The Law of Solicitors’ Liabilities 9781526505293, 9781526505323, 9781526505316

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The Law of Solicitors’ Liabilities Fourth edition

The Law of Solicitors’ Liabilities Fourth edition William Flenley QC MA (Oxon), LLM (Cornell), BCL Bencher of the Middle Temple Hailsham Chambers

Tom Leech QC

MA (Oxon), BCL Bencher of Lincoln’s Inn Partner – Head of Advocacy Group Herbert Smith Freehills LLP Chapter 6 on Solicitors’ Duties of Confidentiality contributed by

Thomas Grant QC

BA (Hons), Dip Law, Maitland Chambers Chapter 9 on Real Estate updated by

Matthew Bonye

BA (Hons), Solicitor, Partner – Head of Real Estate Dispute Resolution Herbert Smith Freehills LLP Chapter 10 on Lenders’ Claims updated by

Nicola Rushton QC

MA (Cantab), LLM (Dalhousie), Hailsham Chambers Chapter 11 on Wills and Chapter 13 on Costs Orders Against Solicitors updated by

Alice Nash

BA (Oxon), Hailsham Chambers

BLOOMSBURY PROFESSIONAL Bloomsbury Publishing Plc 41–43 Boltro Road, Haywards Heath, RH16 1BJ, UK BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc Copyright © William Flenley QC and Tom Leech QC, 2020 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998-2020. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: HB: 978-1-52650-529-3 ePDF: 978-1-52650-531-6 ePub: 978-1-52650-530-9 Typeset by Evolution Design & Digital Ltd (Kent) Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY To find out more about our authors and books visit www.bloomsburyprofessional.com. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters

Preface

It is hard to believe that it is now 21 years since the first edition of this book, and nearly eight years since the third edition. The law relating to the work of solicitors has continued to throw up stimulating and difficult problems, which we have enjoyed writing and arguing about. Previously titled ‘Solicitors’ Negligence and Liability’, we have changed the title for this edition in order to reflect the contents which include regulatory obligations. In this fourth edition we have added a chapter on issues relating to the insurance of solicitors, a topic of great practical importance for claimants, solicitors and their insurers. The chapter includes discussion of the SRA Minimum Terms and Conditions and the Third Parties (Rights Against Insurers) Act 2010 (including the AIG decision in the Supreme Court). Other important new cases covered in the text include Perry v Raleys (loss of a chance and loss of litigation), P&P Property or Dreamvar (identity fraud), William Morrison (vicarious liability), BPE (SaamCo and damages), and SRA v Wingate (lack of integrity in disciplinary proceedings). We have removed the appendices, since these materials are now available online, and tried to remove out-dated material. We have attempted to state the law as at 31 May 2020. We would like to thank Thomas Grant QC for updating chapter 6 and Alice Nash for updating chapters 11 and 13. We welcome to the team of contributors Matthew Bonye who has updated chapter 9, Nicola Rushton QC who has updated chapter 10, and Heather McMahon of Hailsham Chambers and Rhian Arrenberg of HSF who have helped with research. We would also like to thank Paul Mitchell QC for his contributions to the second and third editions and Graham Reid for his contribution to the third edition. Finally, we would like to thank all at Bloomsbury Professional for their help and patience. We dedicate this book to the memory of Jonathan Brettler, who died at too young an age in 2019. We both met Jonathan in Oxford in 1986, and he was a loyal friend from then until his death. Jonathan had a questioning mind in the best traditions of the Bar. He was a man of principle, courage, and wit, who will be sorely missed. William Flenley QC Hailsham Chambers

Tom Leech QC Herbert Smith Freehills LLP

22 June 2020

v

Contents

Preface v Table of Statutes xxvii Table of Statutory Instruments xxxiii Table of Cases xxxv Section A  Civil Law Claims

1

Part 1  General Principles Chapter 1  The solicitor’s duties in contract and tort 5 A Duties in contract 5 1 Introduction 5 2 Exclusion or limitation of liability 11 3 Formation and duration of the retainer 15 4 The rule against reflective loss 24 B Duty of care in tort 28 1 Duty to the client 28 2 Duty to third parties 30 (a) Commercial transactions 33 (b) Litigation 36 (c) The beneficiary principle: White v Jones 37 (d) An employee’s duty of care 40 (e) Exclusion of liability 41 (i) Consumer notices 43 (ii) Other notices 43 Chapter 2  Breach of duty A The standard of care 1 Introduction 2 The standard of reasonable competence (a) Level of expertise (b) Level of fees (c) Knowledge of the law (d) Reliance on counsel’s advice (e) Failure to obtain counsel’s advice 3 The relevance of professional standards and practice (a) Professional standards (b) Professional practice 4 The admissibility of expert evidence (a) CPR Part 35 vii

45 45 45 48 48 54 54 56 57 58 58 61 64 64

Contents (b) Solicitor experts 5 Errors of judgment and slips B The extent of the duty to advise 1 Introduction 2 The nature of the client 3 The nature of the task (a) Duty to clarify instructions (b) Duty to confirm instructions in writing (c) Duty to confirm instructions in person (d) The nature of the advice (e) The extent of the advice

66 67 71 71 71 73 73 73 75 76 78

Chapter 3  Causation and quantum of damages in contract and tort 82 A Introduction 82 B Factual causation 83 1 The ‘but for’ test 83 (a) The normal rule 83 (b) Concurrent or competing causes 84 (c) Chester v Afshar 85 (d) Misrepresentation cases 86 2 How would the defendant have acted? 87 3 How would the claimant have acted? 89 (a) General test 89 (b) Burden of proof 90 4 How would third parties have acted? Damages for the loss of a chance 90 (a) The loss of a chance doctrine 90 (b) In which type of case must the doctrine be applied? 91 (c) Does the doctrine apply where the third party has given evidence? 94 (d) Claimants must show that their hypothetical behaviour would have been honest 95 (e) Parties closely aligned to the claimant 95 (f) Burden of proof – loss of speculative or negligible chances 96 (g) Linked risks and independent risks 97 (h) When should the court give the claimant the benefit of the doubt? 97 (i) Examples of commercial transaction cases 98 C The SAAMCo principle: extent of the defendant’s liability 98 1 General approach 98 2 In which type of case must the SAAMCo principle be applied? 100 3 The SAAMCo principle in summary 101 4 ‘Advice’ cases and ‘information’ cases 102 5 The counter-factual: would the loss have been suffered if the information which the solicitor negligently provided had been true? 105 viii

Contents 6 7 8

D

E

F

G

Is there a further SAAMCo filter? The burden of proof Failure to report a fact which was fundamental to the claimant’s decision to proceed 9 New intervening causes and alternative causes (a) Claimant’s conduct (b) Intervening acts of third parties (c) Defendant’s conduct (d) Events Remoteness of damage 1 The test in contract rather than in tort is generally applied 2 What is the test of remoteness in contract? (a) The orthodox approach (b) The contractual interpretation approach (c) Amalgam of the two approaches (d) Time at which the remoteness test should be applied 3 Application of the contractual test of remoteness Mitigation of damage 1 General principles 2 Reasonableness of bringing further litigation 3 Recovery of costs if alternative litigation brought in mitigation 4 Consequential benefits and ‘legal causation’ (a) Two types of case: legal causation, and collateral benefits (b) The position in principle – legal causation (c) The pre-Fulton professional negligence cases 5 Collateral benefits Date of assessment 1 Is there a breach date rule? (a) The date of breach (b) The date of the transaction (c) The flexible approach 2 The valuation method 3 Conclusion as to date of assessment of damages Damages for mental distress and psychiatric illness

