Isle of Man: Does An Advocate Owe A Duty Of Care To A Third Party?

On October 20 2015, His Honour Deemster Doyle, First Deemster and Clerk of the Rolls, together with His Honour Judge of Appeal Tattersall QC, sitting in the Staff of Government Division, delivered their judgment in Richard Mark Holmes v Jeremy Paul Bradley Carter T/A Carters¹. The issue before the court was whether to grant leave to the Privy Council. This case deals with three main issues; (1) the duty of care of an advocate to a third party, (2) amendments to Particulars of Claim and (3) the test when seeking leave to appeal to the Privy Council.

The Facts

Mr Holmes was a director, chairman and CEO of IncaGold Plc ("the Company"). In November 2005, Mr Tilleard (a business associate) agreed to purchase 5per cent of Mr Holmes' shares. Mr Holmes instructed Cains on his behalf and Mr Tilleard instructed Carters and the share sale and purchase was agreed and signed by Mr Holmes (on the understanding Mr Tilleard would also sign in due course). However, Mr Tilleard did not sign. Following Mr Tilleard becoming a shareholder and being appointed to the board, a dispute arose between the two.

Despite being appointed the company's approved advocate in April 2006, Carters also still acted for Mr Tilleard personally. Later that year, Carters resigned as company advocate and on behalf of Mr Tilleard issued proceedings against Mr Holmes relating to the dispute. A settlement was agreed, however Mr Holmes then commenced proceedings against Carters alleging that they had acted negligently. Mr Holmes claimed damages of £2,128,133.81. In their defence, Carters submitted that they owed no duty of care to Mr Holmes and therefore could not be negligent.

The Issues

At first instance, His Worship the High Bailiff outlined the 'well trodden' legal principles of the court in the context of a party seeking to amend their Particulars of Claim. His Worship observed that the court must give consideration to (1) lateness of the application, (2) prospects of success of the proposed amendments and (3) any limitation period attaching to the proposed pleading of a new cause of action. The proposed amendments must provide a real prospect of success as opposed to being false, fanciful or imaginary, as summarised in Islamic Investment Company of the Gulf (Bahamas) Ltd and Cains Advocates Ltd². The High Bailiff identified that Mr Holmes must establish he had a real prospect of success in proving Carters owed him a duty of care.

The law relating to an advocates duty of care to a third party:

Several Manx cases were examined, in particular, Islamic Investment Company of the Gulf (Bahamas) Ltd v Cains Advocates Ltd, which held that it is very rare than an advocate will be held to owe a duty of care to a third party, but a duty can and will only exist if there was a deliberate and conscious undertaking to act whereby the defendant has assumed responsibility.

Mr Holmes argued that Carters had assumed this responsibility for him at the time of the share transfer. Further, that Carters were exercising skills as advocates and therefore would owe a duty of care to any individual who it could be foreseen would be injured if due care and skill wasn't exercised. Carters countered this by relying upon Liggins v Lumsden³, which held it may not be fair just or reasonable for a legal duty of care to be imposed on a third party, merely because there may be a 'moral duty', this did not necessarily mean there is a legal duty.

Decision of High Bailiff

The High Bailiff commented there was 'full force' in Carter's arguments and there was a significant hurdle to surpass in attempting to establish that Carters had stepped outside their role as advocates for Mr Tilleard and assumed responsibility for Mr Holmes. In the share sale and purchase, Mr Holmes had access to his own advocates who owed him a duty of care, not Carters. Therefore, as the High Bailiff concluded there was no real prospect of Mr Holmes establishing Carters owed him a duty of care and it would be unjust to impose such duty, leave was not granted for amendments to the Particulars.

Decision of Staff of Government Appeal

Mr Holmes appealed to the Staff of Government submitting that the High Bailiff had failed to apply the correct legal tests and consequently, had erred by concluding there was no prospect of success of establishing that Carters owed a duty of care to Mr Holmes. He argued that a duty did exist and this was to (1) act in good faith and (2) not to issue proceedings known to be false.

Carters had been involved in the drafting of the share sale and purchase contract. It was clear that Mr Holmes intended to proceed with the share transfer pursuant to the contract and Carters would have been aware of Mr Tilleard's intention to proceed contrary to the agreement. Carters therefore voluntarily assumed a tortious duty and Mr Holmes was relying upon Carters to act with proper skill and care.

Carters, on the other hand, argued that they had solely acted for Mr Tilleard in drafting the share sale and purchase contract and registered the share transfer on behalf of him. At no time did Carters assume responsibility for Mr Holmes nor make any representations for him as Mr Holmes had his own advocates and it was their responsibility to ensure the agreement was signed prior to accepting funds.

The Staff of Government were satisfied that the High Bailiff had adopted the correct approach. Further, it was accepted that on the facts of this particular case, Carters did not owed a legal duty of care to Mr Holmes.

Decision as to Leave to Appeal to Privy Council

Mr Holmes made an application to the Staff of Government for leave to appeal further to the Privy Council. The Staff of Government division outlined the relevant test for leave, namely that the case must be one of gravity involving a matter of public interest, or some other question of law. In rejecting this application, the Court identified that this matter failed to raise any new issues which have not already considered in their previous judgment and disagreed with Mr Holmes' submission that the case gives rise to issues which are of fundamental importance to the public interest and legal profession.

Summary

These decisions follow the established Manx case law as to when an advocate owes a duty of care to a third party and reiterates the relevant test for an appeal to the Privy Council. Ultimately, such liability is clearly not straight forward and is fact specific to every matter. Leave to the Privy Council will not be granted unless the high threshold is met.

Footnotes

1 [2014] 2DS 10

2 [2012] 2DS 1

3 1999-01 MLR 601

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