Professional Liability Guide

CHAPTER 5 – WHAT IS A PROFESSIONAL/PROFESSIONAL DUTY?

His Honour went on to determine that the activities under consideration were not part of the practice of a solicitor, saying:

‘The “practice” as defined in the policy means the private practice of a solicitor carried on by the firm of Gray & Winter. I do not think the activities with which they were concerned that led to the claim against them by [the client] and then the ultimate settlement answer this description. They were engaged in the business of syndicating property transactions. Any work which they did in relation to that as solicitors was peripheral to the claims made against them. The centre of activity was property syndication. In my opinion the proper conclusion to be drawn from the evidence on which the case turns, in order to characterise the true nature of the relevant activities of Messrs Gray and Winter with which this case is concerned, is that the liability incurred by Messrs Gray and Winter in settling the claim for damages brought against them by [the client] was not incurred in connection with their practice as solicitors.’ 364 Justices Beaumont and Burchett, agreeing with Lockhart J, similarly held that the provisions in the contract of professional indemnity insurance should be construed to cover liability having some nexus with the professional functions of a solicitor. The cover does not extend to liability for an entrepreneurial activity that has no real nexus with the solicitor’s practice. When the conduct of the solicitors in relation to the property syndication scheme was considered as a whole, the inference was drawn that the things they did were done as the actions of entrepreneurs rather than solicitors. It followed that the claims made by the client were outside the scope of the insurance policy. Similarly, Malcolm Douglas Carr trading as Forshaws Neill v Swart and Ors; Lawcover Pty Limited v Swart and Anor 365 concerned whether a claim against a solicitor fell within the scope of his professional indemnity policy, which provided cover for ‘civil liability incurred in connection with the Practice’ of a solicitor. The solicitor entered into a Joint Venture Funds Management Agreement with an investor under which the solicitor would manage funds provided by the investor for investment purposes. The solicitor transferred the funds to a third party for use in a purported investment scheme, which was ultimately lost. The insurer refused to indemnify the solicitor in respect of the investor’s professional negligence claim. The New South Wales Court of Appeal, in referring to Solicitors’ Liability Fund v Gray & Winter, 366 said ‘that case does support an approach whereby all circumstances are considered and a judgment made as to whether what is done by a solicitor is done as a solicitor or in some other capacity.’ 367 In applying that rationale to the circumstances under consideration, the Court then said ‘the [joint venture agreement] was entered into by Mr Carr, not as part of or in the course of his practice as a solicitor, but as a distinct commercial venture in which he was playing an entrepreneurial and/ or managerial role, and in which the exercise of his legal expertise was at most incidental and peripheral.’ 368 The solicitors’ liability under the joint venture agreement was, therefore, held not to have been incurred in connection with the practice of a solicitor.

364 Ibid 168. 365 [2007] NSWCA 337. 366 (1997) 147 ALR 154. 367 Malcolm Douglas Carr trading as Forshaws Neill v Swart and Ors; Lawcover Pty Limited v Swart and Anor [2007] NSWCA 337 [53]. 368 Ibid.

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