Professional Indemnity

A Penumbral Duty of care – is a principled approach possible? (2013) 21 TLJ 106
By Laina Chan

‘that uncertainty that appears necessarily to affect this area of the law if entitlement to damages is to depend upon [a] case-by-case application of a general policy, itself inflexible and ill-defined and dependent upon a survey of a quite variable group of considerations, many of which will be susceptible of the production of differing, subjective judicial reactions.’ -Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’ (1976) 136 CLR 529 at 567 per Stephen J.

It is trite law that in Australia, a solicitor engaged by a client is under concurrent obligations in both contract and tort to exercise care, diligence and skill in performing the scope of the retainer. In Hawkins v Clayton, the High Court held that in certain circumstances, the tortious duty owed to a client might extend beyond the parameters of the retainer and require a solicitor to take positive steps to avoid a client sustaining any real and foreseeable economic loss. Such an obligation has been termed the solicitor’s ‘penumbral duty of care’. This article considers the circumstances in which a court will extend the tortious duty of care of a solicitor beyond the four corners of the solicitor-client retainer to impose upon the solicitor a duty to avoid any real and foreseeable financial loss, requiring in some circumstances that the solicitor provide financial advice, and whether a principled approach to this issue can be distilled from the cases.

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