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.

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

and

has spawned a considerable body

of academic commentary.

In this

jurisdiction the question was

considered by the former Supreme

Court in

Deignan -v- Greene.

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.

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."

Twenty-

five years later, however, the

Supreme Court, without having

been referred to

Deignan

-v-

Greene,

came to the opposite

conclusion and unanimously ruled,

Finlay -v- Murtagh,

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".

This was

also the view adopted by the

Supreme Court of Canada in

Rafuse.

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,

Le Dain J.,

delivering the judgment of the

Court, concluded:

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

relationship of su f f i c i ent

proximity, not how it arose;

TONY KERR

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

the

contract;

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-

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.

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.

foreclosure

proceedings, which eventually

went all the way to the Supreme

Court of Canada,

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

and the plaintiff's

appeal to the Appeal Division of the

Nova Scotia Supreme Court was

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