The Gazette 1979

SEPTEMBER 1979

GAZETTE

The Perils of Destruction B. S. RUSSELL, M.A., Barrister [Reproduced from English Law Society's Gazette 28.11.1979]

It is not often that one has the pleasure of reading such an elegant and comprehensive judgment as that of Oliver J. in Midland Bank Trustee Co. v. Hett Stubbs and Kemp [1978] 3 All ER 571. It deals in masterly fashion with an important aspect of the duty of a solicitor and, indeed of the duties of all professional men who have to advise other persons. This case (and to understand it in full you should also read its immediate predecessor in the reports, Midland Bank Trustee Co. v. Green [ 19781 3 All ER 555) sets out a simple, but sorry, story. The profession does not come out of it very well. A small error by a very experienced conveyancer has taken a total of twelve days in court, ten years of litigation and the citing of 93 cases; the costs in- volved must be stupendous. However, it has at least produced a judgment that, if it can evade the Scylla of the Court of Appeal and the Charybdis of the House of Lords, could properly be described as the leading case on negligence of solicitors and, by inference, of other pro- fessional persons as well. It is no longer safe to rely upon the Limitation Act 1939; six years from the time of the advice being given is no longer the time to destroy files. It is clear that no papers should be destroyed until the poss- ibility of any action for negligence arising has passed. The only safe course is to microfilm such records before they go to destruction; or else keep them for many years. (A comprehensive schedule of suggested document retention periods, together with a detailed brochure for solicitors How Microfilm Can Help Me, is available free from Oyez Services Ltd., Microfilm Division, 70-74 City road, London ECI 2DX, Tel: 01-253 0444). What led to all this sturm und drang? Walter Green owned a farm, Gravel Hill Farm, in Lincolnshire. He also appears to have owned a number of other farms, one of which had the name (which would have pleased P. G. Wodehouse) of 'Shifty Nocking'. He had sold one to his younger son, but when his elder son, Geoffrey, wished to purchase Gravel Hill, Walter was reminded of the death duty advantage of the possession of agricultural property and, instead, Geoffrey was given an option for a period of ten years, in consideration of the payment of £ 1 on 24 March 1961, to purchase the farm at .a set price of £75 an acre. During the next few years Geoffrey occasionally consulted the defendant firm of solicitors about the desir- ability of exercising the option, but nobody noticed that the option had not been registered as an estate contract. The result was that, after Geoffrey had seriously quarrelled with his father in 1967, Walter went to an- other firm of solicitors seeking to defeat the option and they advised him to sell the farm to his wife, which he did for £500. They ought also to have advised him that this would have been a breach of the contractual option, but, as they said rather primly in a letter ' . .. Whether he should have done so or not was a matter upon which we were not asked to advise'. The client on the Clapham omnibus might have a different view as to the propriety of that inaction. Anyway, the die was now cast; the farm was sold, with the startling inclusion of the usual certi- ficate in the conveyance that the amount or value of the consideration did not exceed £5500 (the judge took a merciful view of this palpable undervalue), on 17 August 2 14

1967 and Geoffrey heard about it in September. An attempt was then made to register the option and to exercise it; but it was too late. Proceedings were started on 25 November 1968 and were subsequently complicated by the deaths of practically all those concerned in the matter. In the first case, the Green case, Oliver J. gave judgment against Walter's estate for damages for conspiracy (to be assessed) but the action against that of his late wife failed because it had not been commenced within the limitation period and she was a purchaser for valuable, if not adequate, consideration. There followed the action against the defendant firm of solicitors for damages for negligence or breach of con- tract. These were parallel claims. The solicitors con- tended that their failure to register within a reasonable time was a breach of contract only, and so statute- barred. The judge's view of that was 'the plea of limita- tion is an unattractive plea at the best of times ...'. How- ever, he went on ' . . . it is the familiar experience in cases such as this that solicitor defendants are not, practically, entirely free agents in the matter of the defences which may be raised on their behalf. The inference is obvious and led to a majestic and complete review of the cases, which had to include consideration of whether the court was bound by Groom v. Crocker [1938] 1 KB 194 (where the Court of Appeal held that the relationship of solicitor and client was purely contractual) or whether there was a general, supervening duty of care under the principle of Hedley Byrne v. Heller & Partners [1964] AC 465. Having held that there was such a duty, it there- fore followed that its breach took place when the farm was sold to Mrs. Green in 1967. It was also held that there is no general duty on a solicitor to consider all aspects of his client's interest generally when consulted on a particular problem, so the defendant solicitors were not under a duty to consider the option's registration and enforceability when consulted about its exercise (a ruling that might surprise the client on the Clapham omnibus or even, as the judge put it, in the company car.). Secondly, if the duty owed was purely contractual, the duty to register was continuous until it became impossible to perform on the day that the farm was sold. Thus, having neatly rolled up all the possible loose ends, we are left with the situation that almost any mistake now lies in wait until damage results from it. This will not only apply to solicitors, but also to any person, primarily professionals, upon whose advice or action people rely. It will, equally, not matter whether the advice or action is gratuitous or paid. It is therefore very important that insurances cover this in full (even purely formal advice given at parties!) And that such insurances cover the personal estates of the solicitors who are partners in the firm, salaried solicitors and legal executives; and there should be cover for advisers, whether lawyers or otherwise, in business. But it is even more important that full records should be kept of all advice given and that these should be retained either in their original form, or, if space is lacking or too expensive, in microfilm form acceptable to the courts.