What a person/entity (“party”) can do if they suffer loss caused by his/her lawyer’s negligence

What a person/entity (“party”) can do if they suffer loss caused by his/her lawyer’s negligence

Lawyers have duties to exercise reasonable skill, care and diligence.
If a party suffers loss as a result of a lawyer’s advice or failure to provide advice, they may have a
cause of action in one or more of the following areas of law:

1. Liability under Breach of contract – The retainer
The retainer is a contract between a lawyer and a client, which has obligations and duties by a
lawyer to a client. If a lawyer has breached the terms of the retainer they may be liable for damages
under a breach of a contractual duty. It is important to make sure you have a copy of the fee
retainer to confirm the scope of the retainer.

2. Liability under the Tort of Negligence
If a party suffers loss as a result of a lawyer’s act or omission, which is foreseeable, a lawyer may be
liable for damages under the tort of negligence.
A lawyer could be liable for providing advice to a party (with or without a retainer) that the party
relied upon, and the lawyer knew that the party was relying upon it.

3. Liability under legislation
Certain statutory provisions prohibit lawyers engaging in deceptive or misleading conduct. In NSW
the Fair Trading Act 1987 (NSW) may be relevant as well as the Competition and Consumer Act 2010.
A party may have a cause of action under these Acts if they can prove they suffered a loss by a
lawyer’s misleading conduct.

4. Liability under the provisions of Equity
The relationship between a client and a lawyer is a fiduciary relationship and lawyers have ethical
duties towards their client which if they breach they may be liable for. These duties include:

  • Duty not to exert undue influence or unconscionable conduct
  • Duty to disclose interests
  • Duty not to accept bribes and secret commissions
  • Duty to avoid conflicts of interest
  • Duty of confidentiality
  • Duty to have competent accounting practices

Parties who want compensation from a lawyer usually have to take private legal action against the
lawyer for professional negligence. Legal action can be taken in the Courts or in the Tribunal –
Consumer and Commercial Division (for claims of under $40,000).
When considering legal action against a lawyer, you need proper legal advice.

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