledgement for solicitors and their Insurers in an area of the law where the benefit of the doubt is usually stacked against the professional.