Duty of care - the real price of mates' rates in the provision of professional services

Published 25 May 2017

In Lejonvarn v Burgess, we have another case where a court has found that a professional, who provided friends with professional services gratuitously and without a contract, owed a duty of care in tort to act with reasonable care and skill. This is a cautionary tale for professionals who provide services outside a formal contractual framework, such as "loss leader" exercises undertaken for business development purposes.

Facts

Mrs Lejonvarn was an architect and a friend of Mr and Mrs Burgess. The Burgesses asked Mrs Lejonvarn to assist in a garden landscaping project at their North London home, and as a favour, she agreed. She intended to provide subsequent work in respect of the design elements of the project, for which she would charge a fee. However, before the project completed, the Burgesses became unhappy with the quality and progress of the work and Mrs Lejonvarn's involvement ended. The Burgesses claimed that (i) Mrs Lejonvarn's work was defective, (ii) she was legally responsible for it and (iii) as a result they were owed damages. Their claim was advanced in contract but also in tort on the basis that Mrs Lejonvarn assumed responsibility for the provision by her of professional services acting as an architect and a project manager.

The Technology and Construction Court's decision

The judge concluded that despite the services being provided gratuitously, they were nevertheless being provided "in a professional context and on a professional footing". 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 manner, 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 follow-on design services.

Court of Appeal decision

The Court of Appeal agreed with the TCC judge, finding that Mrs Lejonvarn did owe duties of care to the Claimants to prevent pure economic loss. The Court of Appeal addressed the following issues:

A duty of care can still be owed in the absence of a contract

Whilst the judge at first instance found that there was no contract between the parties, he concluded that the parties' relationship was "akin to a contractual one". The Court of Appeal agreed.

The correct test for establishing duty of care

Generally, claimants cannot recover pure economic loss in tort because defendants are not usually held to have assumed a duty of care to prevent economic loss. There are exceptions to this particularly in certain professional contexts where there has been reliance on the professional's advice.

On appeal, Mrs Lejonvarn argued that the judge erred in applying the test of assumption of responsibility and that he should have applied, or applied additionally, the threefold Caparo test¹, namely: (i) whether the loss was reasonably foreseeable; (ii) whether there was a sufficient relationship of proximity, and (iii) whether in all the circumstances it is fair, just and reasonable to impose a duty of care.

This case affirms the "assumption of responsibility" test is the correct test for a duty of care in tort and that it has subsumed the threefold test, i.e. where a person assumed responsibility to perform professional or quasi-professional services for another who relied on those services, the relationship between the parties was itself sufficient to give rise to a duty on the part of the person providing the services to exercise reasonable skill and care in doing so.

The key question in the appeal was the third branch of the test, i.e. whether in all the circumstances it is fair, just and reasonable to impose a duty of care. Citing previous cases², the Court of Appeal found that the assumption of responsibility test was particularly useful in two core categories of case: (i) where there was a fiduciary relationship; and (ii) where the defendant voluntarily provided services in circumstances where he knows or ought to know that an identified claimant will rely on his advice. The Court of Appeal found that this was a case which concerned Mrs Lejonvarn voluntarily tendering skilled professional services in circumstances where she knew the Burgesses would rely on the proper performance of those services and therefore the assumption of responsibility would subsume the approach in the threefold Caparo test. The Court of Appeal concluded that the TCC judge was correct to determine that Mrs Lejonvarn had assumed responsibility to prevent pure economic loss to the Burgesses.

Comment

Professionals are frequently asked by their clients for ad hoc advice at short notice and without an expectation of a fee being charged. This case adds to the list of cautionary tales illustrating the perils of carrying out work for free and that duties may arise in the absence of a contract.

Professionals can take some comfort from the fact that this case does not undermine the likelihood that ad hoc, free advice, does not necessarily give rise to professional liability. However, they should beware of any situation where such advice may be relied upon. They can and should always take minimal steps to protect their position, such as a note on file or an email which records that it has been made clear to the client that they should not rely upon the advice without further work being undertaken, and a formal retainer being entered into.

¹Caparo Industries Plc v Dickman [1990] AC 605 

²Customs and Excise Commrs v Barclays Bank plc [2007] 1 AC 181 and White v Jones [1995] 2 AC 272