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Free Advice - Heavy Cost


Cautionary tale for professionals

The year’s first decision of the Technology & Construction Court provides a salutary lesson which will concern not just designers and architects, but all professionals and insurers.

In Burgess & Anor v Lejonvarn[i], Alexander Nissen QC, sitting as a Deputy High Court Judge decided a number of preliminary issues. These highlight the dangers common to any professional giving informal friendly advice.

Background

Mrs Lejonvarn, a professional design consultant, had agreed as a favour to help out wiith her friend and neighbours' ambitious landscape gardening project. In what the court described as a "cautionary tale", The work did not go smoothly, the relationship broke down and the former friends Mr and Mrs Burgess claimed for the cost of remedial works.

As a result, Mrs Lejonvarn is defending a claim for £265,000 without any professional indemnity insurance cover. The trial was limited to preliminary issues:

  • The contractual claim: Did a contract exist between the parties, and if so on what terms?
  • The duty of care: Did Mrs Lejonvarn owe the Burgesses any duty of care, including the duty not to be negligent, under the law of tort?

Liability under the English Common Law is divided into claims under contract law, or the law of "tort".

Contract

A contractual claim is based on a prior agreement including an offer, acceptance and each party receiving a benefit or ‘consideration’ as part of the bargain. The agreement is usually set out in writing, which gives clarity for the terms involved. However, a contract can be implied by conduct, even where there is no express written or verbal agreement.

Tort

A claim in tort is based on the principle that everyone owes a duty of care not to cause predictable loss or harm to others. That is whether or not they have any existing relationship.

Decision

The court decided that the professional consultant

  • Had no contractual liability because there had been no offer, acceptance or consideration; there was a lack of clarity on terms such as the duration of the services, termination or remuneration, nor any mention of a contractual relationship.
  • Owed a duty of care in tort that covered both “Advice” and several design and project management “Services”; Mrs Lejonvarn had “assumed responsibility” for the project, and the Burgesses had relied on her. She was therefore liable for the financial losses suffered by the Burgesses when it went wrong.

The judge said

“…in law a duty of care extends to the protection against economic loss in respect of both advice and any service in which a special skill is exercised by a professional. The duty can extend to negligent omissions as well as the performance of negligent acts. For present purposes, the relevant ingredients giving rise to the duty are an assumption of responsibility by the provider of the service coupled with reliance by the recipient of the service, all in circumstances which make it appropriate for a remedy to apply in law…”

However, the court emphasised that "this was not a piece of brief ad hoc advice of the type occasionally proffered by professional people in a less formal context". It was a significant project, approached in a professional way, with services provided over a relatively long period and involving considerable commitment on both sides. In addition, the professional consultant had hoped to receive payment for services that might be necessary later in the project.

Pure economic loss and professional negligence

In cases of negligent advice, the basic principle is to put the claimant in the position they would have been in if the professional had not breached the duty owed to the claimant. In other words, a claimant will usually be entitled to recover the amount by which they are out of pocket as a result of relying on the professional's advice.

The fact that the advice was free, provided as a favour, and without any contract (written or implied) did not avoid the professional being liable for damages in negligence.

Action Points

  • Although this was an extreme case, beware that the absence of a written contract (or that advice is provided free) is no defence to a claim in negligence
  • Where a duty of care, reliance, and loss is proved, liability will follow for all loss and damage arising as a result of negligence
  • Beware giving advice approaching that of an expert or professional without Professional Indemnity insurance
  • Ensure that agreements to provide advice or professional services, whether related to construction works or in any other area, are properly documented and a written contract is drawn up
  • When asked to provide professional advice, consider that giving free advice to a friend can end up with a heavy cost.

[i] [2016] EWHC 40 (TCC), http://www.bailii.org/ew/cases/EWHC/TCC/2016/40.html

Paul Sykes is a Director in our Disputes Management department. For further information regarding negligence claims / business disputes contact Paul.Sykes@lf-dt.com

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.


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