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Does fee size matter in professional negligence claims?

Two recent cases have highlighted a potentially developing trend, where the courts will consider the amount of a professional's fee to help determine the extent of the scope of duty owed to the professional’s client.

Should a professional negligence claim ever be determined by the maxim 'you get what you pay for'?

In Thomas v Hugh James Ford Simey Solicitors, the Defendant solicitors were acting for a coal miner under a DTI high volume, fixed costs scheme set up to deal expeditiously and at modest cost with vibration white finger damages claims. Under the scheme, Mr Thomas was entitled to general damages plus special damages if he required assistance with domestic tasks.

Following an offer for general damages, the solicitors advised Mr Thomas that he might wish to pursue a claim for special damages if he had been unable to carry out certain domestic tasks. During a meeting with Mr Thomas, a case for special damages was discussed, but Mr Thomas informed the solicitors that he was unable to provide evidence that he'd received any assistance and he therefore gave instructions that he did not wish to pursue a claim for special damages.

Several years after accepting an offer in respect of general damages, Mr Thomas brought a claim for negligence against the solicitors on the basis that he would have made a claim for special damages if he'd been properly advised at the time.

The Court held that the solicitors were not in breach of duty as they had satisfied the original retainer requiring them to advise Mr Thomas about possible claims for general and special damages and to pursue such claims where appropriate. Although the Court considered a number of issues, a significant factor in this case appears to have been the fact that the original claim value was modest and the claim was being run under a fixed costs scheme. The Court held that there had to be a sensible limit on what was expected of the solicitors being paid under such a scheme (with the Court noting that such schemes might be the only practicable way of facilitating justice for low value claims at proportionate costs). On the facts of this case, the solicitors could not be criticised for not advising further or exploring in any greater depth whether Mr Thomas had a viable claim, especially after he confirmed he did not wish to pursue it.

In Bank of Ireland v Watts Group Plc, the Court rejected a negligence claim by the bank against Watts Group Plc (Watts) engaged in the capacity of a project monitoring surveyor to report on a borrower's cost estimate for a building development and to thereafter monitor the build. The bank argued that the appraisal of the borrower’s costs was negligent and that it would not have allowed the drawdown of the loan had it been properly advised.

Whilst the claim failed on other grounds, the Court found that the size of fee paid to Watts for producing the report (£1,500) was good evidence of the limited nature of the service they were expected to provide. It reflected the fact that they were not expected to carry out their own detailed calculations in terms of build cost, time to complete the development or cash flow. Instead, the Court held that their retainer was limited to checking the borrower's calculations and a general sense check. They were simply carrying out an overview process.

What are the implications?

Whilst the courts may be sympathetic to a professional who is remunerated at a low level, should what the professional is paid matter in terms of the scope of their duty?

It is long established that, in terms of contract law, the courts will not interfere with what has been agreed just because one party has struck a bad bargain. If a professional has agreed to perform certain tasks for what turns out to be an unrealistically low amount, that should not lower the standard of care expected of that professional when performing such tasks.

In reality, as these two cases have highlighted, the courts are likely to take a practical approach to the scope of duty a professional owes when conducting work on a fixed cost or low value retainer. With this in mind, to avoid such arguments, and a risk that a low fee might lead to a narrower than anticipated scope of duty, clear and detailed instructions to the professional should always be given.

At TLT, we have significant experience in assisting institutions in drafting terms of engagement.  If you would like to discuss further, please do not hesitate to contact Nick Curling.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2017. Specific advice should be sought for specific cases. For more information see our terms and conditions.


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