Risky Business: what to do when former clients ask further questions

In Spire Property Development LLP & Anor v Withers LLP [2022] EWCA Civ 970, the Court of Appeal considered the scope of a solicitor's duty when a former client posed questions to a solicitor concerning a transaction after the retainer had ended. The judgment will be of interest to solicitors who are asked for advice in circumstances where no retainer exists.

Background

The appeal arose out of a claim for professional negligence brought by Spire Property Development LLP and Hortensia Property Development LLP (together the Developers) against Withers LLP, a firm of solicitors.  Withers were instructed on the Developers' purchases of two high value Grade II listed properties.  The two properties shared a common boundary and were to be developed in parallel.  Both purchases completed in 2012.  

In January 2014, the Developers contacted Withers following their post-acquisition discovery of three extra-high voltage electric cables running under both development sites. 

The Developers commenced proceedings in 2018 against Withers, in summary, for (i) failing to make sufficient searches or enquiries so as to identify the cables prior to purchase; and (ii) failing to investigate and advise adequately in 2014 as to the Developers' rights and remedies upon the discovery of the cables.  The Court found in favour of the Developers on both accounts. 

Withers' appeal was limited to the second issue – i.e. on the finding that they owed a tortious duty of care to the Developers to advise them of their rights and remedies in 2014. 

The Court of Appeal carefully considered the exchanges of communication between Withers and the Developers to identify the obligations that arose from it.  There were two critical emails: one from the Developers on 28 January 2014, raising 3 specific queries, and Withers' response of 3 February 2014.

The Developers' email to Withers stated:

"Dear Hannah
Just following up on the below.
Couple of points arising:
1.  Should the existence of the cable not have come up on the radar as a result of seller's replies to enquiries, even if it didn't appear on the title docs?
2.  Could you elaborate slightly on the statutory rights of access point? Does this mean that UK Power could have laid the cable at Sloane and KC without having any kind of legal permission from the owners? It would seem impossible that the owners of the sites were not aware of such a large cable being laid on their property.
3.  If, as there surely must have been, there is some kind of legal documentation relating to the laying of the cable on either site, then the question remains as to why this hasn't shown up on our radar?
We need to decide how 
we are going to approach UK Power about this issue, so would be very helpful to get your thoughts on the above. The better prepared we are the more likely we will succeed in getting the cable moved.
Many thanks."

In its response, Withers stated: 

"Dear Barnaby
In response to your email below and using the same numbering:
1.  The seller can only provide such information as they may have and there were no wayleave agreements or deeds of easement relating to any electricity cable revealed in the seller's replies to enquiries, other than the rights relating to the electricity transformer chambers. In addition, St Mark's was acquired from receivers and therefore the information provided was extremely limited and they had no knowledge of the property whatsoever.
2.  Utility companies have statutory rights of access onto private land to lay pipes, wires, cables and other service infrastructure. Under the Electricity Act 1989 , electricity companies can acquire a wayleave to install an electric line on, under or over private land, together with rights of access of inspection, maintenance and replacement. A wayleave can either be agreed or can arise where the owner of occupier fails to respond to a notice requiring him to grant a wayleave or gives it subject to conditions unacceptable to the electricity company. Wayleaves, whether acquired under the Electricity Act 1989 or granted by a landowner do not need to be registered at the Land Registry. It is therefore possible that a wayleave was granted sometime ago when the cable was originally laid and was not known to the seller. In relation to the Sloane Building, the seller acquired the property in 2010 and before then it had changed hands in 2009 and 1999. Prior to 1999 it appears that the site was owned by the local authority. The seller may therefore not have been aware of the cable. As to St Mark's, the receivers will have had limited information and are unlikely to have known about such matters.
3.  Please see comments above.
Kind regards"

The Developers replied by email within the hour to say; "Thanks" and did not subsequently return to Withers. 

The Developers' case was that they had impliedly asked for advice about the rights and remedies they may have against the utility company that had laid the cables.  They said that, in responding to their enquiry, Withers had assumed a duty of care to advise them correctly about their rights and that, by tendering advice, Withers came under a duty of care to advise as to the remedies available to the Developers. 

Judgment

The Court of Appeal summarised a solicitor's contractual duties owed under a retainer as follows: 

"The general principle is thus that a retained solicitor owes no duty to go beyond the scope of their express instructions and give advice in relation to other matters. This is subject to the qualification that the duty extends to giving advice that is "reasonably incidental" [57]. 

It is well established that a solicitor retained by a client will owe a concurrent duty of care in tort. However, where there is no retainer different considerations arise.  The concept of assumed responsibility remains the foundation of tortious liability. 

The Court of Appeal took the view that whether any responsibility is assumed, and the extent of any such assumption, is to be judged objectively in context and without the benefit of hindsight.  The primary focus must be on exchanges between the solicitor and the claimant. A fact sensitive enquiry in each case is required. 

Withers accepted that it assumed a duty of care to exercise reasonable skill and care in giving the answers that it chose to give to the specific questions asked of it, but contended that it assumed no wider duty.  The central issue before the Court of Appeal, therefore, was the scope of the assumption of responsibility - in particular whether or not Withers assumed responsibility to advise on the Developers' rights and remedies - which was to be determined on the facts.  That was a question of objective construction of the specific email exchanges.  These were not to be read as if they were formal legal documents, but considered in the context that they were exchanges between a solicitor and former client who were familiar to each other and involved in ongoing professional relationships. It was noted that the Developers were both highly experienced and well-resourced.

The Developers argued that there was a clear request for advice going beyond a narrow answer. When considering this, the Court of Appeal noted that the Developers expressly asked for Withers' thoughts "on the above." "[T]he above" was the three questions set out in their email.  Consistent with that, Withers responded to those questions "using the same numbering".  Objectively, Withers was not assuming responsibility for anything going beyond answering those three questions.  It was not for Withers to second-guess how or why its answers to the three questions might assist the Developers.  Thus, by answering the email in the manner that they did, Withers was not to be taken as having assumed a duty to advise on the wider questions of potential rights and remedies.

The Court concluded that, on a fair and objective reading of the relevant email exchanges in context, Withers did not assume legal responsibility to the Developers to advise on the legal position in the event the utility company did not have documentation in support of its right to lay cables through the Properties and/or in respect of their rights generally against the utility company. 

Key issues

This is an important case concerning the obligations of solicitors when responding to queries from former clients.  It is important for solicitors to be able to respond constructively to "one-off" requests for information or advice in circumstances where no retainer exists without fear of creating legal liability. 

When advice is given outside the retainer, the scope of duty will be considered by an objective construction of the relevant exchanges between the parties. It seems that the sophistication of the client will also be considered by the Court.  Nonetheless, it would be wise for solicitors to identify the extent of their assumption of responsibility.