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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
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
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.
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.'
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
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