Solicitor – Breach of contract – Implied term – Claimant instructing defendant solicitors and two predecessors to advise on drafting contracts – Claimant alleging professional negligence against defendant as successor to predecessors – Claimant proposing to amend pleadings alleging single contract between claimant and three firms – Defendant applying to strike out amendments as hopeless – Application granted
The claimant company was a national building contractor which for many years had instructed the defendant solicitors’ firm and its predecessors (M and P) to advise on and draft contract-specific and bespoke amendments to use with the standard JSB forms on subcontracts. The predecessors had merged to form the defendant limited liability partnership in 2004.
In late 2007, the claimant was engaged by T as main contractor to carry out a shopping centre development and the claimant engaged three subcontractors on the development. The subcontracts included a “pay-when-paid” clause under which the subcontractor was not to be paid until the main contractor had been paid by the developer. When T went into administration in 2009, the claimant withheld sums due to the subcontractors on the ground of T’s insolvency. The court held that, since T had not become insolvent by one of the four alternative routes stated in their contracts, the subcontractors were entitled to be paid.
The claimant said that it had incurred substantial losses exceeding £10.6 million as a result of the ineffective pay-when-paid clauses and commenced proceedings alleging professional negligence against the defendant, as the successor partnership to M and P. The defendant applied to strike out the claim on the ground that it was not liable for breaches of contract on the part of, or acts or advice given by, M and P.
The claimant sought to amend its particulars of claim to allege that the relationship between it, M, P and the defendant in succession was in the nature of a single contract or retainer comprising a range of specific instructions and commissions; and that that single contract was based on the on-going and close relationship between the claimant and the defendant and their conduct over many years. The defendant applied to strike out those amendments, arguing that the single contract argument had no prospect of success.
Held: The application was granted.
The allegations of breaches of a single contract were unsustainable. A solicitor’s functions and responsibilities primarily had to be determined by the retainer. There was no suggestion or assertion that there was any express agreement, oral or otherwise, by which a single contract between the claimant and each of the three firms had been concluded. The placing of even a large number of specific commissions on a more or less informal basis could not give rise to a necessary implication that there had to be some overarching general retainer requiring the solicitor to keep under relatively constant review all previous advice and drafting. The facts that the same people within the respective solicitor firms had contact with and generally gave advice to the claimant did not give rise to some general retainer.
There was something commercially and professionally worrying if professional people were to be held responsible for reviewing all previous advice or services provided. There was a difference between a specific retainer or commission which imposed a continuing duty on a professional to keep earlier advice or services under review and some sort of obligation which required the professional to review and revise previous advice given or services provided on commissions or retainers which were complete. Thus, in the field of architects or engineers, their retainers might require them to keep under review designs produced during the course of those retainers; if during the defects liability period an architect either ascertained or should have ascertained that the design put into effect was defective, possibly in the light of new practice, it might well be that his or her retainer required him or her at least to raise that with the client. However, the fact that the architect or engineer had a number of commissions with the particular client would not mean that as such they had to review the designs on completed commissions.
Furthermore, if a reviewing function continued indefinitely or for a long time into the future, a question arose whether the professional was entitled to be paid for time spent reviewing and advising on the need for revision of earlier advice or drafting. The costs of reviewing could run into thousands of pounds, particularly if one included reasonable research into legislative changes and current legal decisions. However, different considerations might apply where the relationship between a client and solicitor was that of family solicitor where there might be a general retainer by which the solicitor was required from time to time to give advice to his client for reward.
Essentially, the single contract relied upon by the claimant was a hopelessly, wide general and continuing retainer by which the relevant firm was required to review all advice and drafting which it had previously done. If the existence of a long-standing relationship and the award of numerous specific commissions to a solicitor gave rise by implication to an implied general retainer pursuant to which the solicitor had to keep under review all previous advice and drafting, that would have very wide ramifications for the solicitors’ profession and their clients who might be expected to have to pay.
It followed that those parts of the draft amended particulars of claim which relied upon the single contract should either be struck out, in so far as they were in the original particulars of claim, or permission to amend refused on the basis that they had no realistic prospect of success.
Paul Darling QC and Simon Hughes QC (instructed by Nabarro LLP) appeared for the claimant; Roger Stewart QC (instructed by Beale & Co LLP) appeared for the defendant.
Eileen O’Grady, barrister