Farnon v Devonshires Solicitors (a firm)

A solicitor’s duty to exercise reasonable skill and care is defined principally by the scope of the retainer and the circumstances apparent to the solicitor. A solicitor is not generally required to advise on matters outside that retainer, but must warn the client of a material risk discovered while carrying out the instructed work. The scope of the retainer may expand as the client’s instructions and circumstances develop, but merely discussing a legal issue as a negotiating tactic does not necessarily create an obligation to provide comprehensive advice on it. Where the client’s principal objective is a negotiated exit, advice may properly focus on the risks affecting that objective. The claim was dismissed because the advice fell within the retainer and was not negligent.

The claimant, formerly a fund manager and member of a limited liability partnership, retained the defendant solicitors in connection with her proposed departure so that she could join a competitor without serving her notice period or remaining subject to restrictive covenants.

She alleged that the solicitor negligently failed to advise on a potential sex-discrimination claim, allegations that she had breached the partnership agreement, and the continuing tax liability arising under a compromise agreement. The central issues were the scope of the retainer, breach of duty, and causation and loss.

1. Scope of retainer. The retainer was limited to advice concerning the claimant’s exit from the LLP and her ability to join a competitor without serving her notice or being bound by restrictive covenants. The discussion of sex discrimination was intended to provide negotiating leverage and did not expand the retainer into an instruction to advise comprehensively on or pursue a discrimination claim (paras [64]-[65]).
2. The duty to exercise reasonable skill and care depends on the retainer and the particular circumstances, including the client’s characteristics. A solicitor is not a general insurer against legal problems. However, a solicitor who becomes aware, while carrying out the retainer, of a material risk of which the client may reasonably be unaware must warn the client (paras [32]-[34]).
3. The advice on sex discrimination was not negligent. The advice on limitation, injury to feelings and the estimated bonus shortfall was reasonable in context. The evidence did not establish a realistic entitlement to the substantially larger bonus claimed (paras [66]-[70]).
4. The advice concerning alleged breaches of the Partnership Agreement was also reasonable. The documents disclosed a strong prima facie case, creating risks of expulsion, injunctive proceedings, damages, reputational harm and difficulty taking up the new employment. Detailed advice on the merits of defending proceedings was not required where the immediate issue was negotiating a prompt exit (paras [78]-[88]).
5. Although the solicitor may have assumed that LLP members owed fiduciary duties as partners, the express contractual obligations concerning good faith, devotion to the business, care and skill, confidentiality and expulsion made that error immaterial (paras [82]-[87]). Removal of the tax clause from the compromise agreement did not extinguish the underlying tax issue. The claimant was repeatedly told that it would need to be resolved later (paras [89]-[103]).
6. The claimant failed to establish breach of duty, and the claim was dismissed. The causation issue therefore did not arise (paras [104]-[105]).