Chapter 4  Claims in equity A The relevance of equity B Breach of trust 1 Express, implied and resulting trusts (a) Client funds (b) Third party funds (c) Conscious or deliberate breach of trust 2 Constructive trusts (a) Dishonest assistance (i) The trust (ii) Breach of trust ix

106 108 109 109 110 112 114 115 116 116 117 117 119 121 122 123 126 126 128 130 131 131 131 133 137 138 138 138 139 141 142 142 143 144 144 144 144 144 148 153 154 155 156 157

Contents (iii) Assistance (iv) Dishonesty (b) Knowing or ministerial receipt (i) Disposal of assets in breach of fiduciary duty (ii) Beneficial receipt (iii) Knowledge (iv) Ministerial receipt C Breach of fiduciary duty 1 Introduction 2 Conflict of interest and duty (a) The general principle (b) The no profit rule (c) Abuse of confidence (d) Undue influence (e) Bribes and secret benefits (f) Professional conduct 3 Conflict of duty and duty (a) Terminology (b) The double employment rule (c) The actual conflict rule (d) The no inhibition principle (e) The duty of good faith D Compensation in equity 1 Introduction (a) The controversy: equitable account (b) The nature of the remedy 2 Causation (a) Scope of the principle (b) The conduct of the claimant (c) The conduct of the defendant (d) The conduct of third parties (e) Scope of duty (f) Remoteness of damage (g) Contributory negligence (h) Mitigation 3 Measure of compensation (a) Date of assessment (b) Changes in value 4 Set off 5 Interest (a) The equitable jurisdiction (b) Compound interest 6 Section 61 of the Trustee Act 1925 (a) Honesty (b) Reasonableness (c) Fairness x

158 159 163 164 165 166 167 168 168 170 170 171 173 174 175 175 176 176 177 180 181 183 185 185 185 188 191 191 194 195 195 196 196 197 197 198 198 198 199 199 199 201 202 202 203 204

Contents E Limitation 1 Introduction 2 Express, implied and resulting trusts (a) Client funds (b) Third-party funds 3 Constructive trusts (a) Dishonest assistance (b) Knowing or ministerial receipt 4 Breach of fiduciary duty (a) General (b) The no profit rule (c) Abuse of confidence (d) Undue influence (e) Bribes and secret benefits

205 205 206 206 207 208 208 209 209 209 211 212 212 213

Chapter 5  Authority, vicarious liability and undertakings A Authority 1 Introduction 2 Partners: authority to bind the firm (a) Section 5 of the Partnership Act 1890 (i) Limb 1 (ii) Limb 2 (b) Section 10 of the Partnership Act 1890 (c) Sections 11 and 13 of the Partnership Act 1890 (d) Section 14 of the Partnership Act 1890 3 LLPs: members’ authority to bind the firm (a) Section 6(1) of the Limited Liability Partnership Act 2000 (b) Section 6(2) of the Limited Liability Partnership Act 2000 (c) Section 6(3) of the Limited Liability Partnership Act 2000 (d) Section 6(4) of the Limited Liability Partnership Act 2000 4 Employees: vicarious liability of the firm (a) General principles (b) Clients (c) Third parties 5 Solicitors: authority to bind the client (a) Express authority (b) Implied or incidental authority (c) Ostensible authority 6 Breach of warranty of authority (a) Basis of liability (b) Nature of the warranty (i) Litigation (ii) Identity fraud (iii) Exclusion of the warranty (c) Reliance (d) Compensation

214 214 214 215 215 217 220 221 223 224 226 226 227 228 229 230 230 233 234 234 234 235 237 239 239 241 241 243 245 246 247

xi

Contents (i) Transactional cases (ii) Litigation cases: costs (c) Unauthorised proceedings B Undertakings 1 The court’s summary jurisdiction 2 Construction and enforcement (a) Introduction (b) Construction (c) Capacity (d) Enforcement (e) Impossibility (f) Discretion (g) Compensation (h) Procedure

247 248 249 250 250 252 252 253 254 255 257 258 259 260

Chapter 6  Solicitors’ duties of confidentiality 263 A Introduction 263 B Confidentiality and legal professional privilege 264 C The duty of confidentiality 270 1 Sources of the duty 270 2 Incidents of the duty 273 (a) The duty post-dates the termination of the retainer 273 (b) To whom is the duty owed? 275 (c) The duty is absolute 276 (d) The type of information protected 278 (e) Source of the information 280 3 The contents of the duty 281 (a) Wrongful disclosure 284 (b) Wrongful use 289 (c) Burden of proof 292 4 Multiple principals: conflicting duties of confidentiality and disclosure 293 (a) Introduction 293 (b) Acting for the borrower and lender 298 (c) Acting for purchaser and vendor 299 5 Overriding or releasing the duty 301 (a) Greater duty to client 301 (b) Public interest/iniquity 302 (c) Proceedings against or by the solicitor 307 (d) Statutory legal compulsion/right 309 (e) Loss of confidentiality 310 D Remedies 310 1 Claim for an injunction by an existing or former client to protect confidential information 311 (a) Bolkiah v KPMG 312 (b) The Bolkiah test 315 xii

Contents

2

3

(c) Cases post-Bolkiah: adequacy of information barriers 318 (d) Interim or final injunction 320 (e) Claim brought by an existing client 321 (f) The Solicitors’ Code of Conduct 323 Injunctions where confidential information learnt from ‘the other side’ 324 (a) Mistaken disclosure to the other side 324 (b) Mediations 326 (c) Documents disclosed to the other side pursuant to CPR Part 31 328 (d) Arbitrations 331 Other remedies 332

Chapter 7  Limitation 333 A Introduction 333 B Claims at common law 333 1 Personal injuries: claims in which a limitation period of only three years applies 335 2 Contract 337 (a) General rule 337 (b) Continuing obligations 337 3 The tort of negligence 341 (a) Cases where a future contingency depresses the value of an asset 344 (b) Cases where, absent negligence, the claimant would not have entered into a transaction at all 345 (c) Cases where, absent negligence, the claimant would have entered into the same transaction but on better terms 347 (d) Cases where the claimant’s loss is purely dependent upon a contingency 351 (e) Purchasers’ cases 353 (f) Identity fraud 354 4 Lenders’ claims: Nykredit 355 (a) The basic comparison 355 (b) Cause of action accruing before the borrower has defaulted 357 5 Negligent conduct of litigation 359 6 Wills and inheritance planning 361 C Statutory extensions to the limitation period 362 1 Limitation Act 1980, s 14A 362 (a) Scope of s 14A 363 (b) The ‘starting date’ 363 (c) Burden of proof 365 (d) Degree of certainty required 365 (e) Causation knowledge 366 (f) Material facts knowledge 374 xiii

Contents (g) Constructive knowledge (h) Knowledge in relation to separate causes of action 2 Limitation Act 1980, s 32 (a) Fraud (b) Deliberate concealment (s 32(1)(b)) (c) Deliberate commission of a breach of duty (s 32(2)) (d) Mistake (e) Constructive knowledge D Contribution claims

375 378 378 379 379 382 383 383 385

Chapter 8  Contributory negligence and contribution A Contributory negligence 1 Introduction 2 Scope: in what sort of claim is a defence of contributory negligence open to defendants? (a) The 1945 Act, and claims in negligence (b) Contract claims in general (c) Lenders’ claims, and SAAMCo (d) Fraudulent and negligent misrepresentation; breach of warranty of authority (c) Fiduciary duty and breach of trust 3 Application: making reductions in cases in which the defence of contributory negligence is available (a) General principles (b) Contributory negligence in claims against solicitors B Contribution 1 Scope (a) General principles, including ‘same damage’ (b) Restitution and knowing assistance in breach of trust (c) Settlements 2 Application – assessment of the amount of contribution (a) What figure is to be apportioned? (i) ‘The damage in question’ (ii) Impact of remoteness (iii) Impact of contributory negligence (iv) Impact of SAAMCo (v) Impact of contractual limitation clause (vi) Costs figure to be apportioned (b) How should the resulting figure be apportioned between the parties?

