45. Negligence and Breach of Duty Claims - Lavelle Coleman

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The same broad principles apply in relation to the borrowers accountants, valuers, tax advisers, surveyors and other parties on whom the lender relies in advancing loan monies as well as equivalent service providers that the lender has itself engaged. Where a solicitor provides services for a client, there will generally be a contract or retainer agreement setting out the terms under which services are provided. Solicitors must issue an engagement letter to clients setting out the terms on which services are provided. circumstances where things go wrong notwithstanding that the solicitor acted with due care and skill. In these cases, there is no liability. A solicitor will generally be liable if he failed to exercise the due care and skill that a reasonably competent solicitor in that area of work would have undertaken. However, a solicitor can be liable in negligence, even if he follows standard practice. If the standard practice contains an obvious risk (even in hindsight) then the solicitor may be held liable. The solicitors letter of engagement will specify the scope of the solicitors responsibilities. It may not specify the standard of performance in which case, it will be implied that the solicitor must perform the services with due care and skill. Even if there is no contract between a solicitor and client, the solicitor may be liable for negligent work or advice in accordance with the above principles. A solicitor may be liable to a person who is not a client, if he knew or should have known that person was likely to rely on his advice or on his work. A solicitor is obliged to take due care in relation to his services and advice. He is not an insurer in this sense and does not have absolute responsibility. There may be many Other Duties Some obligations undertaken by solicitor are unconditional. This depends on how they are worded. Certain parts of a certificate of title and undertakings involve unconditional obligations, rather than an obligation to use due care and skill. In these cases the solicitor guarantees a particular result or position, rather than agreeing to use due care and skill to do so. For example, undertakings regarding handing of loan monies etc. are unconditional. A solicitor owes so-called fiduciary duties to clients. This is a duty to act in good faith and to disclose and avoid conflicts of interest. A fiduciary duty involves stricter duties than in the case of other professional
services. A solicitor may only act for both the bank and borrower if there is no potential conflict of interest or if the conflict is fully disclosed and both consent to the solicitor acting. Under the standard Law Society Certificate of title, the bank is not the solicitors client. Basis of Liability The cases illustrate the courts approach to cases where the lender alleges it would not have lent or would have lent less, but for valuers negligence or the failure of a solicitor to disclose some material defect or matter. The cases indicate that there were three scenarios: v the lender would not have lent if it had been known the true position. In this case, the valuer and/or solicitor is potentially liable for the entire loss subject to issues of contributory negligence and the lenders obligation to mitigate. v the lender would have been unwilling to lend the same amount, if it had known the true position. In this case, the valuer and/or solicitor may be liable for a maximum of the difference between the amount lent and the amount if would have lent, had it known the true position. v The lender would have entered the transaction anyway had it known the true position. In this, there is no liability because they have caused no loss. The retainer agreement/contract will define the liability in relation to the services concerned. Liability may be limited by the term of the agreement. In the case of some advisors, the relevant professional rules may restrict the extent to which liability may be limited. An advisor may be liable to a client both for breach of contract and for negligence. If the contract validly limits the level of liability, this cannot be circumvented by claiming for negligence. A lender may be guilty of contributory negligence by failure to make its own enquiries and ignoring obvious risks of which it was aware. The lender may be familiar with the market and may be aware of partcular practices. If it is equally aware or should have been aware of the risks, a court may decide that the solicitors or valuers negligence did cause the loss. Alternatively, the court may decide that the lender is partly responsible or guilty of contributory negligent and that accordingly, its entitlement to compensation should be reduced. Regulation of Solicitors Solicitors are regulated by the Incorporated
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45. Negligence and Breach of Duty Claims - Lavelle Coleman

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