Mason & Ors v Mills & Reeve (A Firm)

A solicitor’s continuing retainer does not impose a duty to advise on every risk suggested by incidental information. The scope and extent of the duty depend on the retainer, the documents and the particular circumstances. Where information arrives by chance, the client has not sought advice, and it does not reasonably indicate a significant risk, no duty arises to advise on that risk or to recommend delaying the transaction. A successful defendant may bear costs of distinct issues on which it failed. However, refusal to mediate is not unreasonable where the defendant reasonably considers its core case strong and mediation has no reasonable prospect of success.

The claimants appealed against Arnold J’s dismissal of their professional-negligence claim against a firm of solicitors: [2011] EWHC 410; [2011] STC 1177. They alleged that the firm should have advised about the inheritance-tax and capital-gains-tax consequences if the principal shareholder died shortly after completion of a management buy-out, and should have recommended postponement until after a planned heart procedure. The claim was confined by an earlier procedural appeal to a case dependent on the firm’s knowledge of that procedure. The firm cross-appealed against an order requiring payment of only 50% of its costs, particularly the costs consequences of refusing mediation. The central issues were whether the information received triggered a further duty and whether the costs discretion had been properly exercised.

1. Liability. Davis LJ, with the Master of the Rolls and Lord Justice Richards agreeing, dismissed the appeal. The retainer covered advice on the tax consequences flowing from the transaction, but not advice on how it fitted into each client’s wider financial and tax planning. The scope and extent of any continuing duty depended on the particular retainer documents and circumstances.
2. The email about the heart procedure reached the supervising solicitor by chance, through a copied email chain. The client had not sought advice on it. The email described what appeared to be a routine procedure and identified travel restrictions, not a significant risk of death. The firm’s earlier knowledge of ill-health did not materially alter that assessment. The firm therefore had no duty to advise on the tax consequences of death or to recommend deferring completion. The situations considered in Hall v Meyrick, Mortgage Express Ltd v Bowerman and Partners and Credit Lyonnais SA v Russell Jones and Walker were materially different.
3. The alternative formulation of the claim could not succeed. The earlier procedural ruling had confined the case to a duty dependent on knowledge of the particular heart procedure. The claimants could not reintroduce a wider case based on death after completion however arising. The court therefore did not need to determine the further causation submissions.
4. Costs. Under Civil Procedure Rules 1998, r 44.3, a trial judge has a broad discretion. An appellate court should interfere only for an error of principle, failure to consider a relevant matter, consideration of an irrelevant matter, or a plainly wrong result. A successful defendant may nevertheless bear costs relating to discrete unsuccessful issues, even without unreasonable conduct. The judge was entitled to allow for the unnecessary disclosure exercise concerning Kirby & Haslam.
5. The judge was wrong to treat refusal to mediate as adverse conduct. Halsey v Milton Keynes General NHS Trust confirms that parties cannot be compelled to mediate and that mediation is not appropriate in every case. A reasonable belief in a strong case may justify refusal, particularly where circumstances have not changed and mediation has no reasonable prospect of success. The Court of Appeal exercised the costs discretion afresh and substituted an order that the claimants pay 60% of the defendant’s costs.

• Court of Appeal (Civil Division): The appeal on liability was dismissed. The costs cross-appeal was allowed and the costs order was varied from 50% to 60%.
• Earlier Court of Appeal procedural appeal: The court refused permission to re-amend the claim to advance a wider duty, reported at [2011] EWCA Civ 14; [2011] 1 WLR 2735.
• High Court, Chancery Division: Arnold J dismissed the professional-negligence claim and ordered the claimants to pay 50% of the defendant’s costs: [2011] EWHC 410; [2011] STC 1177.