Solicitors’ negligence - implied retainers and voluntary assumption of responsibility (NDH Properties Ltd v Lupton Fawcett LLP)

A claimant sought damages from the defendant firm of solicitors for allegedly negligent conduct in circumstances where the said solicitors had not entered into any written retainer with the claimant. On the contrary, the solicitors had been instructed to represent the other side in a transaction deal. The claimant argued that the firm of solicitors had implicitly been retained to act for them and/or owed them a tortious duty of care. The court dismissed both of those arguments. The objective circumstances did not lead to the conclusion that there was an implied retainer between the parties. Further, the solicitors had not made any statement sufficient to allow the claimant to reasonably believe that they had assumed a responsibility towards the claimant. The claim was dismissed. Written by Christopher Snell, Barrister at New Square Chambers.

NDH Properties Ltd v Lupton Fawcett LLP [2020] EWHC3056 (Ch)

What are the practical implications of this case?

This is a relatively unusual example of a claim being brought against a solicitor for negligence in circumstances where: (a) there was no written, express contractual retainer between the claimant and the defendant, and (b) the solicitor had, in fact, acted on the opposite side of the transaction to the claimant.

Although such claims are (thankfully) uncommon, the decision will be of interest to those involved in transactional business. It confirms, importantly, as follows:

• even where there is no written contractual retainer between the parties, the court will readily imply a retainer if, viewed objectively, the parties’ conduct is consistent only with the solicitor being retained to act for the claimant. That is a multi-factorial consideration and is largely fact specific. However, it is important to note that – in the event that advice is given and/or work carried out on behalf of a person with whom no contractual retainer is in place – that will not absolve the solicitor of a contractual duty of care. The court may imply one
• even where the objective circumstances do not tend to suggest that there was an intention for the solicitor to act for the claimant, the solicitor may still be in breach of a tortious duty of care. That will, usually, require a claimant to establish that the solicitor assumed responsibility for them. An assumption of responsibility can only arise when it is reasonable for the claimant to have relied upon what a solicitor says; and the solicitor could reasonably have foreseen that claimant would do so. This only serves to emphasise the care that must be taken when communicating with a party on the opposite side of a transaction, especially if that party is unrepresented

What was the background?

NDH Properties Limited (NDH) brought a claim in professional negligence against Lupton Fawcett LLP (Lupton Fawcett) in relation to a short-term loan facility of £350,000 (the Loan) taken out by NDH from Amalgamated Finance Limited (Amalgamated).

The Loan was secured over commercial property (the Property) owned by NDH. The purpose of the Loan was to enable NDH’s sole director and majority shareholder, Mr Nayee, to discharge monies owed by him to the Yorkshire Bank (the Bank). The Bank’s lending was itself secured over the Property; and, further, the Bank had appointed receivers. Thus, the Loan allowed the sums owed to the Bank to be repaid with the result that the receivers’ appointment was terminated.

Lupton Fawcett was instructed by Amalgamated to act in relation to the Loan and the ancillary security documentation. NDH defaulted on the Loan; and Amalgamated appointed receivers.

Mr Nayee had been introduced to Amalgamated by a related company, the Bankruptcy Protection Fund Limited (BPFL). Some months prior to the Loan, Mr Nayee had signed a letter identifying BPFL and Lupton Fawcett as being authorised to act for him in relation to the annulment of his bankruptcy.

NDH alleged that, as a result of Mr Nayee having signed the aforementioned letter of authority, Lupton Fawcett had been implicitly retained to act for NDH as well as for Amalgamated in relation to the Loan. In the alternative, NDH contended that Lupton Fawcett owed it a duty of care in tort to give advice in relation to the Loan; or to warn NDH that Lupton Fawcett was not acting for it.

NDH further alleged that:

• Lupton Fawcett had breached its contractual and/or tortious duties by failing to advise NDH of the high level of interest and fees payable under the Loan, and/or
• Lupton Fawcett failed to advise NDH that it was there was no certainty that long-term finance would be available to NDH to refinance the Loan at the end of its term

Lupton Fawcett denied the existence of any implied retainer or the assumption of any responsibility to NDH so as to owe duties in tort.

What did the court decide?

Although there was no express relationship of solicitor and client between NDH and Lupton Fawcett the court may be prepared to find that there existed an implied retainer if, viewed objectively, the parties acted as if such a relationship existed. The key ingredient is agreement to enter into a contractual relationship: see Dean v Allin & Watts [2001] EWCA Civ 758; and the court should ask: ‘Was there conduct by the parties which was consistent only with the firm being retained as solicitors for the claimants?’ Caliendo v Mischon de Reya [2016] EWHC 150 (Ch).

On the facts of this case, there was no doubt that Lupton Fawcett did not implicitly agree to act as solicitors for NDH in relation to the loan. There was no documentary evidence and no conduct of the parties which, when viewed objectively, supported the inference that Lupton Fawcett had agreed to act as NDH’s solicitors in relation to the Loan. Further, objectively, Lupton Fawcett did not believe it was acting for NDH.

The court’s conclusion that there was no implied contractual retainer between the parties did not, however, exclude the possibility that Lupton Fawcett owed NDH a tortious duty of care. Although a duty in tort is more likely to exist where there is a relationship equivalent to a contract, the court concluded that the authorities make it clear that a duty of care in tort can exist independently of contract. The appropriate test to be applied was that of assumption of responsibility: NRAM plc v Steel [2018] 1 WLR1190. In NRAM the Supreme Court held that:

‘… a solicitor will not assume responsibility towards the opposite party unless it was reasonable for the latter to have relied on what the solicitor said and unless the solicitor should reasonably have foreseen that he would do so. These are … two ingredients of the general liability in tort for negligent misrepresentation; but they are particularly relevant to a claim against a solicitor by the opposite party because the latter’s reliance in that situation is presumptively inappropriate.’

On the facts of this case, there was in fact no contact between NDH and Lupton Fawcett. In those circumstances it was impossible for the court to conclude that Lupton Fawcett had assumed any sort of responsibility viz. NDH.

Case details

• Court: Business List (Chancery Division), Business and Property Courts in Leeds, High Court of Justice
• Judge: Mr Justice Snowden
• Date of judgment: 16 November 2020

Christopher Snell is a Barrister at New Square Chambers, and a member of LexisPSL’s Case Analysis Expert Panel. Suitable candidates are welcome to apply to become members of the panel. Please contact caseanalysis@lexisnexis.co.uk.

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