386 386 386 386 386 387 389 393 393 394 394 396 397 397 397 403 404 408 408 408 409 409 410 411 411 411

Part 2  Specific Claims Chapter 9  Real Estate A Introduction

417 417 xiv

Contents B Acting for more than one party 417 1 Acting for buyer and seller 417 (a) Conduct 417 (b) Equity: the double employment rule 418 (c) Contract 419 2 Obtaining the authority of the client or clients 420 (a) Conduct rules 420 (b) Contract 420 (c) Tort 423 3 Acting for mortgagors, mortgagees and sureties 424 (a) Non est factum 424 (b) Undue influence 425 (i) The importance of legal advice 427 (ii) Notice 427 (iii) The lender’s duty: pre-Etridge cases 428 (iv) The lender’s duty after Etridge 429 (c) Acting for the guarantor alone 432 (i) Liability to the guarantor 432 (ii) Liability to the lender 434 (d) Acting for the lender and borrower 435 (i) Liability to the lender 435 (ii) Liability to the guarantor 438 (e) Acting for the lender alone 438 4 Duties to third parties 439 (a) Pre-contract inquiries 439 (b) Certificates of title 441 (c) Requisitions on title 443 (d) Miscellaneous cases 443 (e) Damages 444 C Acting for the purchaser 444 1 Duties before contract 444 (a) Commercial advice 444 (b) General advice 445 (c) Searches and inquiries 447 (i) Boundaries and dimensions 448 (ii) Local authority searches 448 (iii) Rates and tenancies 450 (iv) Easements and restrictive covenants 451 (d) Leasehold purchasers 452 (i) User clauses 452 (ii) Rent review 453 (iii) Break clauses 453 (iv) Alienation clauses 454 2 Duties on exchange of contracts 454 3 Duties post-contract 456 (a) Searches and investigation of title 456 xv

Contents (b) Encumbrances (c) Conditions (d) Occupiers (e) Further advice 4 Duties on completion 5 Illegality 6 Damages (a) Introduction (b) Date of assessment (c) Measure of damage (i) Loss of opportunity to purchase (ii) Delayed purchase (iii) Defective purchase (1) The valuation method (2) The costs of extrication (3) Costs of cure (4) Costs of replacement (iv) Profit on resale (v) Alternative investment opportunity (d) Extent of liability (e) Damages for distress and inconvenience D Acting for the vendor 1 Liability (a) Contract races (b) General advice (i) The sale price (ii) The deposit (iii) Overage clauses (iv) Tax (v) Sale and leaseback (c) Searches and inquiries (d) Leases (e) Making title 2 Damages (a) Valuation method (b) Loss of a chance (c) Other cases (d) Trading losses E Particular kinds of property 1 Lease renewals and extensions (a) Acting for tenants (b) Acting for landlords 2 Options (a) Reminders (b) Exercise of the option (c) Damages xvi

456 457 457 458 458 462 462 462 464 465 465 466 467 467 471 472 473 474 475 475 476 477 477 477 477 478 478 479 479 479 480 481 481 482 482 482 483 484 484 484 484 486 487 487 487 488

Contents (i) Grant of the option (ii) Exercise of the option

488 489

Chapter 10  Lenders’ claims 490 A Contract and the tort of negligence 490 1 Introduction and summary of key issues 490 2 Factual background to lenders’ claims 491 (a) Value of the security 492 (b) Value of the borrower’s covenant 492 (c) Lender’s retainer of the solicitor 493 (d) Sub-sales, back to back sales and direct payments 494 (e) Identity fraud 495 (f) Law Society and SRA Guidance 495 3 The Lenders’ Handbook and solicitors’ regulation 496 (a) The regime from 2007 until 2011 – acting for lender and borrower 499 (i) Individual and standard mortgages 499 (ii) Standard mortgages – property to be used only as borrower’s residence 499 (iii) Standard mortgages – property not to be used only as borrower’s residence 500 (b) The regime from 2007 until 2011 – acting for borrower only or for lender only 500 (c) The SRA Codes of Conduct 2011 and 2019 – acting for lender and borrower 501 (i) 2011 Code – Outcome 3.6 502 (ii) 2011 Code – Indicative Behaviour 3.7 503 (iii) 2011 Code – cases within IB(3.7) 504 (iv) 2011 Code – cases not within IB(3.7) 504 (v) SRA Codes of Conduct for Individuals and for Firms 2019 505 (d) Acting for lender only – the position from July 2012 508 4 Express contractual terms 508 (a) Reporting sub-sales 510 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 510 (ii) Cases subject to the Lenders’ Handbook or approved CoT 511 (b) Discrepancies in the purchase price and direct payments 512 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 512 (ii) Cases subject to the Lenders’ Handbook and/or approved CoT 516 (c) Resident borrower 518 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 518 xvii

Contents (ii) Cases subject to the Lenders’ Handbook and/or approved CoT 519 (d) Redemption of existing mortgages before completion 520 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 520 (ii) Cases subject to the Lenders’ Handbook or approved CoT 520 (e) Obligation to report material changes in circumstances 521 (f) Failing to obtain proper security on completion 521 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 521 (ii) Cases subject to the Lenders’ Handbook and/or approved CoT 523 (g) Identity fraud 523 (i) Cases where the Lenders’ Handbook and approved CoT do not apply 523 (ii) Cases subject to the Lenders’ Handbook or approved CoT 525 (h) Following Law Society or SRA guidance 530 (i) Remaining issues in cases subject to the CML Lenders’ Handbook or approved CoT 531 (i) Conflicts of interest 531 (ii) Terms of reporting 532 (iii) Other occupiers, and guarantors 533 (iv) Completion 535 5 Liability for breach of implied contractual terms and in the tort of negligence 535 (a) Matters relevant to the value of the security 536 (i) The Bowerman duty 536 (ii) Cases to which Part 1 of the Lenders’ Handbook, or the approved CoT, apply 538 (iii) Cases to which the Lenders’ Handbook and approved CoT do not apply 540 (b) Creditworthiness of the borrower 542 (c) Implied waiver of confidentiality by the borrower 547 (d) Information learnt from other transactions 550 6 Forms of undertaking agreed between banks and the Law Society 551 7 Causation 552 (a) Proof of causation 552 (b) Effect of intervening redemption of mortgage 556 8 Basic or transactional loss 558 (a) Interest 563 9 Attributable loss 564 (a) SAAMCo and valuers 565 (b) Hughes-Holland v BPE 566 xviii

