Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

Similar sentiments were expressed by the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (in the context of an engineer) that the ‘contract defines the task which the builder or engineer took’ 4 and the Supreme Court of Victoria in Sali & Ors v Metzke & Allen (in the context of an accountant) that ‘the scope and extent of an accountant’s liability to the client is largely established by the terms of the accountant’s retainer’ and that ‘Courts must not impose upon a professional duties beyond the scope of what he or she was retained to do’ 5 . Therefore, careful consideration must be given to the contractual matrix with a view to defining the tasks agreed to be undertaken by the professional on behalf of the client, from which any obligations (and liability) might arise. For instance, in Midland Bank , when a solicitor was instructed to advise on the tax implications of exercising an option to purchase land, the duty did not extend to ascertaining whether the option was registered. The Queensland Court of Appeal gave the issue detailed consideration in Littler v Price , 6 which concerned a solicitor’s failure to provide certain advice to the purchasers in an off-the-plan unit purchase. The unit was subject to a lease agreement under which the purchaser would have the benefit for 10 years, with an option for a further two 10-year periods. The deal was that the development company would rent the unit, run the complex as a resort, and return income to the purchaser from letting the unit. The question was whether it was negligent for the solicitor not to advise the purchaser that the lease agreement on which the income stream depended had not been guaranteed by the directors of the development company. The solicitor contended that his obligation was limited to advising about the mechanics of the conveyancing documentation; the purchasers had sought no advice concerning the lease or whether the lease should be supported by a guarantee. In the leading judgment of the Court of Appeal, Cullinane J endorsed the trial judge’s finding that the solicitor had a duty to advise the purchasers about the lease and the lack of protection afforded to the purchasers in the absence of guarantees related to the lessee company’s obligations. 7 Justice Jerrard dismissed the solicitor’s argument that he had assumed the clients’ financial advisor, who had referred the clients to him for the conveyance, had already advised them about the lease. In this regard, his Honour observed: ‘… his saying that he assumed the financial advisor had done that (namely, advised concerning the lease) impermissibly delegated the solicitors’ obligations to the advisor, and saying that the clients did not contact him to ask for advice failed to put at their disposal the knowledge he had. If his doing that jeopardised his chance of getting his fee agreed upon between himself and the financier and dependent upon the transaction going ahead, then that was a matter he was not entitled to take into account.’ 8 However, a line of authority is emerging in Australia as an exception to this rule, particularly in cases involving solicitors.

4 (2004) 216 CLR 515, 532. 5 [2009] VSC 48 [12]. 6 [2005] 1 Qd R 275.

7 Ibid 281. 8 Ibid 278.

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