Are advisers liable? What is an adviser’s duty of care?
The High Court this month overturned a decision in which a solicitor was found to be responsible to a beneficiary, named in his client’s Will.
The High Court rejected that the solicitor was responsible to not only prepare the Will as instructed but to:
- make enquiries with his client as to the existence of any persons who might make a claim against his Estate; and
- advise his client of what steps could be taken to avoid exposing his assets to a claim, the risks if those steps are not taken and a claim is successful.
The client instructions were to prepare a Will which gifted all of his assets to his son.
At the time the Will was made, the client’s assets comprised a 50% interest in two properties which were co-owned with his son.
When the client passed away, his estranged daughter from a previous marriage (who received no benefit under the Will but did in an earlier Will) brought a successful family provision claim against his Estate, resulting in the son’s entitlements being substantially depleted.
To compensate his losses, the son sued the solicitor alleging negligence in the solicitor failing to:
- enquire as to the possibility the client had children (i.e. that his daughter might claim against his Estate); and
- advise his father (the client) of the options available to protect his assets [and his son’s entitlements] against a claim (for example, changing from co-ownership to joint tenancy).
At first instance, the Court did not decide as to whether the solicitor owed a duty to the beneficiary son because no causation of loss was established on the facts. The Court did however find that a solicitor owes a duty to their client to:
- enquire as to the existence of any person who could make a claim against their estate; and
- if a potential claim exists, advise the client of the risks to their estate if a successful claim is made.
The son appealed the first decision, arguing that:
- the solicitor was negligent for not identifying potential claims against his father’s Estate and for not advising his father on options to avoid such claims; and
- the solicitor’s duty to his client also extended to his son, as the nominated beneficiary, to receive the whole of his father’s Estate, as intended.
The solicitor argued that his retainer was to prepare the Will and did not extend to providing advice about how to avoid any claims against his client’s Estate.
The Court agreed with the son.
Final High Court decision
On appeal again, the High Court reversed the decision, finding that the solicitor’s duty did not extend to the intended beneficiaries of his (or her) client’s Will as to do so would be outside the scope of the solicitor’s retainer.
While this case may read as a “win” for solicitors (and more broadly advisers), it draws an important distinction between clients instructing/retaining a solicitor to:
- prepare a valid Will which simply reflects their instructions (the extent of the retainer); or
- ensure that a valid Will gives effect to their instructions.
At Kliger Partners we recognise that an effective Will extends beyond the paper it is written on by:
- ensuring that our client’s wishes and desired outcomes are achievable; and
- providing advice about potential estate claims and if a risk exists, the steps that can be taken to avoid or discourage potential claims.
Our previous article on Duties of Professional Advisers can be found here.
For more information about estate planning, asset protection and family provision claims, please contact a member of our Estate Group on (03) 8600 8885.
Note: This update is a guide only and is not intended to constitute legal advice.