Litigation Liability to other advisers with engagement letters

The adviser may have a contract of engagement with other advisers. For example, the engagement letter for a firm of accountants will often be addressed to both the corporate client and the investment bank, and the reports issued by the accountants addressed to both of them.

Liability in tort for negligent misstatement may arise where, irrespective of a contract between the parties, a statement is made carelessly and the relationship between the parties is such that it gives rise to a duty of care on the part of the representor. A negligent misstatement action is brought at common law in tort. A litigation claim may be brought where party A owed a duty of care to party B and carelessly made a false statement to party B, on which party B relied and, as a result of which, party B suffered loss. A claim for negligent misstatement may arise whether or not a contractual relationship exists between the parties. However, if there is a contractual relationship, it is more likely that a claim would be brought for negligent misrepresentation. 

An adviser needs to consider, not only the litigation claims that may be made against it by other advisers, but also the extent to which it will be able to reduce any liability that it incurs to the client or to third parties by claiming contribution from other advisers under the contribution rules in the Civil Liability (Contribution) Act 1978 (the Contribution Act). 

In the case of joint and several legal obligations, where one joint party is found liable to pay damages for breach in a litigation claim (or agrees to pay a sum of money in bona fide settlement of a claim alleging breach), it is entitled to seek a contribution from the others liable for the same damage (section 1, Contribution Act). The amount of the contribution payable by each party is such amount as the court considers just and equitable having regard to that party's responsibility for the damage in question (section 2, Contribution Act).

Questions of contribution as between parties jointly and severally liable with each other are of no direct concern to the third party such as the client - it may choose to sue (and recover against) any or all of them and leave them to sort out the apportionment between themselves (either in separate proceedings or by joining them in as third parties to the principal legal proceedings).