Solicitor's duty beyond the retainer

AS BANNISTER & ORS v SIRROM ENTERPRISES PTY LTD [2016] SASCFC 153

85. The extent to which the duty requires a solicitor to advise on matters beyond a client’s express instructions is problematic. In Micarone v Perpetual Trustees Australia Ltd,[1] Debelle and Wicks JJ identified the scope of a solicitor’s duty of care as follows:[2]

 

The content of the duty of care

[689] The extent of a solicitor’s duties to his client depends upon the terms and limits of the retainer and any duty of care to be implied must be related to what he is instructed to do: Midland Bank v Hett Stubbs & Kemp [1979] Ch 384 at 492-403 per Oliver J. In Hawkins v Clayton (1988) 164 CLR 539 at 574, Deane J expressed the view that the trend of modern authority supported the approach that the duty of care owed by a solicitor to a client in respect of professional work prima facie transcends that contained in the express or implied terms of the retainer and includes the ordinary duty of care arising under the common law of negligence. As the Court of Appeal in New South Wales pointed out in Cousins v Cousins [1991] ANZ ConvR 245, which was followed in Citicorp v O’Brien (1996) 40 NSWLR 398 at 413, it is not clear whether it is yet possible to express in general terms the duty that arises at common law from the relationship of solicitor and client as distinct from the contract since none of the other justices in Hawkins v Clayton appear to have adopted the approach of Deane J. Later, at 579, Deane J said: ‘The relationship of solicitor and client … may well give rise to a duty of care on the part of the solicitor which requires the taking of positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client. Whether the solicitor-client relationship does give rise to a duty of care requiring the taking of such positive steps will depend upon the nature of the particular professional task or function which is involved and the circumstances of the case.’ Although these views of Deane J may not, in a formal sense, form part of the ratio decidendi in Hawkins v Clayton, they accord with the trend of development in the law of negligence in the High Court in recent years. We will, therefore, proceed on the footing that the views of Deane J accurately state the law in Australia. The scope or content of the duty of care owed by Belperio to the plaintiffs is, therefore, to be determined by reference to the circumstances surrounding the relationship between the plaintiffs and Belperio. Those circumstances include the instructions Belperio received, the terms of any retainer, and any responsibility assumed by Belperio

 

86. In Heydon v NRMA Ltd,[3] after referring to the decision in Rogers v Whittaker[4] on a medical practitioner’s duty to warn, Malcolm AJA described the duty of legal practitioners in the following terms:[5]

[145] While no therapeutic privilege is relevant in the present context, the application of these principles to a set of circumstances in which lawyers are called upon to advise whether a transaction can be implemented in particular way clearly gives rise to a duty to warn a client of any material risk in the same sense as that used in the medical context in Rogers v Whitaker. [146] In my opinion the approach adopted in Rogers v Whitaker is applicable to the duty of care of legal practitioners and the standard of care. Both barristers and solicitors owe a duty of care to those whom they advise or for whom they act. In the present context, their duty is to exercise reasonable care and skill in the provision of professional advice. The standard of care and skill is that which may be reasonably expected of practitioners. In the case of practitioners professing to have a special skill in a particular area of the law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill. … [147] In this context the content of the duty of care and the liability is the same whether it is founded on contract in the case of a solicitor, or whether it is founded on a duty of care in tort in the case of a barrister. In each case the duty is to apply the relevant degree of skill and exercise reasonable care to carrying out the task. There is no implied undertaking that the advice is correct, but only that the requisite degree of professional skill and care has been exercised in the giving of the advice. Of course, where there is reason for doubt or there are risks which a person possessing the relevant degree of skill and competence should perceive, it follows from the above that there may be a duty to warn of the kind recognised by their Honours in Rogers v Whitaker. Thus, in Hawkins v Clayton (at 583–585), it was held by Deane J that, in the case of a solicitor, the circumstances may give rise to a duty to do more than simply perform the task defined by his instructions, if circumstances arose giving rise to a real and forseeable risk of economic loss by the client, or, in particular circumstances, even a person who was not a client but who may be adversely effected. See also Waimond Pty Ltd v Byrne in which the judgment of Deane J was followed. In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, the House of Lords declined to follow Hawkins v Clayton insofar as it suggested that in the case of a solicitor liability lay only in contract rather than concurrently in contract and tort. In Astley v Austrust Ltd, the High Court decided to follow the decision in Henderson v Merrett Syndicates Ltd in preference to the judgment of Deane J so that in the case of solicitors, the liability remains a concurrent liability in contract and in tort.

 

87. In contrast, McPherson AJA in Heydon held that the statement of Deane J in Hawkins v Clayton,[6] that a solicitor may have a duty to take positive steps beyond the express terms of the solicitor’s retainer, was no longer good law:[7]

