Pickersgill and Another v Riley
| Jurisdiction | UK Non-devolved |
| Judge | Lord Scott of Foscote |
| Judgment Date | 25 February 2004 |
| Neutral Citation | [2004] UKPC 14 |
| Docket Number | Appeal No. 12 of 2003 |
| Court | Privy Council |
| Date | 25 February 2004 |
[2004] UKPC 14
Present at the hearing:-
Lord Nicholls of Birkenhead
Lord Hoffmann
Lord Hope of Craighead
Lord Scott of Foscote
Baroness Hale of Richmond
Privy Council
At issue in this case is the scope of the duty of care owed by Mr Pickersgill, a solicitor and partner in the appellant firm, to the respondent, Mr Riley, while acting for him as his solicitor in a commercial transaction. The transaction involved, first, the grant of a 28 year lease of business premises in Jersey to Magnet Publications Ltd, the shares in which were owned by Mr Riley, and second, the sale of those shares to an English company, West of England Newspapers Ltd ("WEN").
The lessor of the Jersey property wanted a guarantee to be given by Mr Riley underwriting the due payment by Magnet of the rent falling due under the lease. Mr Riley agreed to give the guarantee and the lease was granted to Magnet accordingly. On the sale of his shares in Magnet Mr Riley naturally wanted to be released from the guarantee he had given. But the lessor, for reasons that are not material, was not willing to accept the substitute guarantors that were on offer and so was not willing to release him. A solution to this difficulty was negotiated between Mr Riley and the individuals who were representing the proposed purchaser of the Magnet shares. It was agreed that WEN, as a term of its purchase of the shares, would undertake to indemnify Mr Riley against any liability he might incur under the lease guarantee. The sale of the shares, at a price of £125,000, proceeded to completion on that basis.
At the time of the transaction both Mr Riley and Mr Pickersgill were under the impression that WEN was a company of substance. But neither of them carried out any investigation of WEN's financial status.
Several years later Magnet became insolvent and rent due under the lease fell into arrears. The lessor claimed against Mr Riley and Mr Riley had to pay the lessor a sum of £56,152 odd to discharge his liability under the guarantee. Mr Riley then tried to obtain re-imbursement from WEN pursuant to the undertaking WEN had given on the sale of the shares. But it transpired that WEN had no assets. It had been a shell company with no assets at the time of the transaction and remained in that state. Mr Riley could not expect to recover anything under WEN's undertaking. So he sued his solicitors in negligence.
Mr Riley succeeded in his negligence action before the Royal Court of the Island of Jersey. The Commissioner, giving the judgment of the Royal Court on 26 July 2001, said that
"… Mr Pickersgill had a duty either to investigate West of England Newspapers Limited or to advise his client of the risk that he was running by not having the financial standing of the company investigated." (para 39 of the judgment)
This conclusion was upheld and repeated in the Court of Appeal on 13 September 2002 (see para 19 of the judgment of Tugendhat JA). The solicitors' appeal was dismissed.
The solicitors have now appealed to their Lordships. A number of issues have been raised. First and foremost there is an issue as to the scope of the duty of care imposed on Mr Pickersgill by the instructions he had received from Mr Riley. Was it his duty to investigate the financial substance of WEN or to advise Mr Riley of the financial risk he would run if that were not done? If that was his duty, there is no doubt that Mr Pickersgill was in breach of it. The Royal Court and the Court of Appeal held that Mr Pickersgill owed the duty as formulated in the passage cited above and that he was in breach of it. A number of other issues then arose and were decided in Mr Riley's favour. But unless the courts below were correct in concluding that Mr Pickersgill was in breach of his duty of care, these other issues do not arise. Their Lordships will, therefore, address themselves first to the duty of care issue.
It is plain that when a solicitor is instructed by a client to act in a transaction, a duty of care arises. But it is also plain that the scope of that duty of care is variable. It will depend, first and foremost, upon the content of the instructions given to the solicitor by the client. It will depend also on the particular circumstances of the case. It is a duty that it is not helpful to try to describe in the abstract. The scope of the duty may vary depending on the characteristics of the client, in so far as they are apparent to the solicitor. A youthful client, unversed in business affairs, might need explanation and advice from his solicitor before entering into a commercial transaction that it would be pointless, or even sometimes an impertinence, for the solicitor to offer to an obviously experienced businessman.
As to the extent to which a solicitor should make enquiries or investigate matters that he has not been asked to enquire into or investigate, their Lordships think that para 10-160 in Jackson and Powell on Professional Negligence, 5th ed (2002) correctly states the position:
"In the ordinary way a solicitor is not obliged to travel outside his instructions and make investigations which are not expressly or impliedly requested by the client."
In support of that proposition the text goes on to refer to Clark Boyce v Mouat [1994] 1 AC 428, a Privy Council decision, where Lord Jauncey of Tullichettle said, at page 437:–
"When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in the carrying out of a particular transaction, that solicitor is under no duty whether before or after accepting instructions to go beyond those instructions by proffering unsought advice on the wisdom of the transaction."
And in Reeves v Thrings & Long [1996] PNLR 265 Sir Thomas Bingham MR said, at page 275, in a dissenting judgment:
"It will always be relevant to consider what the solicitor is asked to do, the nature of the transaction and the standing and experience of the client. Thus on the facts here Mr Sheppard was not retained to advise on the wisdom of offering the price Mr Reeves had informally agreed to pay … But it was in my view Mr Sheppard's...
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