Solicitor's duty of care to client - transaction undertaken for experienced businessman - no duty to advise client on commercial implications of transaction

Pickersgill and another v Riley: PC (Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Hope of Craighead, Lord Scott of Foscote and Baroness Hale of Richmond): 25 February 2004

The claimant instructed the first defendant solicitor in relation to the grant of a lease of business premises in Jersey to the claimant's company, M Ltd, and the sale of that company to an English company, W Ltd.

The lessor required a guarantee for the rent, which the claimant provided, obtaining an indemnity from W Ltd as a condition of the sale of M Ltd.

Subsequently, M Ltd became insolvent and the lessor claimed arrears of rent from the claimant under the guarantee.

The claimant found, on attempting to reclaim the sum paid under the indemnity, that W Ltd was a shell company with no assets.

The claimant sued the first defendant and his partner in negligence.

The Royal Court of Jersey, whose decision was upheld by the Court of Appeal of Jersey, held that the first defendant had been under a duty either to investigate the financial standing of W Ltd or advise the claimant of the risk of not doing so.

The defendants appealed.

Bernard Livesey QC (instructed by Reynolds Porter Chamberlain) for the defendants.

Advocate Matthew Thompson and Advocate Naomi Rive (both of the Jersey Bar) (instructed by Clyde & Co) for the claimant.

Held, allowing the appeal, that the scope of the duty of care owed by a solicitor to his client depended on the instructions he received and the circumstances of the case; and that where the client was an experienced businessman and the transaction involved no hidden legal pitfalls the solicitor was not obliged to investigate matters outside his instructions or warn his client of commercial risks involved in the transaction.