The Gazette 1971

Lawyer's Negligence, Part 2 INTERNATIONAL BAR ASSOCIATION TOKYO CONFERENCE—SEPTEMBER 1970 Extract from the "International Bar Journal" THE LAWYER'S LIABILITY FOR HIS NEGLIGENCE THE LEGAL BASIS AND POSSIBLE INSURANCE COVER Report submitted by Colin H. Dunlop, LL.B., Solicitor, New South Wales, Australia. [Continued from Gazette, July-August, pp. 71-76] Division 4—Avoidance of Liability

Therefore, the solicitor cannot by statute enter into an enforceable contract in writing whereby he provides he shall not be liable for negligence in respect of contentious business undertaken by him. In regard to non-contentious business there is no outright statutory ban on the inclusion in an agree- ment a disclaimer or limitation of liability for negli- gence. However, the agreement must be in writing, and there is power to the Court in certain circum- stances to cancel it. Furthermore, having regard to the fiduciary duty of the solicitor to his client, the old common law principles apply that the Court will not enforce in the client's favour an unfair agreement (which as a disadvantageous agreement, the solicitor should have given him warning not to enter). In general, therefore, the power of the solicitor to disclaim liability for his negligence is, if not prohi- bited altogether, at least severely restricted, and it is the view of the Law Society that as a matter of general policy solicitors should not seek to disclaim or limit their liability to their clients for negligence, far less for gross negligence. Mr. Marden refers to the Code of Professional Respon- sibility adopted by the American Bar Association in August 1969 stipulating that a lawyer may not "exon- erate himself from liability for malpractice or limit his liability for malpractice by contract with his client or by use of corporate structure". As the quotation is given in answer to a question on negligence, it is assumed that "malpractice" includes negligence. Position in England, Scotland and Ireland In Soctland "an advocate is not permitted to enter into any contract with the client", but the view of the English Bar, as expressed by Mr. Rink, is that, "at least in theory, it would be practicable for a barrister to enter into an agreement with his client—rather than himself merely stating unilaterally—that he should be exempt (either generally or beyond a stated amount) from lia- bility for negligence in pure paper work done by him for that client". A similar view is stated for the Irish Bar by Mr. McMahon. Dr. Binder's report indicates that the Austrian Courts have rejected agreements exonerating from liability for "purposely caused dam- ages" or for crassa negligentia as "contra bonos mores and therefore null and void" and adds that, while an agreement to exonerate a lwyer from slight negligence might he upheld, the Disciplinary Council of the Bar Associations might consider "any agreement for general avoidance of a lawyer's liability a violation of his professional duty and of the profession's honour and reputation". Of the correspondents not quoted on this question about an equal number says, on the one hand, that no

Vastly increased and ever increasing burdens of responsibility are falling on the practising lawyer. The complexity of modern business—partly his own creation —the intricacies of commercial law and, in many places, spiralling values of property passing through his hands, all give him a huge loss potential if he should fall into actionable error. Awareness of this situation has led a growing number of lawyers to ask whether there should not be some means of avoiding the consequences of error when they assume the proportions of a major disaster. Indemnity insurance is not the complete answer, as will be seen when the limitations of that palliative are examined later. Suggestions have been made that groups of lawyers might practice as employees of a limited liability corporation, comprising themselves, which would provide clients of the corporation with specified legal services. Rejection of this concept by national correspondents, some speaking with the express authority of their own societies, has been almost unani- mous. In South Africa, attorneys, in concert with other professions, persuaded the Government to amend the company laws to provide For a new type of company in which professional men alone could be shareholders and directors but which would not be a limited company in the sense that the liability of members would be unlimited. . . . It is of interest to note that other statutory provisions would bar practice of attorneys in company form (also that, following representation by attorneys to the Government, the original purpose of seeking the amend- ment—to obtain tax relief—was achieved when a re- versal of budgetary policy gave individual taxpayers more liberal treatment than companies). The idea of lawyers protecting themselves against negligence actions by special agreements with their clients has been received with considerable doubt as fo the validity and the propriety of such an agreement. An example of this view, with one express prohibition cited, is seen in the following excerpt from Mr. D. A. Marshall's report. In principle a disclaimer of liability for negligence by the solicitor will be legally valid unless it is held to be (a) contrary to public policy or (b) contrary to Section 60 (4) of the Solicitors Act, 1957 (relating to contentious business). Section 60 (4) of the Act lays down : 'a provision (in any agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him . . .) that the solicitor shall not be liable for negli- gence, or that he shall he relieved from any respon- sibility to which he would otherwise he subject as a solicitor, shall be void.'

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