Contents (c) SAAMCo and interest 569 (d) SAAMCo and solicitors 569 (i) Loss not attributable to breach of duty 574 (ii) Breach of duty relevant only to valuation of the property 575 (iii) Breach of duty relevant to nature/value of borrower’s covenant 577 (iv) Exceptional cases: solicitor as adviser 579 10 Contributory negligence 579 (a) Levels of deduction for contributory negligence 581 (b) Excessive LTVs 582 (c) Non-status lending 585 (d) Borrower known to lack integrity 586 11 Mitigation 586 12 Contribution 588 13 Syndication and securitisation 589 (a) Contract 589 (i) Novation 589 (ii) Sub-participation agreements 590 (iii) Syndication and trust arrangements 591 (iv) Securitisation 592 (b) Tort 594 B Fraud 594 C Breach of warranty of authority and breach of undertaking 595 D Actions for money had and received 598 E Equity 598 Chapter 11  Wills, estates and trusts A The preparation and execution of wills 1 Duty of care (a) Claims involving a client’s will or estate (b) The beneficiary principle (c) The scope of the duty (i) Proximity (ii) Object of the transaction (iii) Class of potential beneficiaries (iv) No other remedy 2 Breach of duty (a) Preparation (b) Execution (c) Taking instructions (d) Notification of personal representatives or beneficiaries 3 Claims brought by estates (a) Losses suffered during administration (b) Losses suffered on death (c) Inheritance tax losses xix

600 600 600 600 601 603 603 604 605 606 609 609 611 612 615 616 616 617 618

Contents (d) Derivative claims 4 Damages (a) General principles (b) Costs (c) Rectification B Inter vivos trusts and dispositions 1 Claims by trustees 2 Claims by settlors 3 Claims by beneficiaries

618 620 620 621 623 625 625 627 628

Chapter 12  Litigation 631 A Advocates’ former immunity, and abuse of process 631 1 Advocates’ former immunity 631 2 Abuse of process 631 (a) Criminal cases 632 (b) Civil cases 634 B Liability 639 1 Basic errors 641 2 Funding and insurance 641 3 Parties and statements of case 643 4 Interlocutory applications 643 5 Preparation for trial 644 6 Advice on the merits, strategy and settlement 645 7 Mediation 649 8 At court and on appeal 649 C Causation and assessment of damages 649 1 General principles: loss of legal claims 649 2 What is assessed on the balance of probabilities? 650 3 Types of case in which damages are awarded for the loss of a chance 653 (a) Due to solicitor’s negligence claimant loses any chance of having a claim or part of a claim tried or settled 653 (i) Loss of a chance evaluation 654 (ii) Mount principles 655 (iii) Nature of assessment of value of lost claim 660 (b) Underlying claim settled but solicitor’s negligence caused settlement at undervalue 664 (c) Underlying claim tried but solicitor’s negligence caused claimant to achieve worse result 666 4 Trial or settlement? 668 5 Civil cases: loss of a trial 669 (a) Notional trial date 669 (b) Evidence which would have been available at trial 669 (c) State of law at notional trial date 673 (d) Interaction of risks 674 (e) Litigation risk 674 xx

Contents (f) Nominal damages 675 (g) Strong cases 675 (h) Intermediate cases 676 (i) Appeals 676 (j) Costs, and weak cases 676 (k) Enforcement 678 6 Civil cases: losing a settlement or obtaining a worse settlement 678 7 Criminal cases 679 D Recoverable damage 680 1 Consequential losses 680 2 Mental distress and psychiatric illness 680 (a) Mental distress 680 (b) Psychiatric illness 682 3 Costs and CRU certificates 682 E Mitigation 683 Part 3  Procedure Chapter 13  Costs orders against solicitors A Bases for order B Wasted costs orders 1 Scope 2 Procedure (a) Procedural rules (b) Practice Direction (c) Stages of the application (d) A simple procedure (e) Appeal against refusal to make order (f) The impact of legal professional privilege (g) Timing and judge (h) Court initiating application (i) Applications by non-parties (j) Settlement (k) Interrelationship between wasted costs orders and orders for costs against LSC 3 Basic requirements 4 Improper acts and omissions 5 Unreasonable acts and omissions (a) Agreeing expert evidence (b) Abuse of process and hopeless cases 6 Negligent acts or omissions (a) Non-negligent conduct (b) Negligent conduct 7 Reliance on counsel 8 Relevance of public funding and conditional fee agreements 9 Causation xxi

687 687 688 689 693 693 694 696 697 701 702 706 707 707 708 708 709 710 711 712 712 716 717 719 722 724 725

Contents 10 Justice in all the circumstances 11 Contribution and indemnity 12 Criminal law C Inherent jurisdiction over solicitors D Non-party costs orders E Court’s powers on assessment of costs

727 728 728 731 733 739

Chapter 14  Disclosure and privilege A Pre-action disclosure 1 Introduction 2 Production and inspection of documents (a) Ownership of a solicitor’s file (b) The court’s jurisdiction 3 The protocol 4 Dual retainers (a) Joint retainers (b) Multiple retainers (c) Joint interest privilege 5 Solicitors’ rights of disclosure (a) The position in the absence of client consent or waiver (b) When does the client waive privilege? (c) What is the scope of the waiver? (d) Who can waive? B Standard disclosure 1 Introduction 2 Relevance of other transactions 3 Legal advice privilege 4 The crime or fraud exception (a) Legal advice privilege (b) Litigation privilege 5 Implied waiver of privilege (a) The defendant’s files (b) Other solicitors (c) The extent of implied waiver (d) Counsel (e) Limitation defences (f) Damages (g) Settlements and compromises

742 742 742 743 743 744 745 746 746 748 751 753 753 756 757 758 759 759 760 763 772 774 775 776 776 778 780 781 782 782 783

Section B  Professional Regulation And Discipline Chapter 15  The regulation of solicitors A Introduction 1 Scope 2 Terminology xxii

787 787 787 787

Contents B Framework 1 Legal Services Act 2007 (a) ‘reserved legal activity’ (b) The Law Society (c) The SRA (d) Regulatory objectives 2 Conduct rules 1999 to 2019 (a) The Guide to the Professional Conduct of Solicitors (b) Solicitors Code of Conduct 2007 (c) The SRA Handbook 3 The SRA’s Standards and Regulations 2019 4 Regulated firms and individuals (a) Terminology (b) Solicitors (c) Recognised bodies (d) Licensed bodies (e) Managers (f) Employees (g) Interest holders C Conduct rules and civil liabilities 1 Introduction 2 Common law duties (a) Duty of care (b) Implied terms 3 Statutory duties 4 Breach of trust (a) The SRA Accounts Rules 2019 (b) The terms of the trust D Redress 1 Introduction 2 The Legal Ombudsman (a) The scheme (b) Determinations (c) Investigative powers (d) Civil claims 3 Other redress (a) Co-operation and accountability (b) Complaints handling

788 788 788 790 791 791 792 792 792 792 793 795 795 796 796 797 798 799 799 799 799 800 800 802 804 806 806 806 807 807 808 808 808 809 810 810 810 811

Chapter 16  Disciplinary proceedings A The SRA: disciplinary action and investigations 1 The SRA’s disciplinary powers (a) Solicitors Act 1974 (b) Administration of Justice Act 1985 (c) Legal Services Act 2007 (d) Other controls

813 813 813 814 815 816 817

xxiii

Contents (e) SRA Regulatory and Disciplinary Procedure Rules 2019 (f) Authorised decision makers (g) Jurisdiction (h) Procedure (i) Paper decisions (ii) Meetings and oral hearings (iii) Findings (i) Enforcement (j) Disclosure and publication (k) Review (l) Appeal (m) Costs of investigation (n) Regulatory Settlement Agreements 2 SRA investigations (a) Co-operation and accountability (b) Commencing an investigation (c) Production notices (d) Explanations (e) Information offences (f) Legal professional privilege (g) Disclosure to third parties (h) The report stage (i) SDT proceedings B Procedure before the SDT and on appeal 1 Introduction 2 Jurisdiction (a) Appellate jurisdiction of the SDT (b) First instance jurisdiction of the SDT (c) Appeals from the SDT to the High Court 3 Procedure in relation to the first instance jurisdiction of the SDT (a) Solicitors (Disciplinary Proceedings) Rules 2019 (b) The standard of proof (c) Making applications to the SDT – the rule 12 statement (d) Certification of case to answer (e) Case management, Answers, and procedural applications (f) Disclosure, and client privilege (g) Use of the SRA’s investigative powers during proceedings (h) Evidence (i) Subpoena powers (j) Adjournment (k) Publicity (l) Agreed outcomes (m) Substantive hearings (n) Costs of hearings in the SDT (o) Appeals xxiv

