Professionals’ Duty of Care to Clients: The Importance of the Retainer

Last month the High Court in Denning v Greenhalgh Financial Services Ltd [2017] EWHC 143 (QB) considered the scope of the duty of care owed by a professional to its client. In striking out the claim against a pensions advisor the Court provided a useful reminder of the “signal importance” of the retainer and the limited circumstances in which the Court might be willing to extend a professional’s duty beyond those terms.  

Background

In 2000 the Claimant had instructed Alexander Forbes Financial Services Limited in relation to the transfer of deferred employment benefits between providers. Years later, in 2008, the Claimant instructed Greenhalgh Financial Services Ltd as its pensions advisor and signed a written agreement with Greenhalgh, which sought to define the scope of the retainer.

In 2014 the Claimant brought a claim against Greenhalgh alleging that it failed to advise in respect of Alexander Forbes’ advice in 2000, which the Claimant alleged was erroneous (a claim against Alexander Forbes being out of time for the Financial Ombudsman and Court).

The Issues

It was not disputed that the Claimant did not expressly instruct (or pay) Greenhalgh to review Alexander Forbes’ advice, and that the retainer did not extend to such work. The Claimant sought to argue that Greenhalgh should have done so anyway, relying on authorities including Credit Lyonnais SA v Russell Jones & Walker [2002] EWHC 1310 (Ch), which provides that a professional may owe a duty to give advice outside of the retainer if, while performing the retainer, the professional comes across information which would lead any competent professional to perceive and advise upon a legal risk.

The Court distinguished this case on the facts and concluded that a duty will only extend beyond the retainer where there is “a close and strong nexus” between the retainer and the matter upon which it is alleged the professional should have advised. In this case, there was not. Amongst other things the Court found there was no substantive connection between Alexander Forbes’ advice in 2000 and the matters on which Greenhalgh was expressly instructed to advise, Greenhalgh did not have the information which would have enabled it to advise and the alleged errors in Alexander Forbes’ advice were not obvious.  

Lessons

The judgment provides a valuable reminder of the importance of the retainer to record the express terms of the relationship between a professional and its client. Professionals should carefully consider the terms of a written retainer at the outset, ensuring that the scope of the work and any limitations are clearly defined. Similarly, clients of professionals should ensure they are satisfied that the retainer sufficiently reflects their intentions and address any potential issues at that stage. Further, retainers should be regularly reviewed and, if necessary, revised as the matter progresses. Doing so should alleviate ambiguity and the risk of disputes arising, leaving only limited circumstances in which a Court may be prepared to extend a professional’s duty.  

For further information regarding this article, or any other issues around professional negligence disputes, please contact Sarah Holland.