Julian v Rollit Farrell & Bladon

A solicitor cannot simply rely on a client's recollection where the solicitor has been instructed to address personal guarantees, a possible guarantee has been identified, and the client's memory has proved unreliable. The solicitor must either investigate the possible liability, warn the client of the unresolved risk and its consequences, or obtain clear instructions that the client accepts the risk and does not require investigation. Failure to take any of those courses may fall below the required standard of care, even where the solicitor is otherwise careful and competent and the necessary investigation would require minimal time and expense. Questions of causation and damage remain separate issues.

Mr David Julian sued his former solicitors, Rollit Farrell & Bladon, for breach of retainer. The claim concerned advice given during a 1992 refinancing of Vertex Optical Ltd, of which Mr Julian had been managing director and majority shareholder. He had previously given a personal guarantee of the company's liabilities to the Woolwich, but the guarantee was not identified before the refinancing completed.

Mr Justice Blackburne tried breach of duty as a preliminary issue and dismissed the claim. The Court of Appeal considered whether the solicitor could reasonably rely on Mr Julian's recollection after being alerted to the possible Woolwich guarantee and after another personal guarantee had been forgotten. The central issue was whether further investigation, warning or express risk-based instructions were required.

Lord Justice Chadwick delivered the leading judgment. Mr Justice Rougier agreed with the proposed disposition and supported the observations on causation. Lord Justice Kennedy agreed with both judgments.

1. The retainer did not require the solicitors to secure Mr Julian's release from every guarantee. It did require them, before completion of the refinancing arrangements, to advise whether he remained liable under personal guarantees of the company's liabilities.
2. By 4 June 1992 the solicitor had been alerted to the possible existence of a Woolwich guarantee. The possibility was not fanciful because the company had an existing Woolwich charge which might have been supported by a personal guarantee. The solicitor also knew, after the IFL guarantee was discovered, that Mr Julian's recollection could not safely be treated as conclusive.
3. In those circumstances, the solicitor had three proper courses available: investigate the existence of the Woolwich guarantee; explain that the issue remained unresolved and warn of the risk of future enforcement; or obtain clear instructions that Mr Julian accepted that risk and did not require investigation. None was taken. Reliance on the client's tentative recollection was therefore insufficient, and the failure to deal with the guarantee fell below the required standard of care.
4. The appeal was allowed on the preliminary issue of liability. Causation and damage remained to be tried. The Court of Appeal regarded the first-instance judge's observations suggesting difficulties on those issues as well founded, but they were not a determination of them and should not encourage an assumption that the proceedings would ultimately succeed.

The reasoned judgments state that the appeal should be allowed. The transcript's final line records “Appeal dismissed”, which is inconsistent with those judgments.

• High Court: Mr Justice Blackburne determined breach of duty as a preliminary issue and dismissed Mr Julian's claim.
• Court of Appeal (Civil Division), [2001] EWCA Civ 1187: the court's judgments allowed the appeal on liability, leaving causation and damage for trial.