817 818 819 820 821 822 823 824 825 825 826 826 826 827 828 829 829 833 834 835 838 838 839 840 840 841 841 841 842 843 843 843 844 845 846 846 848 848 849 849 850 850 851 852 854

Contents C Legal Issues arising from the SRA Principles and Accounts Rules 855 1 Introduction 855 2 The SRA Principles 2019 856 (a) Status and content of the Principles 856 (b) Principle 4 – the test for dishonesty 856 (i) First stage of the test 857 (ii) Second stage of the test 858 (c) Principle 5 – lack of integrity 858 (i) Lack of integrity includes conduct other than dishonesty 858 (ii) General definitions of lack of integrity 859 (iii) Examples of lack of integrity from the pre-Ivey period 860 (iv) Examples of lack of integrity from the post-Ivey period 863 (d) Principle 2 – Upholding public trust and confidence in the solicitors’ profession 865 (e) Principle 1 – Upholding the rule of law and the proper administration of justice 865 (f) Principle 7 – acting in the client’s best interests, and conflicts of interest 866 3 The SRA Accounts Rules 2019 869 D Sanctions 870 Chapter 17  Insurance A Statutory framework 1 The SRA Indemnity Insurance Rules 2 The Minimum Terms and Conditions (a) Scope of cover (i) The ‘insured’ (ii) ‘Claim’ (iii) ‘Circumstances’ (iv) ‘Civil liability’ (v) ‘Defence costs’ (vi) Exclusions (b) Limit of cover (c) Excesses (d) Special conditions (i) No avoidance or repudiation or limitation (ii) Advancement of defence costs (e) Extended policy period and run-off cover (i) ‘Prior practice’ (ii) ‘Successor practice’ (f) General conditions (g) Law and jurisdiction B Rights of third parties against insurers 1 Introduction 2 Third Parties (Rights Against Insurers) Act 1930 xxv

874 874 874 876 876 877 878 879 884 885 885 889 894 895 895 895 896 897 898 902 902 903 903 903

Contents 3

The Third Parties (Rights Against Insurers) Act 2010 (a) The statutory assignment (b) Declaration (c) Defences (d) Limitation (e) Information rights (f) Other provisions

908 908 909 910 910 911 913

Index 915

xxvi

Table of statutes [References are to paragraph number] Access to Justice Act 1999.........15.03 s 22(1).............................. 13.60, 13.67 Administration of Justice Act 1982.....................................11.12 s 20...........................................11.25 (1)(b)..................................11.26 Administration of Justice Act 1985..................15.14, 15.16, 15.19; 16.01, 16.22 s 9...........................9.04; 15.14, 15.16; 16.03; 17.01, 17.33 (1)................................15.16; 16.22 (2)(fb)..................................15.16 9A(1).....................................15.16 Sch 2 para 14B............15.16; 16.01, 16.03 (2), (3)....................15.16 14C...............................16.16 (6)..........................16.39 16..................................16.37 (1), (1A)...................15.16 17..................................16.37 18, 18A................. 15.16; 16.37 24..................................1.05 32–35............................16.05 Agricultural Holdings Act 1986.....................................9.70 Children Act 1989......................6.46 Civil Evidence Act 1995.............16.48 Civil Liability (Contribution) Act 1978 ................ 7.85; 8.19, 8.22, 8.23, 8.28, 8.33, 8.46 s 1.........................................8.33, 8.36 (1)....................................8.19, 8.38 (2)........................................8.32 (3)........................................8.31 (4)........................................8.32 (5)........................................8.34 2(1).......................... 8.36, 8.38, 8.39, 8.40, 8.42, 8.43, 8.45

Civil Liability (Contribution) Act 1978—contd s 2(3)........................................8.43 (a)....................................8.43 (b)....................................8.40 6(1).................................... 8.19, 8.30 Commonhold and Leasehold Reform Act 2002.................9.35 Companies Act 1985 s 311.........................................7.65 Companies Act 2006...................4.66 s 43–47.....................................5.13 175.........................................4.39 (6)....................................4.30 Company Directors’ Disqualification Act 1986 s 8.............................................12.12 Consumer Rights Act 2015.....1.06, 1.07 s 21...........................................1.32 49....................................... 1.04; 2.01 57(1)......................................1.05 (3)......................................1.05 Pt 2 (ss 61–76).........................1.32 s 61(4)......................................1.32 (6)–(8)................................1.32 62...........................................1.07 (4)......................................1.07 64(1)(a)..................................1.07 100(5)....................................1.04 Sch 1 para 38(c).............................1.04 Sch 2.........................................1.06 Sch 4 para 5....................................1.05 Contracts (Rights of Third Parties) Act 1999................1.10 s 1.............................................1.11 (1)(b)....................................1.11 (3)..........................................1.11 County Courts Act 1984 s 142.........................................5.40

xxvii

Table of statutes Courts and Legal Services Act 1990..............................15.03, 15.33 s 89(3)......................................16.38 119(1).............................13.07, 13.08 Criminal Appeal Act 1995 s 14...........................................12.05 Data Protection Act 1998 s 55...........................................14.30 Employment Rights Act 1996....5.13 Enterprise Act 2002....................17.38 Equality Act 2010.......................5.16 Family Law Act 1986 s 33...........................................6.52 Financial Services Act 1986.......7.30 s 47A(3)...................................15.26 Financial Services and Markets Act 2000........15.26; 17.01 s 128.........................................15.35 404.........................................15.38 Income and Corporation Taxes Act 1988 s 34...........................................2.06 Inheritance (Provision for Family and Dependants) Act 1975.......................  6.13; 11.26 s 1.............................................11.26 (2)(b)....................................11.26 2.............................................11.26 Insolvency Act 1986....................17.38 Pt I (ss 1–7B)...........................17.38 s 421.........................................17.40 423................................... 6.46; 14.26 436.........................................6.02 Landlord and Tenant Act 1954 Pt II (ss 23–46).................... 3.61, 3.79; 5.23; 9.89 s 25, 26.....................................9.89 38A........................................5.22 Land Registration Act 1925.......9.51 Land Registration Act 1967.......2.24 Land Registration Act 2002....9.07, 9.51 s 27(1)......................................9.56 Sch 1.........................................9.51 Sch 3.........................................9.51 para 2(b), (c).........................9.51 Law of Property Act 1925 s 40...........................................5.44 49...........................................9.47 (2)......................................9.78

