UK: Thrown To The Lyons: Are Solicitors Under A General Duty To Warn?

Are solicitors under a duty to warn their clients about risks relating to matters which fall outside the scope of their retainer, or are their duties limited to advising only on matters which form part of their instructions? These questions often arise in professional negligence claims against solicitors. In this article we consider the current state of the law in light of the Court of Appeal's decision in Lyons v Fox Williams LLP [2018] EWCA Civ 2347.

The claimant, Mr Lyons, was the CFO and Managing Partner of Operations for EY in Moscow. He was seriously injured in a motorbike accident which resulted in part of his right foot being amputated and lasting damage to his right shoulder and arm.

Mr Lyons made claims under two insurance policies taken out by EY for the benefit of its employees. The first covered Accidental Death and Dismemberment (ADD), while the second covered Long Term Disability (LTD).

He instructed Fox Williams, the defendant solicitors, to advise him on his claim under the ADD policy, which was disputed by EY's insurers. The firm's engagement letter did not expressly refer to the claim under the LTD policy, which was dealt with by EY.

Subsequently, Mr Lyons decided to leave EY and Fox Williams' retainer was extended to advising him on a settlement agreement. As part of the settlement, Mr Lyons wanted EY to compensate him for his injuries if the ADD insurers did not. He eventually reached a settlement with EY which included the ADD claim. His claims under both the ADD policy and the LTD policy later became time-barred.

Mr Lyons instructed alternative solicitors who managed to obtain payment under the ADD policy. He then sued Fox Williams for damages in respect of the LTD claim, alleging negligence and a failure to warn him that he needed to get advice about that claim.

At first instance, Mr Justice Turner found that Mr Lyons had not instructed Fox Williams to advise on the LTD claim and that advising on the scope and validity of the LTD policy had not formed part of the retainer. He also found that Fox Williams had not been under a duty to warn Mr Lyons about the risk that his claim under the LTD policy might become time-barred.

Mr Lyons appealed. He argued that Fox Williams had been under a duty to warn him in substantive terms about his rights under the LTD policy and what needed to be done to prevent the LTD claim from becoming time-barred, or to warn him that the claim might have time limits and that he needed advice.

The Court of Appeal dismissed the appeal. In doing so, Lord Justice Patten considered the authorities regarding a solicitor's duty to warn, and in particular Credit Lyonnais SA v Russell Jones & Walker [2002] EWHC 1310 (Ch) and Minkin v Landsberg [2015] EWCA Civ 1152 .

Credit Lyonnais concerned a claim against solicitors relating to the negligent termination of a lease. The claimant argued that, having been instructed to terminate the lease, the solicitors' retainer was wide enough to cover advice on ensuring compliance with a break clause in the lease. Alternatively, the solicitors were under a duty to warn the claimant of any substantial risks which would be apparent to a competent property lawyer.

Mr Justice Laddie found that the solicitors had acted negligently. In doing so, he recognised that solicitors' duties are defined by the terms of their retainer, and that they are not under a general obligation to spend time and effort on tasks going beyond the scope of those duties. However, if a solicitor, when carrying out the duties which do arise under the retainer, becomes aware of a risk (or potential risk) to the client, he or she is under a duty to warn the client about it. Solicitors are therefore under a duty to warn their clients about risks which the solicitors, in their area of competence, notice or ought to notice, and of which it might reasonably be assumed their clients are unaware.

In Minkin, the claimant retained the defendant solicitors to advise on the drafting of a consent order following the negotiation of a financial settlement in divorce proceedings. The claimant subsequently regretted signing the consent order and brought a claim against the solicitors alleging that they had failed to warn her against entering into the agreement. The solicitors argued that their retainer was limited to the drafting of the order. The claim was dismissed at first instance and the claimant appealed.

In dismissing the appeal in Minkin, the Court of Appeal found that the solicitors were operating under a limited retainer and so were not under an obligation to warn the claimant about the terms of the settlement. Lord Justice Jackson agreed with the approach taken by Mr Justice Laddie in Credit Lyonnais and summarised the relevant principles as follows:

  • solicitors are under a duty to carry out those duties which they have agreed with the client to undertake;
  • solicitors are also under an implied duty to carry out work which is reasonably incidental to the duties arising under their retainer;
  • in determining what is reasonably incidental, it is necessary to have regard to all the circumstances of a case, including the client's level of experience and the amount of fees that the client has agreed to pay for the solicitors' work; and
  • it is possible for solicitors to agree to limit the extent of their duties. Any such limitation should be agreed with the client in writing.

In Lyons, Lord Justice Patten emphasised that "although cases like Minkin are often cited as authority in support of a legal duty to warn, they are in fact decisions about the scope of a solicitor's duty based on a particular retainer". Referring to Mr Justice Laddie's decision in Credit Lyonnais, which had been approved in Minkin, he found 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."

He also found that neither Credit Lyonnais nor Minkin was authority for the proposition that solicitors were required to carry out investigative tasks in areas that they not been asked to deal with, however beneficial to the client that might have turned out to be. The question of whether or not solicitors have a duty to bring a particular risk to the attention of the client is therefore a question of the scope of the particular retainer under which the solicitors have been engaged, as opposed to there being a general duty to warn.

This reasoning led the Court of Appeal to reject Mr Lyons' appeal on the basis that the LTD claim fell outside of the terms of Fox Williams' retainer, meaning that it would have been unreasonable to expect them to have warned Mr Lyons of risks relating to the LTD policy.

Analysis

The Court of Appeal's decision in Lyons provides welcome clarification to solicitors that they are not under a general duty to warn their clients about risks relating to matters which fall outside the scope of their retainer. That said, solicitors should still be mindful of the risks inherent in their particular line of work which may arise in the circumstances of a particular case, and about which it may be advisable to inform their clients. Solicitors should ensure that they issue properly drafted retainers and should also recognise that they are able to clarify or limit the scope of the duties arising under them by written agreement with their clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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