GC Collective Horizon Scanner - Autumn 2018
DAC Beachcroft's GC Horizon Scanner is a selection of legal and regulatory developments that we consider are the most interesting and relevant to General Counsel, senior managers and professionals,…
Published 19 March 2019
Professionals who provide professional services gratuitously and without a contract owe a duty of care in tort to act with reasonable care and skill in respect of services they provide. But they are under no duty to advise or give warnings, and they will not be liable for work they do not do. This was the conclusion of the Court of Appeal in Burgess v Lejonvarn.
Mr and Mrs Burgess asked Mrs Lejonvarn, a friend and architect, to assist in a landscape gardening project at their home. She arranged for a contractor to price the ground works and first phase, and she set up a project team. She did not charge a fee but there was an understanding that she would charge for detailed design work later in the project. Before the project completed, however, the Burgesses became unhappy with the quality and progress of the work and the relationship ended.
The Burgesses brought a claim against Mrs Lejonvarn alleging negligent advice, design and project management.
At the preliminary issue hearing (discussed more fully in our article here), the judge held that there was no contract between the parties but Mrs Lejonvarn owed a duty of care in tort to exercise reasonable skill and care in relation to the professional services that she provided, notwithstanding that they were provided gratuitously. She had assumed responsibility for the provision of those professional services and to prevent pure economic loss.
An appeal by Mrs Lejonvarn on the preliminary issue was dismissed by the Court of Appeal. The Court made clear that a professional providing gratuitous services was liable to undertake any work with reasonable skill and care but importantly the scope of this tortious duty did not require her to carry out specific services and she could not be liable for what she did not do or failed to do.
At the subsequent liability trial, the High Court had to decide what services Mrs Lejonvarn had actually provided during her involvement and whether she had, as a finding of fact, acted negligently in their provision.
The Court was highly critical of the Burgesses’ failure to properly particularise and evidence the allegations of negligence and their alleged losses. It found the claim for negligent design and project management lacked credibility, the claim for breach of design and project management responsibilities was “threadbare”, and their global claim for damages lacked “common sense”. In short, they had failed to establish that the architect had negligently performed the services that she had provided gratuitously.
While Burgess involved gratuitous services provided by an architect, the decision is relevant to all professionals. Accountants or financial advisers who provide “freebie” advice in the hope of clinching bigger instructions or who (perhaps inadvertently) stray into advising on new issues beyond their formal retainer must understand the associated risks - they will be on the hook if the gratuitous advice they give is negligent but they will not be liable for advice they do not give or services they do not provide. In this scenario, the proverbial “silence is golden” approach is best.
The case is an important reminder that professionals such as accountants should always try to operate within the terms of a written retainer to avoid similar disputes from arising. If you find yourself giving ad hoc advice or providing services beyond your retainer, then follow up in writing and make it clear what services you are and are not providing.