Jenifer Evans v Hughes Fowler Carruthers Ltd

A solicitor may owe a duty to advise a client about the solicitor’s own earlier negligence where the solicitor knows or ought to know that there is a significant risk of that negligence. The duty is not confined to cases where the earlier negligence was latent. On a summary judgment application, the court must assess whether the claim has a real prospect of success and must not resolve factual issues through speculation about what third parties knew or ought to have advised.

Equitable set-off is available where the cross-claim is sufficiently closely connected with the claim, such that it would be manifestly unjust to enforce the claim without taking the cross-claim into account. The claims need not arise from the same contract or transaction.

Hughes Fowler Carruthers Ltd claimed approximately £91,000 in unpaid legal fees arising from work undertaken for Jenifer Evans in 2018. Ms Evans counterclaimed damages for alleged negligence in the conduct of earlier divorce proceedings before Mostyn J in 2011 and 2012, claiming approximately £500,000 in wasted costs.

The earlier proceedings had been set aside after a conflict arose from the solicitors’ representation of Lady Mostyn. Ms Evans alleged that the solicitors had failed to advise her about earlier negligence and about a possible claim against themselves. She also sought to rely on that claim by way of equitable set-off.

The County Court judge summarily dismissed the counterclaim. The appeal concerned whether the alleged duty to advise had a real prospect of success and whether the negligence claim was sufficiently connected with the later fee claim for equitable set-off.

1. Appeal allowed. The counterclaim was reinstated.
2. A solicitor’s duty to advise about earlier negligence arises only in a relatively exceptional case, but may arise where the solicitor knows or ought to know that there is a significant risk that earlier conduct was negligent. The duty is not restricted to latent negligence or to cases where a later trigger event brings the problem to light.
3. The judge below had treated the apparent failure of Farrer & Co, leading counsel and the Solicitors Regulation Authority to raise concerns as effectively determinative. That was unsafe on a summary judgment application. The scope of those parties’ retainers and advice had not been investigated sufficiently, and the inference involved excessive speculation.
4. There was a real prospect of showing that the duty had not been discharged. Telling the client to obtain advice elsewhere about the conflict created by the judge’s emails did not necessarily amount to telling her that she might have a claim against the solicitors themselves. In an own-interest conflict, the solicitor should explain clearly that a possible claim exists and that independent advice is required.
5. The pleading sufficiently alleged constructive knowledge, and could readily be amended to make that basis explicit. The issue whether any duty continued during the limitation period was not technically within the appeal, but there was force in the argument that it could persist while the client remained able to pursue the claim.
6. Equitable set-off requires a sufficiently close connection between the claim and cross-claim. The claims need not arise from the same transaction. The relevant question is whether the connection is such that it would be manifestly unjust to enforce the claim without taking the cross-claim into account.
7. On the assumed facts, the later fee claim and the negligence cross-claim arose from the same overall solicitor-client dealings and divorce proceedings. If the solicitors owed an undisclosed duty to advise, the 2012 retainer had not definitively drawn a line under the earlier matter. Ms Evans therefore had a properly arguable case on equitable set-off.

• High Court (Chancery Division): appeal allowed and counterclaim reinstated.
• Lower court: the counterclaim had been summarily dismissed under CPR Part 24.