[364] Finally, reference must be made to the limits of the duty to advise. At one time a solicitor’s duty was considered to be limited by the terms of the retainer from the client, there being no affirmative legal obligation to give advice going ‘beyond the specifically agreed task or function’. Then, in Hawkins v Clayton (1988) 164 CLR 539 at 585; 78 ALR 69 at 102, it was held that there was no justification for imposing a contractual duty of care that was co-extensive with the parallel duty independently imposed in the law of negligence. It followed that an obligation might arise requiring a solicitor to take positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client, or even by others who were not the clients who had retained the solicitor. The result was that in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652, a majority of this Court held that an affirmative duty to advise might exist in relation to matters that were not directly within the ambit of the retainer from the client. The decision on this point in Waimond Pty Ltd v Byrne has since been followed on several occasions. More recently, however, in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 193–194; the House of Lords rejected the reasoning of Deane J in Hawkins v Clayton, holding instead that there was ‘no sound basis for a rule which automatically restricts a claimant to either a tortious or a contractual remedy’, and that it was the contract that defines the relationship of the parties, so that ordinarily ‘the parties must be taken to have agreed that the tortious remedy is to be limited or excluded’. In Astley v Austrust Ltd (1999) 197 CLR 1; 161 ALR 155; [1999] HCA 6, the High Court decided to follow the reasoning in Henderson v Merrett Syndicates Ltd, in preference to that of Deane J in Hawkins v Clayton. The result, in my respectful opinion, is that what was said by Deane J in Hawkins v Clayton has ceased to be good law in Australia. Because it formed the or a pivotal point in the reasoning in Waimond Pty Ltd v Byrne, it is no longer possible to say that there is a ‘penumbral’ duty in tort requiring a solicitor to advise on matters going beyond the limits of his or her retainer. On that aspect, the decision in Waimond Pty Ltd v Bryne is inconsistent with the reasoning in Astley v Austrust Ltd, and should, in my opinion, no longer be followed. It had the effect of enlarging or extending the range of matters on which a solicitor, and possibly also a barrister, might be required by the law of tort to advise a client or other persons.

88. In David v David,[8] the New South Wales Court of Appeal, in considering the scope of the duty of care of a solicitor retained to give advice on a refinancing transaction, doubted the general proposition that a penumbral duty always attaches itself to and extends beyond the retainer. However, Allsop P (Hodgson JA and Handley AJA agreeing) accepted that notice of a legal risk to a client’s interest may enliven a duty to alert the client to the need for additional advice:[9]

[76]   Some reliance was placed on Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 in argument. In Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; 252 ALR 55; 14 BPR 26,565; [2008] NSWCA 343 at [267]–[294] Campbell JA undertook a detailed analysis of the precedential status of Waimond in particular after Heydon v NRMA Ltd (2000) 51 NSWLR 1; 36 ACSR 462; [2000] NSWCA 374 and Astley v Austrust Ltd (1999) 197 CLR 1; 161 ALR 155; 73 ALJR 403; [1999] HCA 6. It is unnecessary to repeat that analysis. It is sufficient to say that the notion that a solicitor may owe a client a ‘penumbral’ duty that extends beyond scope of the retainer is doubtful. If, however, the solicitor during the execution of his or her retainer learns of facts which put him or her on notice that the client’s interests are endangered or at risk unless further steps beyond the limits of the retainer are carried out, depending on the circumstances, the solicitor may be obliged to speak in order to bring to the attention of the client the aspect of concern and to advise of the need for further advice either from the solicitor or from a third party.[/perfectpullquote]

89. In AJH Lawyers Pty Ltd v Hamo,[10] Nettle JA accepted that circumstances may arise which impose a duty to warn of matters on which the legal practitioner has not been engaged to advise:[11]

[23]   … As Deane J said in Hawkins v Clayton, depending upon the circumstances, a solicitor may come under a duty to do more than simply perform the task defined by his instructions. A duty to warn may arise where circumstances give rise to a real and foreseeable risk of economic loss by the client or, in particular circumstances, even a person who was not a client but who may be adversely affected. (citations omitted)

 

90. In Badenach v Calvert,[12] French CJ, Kiefel and Keane JJ found that there was at least an interplay between a tortious and contractual duty:[13]

[16]   There could be no doubt that a solicitor owes a duty to his or her client in both contract and tort. The scope of a solicitor’s duties with respect to the latter will usually be set by the terms of the retainer. …[/perfectpullquote]

91. In the same case, Gageler J observed that the extent to which a solicitor’s duty extended beyond his or her retainer remained an open one:[14]

 [57]   Subject to statutory or contractual exclusion, modification or expansion, the duty of care which a solicitor owes to a client is a comprehensive duty which arises in contract by force of the retainer and in tort by virtue of entering into the performance of the retainer. The duty is to exercise that degree of care and skill to be expected of a member of the profession having expertise appropriate to the undertaking of the function specified in the retainer. Performance of that duty might well require the solicitor not only to undertake the precise function specified in the retainer but to provide the client with advice on appurtenant legal risks. Whether or not performance of that duty might require the solicitor to take some further action for the protection of the client’s interests beyond the function specified in the retainer is a question on which differences of view have emerged. That question was not addressed in argument, and need not be determined in this appeal. … [79]   When formulating a duty of care, its scope and its content ‘must neither be so broad as to be devoid of meaningful content, nor so narrow as to obscure the issues required for consideration’. Moreover, the scope of the duty of care is not to be determined retrospectively by looking at questions of breach of duty – that is, by asking first what could have been done to prevent the loss or damage. They are separate inquiries, which must not be conflated. (citations omitted)

92. I do not accept that the decision of the High Court in Astley v Austrust Limited[15] is inconsistent with the propositions in the judgment of Deane J in Hawkins v Clayton on the existence of the ‘penumbral’ duty. What is sometimes described as a penumbral duty is no more than a particular aspect of a solicitor’s primary duty.  At the basis of the solicitor-client relationship, and the very reason for its existence, is the fact that clients seek the advice of solicitors on the legal implications of their factual circumstances precisely because they are ignorant of them.  The first responsibility of a solicitor therefore is to assist the client to identify those legal implications so that the client can properly frame the scope of the retainer.  In any event it is well established that a solicitor must bring material risks to the client’s interests to his or her attention and advise the client whether further advice should be sought.