Climate Risk and the Retainer – In or out?

Introduction 

On April 19^th 2023, the Law Society of England & Wales published its groundbreaking Guidance on the Impact of Climate Change on Solicitors (the Guidance). Given the scale of the impacts which the climate crisis is having, with drier summers leading to drought and wetter winters causing increased flooding affecting people, business, places and the wider environment, the need for such guidance was inevitable.

Reaction to the Guidance has been quite mixed. Some law firms – especially larger commercial law firms with thriving environmental and ESG practices – are embracing it.  Other law firms, especially conveyancing firms, have argued that climate change is not a legal issue and that other professionals are better placed to advice clients on these matters. The publication of the Guidance underlines that a lawyer and conveyancer’s duties in law override these arguments. 

Climate change has wide ranging impacts, including reducing asset value (land, buildings, businesses), creating professional risks for solicitors who fail to advice and warn their clients about the risks.  The simple message from the Guidance is that solicitors need to take climate change much more seriously.

Limiting the Retainer?

One question which has arisen is whether solicitors can exclude giving climate advice from their contract of engagement – the retainer – especially given that the Guidance states: 

‘’…it may be possible to exclude climate issues specifically from your retainer, for instance, where you are not competent to advise or where the client is directed to more expert technical advice’’.

To latch onto this one sentence in the Guidance and conclude that excluding climate advice from the retainer is a safe course of action for a solicitor to take, would be a highly selective and inadvisable  reading of the Guidance and the underlying law and SRA rules.  

a) The retainer

The starting point for determining whether a solicitor has breached their general duty to exercise reasonable skill and care is the retainer. If the solicitor fails to carry out a step within the scope of their retainer it is a breach of this duty. 

b) Limiting the retainer 

The retainer may be an oral contract, but most law firms have detailed written retainers including client care letters. 

It is possible to limit the scope of the retainer by excluding matters such as planning or tax advice, so some solicitors are wondering whether to add climate advice to this list. 

The Guidance explains that it ‘’becoming less realistic in practice’’ to exclude climate advice due to pressures that clients are under (e.g., especially from lenders)  to adopt responsible approaches to climate risks. This is making it more and more undesirable, reputationally and commercially, for law firms to seek to exclude climate legal risks from the retainer. 

If a solicitor wishes to disregard these pressures by seeking to exclude climate advice from their retainer, they should be aware that making a unilateral change to the retainer will not be effective. For any exclusion from the retainer to work the following is required: 

c) Informed consent of the client  

The exclusion must be with the client’s consent – and the consent must be informed.  

As the Guidance makes clear at section 4.4, obtaining the client’s informed consent ‘’is not straightforward, requiring an explanation of the significance of the relevant issues to the client and the risks that you will not be advising upon’’. 

Leading environmental law practitioner, Stephen Tromans KC, has considered the duties solicitors and other professional conveyancers owe to clients to advise on risks arising from climate change, and how any such duty may be discharged. Instructed on behalf of Groundsure in July 2022, he advised as follows in relation to the question of informed consent: 

‘’The care and effort likely to be required by the solicitor in explaining the exclusion from the retainer seem to me likely to make that a very unattractive course. 

In order to protect themselves this would involve[the solicitor giving]  a full and clear explanation of the various aspects of risk, including not only physical damage but also possible future risks on insurance, the acceptability of the property as lending security, and effects on market value’’. 

d) Written agreement of the client 

In addition to securing the client’s informed consent to exclude climate advice from the retainer, the Guidance makes it clear that this should be confirmed in writing. 

A failure to do this opens up the possibility that the SRA or a court may not accept that the exclusion was accepted by the client. 

This is a further step which makes excluding climate advice much less attractive. 

e) The retainer and the duty to warn 

One of the most notable aspects of the Guidance is its articulation of the solicitors’ tortious duty to warn.  

‘’Advising on matters often requires solicitors to make judgements on complex issues and uncertain outcomes. This analysis may be impacted by climate change. 

A solicitor has a duty to warn a client about potential risks by pointing out hazards of a kind which should be obvious to the solicitor but that the client may not appreciate)’’. 

The experience of the client is relevant to understanding and discharging this duty. Hence, a solicitor carrying out a transaction for an inexperienced client is not justified in expressing no opinion when it is plain that the client is rushing into an unwise transaction or venture. In the context of climate risk, this could include the purchase of, say, a coastal or riverside property exposed to accelerating erosion and flooding due to rising sea levels and extreme weather events. 

Most importantly, the duty to warn may extend to information obtained while fulfilling the solicitor’s retainer, whether or not the matter in question is itself expressly within the scope of the retainer (Minkin v Landsberg [2015] EWCA Civ 1152; [2016] 1 W.L.R. 1489 at [38]. 

f) . A warning for solicitors excluding matters from their retainer – SRA v Hayhurst

The case of SRA v David Hayhurst (Solicitors Disciplinary Tribunal 12072 – 2020) is an important example of how some attempts to exclude matters from the retainer are ineffective. 

The case concerned the failure of a solicitor to warn their clients about a particularly risky property investment. The solicitor was reprimanded by the SRA and fined £10,000 plus £15,000 towards costs. 

The solicitor had sought to limit their retainer by stating in their client care letter that their advice ‘’does not extend to providing investment advice on the purchase generally”.

The SRA alleged and the solicitor agreed that the limitation of the retainer did not remove the duty to warn the client about obvious risks which came or ought to have come to their attention whilst carrying out the retainer. Putting this another way, the fundamental duty to warn clients about stark risks overrode the attempted exclusion in the retainer.  

In addition, the SRA argued, and the solicitor accepted that the very attempt to limit the retainer to not advice on this significant risk was itself a ‘’regulatory issue’’ (i.e., the exclusion was itself a breach of SRA rules). 

Applying the reasoning in Hayhurst to climate advice, it would seem that any attempt to exclude the duty to warn from the retainer would be a breach of SRA rules. 

This case will clearly give solicitors who think that climate advice can simply be carved out of the retainer, further pause for thought. 

The Future

There are two other developments which solicitors will need to be aware of because the Guidance is not the last word on the issue of climate change, the duty to warn and the retainer.  

1. More climate guidance on the way from the Law Society

The Guidance is just the first of the Law Society’s statements of good practice for the profession. It states at section 4.4. that ‘’further sector-specific guidance on climate legal risks will cover how the scope of the retainer is impacted in different contexts’’. Sector specific guidance is anticipated for real estate lawyers. 

 2. Enter the SRA

The Guidance states that solicitors should follow Law Society and SRA guidance as it emerges. 

The SRA is supportive of the Law Society’s guidance, but to date it has not provided very little  climate guidance on climate matters, but this is set to change.

The SRA’s recently published corporate strategy for 2023-26 states that by 2026 it will be ‘’be perceived as an authoritative, credible regulator providing leadership to the legal sector on key public interest areas and valued insights to help shape wider societal debate, particularly in areas relating to access to justice, ethical practice, climate change….’’. 

Summary

Excluding climate advice from the retainer may at first sight appear to be a suitable course of action for solicitors overburdened with other matters, but on closer examination it is measure that is clearly discouraged in the Guidance itself. Excluding climate advice is full of legal, regulatory and reputational difficulties.

The better course of action is to read and reflect upon the entirely of section 4.4. of the Guidance, rather than a highly selective extract  from it. Anyone who does so is highly unlikely to conclude that excluding climate advice is a prudent step to take.