Mason & Ors v Mills & Reeve (A Firm) [2012] EWCA Civ 498

The BCC / CC email and a solicitor’s duty to advise

Solicitors PI – Continuing duty to advise – change of circumstances

• A solicitor is not required to give advice on the contents of an email they receive by blind carbon copy (BCC) without a specific instruction to do so

The Court of Appeal has upheld a decision that a firm of solicitors was not negligent in failing to advise a client to defer a Management Buy-Out (MBO) in light of his forthcoming heart operation.

Background

The solicitors, Mills & Reeve, were retained by Christopher Swain, a successful businessman to advise him on exit strategies from his company. Mr Swain had a number of health problems including Type 2 diabetes. He had suffered a heart attack in 2001 and underwent heart surgery twice. He was on anti-coagulation drugs and regularly attended a hospital for supervised exercise.

In June 2006 Mr Swain met with a solicitor from Mills & Reeve to discuss selling his shares in his company and a possible MBO. Mr Swain made Mills & Reeve aware of his ill health. Mills & Reeve gave advice to each of Mr Swain and his daughters, two of whom were employees of the company and were also selling their shares.

On 16 January 2007 a solicitor from Mills & Reeve was “blind copied” into an email from Mr Swain. The email included a chain of correspondence. One email, three days earlier in the chain (which no one at Mills & Reeve had been sent directly), referred to a heart operation which Mr Swain was due to undergo shortly, around the time the MBO was to complete.

The MBO completed on 31 January 2007. Mr Swain underwent heart surgery on 17 February 2007 and died during the procedure.

Claim

Mr Swain’s death resulted in tax consequences, the most significant being that the proceeds of the share sale, held in his estate, were liable to inheritance tax of approximately £1 million. This would not have been the case if Mr Swain had died still owning the shares. The tax payable would have been significantly less.

The procedural history of the case is complicated, and there were proceedings in relation to the late amendment of Particulars of Claim. However in the final pleaded case heard in the High Court, Mills & Reeve were alleged to have been negligent when they became aware on 16 January 2007 that Mr Swain was undergoing heart surgery in February 2007, and failed to advise him to defer the MBO to avoid undesirable tax consequences in the event of his death.

Decision

The Court of Appeal agreed that Mills & Reeve had not been negligent.

Davis LJ held that the first instance judge had rightly identified the key question as being whether or not the receipt of the chain of emails on 16 January 2007 (which included reference to the forthcoming heart operation) triggered any duty to give further advice.

Davis LJ considered that, although the solicitors were under a continuing duty to advise their clients in light of changing circumstances, there was no evidence to suggest that Mr Swain had any particular intention to convey the information about the heart operation to Mills & Reeve, still less to ask for any advice arising out of it.

Comment

This decision should be of comfort to solicitors and their insurers. Given the volume of email correspondence often received by solicitors by way of carbon or blind carbon copy, an obligation to actively advise on the contents of all such correspondence, without specific instruction or request, would be onerous in the extreme and leave open the possibility of liability arising from issues which a solicitor had never been instructed to address.

Although the judgment did not specifically address whether the position would have been different had the email been copied directly to Mills & Reeve, rather than blind copied, it seems likely that the same principle would apply.