The Gazette 1987

GAZETTE

SEPTEMBER 1987

The Running of Time in Professional Negligence Cases

On October 9 last year, the Supreme Court of Canada gave j udgment in Central Trust Co. -v- Rafuse A It is a decision of crucial significance to practitioners throughout the common lew world. The central question was whether a solicitor was liable to a client in tort as well as in contract for the damage caused by a failure to meat the requisite standard of care in the performance of the services for whi ch the solicitor had been retained. A consequential question however, assuming there was a failure to meet the requisite standard of care, was whether the action against the solicitor was statute- barred.

ance of the professional services for which he had been retained, there being " n o sound reason of principle or policy" why a solicitor should be in a different position in respect of concurrent liability f r om t hat of other pro- fessionals. Subject to the qualification mentioned in the third of Le Dain J.'s conclusions a plaintiff, where concurrent liability in tort and contract exists, has the right to assert the cause of action that appears to be the most advan- tageous to him in respect of any particular legal consequence. 12 S i gn i f i cance of d i s t i nc t i on between tortious and contrac- tual liability A number of important conse- quences turn on the differences in the rules applicable to contractual and tortious liability — the measure of damages, entitlement to jury trial and limitation periods to name but three. Finlay -v- Murtagh involved the second-mentioned consequence and Rafuse involved the last mentioned. The defendant solicitors acted for the plaintiff company in connection with a mortgage loan to a motel and restaurant company. Both the plaintiff and defendant knew that the proceeds of the loan were to be used to assist certain individuals to purchase the shares of the company. Neither, apparently, was aware that in Canadian law, as in Irish, it is unlawful for a company to give financial assis- tance for the purpose of or in con- nection with a purchase by any person of any shares in the company. 13 In foreclosure proceedings, which eventually went all the way to the Supreme Court of Canada, 14 it was held that the mortgage was void and unenforceable and the plaintiff subsequen t ly i ns t i t u t ed pro- ceedings against the defendant. At first instance Hallett J. dismissed the action 15 and the plaintiff's appeal to the Appeal Division of the Nova Scotia Supreme Court was

After an exhaustive survey of academic and judicial opinion on the question of concurrent liability in Canada, Britain, Australia, New Zealand, the United States of America and Ireland, 9 Le Dain J., delivering the judgment of the Court, concluded: 10 1. The common law duty of care was not confined to relation- ships that arose apart from contract — the question was whe t her there was a relationship of su f f i c i ent proximity, not how it arose; M.A.(Dub.), LL-M.(Lond-) Lecturer in Lew, University College, Dublin. 2. What is undertaken by the contract will indicate the nature of the relationship that gives rise to the common law duty of care, but the nature and scope of the duty that is asserted as the foundation of tortious liability must not depend on specific obligations or duties created by the express t e rms of the contract; 11 3. Concurrent liability in tort would not be admitted if its effect would be to permit a plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort; 4. These principles applied to the liability of a solicitor to a client for negligence in the perform- by TONY KERR

The first question - whether there can be concurrent liability in contract and tort for negligence in the performance of professional services - has been the subject of conflicting judicial opinion 2 and has spawned a considerable body of academic commentary. 3 In this jurisdiction the question was considered by the former Supreme Court in Deignan -v- Greene. 4 Kingsmill Moore J. was of the opinion that, as the mutual rights and duties of solicitor and client were regulated by the contract, the solicitor was not separately liable in tort for negligence in the conduct of the business entrusted to him. 5 O'Dalaigh, J. was also most sceptical about a claim in tort. He said " i t may indeed be that the categories of negligence are never closed; but it does not necessarily follow that all the rejected claims of other branches of the law can there find a sanctuary." 6 Twenty- five years later, however, the Supreme Court, without having been referred to Deignan -v- Greene, came to the opposite conclusion and unanimously ruled, in Finlay -v- Murtagh, 1 that a solicitor was liable to a client in tort as well as in contract. To hold that an action by a client against a solicitor of breach of his professional duty of care was "necessarily and exclusively one in contract", said Henchy J., was " i n c omp a t i b le w i t h modern developments in the law of t o r t" and authorities to that effect "should be overruled". 8 This was also the view adopted by the Supreme Court of Canada in Rafuse.

209