Solicitors’ duties to remind clients
Snapshot
- Recent Court of Appeal decision has confirmed the general principle that solicitors are not obliged to repeat advice previously given to a client.
- Solicitors should satisfy themselves that important advice and/or requests for instructions are properly understood by clients.
The recent New South Wales Court of Appeal decision in Shoal Bay Beach Constructions No. 1 Pty Ltd v Mark Hickey & Ors [2023] NSWCA 23 (‘Shoal Bay’) has confirmed the general principle that a solicitor is not obliged to repeat advice previously given to a client, or to advise on what a client already knows. However, solicitors should remain cognisant that the application of this principle will depend on the facts in each case.
Obligation to remind or repeat advice
Shoal Bay Beach No. 1 Pty Ltd (‘Developer’) was engaged in residential property development and retained a law firm to advise and assist in the sale of off-the-plan units. The contracts enabled the vendor or purchaser to rescind the contract if certain conditions precedent were not satisfied prior to the ‘Registration Date’ (Clause 42.2). In certain circumstances, the Developer was entitled to extend the Registration Date by giving one month’s notice to the purchasers (Clause 43).The law firm repeatedly advised the Developer regarding the effect of Clause 43. That is, if it wished to extend the Registration Date, it needed to give the purchasers one month’s written notice. The law firm also provided multiple schedules to the Developer setting out the Registration Dates for various contracts.
Ultimately, due to constructions delays, the Developer did not satisfy certain conditions prior to the Registration Date for two properties. Pursuant to Clause 42.2, the purchasers rescinded their contracts. The plaintiff contended that the law firm failed to alert the Developer of the deadlines for exercise of its rights under Clause 43 or to seek instructions from the Developer to give notice extending the Registration Dates, and as a result, the purchasers rescinded the contracts.
In a unanimous decision, the Court of Appeal held that in circumstances where the law firm had given repeated advice confirming the Developer’s understanding of Clause 43, notwithstanding that this advice was not repeated closer to the Registration Dates, the law firm had no liability in negligence. Moreover, it was reasonable for the law firm to proceed on the basis that if the Developer wanted to issue a notice, it would provide those instructions.
The Court’s continued application of the principle that a solicitor is not obliged to repeat advice previously given to a client is a positive development for solicitors. However, the principle is not unfettered. The principle was discussed in About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370 (‘About Life’), where it was not applied as generously.
In About Life, a solicitor was found to have acted negligently by failing to make adequate enquiries about the existence of an important side deed (the existence of which was only within the knowledge of the client).
The solicitor submitted that, having asked the client about the existence of side deeds and not being told about them, it had no duty to jog the memory of the client on the off-chance that such a document might exist and the client had forgotten about it. The submission was rejected on the basis that the client did not understand the nature or importance of the solicitor’s queries about the existence of the side deed and the solicitor ought to have been aware that the client did not understand the request for instructions in this regard.
Limitations and considerations
Following the decisions in Shoal Bay and About Life, there are a few matters to consider regarding solicitors’ obligations to remind clients of advice or to repeat advice including:
- in Shoal Bay, the law firm gave repeated reminders about the requirement to give notice. It is possible that a different conclusion would be reached where advice is given on a single occasion or out of context;
- in Shoal Bay, the Court found the Developer understood the advice provided regarding Clause 43, whereas the opposite was true in About Life. The assertion that advice or requests for instructions need not be repeated is likely to have most force where the client fully appreciates the relevant advice and/or request for instructions, or is given the necessary tools to understand;
- in both cases, the Court considered the solicitor’s opinion as to whether the advice was understood by the client. It would be prudent for solicitors to satisfy themselves that the importance or consequences of any advice and/or request for instructions is properly understood by the client.
This article originally appeared on lsj.com.au