Dayman v Lawrence Graham (a firm)

A solicitor’s duties are defined by the scope of the retainer. Where a firm acts for one spouse and relies on the other spouse, who is a partner, to discharge a legal duty within that retainer, the firm remains liable for the partner’s omission. The duty may require an explanation of unusual legal documents and security arrangements. It does not generally require solicitors to protect a client from a spouse’s dishonesty or fraud without notice of a relevant risk.

In a loss-of-chance claim involving the hypothetical actions of both the claimant and a third party, the claimant must prove the claimant’s own acts on the balance of probabilities. The chance of the third party’s response is assessed by whether there was a real and substantial chance of that response occurring. The claim failed because the breach did not cause loss.

The claimant, a trustee in bankruptcy, claimed damages from the defendant solicitors for breach of contract and professional negligence in connection with the sale of the bankrupt’s home and purchase of another property in 2000. The claim alleged that the solicitors failed to explain that most of the sale proceeds would be paid to the bank and that alternative offshore finance would leave the replacement property subject to precarious security.

The claimant sought damages for the lost opportunity to negotiate a reduction or release of the bankrupt’s pre-existing liability to the bank. The central issues were the scope of the solicitors’ retainer, breach, causation and the assessment of loss of a chance where the claimant’s and a third party’s hypothetical conduct were both material.

The claim was dismissed. The court held as follows.

1. The solicitors’ retainer extended beyond the giving of a particular undertaking. Once alternative short-term offshore funding was obtained to discharge the undertaking, the solicitors owed a duty to provide appropriate legal explanation and advice about the terms of that funding and its security. They could have discharged that duty by sending a letter; a personal attendance was unnecessary.

2. Because the firm looked to Mr Fielding, a partner and the client’s husband, to provide that explanation in his capacity as solicitor and partner, the firm was vicariously liable for his omission. A firm acting for the spouse or relative of a partner is liable where it relies on that partner to perform a legal duty within the scope of the retainer.

3. The duty did not extend to guarding Mrs Fielding against deception or fraud by her husband. The firm had no notice of any such risk, or of the relevant extent of the joint borrowing. The alternative claim concerning money paid to Coutts & Co also failed because there was no breach and, in any event, the money would not have been available to Mrs Fielding.

4. For loss of a chance involving a claimant and an independent third party, the claimant must prove on the balance of probabilities that she would have approached the third party. The court then asks whether there was a real and substantial chance that the third party would have proposed a deal. The claimant must prove on the balance of probabilities that she would have accepted that deal. The court should identify the least favourable deal which the third party had a real and substantial chance of offering and test whether it would probably have been accepted, repeating the exercise where necessary.

5. Applying that approach, Mrs Fielding would probably have followed her husband’s advice and would not have approached the bank. Even if she had approached it, there was no real or substantial chance that the bank would have proposed an acceptable settlement. The limited breach therefore caused no loss.