Clarity in letters of engagement: Sheriff Court dismisses professional negligence claim against Scottish firm

A recent Debate decision from the Sheriffdom of Glasgow and Strathkelvin has reaffirmed the importance of clearly defined scopes of business in professional services contracts. In Michael James Cochrane v Harper Macleod LLP [2025] SC GLA 75, the court dismissed a claim for professional negligence and breach of contract, finding that the solicitor’s duty was limited by the express terms of the engagement.

Background

The Pursuer, Mr Cochrane, brought an action against Harper Macleod LLP, alleging that the firm failed to advise – or refer him for advice – on potential Capital Gains Tax (CGT) implications for the sale of the matrimonial home during divorce proceedings.  He claimed this omission led to a financial loss of over £130,000, made up £10,046.20 in legal fees paid to the Defender, £13,336.03 in fees paid to his new solicitors in relation to the matter and £113,518 for his CGT liability.  He averred that had he been made aware of the CGT liability at the outset of the work, his divorce agreement could have been structured in such a way that this liability could have been mitigated either in full or in part.

Central to the dispute was a Letter of Engagement signed in 2019, which explicitly stated that the firm would not provide tax advice in relation to the matter.  It did, however, offer the option of engaging the firm’s tax director or working with an external tax adviser.

The Court’s Reasoning

Sheriff Taylor upheld the Defender’s preliminary plea, finding that:

1. The scope of the work was unambiguous: The Letter of Engagement expressly excluded tax advice. The court held that even identifying a need for tax advice or referring the client for such advice would fall within the excluded scope.
2. No implied duty arose: Sheriff Taylor rejected the argument that the solicitor had a separate duty to refer the client for tax advice.  Citing McMahon v Grant Thornton UK LLP and Minkin v Landsberg, the court emphasised that a solicitor’s duty is defined by the terms of the scope of work and cannot be extended by implication where the contract is clear.
3. The Pursuer’s loss of chance claim failed for lack of specification: The Pursuer did not specify what tax advice he would have received or how it would have changed the outcome.
4. The Pursuer’s claims for legal fees similarly lacked specification: The Pursuer’s assertions regarding wasted expenditure and additional fees paid to new solicitors were not supported by sufficient evidence or explanation.  He averred that 80% of his new solicitors fees would not have been incurred had he received CGT advice from the Defender, but failed to specify how he arrived at this figure – this was not helped by invoices from his new solicitor, lodged in process, failing to include any breakdown of the time spent on his case.

Implications for Legal Practitioners

This decision reinforces several key principles for legal practitioners:

1. Letters of Engagement must be clear and comprehensive: Firms should ensure that engagement letters clearly define the scope of work and explicitly exclude areas such as tax, financial, or investment advice where appropriate.
2. Exclusions must be honoured: Courts will uphold contractual exclusions where they are clearly worded and understood by the client. There is no general duty to advise on matters outside the agreed scope.
3. Loss of chance claims require specificity: Pursuers must plead both what they would have done differently and what others would have done, with sufficient detail to allow the Defender to respond accordingly.  Where no such detail is provided, the claim will fail.
4. Specification of loss is essential: Claims for professional fees as damages must be supported by itemised evidence. Vague estimates or general assertions are unlikely to succeed.

Conclusion

The judgment in Cochrane v Harper Macleod LLP serves as a timely reminder that clarity in client engagement is not just good practice – it is a critical safeguard against liability.  Firms should regularly review their Letters of Engagement and ensure that all limitations and exclusions, where appropriate, are clearly communicated and documented.