Law of Property (Miscellaneous Provisions) Act 1989 s 2......................................... 2.10; 9.47 Law Reform (Contributory Negligence) Act 1945..... 8.05, 8.13, 8.16 s 1(1)...........................8.02, 8.03, 8.04, 8.08, 8.15, 8.16 4.............................................8.02 Law Reform (Miscellaneous Provisions) Act 1934 s 1.............................................11.18 (1)........................................11.01 Law Reform (Miscellaneous Provisions) Act 1989...........2.09 s 317.........................................2.09 Leasehold Reform, Housing and Urban Development Act 1993...............................9.89 Legal Aid Act 1988 s 31(1)......................................13.60 Legal Aid, Sentencing and Punishment of Offenders Act 2012...............................1.13 s 56...........................................16.06 Legal Services Act 2007........ 2.03; 6.03; 13.11, 13.79; 15.01, 15.03, 15.04, 15.06, 15.07, 15.11, 15.14, 15.19, 15.21, 15.29, 15.33, 15.34; 16.01, 16.04, 16.22, 16.24, 16.27 s 1.............................................15.09 (1)........................................15.09 (3)........................................15.09 12...........................................15.04 13...........................................15.04 14.......................... 2.03; 15.04, 15.06 (4)......................................15.06 15......................................2.03; 15.05 (4), (5)................................15.05 16.......................... 2.03; 15.05, 15.06 (4)......................................15.06 17...........................................15.04 18(1)......................................15.04 27...........................................15.07 28...........................................15.09 (3)......................................15.09

xxviii

Table of statutes Legal Services Act 2007—contd s 29, 30.....................................15.07 52(1), (4)................................15.04 Pt 5 (ss 71–111)................15.17; 17.33 s 71....................................15.17; 17.33 s 71(2)......................................17.33 72...........................................15.14 (5)......................................15.21 73...........................................15.17 85(4)......................................15.18 90...........................................15.18 91(3)......................................15.18 92(1)......................................15.18 93....................... 16.07, 16.19, 16.24, 16.26, 16.30, 16.46, 16.47 94.........................16.07, 16.19, 16.47 95....................................15.18; 16.01 96....................................16.04, 16.16 (6)......................................16.39 97...........................................16.04 99...........................................15.18 (1), (3)................................16.05 102.........................................16.05 114.........................................15.33 137(1)....................................15.35 (2)....................................15.35 (c)................................15.35 (5)....................................15.34 140(1)....................................15.37 147(1), (6)..............................15.36 148.........................................15.36 157.........................................15.33 (1)....................................15.29 158.........................................15.33 176.......................15.18, 15.29; 16.04 190.........................................15.06 207.........................................15.19 (5)....................................15.19 Sch 2....................................2.03; 15.04 para 9(3), (7)–(12)................16.25 Sch 4 Pt 1 (paras 1, 2)....................15.07 Sch 10 Pt 1 (paras 1–16)..................15.17 Sch 11 para 11, 13............................15.18 Sch 12.......................................15.04 Sch 13 Pt 1 (paras 1–9)....................15.17

Legal Services Act 2007—contd Sch 13—contd para 3................................15.21 Limitation Act 1939....... 4.77; 7.74, 7.82 Limitation Act 1980....... 7.02, 7.10, 7.36 s 2................................ 4.78; 7.02, 7.72 s 5......................................... 4.78; 7.02 10....................................... 7.85; 8.34 (4)......................................7.85 11.......................................7.06, 7.08 (1)......................................7.07 14............................. 7.54, 7.55, 7.57, 7.67, 7.68, 7.69 (1)(b)..................................7.57 14A................. 7.01, 7.03, 7.05, 7.06, 7.09, 7.10, 7.28, 7.32, 7.49, 7.50, 7.51, 7.52, 7.54, 7.55, 7.56, 7.58, 7.59, 7.60, 7.61, 7.63, 7.64, 7.65, 7.66, 7.67, 7.68, 7.69, 7.70, 7.71, 7.72, 7.84; 9.89; 14.37 (5)...................................7.53 (6)...................................7.55 (a), (b)........................7.66 (7)...................................7.66 (8)......................7.56, 7.57, 7.66, 7.67 (a)........................... 7.53, 7.62 (9)..................... 7.56, 7.63, 7.65, 7.68 (10).....................7.65, 7.67, 7.68 (a)..........................7.68, 7.69 14B............................7.51, 7.72, 7.75 21.................... 4.12, 4.71, 4.74, 4.75, 4.76, 4.78, 4.79 (1)..........................4.72, 4.73, 4.75 (a).............................. 4.73, 4.78 (b)......................4.73, 4.78, 4.79 (2).................................. 4.72, 4.75 (3).........................4.72, 4.73, 4.75, 4.78, 4.79, 4.80 23...........................................4.78 29(5).................................. 4.48, 4.72 32.................... 4.75, 4.79, 4.80, 4.81, 4.82; 7.01, 7.04, 7.05, 7.49, 7.72, 7.83, 7.84; 14.37 (1)......................................7.83

xxix

Table of statutes Limitation Act 1980—contd s 32(1)(a)...........  4.75, 4.76; 7.73, 7.74 s 32(1)(b)...........4.75, 4.76; 7.10, 7.52, 7.73, 7.75, 7.76, 7.77, 7.78, 7.79, 7.80 (c)..................................7.82 (2).........................4.75; 7.73, 7.75, 7.77, 7.80, 7.81 (5).................................. 7.52, 7.75 s 33.............................7.08, 7.69; 14.37 36...........................................4.77 38...........................................7.07 (1).................................. 4.71, 4.79 Limited Liability Partnerships Act 2000........................... 5.13, 5.16 s 1.............................................5.13 5.............................................9.06 6................................ 5.03, 5.15; 9.06 (1)........................... 5.13, 5.14, 5.15 (2)........................................5.14 (a)....................................5.13 (b)....................................5.14 (3)........................................5.15 (a)....................................5.15 (4).................................... 5.15, 5.16 9.............................................5.15 Local Land Charges Act 1975...9.70 Marine Insurance Act 1905 s 39(5)......................................4.18 Matrimonial Homes Act 1967...9.49 Misrepresentation Act 1967 s 2(1)........................... 3.28, 3.35; 8.13 3.............................................9.27 Moneylenders Act 1927..............4.34 Official Secrets Act 1989............6.34 Partnership Act 1890 s 5...................... 5.03, 5.04, 5.05, 5.06, 5.08, 5.10, 5.13, 5.14, 5.43 10............................ 5.06, 5.08, 5.10, 5.16 11, 13........................ 5.03, 5.11, 5.16 14...........................................5.12 Pensions Act 1995 s 67...........................................1.13 Proceeds of Crime Act 2002......6.52 Pt 7 (ss 327–340).....................4.20 s 328.........................................4.20 (4A).................................4.20 330.........................................4.20

Prosecution of Offences Act 1985.....................................13.76 s 19A.................................13.75, 13.90 s 19B.................................13.76, 13.90 Rehabilitation of Offenders Act 1974...............................16.20 Road Traffic Act 1972 s 168.........................................6.04 Senior Courts Act 1981 s 35A................... 7.36; 10.136, 10.144 s 37...........................................6.15 50...........................................5.40 51.........................5.38; 13.06, 13.07, 13.88 (1).................. 13.06, 13.81, 13.82, 13.83 (3)....................8.33; 13.81, 13.82, 13.83 (6).................. 13.01, 13.13, 13.82, 13.91 (7).................. 13.04, 13.11, 13.32, 13.59, 13.91 (13).............................13.07, 13.08 56...........................................13.75 (7)......................................13.72 128.........................................1.05 Settled Land Act 1925................9.51 Solicitors Act 1957 s 29...........................................16.29 Solicitors Act 1974.......1.01, 1.05; 15.03, 15.14, 15.15, 15.16, 15.19, 15.20, 15.26, 15.27, 15.28, 15.33; 16.01 s 1.............................................2.03 1A..........................................2.03 6.............................................15.15 7.............................................15.15 13B........................................16.05 31............... 9.04; 15.15, 15.28; 17.01 (2)...............................15.15, 15.29 32(3)......................................15.29 34A........................................16.37 (1)...................................15.20 (2)............................15.20, 15.29 35.................................... 6.52; 16.05 37........................15.28; 17.01, 17.03 37A.................................15.27; 16.11 43......................... 2.03; 16.05, 16.40 (1)......................................15.20

