Can You Owe A Professional Duty of CLIENT UPDATE

CLIENT UPDATE
2014 OCTOBER
DISPUTE RESOLUTION
Can You Owe A Professional Duty of
Care to a Contractual Stranger?
Introduction
In the provision of professional services, the provider should always be aware as to his duty of care.
However, the scope of this duty is sometimes less than certain. Is the duty contractual or is it also
tortious? Does it cover the client alone, or does it extend to third parties to the arrangement? These were
some of the questions faced by the Singapore Court of Appeal in Anwar Patrick Adrian v Ng Chong &
Hue LLC [2014] SGCA 34.
The case involved a lawyer whom the Court found to have failed to take reasonable care in advising his
client on certain security documents. Although there was no contract between the lawyer and his client’s
sons, the Court held that – on the facts – the lawyer owed both a contractual and tortious duty of care to
the sons as well.
Importantly, the Court reconciled Singapore tort law with a UK decision where a lawyer was held to owe a
duty of care to beneficiaries of his client’s estate who did not even know of the lawyer’s existence. The
recognition by the law of the potentially wide scope of a duty of care could impact the liability of all
professional service providers, whether legal, financial, or otherwise.
Brief Facts
The Respondent in this case (“Ng”) was a lawyer, whose client (“Agus”) was a prominent investor.
Agus’s two sons were the Appellants.
During the 2008 stock market crash, Agus ran into financial trouble with his investments. Agus,
represented by Ng, entered into negotiations with a credit facility provider for the provision of further
security. In the course of negotiations, Agus rejected proposals for the Appellants to be his personal
guarantors.
However, Agus and the Appellants ended up executing certain security documents (the “Security
Documents”) in which the Appellants effectively gave personal guarantees. The Appellants then
brought a claim against Ng for breach of duty of care, alleging that he had failed to bring the personal
guarantee clause to their attention or to properly advise them on the clause.
Holding of the Court of Appeal
The Court of Appeal found that Ng was liable to the Appellants for breaches of both contractual and
tortious duties of care.
Contractual duty
Although Ng did not directly advise the Appellants, the Court found that there was an implied retainer
between them. Ng had signed off on the Security Documents as “solicitor for the mortgagors” (meaning
the Appellants) on the Certificate of Correctness. The Certificate of Correctness is an important
document, and the Court found that Ng, in signing it, must have believed that he was acting as the
Appellants’ solicitor for the mortgage.
From the Appellants’ point of view, Ng was the only legally trained person on their side, and they were
entitled to think that Ng was their solicitor on record. Therefore, the Court allowed their claim against Ng
based on an implied retainer.
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CLIENT UPDATE
2014 OCTOBER
DISPUTE RESOLUTION
Tortious duty
The Court then went on to consider the more contentious question of whether Ng owed the Appellants a
duty of care in tort independent of the implied retainer. Importantly, it considered the UK House of
Lords case of White v Jones [1995] 2 AC 207 (“White”), which extended the duty of care for solicitors to
cover an intended beneficiary of a client’s estate.
The Singapore framework for duty of care was set out in Spandeck Engineering (S) Pte Ltd v Defence
Science & Technology Agency Pte Ltd [2007] 4 SLR(R) 100 (“Spandeck”).
(i)
(ii)
(iii)
The threshold requirement is that there is factual foreseeability.
If this is satisfied, the first stage of the test is whether there is sufficient proximity between
the parties.
The second stage of the test is to consider the policy factors for or against the recognition of
such duty.
The House of Lords in White made their decision based on the principle of assumption of responsibility,
which the Singapore Court of Appeal in this case declined to apply. However, the Court of Appeal was
able to reconcile the decision in White within the Singapore framework by subsuming the assumption of
responsibility as one of the factors of the first stage of the Spandeck test (proximity between the parties).
On an analysis of the facts, the Court of Appeal held that Ng was liable to the Appellants under the
Spandeck test, finding that there was factual foreseeability of detriment to the Appellants upon Ng’s
failure to take reasonable care in advising on the Security Documents, as well as sufficient relational and
causal proximity. Further, policy considerations supported the recognition of a duty of care so as to
uphold the professional standards of the industry.
Having failed to take reasonable care is advising the Appellants on the contents of the Security
Documents, Ng was held to be in breach of his tortious duty of care to the Appellants.
Concluding Words
The extension of the duty of care principle in this decision provides potentially serious implications on the
provision of professional services. It paves the way for the recognition of liability towards strangers to the
professional services retainer.
This is especially significant when one considers that, in White, the solicitor was found to owe a duty of
care to beneficiaries who did not even know of his existence. The UK House of Lords extended the Hedley
Byrne principle by extending its inherent concept of assumption of responsibility to a situation which
involved neither a direct undertaking from the solicitor to the third party nor reliance by the third party
on the solicitor. Quite apart from the conceptual difficulties that arise in recognising that a solicitor in
these circumstances had assumed responsibilities towards a third party, the effect of such an extension
would surely erode the boundaries of the duty of care.
Of course, by subsuming the principle of assumption of responsibility into the test for proximity within
the Spandeck framework, the Singapore Court of Appeal may be seen to be limiting the potentially wide
scope of the decision in White. The assumption of responsibility is not a test in and of itself, but is merely
a factor in ascertaining whether there was sufficient proximity. Further, the claimant must cross the
threshold requirement of factual foreseeability, as well as the balance of policy factors, before being able
to pass the Spandeck test. Nonetheless, the decision of the Singapore Court here does indicate that the
professional duty of care could stretch beyond what has traditionally been recognised.
Professional duty of care is, of course, owed not just by lawyers. Many professionals provide advice upon
which such duty is based, such as through investment, banking, accounting, or other financial services.
Parties wishing to consult on the scope of their duty, or possible contractual management of such duty,
may contact our Commercial Litigation Practice below.
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CLIENT UPDATE
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DISPUTE RESOLUTION
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chandra.mohan@rajahtann
[email protected]
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