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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  EWHC3056 (Ch)
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:
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 denied the existence of any implied retainer
or the assumption of any responsibility to NDH so as to owe duties in tort.
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  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  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  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.
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
The views expressed by our Legal Analysis interviewees are
not necessarily those of the proprietor.
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