March 2007 Litigation Department Bulletin
Clients: experienced or not?
The Football league’s claim against the former Edge Ellison for £142m received much publicity in the press.
The Court’s decision was given in June 2006 and deals with the difficult issue of whether a Solicitor owes a duty of care to a client outside the express terms of the retainer and if so, the scope of that extended duty.
Although the decision concerned a Solicitor, similar principles are likely to apply to other professionals.
Background
In short, in June 2000 the Football League negotiated a deal with ONdigital worth £315m for the television rights to football league matches.
All went well until March 2002 when ONdigital went into administration and finally, in October 2002, into liquidation. At the time of the liquidation, ONdigital still had £178.5m to pay to the Football League.
The Claim
ONdigital was a relatively new company at the time of the deal ; a joint venture between its parent companies Carlton and Granada. However, Carlton and Granada were not party to the deal and therefore ONdigital’s liquidation left the Football League without a remedy.
The Football League placed the blame on their Solicitors, Edge Ellison. They claimed that Edge Ellison should have advised it to obtain parent company guarantees from Carlton and Granada.
Edge Ellison’s response was simply that it had no duty to provide that advice to the Football League.
The Judgment
The Court ultimately found in favour of Edge Ellison and ruled that a Solicitor has no generally implied duty to advise clients about commercial issues.
The issue of parent company guarantees was expressed by the Court to be “an exclusively business one” and it was pointed out that all the Football League’s representatives were experienced businessmen. They were all aware of the risk of corporate insolvency and knew about the availability of parent company guarantees.
A distinction was therefore drawn between legal and commercial advice. A Solicitor is clearly expected to be able to advise about the law, but ordinarily a Solicitor is under no duty to advise about commercial issues. When it comes to commercial issues, the client is expected to know best and the Solicitor is entitled to rely on the client’s expertise.
Important points to note
- The general rule that a Solicitor has no generally implied duty to advise on commercial issues can be overridden by express agreement.
Both clients and solicitors should be clear about the terms of the retainer and make sure that they are not too generally worded.
- The general rule can also be overridden by circumstance. For example, if a client is clearly inexperienced in business, a Solicitor may have a duty to explain the commercial wisdom, as well as the legal consequences of a transaction.
- The line between commercial and legal advice may be very fine.
This bulletin is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of specific advice given in relation to particular circumstances.
For further information on this or any related topic please contact Martin Bailey or Carina Sparkes.
South Cheshire's leading Law Society accredited law firm
South Cheshire House, Manor Road, Nantwich, CW5 5LX
Tel: 01270 611106 Fax: 01270 610515 or 610085
www.bowcockcuerden.co.uk
Bowcock Cuerden LLP …. taking care of your business
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