xxx

Table of statutes Solicitors Act 1974—contd s 43(2)...............................15.20; 16.22 (3)......................................16.36 44(1), (2)................................15.20 44B.....................14.12; 16.07, 16.19, 16.22, 16.23, 16.24, 16.26, 16.27, 16.29, 16.30, 16.46, 16.47 (1)....................................16.22 s 44B(1)(a), (b).........................16.22 (2)....................................16.22 (3)....................................16.22 (a)–(d).........................16.27 (4)(a)–(c).........................16.22 (5)....................................16.22 (6).............................16.22, 16.23 (7), (8).............................16.22 44BA...................14.12; 16.07, 16.19, 16.26, 16.27, 16.29, 16.30, 16.47 (3)(a)(i).........................16.26 44BB...................16.07, 16.19, 16.25, 16.27, 16.29, 16.47 (2).................................16.25 44BC...............................16.19, 16.27 (1).................................16.27 (3), (4)..........................16.27 44D............................... 15.15; 16.01, 16.02, 16.03 (1)...................................16.01 (2)...................................16.02 44E.........................................16.16 (6)....................................16.39 46...........................................16.35 (9)......................................16.35 (11)....................................16.49 47.................................. 16.08, 16.33, 16.37, 16.82 (1)......................................16.33 (a), (b)...........................16.33 (d), (e)...........................16.38 (2)...............................15.15; 16.33 (i)...................................16.55 48(4)......................................16.54 49...........................................16.39 (3)......................................16.39 57...........................................1.01 (3)......................................1.01 (5)......................................1.01 59...........................................1.05

Solicitors Act 1974—contd s 60...........................................1.01 (3)......................................1.01 (5)......................................1.05 61...........................................1.01 (2)......................................1.01 (4B)....................................1.01 62–64.....................................1.01 65...........................................1.01 s 65(2)......................................1.12 66...........................................1.01 68.................................... 1.01; 14.03 69.................................... 1.01, 1.12 70...........................................1.01 (2)–(4)................................1.12 79...........................................15.07 (1)(a)..................................15.08 87......................... 1.05; 15.15; 17.07 Sch 1.........................................16.05 para 5A.................................16.22 9....................................16.22 (1), (3)........................16.22 (4)............................16.22, 16.23 (5)–(9)........................16.23 Sch 1A...............................15.27; 16.11 para 1, 2................................15.33 Supply of Goods and Services Act 1982 s 2.............................................1.04 13............................ 1.04; 2.01; 10.89 Supreme Court Act 1981 see Senior Courts Act 1981 Supreme Court of Judicature Act 1873...............................5.40 Taxes Management Act 1970.....16.28 s 20...........................................6.52 Third Parties (Rights against Insurers) Act 1930..... 17.36, 17.38, 17.42, 17.44, 17.46 s 1(1)......................17.37, 17.38, 17.41 (3)........................................17.39 2.............................................17.40 (1).................................17.40, 17.46 (2), (3)..................................17.40 3.............................................17.41 3A..........................................17.38 Sch 1 para 1....................................17.46 (3)...............................17.46 (a)...........................17.46

xxxi

Table of statutes Third Parties (Rights against Insurers) Act 1930—contd Sch 1—contd para 1(4), (6)........................17.46 2....................................17.46 (1), (2), (4)..................17.46 3–5................................17.46 Sch 3.........................................17.37 Third Parties (Rights against Insurers) Act 2010......17.37, 17.40, 17.42 s 1......................................17.43, 17.47 (1)........................................17.37 (3), (4)..................................17.42 2......................................17.42, 17.43 (2)........................................17.43 (a)....................................17.43 (3).................................17.43, 17.44 (4)........................................17.45 (6)–(9)..................................17.43 (11)......................................17.43 3.............................................16.43 5(2)........................................17.47 6.............................................16.42 (2)........................................16.42 6A..........................................16.42 7.............................................17.43 8.............................................17.47 9.............................................17.47 (2), (4)..................................17.47 10...........................................17.44 12(1)–(3)................................17.45 (4)(a)..................................17.45 14...........................................17.47 (1), (6)................................17.47

Third Parties (Rights against Insurers) Act 2010—contd s 17...........................................17.47 Tribunals, Courts and Enforcement Act 2007 s 29(5)......................................13.11 Trustee Act 1888.........................4.71 Trustee Act 1925 s 61.................... 4.01, 4.05, 4.66, 4.68, 4.70; 5.32; 15.32 68(17)....................................4.71 Trustee Act 2000.........................4.43 Unfair Contract Terms Act 1977....................... 1.05, 1.06, 1.30, 1.31, 1.33 s 1(1)........................................1.30 2.............................................1.32 (2)........................................1.30 3.............................................1.05 11....................................... 1.06; 9.27 (3).................................. 1.30; 9.30 13(1)......................................1.30 Wills Act 1837 s 15...........................................11.12 18(4)(b)..................................11.12 ITALY Consolidated Law on Banking and Credit art 107......................................4.50 AUSTRALIA QUEENSLAND Partnership Act 1891.................5.10

xxxii

Table of statutory instruments [References are to paragraph number] Civil Procedure Rules 1998, SI 1998/3132....... 3.71; 14.18; 16.40 r 1.2, 1.4...................................14.18 3.4(2)......................................14.18 Pt 5 (rr 5.1–5.6)........................14.13 r 5.4(1), (3)...............................14.13 Pt 7 (rr 7.1–7.12)......................17.38 Pt 8 (rr 8.1–8.9)....... 5.50; 14.03; 16.23 r 14.11(2)(a), (b)......................13.92 Pt 24 (rr 24.1–24.6)..................12.43 Pt 31 (rr 31.1–31.23)........... 6.46, 6.76, 6.78; 14.16 r 31.12......................................14.18 31.16....................14.01, 14.03, 14.04 31.17......................................14.20 31.19(6)..................................14.25 31.20......................................6.72 31.22.................................  6.76, 6.77 32.1........................................14.18 34.4........................................16.48 Pt 35 (rr 35.1–35.15)................2.19 r 35.1........................................2.19 Pt 36 (rr 36.1–36.23)................13.92 39.2(3)............................  6.60; 14.14 44.2................................ 13.14; 16.59 44.11.............................. 13.11, 13.91 (1)(a).............................13.92 (b)...........13.03, 13.91, 13.92 Pt 46 (rr 46.1–46.19)................13.14 r 46.1(2)....................................14.01 46.8........................................13.13 (3)(a), (b)........................13.14 (4)....................................13.14 PD 46....................13.15, 13.16, 13.17, 13.18, 13.29, 13.31, 13.35 r 47.11.............................. 13.11, 13.12 48.7(3)....................................13.24 PD 51U.....................................14.16 r 52.21(1)..................................16.59 (3)(a).............................16.59 PD 52D.....................................16.39

Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, SI 2013/3134........................1.06 Costs in Criminal Cases (General) Regulations 1986, SI 1986/1335 reg 3A–3D................................13.75 3E–3I..................................13.90 European Communities (Lawyer’s Practice) Regulations 2000, SI 2000/1119 Sch 4 para 24(2).............................16.38 Legal Services Act 2007 (Appeals from Licensing Authority Decisions) (No 2) Order 2011, SI 2011/2863 art 4..........................................16.39 Legal Services Act 2007 (Licensing Authorities) (Maximum Penalty) Rules 2011, SI 2011/1659..............16.04 art 2..........................................15.18 Limited Liability Partnerships (Application of the Companies Act 2006) Regulations 2009, SI 2009/1804 reg 4.........................................5.13 Limited Liability Partnerships Regulations 2001, SI 2001/1090 Sch 5 para 2....................................17.38 Money Laundering Regulations 2003, SI 2003/3075........................4.20

xxxiii

Table of statutory instruments Money Laundering Regulations 2007, SI 2007/2157.................... 1.08; 4.20 Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692............ 1.08, 1.22; 4.20; 5.26; 6.52; 16.06 Regulatory Reform (Business Tenancies) (England and Wales) Order 2003, SI 2003/3096........................9.89 Rules of the Supreme Court 1965, SI 1965/1776 Order 85...................................6.46 Solicitors (Disciplinary Proceedings) (Amendment) Rules 2020, SI 2020/462..........................16.41 r 13(2).......................................16.46 20(a).......................................16.55 Solicitors (Disciplinary Proceedings) Rules 2007, SI 2007/3588................16.40, 16.41 Solicitors (Disciplinary Proceedings) Rules 2019, SI 2019/1185................ 16.40, 16.41 r 4(1)–(4)..................................16.40 5.............................................16.41 6.............................................16.40 12(2).......................................16.42 13(1), (3), (4).........................16.43 (5).......................................16.44 14(5).......................................16.42 20(1).......................................16.44 (2)(b)..................................16.44 (c)..................................16.45

Solicitors (Disciplinary Proceedings) Rules 2019, SI 2019/1185—contd r 20(4)(a)..................................16.44 22...........................................16.44 (3)(h)..................................16.49 25(1)–(5)................................16.52 26(1), (2)................................16.45 (3).......................................16.46 (4).......................................16.45 27(2)(a)..................................16.48 28...........................................16.48 (4).......................................16.48 29...........................................16.48 33...........................................16.53 35(1), (2)................................16.51 41...........................................16.54 (2), (3)................................16.81 43(1), (2), (4).........................16.55 Solicitors (Non-Contentious Business) Remuneration Order 2009, SI 2009/1931..1.01 Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692..........................4.20 Third Parties (Rights Against Insurers) Regulations 2016, SI 2016/570.........17.37, 17.42 Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083......... 1.05, 1.06, 1.07, 1.32 reg 5(1), (2)..............................1.05 6(1), (2)..............................1.07 7(1).....................................1.05

xxxiv

Table of Cases [References are to paragraph number] 3M United Kingdom plc v Linklaters & Paines (a firm) [2006] EWCA Civ 530, [2006] PNLR 30, [2006] 2 EGLR 53...................................................7.66 4 Eng Ltd v Harper [2008] EWHC 915 (Ch), [2009] Ch 91, [2008] 3 WLR 892.................................................................................................  3.19; 4.55; 9.60 A A & J Fabrications (Batley) Ltd v Grant Thornton (a firm) (No 2) [2000] BPIR 1, [1999] Lloyd’s Rep PN 863, [1999] PNLR 811............................1.24 AB v Ministry of Defence [2012] UKSC 9, [2012] 2 WLR 643, [2012] 3 All ER 673..................................................................................  7.54, 7.55, 7.62, 7.67 ACC Bank plc v Johnston & Co [2010] IEHC 236, [2011] PNLR 19 (Irish HC)...........................................................................................................2.16; 5.05 A-G v Blake [1998] Ch 439, [1998] 2 WLR 805, [1998] 1 All ER 833..........6.05, 6.06, 6.23 A-G v Guardian Newspapers (No 2) (The Spycatcher case) [1990] 1 AC 109, [1988] 3 WLR 776, [1988] 3 All ER 545................................................6.05, 6.15 A-G v R [2003] UKPC 22, [2003] 3 WLUK 435, [2003] EMLR 24..................4.32 A-G of Hong Kong v Reid [1994] 1 AC 324, [1993] 3 WLR 1143, [1994] 1 All ER 1.......................................................................................................4.33 A-G of Zambia v Meer Care & Desai (a firm) [2008] EWCA Civ 1007, [2008] Lloyd’s Rep FC 587..........................................4.14, 4.19, 4.62; 5.10, 5.21 AIB Group (UK) plc v Mark Redler & Co (Solicitors) [2014] UKSC 58, [2015] AC 1503, [2014] 3 WLR 1367; aff’d [2013] EWCA Civ 45; revs’d in part [2012] EWHC 35 (Ch), [2012] PNLR 16............... 4.01, 4.03, 4.05, 4.43, 4.46, 4.47, 4.48, 4.49, 4.50, 4.52, 4.57, 4.59, 4.61; 8.14; 10.160, 10.201; 15.32 AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm) [2006] EWCA Civ 1601, [2007] 1 All ER (Comm) 667, [2007] 1 Lloyd’s Rep 555......7.76, 7.79 AIG Europe Ltd v Woodman; AIG Europe Ltd v OC320301 LLP [2017] UKSC 18, [2017] 1 WLR 1168, [2018] 1 All ER 936.............. 17.23, 17.24, 17.25 AKB v Willerton; H v Craven [2016] EWHC 3146 (QB), [2017] 4 WLR 25, [2016] 12 WLUK 164..................................................................................4.32 AMP General Insurance Ltd v Macalister Todd Phillips Bodkins [2006] WTLR 189...................................................................................................11.29 A/S Dan Bunkering Ltd v FG Hawkes (Western) Ltd [2009] EWHC 3141 (Comm)........................................................................................................5.24 AW Group Ltd v Taylor Walton (a firm) [2014] EWCA Civ 592, [2014] 5 WLUK 193...................................................................................................9.39 Aaron v Law Society [2003] EWHC 2271 (Admin), [2003] NPC 115...............16.48 Abbey National Mortgages plc (formerly CIBC Mortgages plc) v Leftley Goodwin (a firm) (unreported, 19 April 2000)............................................7.84 Abbey National plc v Clive Travers & Co [1999] Lloyd’s Rep PN 753, [1999] PNLR 819................................................................................................6.46, 6.47

xxxv

Table of Cases Abbey National plc v Forsyths (unreported, 11 June 1997)................................7.70 Abbey National plc v David Gouldman & Co [2003] EWHC 925 (Ch), [2003] 1 WLR 2042, [2003] PNLR 21....................................................................8.35 Abbey National plc v Sayer Moore [1999] EG 114 (CS)....................................7.70 Abedi v Penningtons [2000] 2 Costs LR 205, (2000) 150 NLJ 465....................1.12 Aberdeen Rly Co v Blaikie Bros (1854) 1 Macq 461..........................................4.39 Ablitt v Mills & Reeve (The Times, 24 October 1995).......................................6.72 Abou-Rahmah v Abacha [2006] EWCA Civ 1492, [2007] Bus LR 220, [2007] 1 LLoyd’s Rep 115.......................................................................................4.18 Abrams v Abrams [1996] PNLR 129...................................................................1.25 Abraxas Computer Services Ltd v Rabin Leacock Lipman [2000] EG 70 (ES)....9.91 Accident Assistance Ltd v Hammonds Suddards Edge (a firm) [2005] EWHC 202 (Ch), [2005] PNLR 29..........................................................................2.30 Accident Exchange Ltd v McLean [2018] EWHC 23 (Comm), [2018] 4 WLR 26, [2018] 1 WLUK 67.................................................. 14.05, 14.10, 14.15, 14.27 Ackroyd v Hollely [2013] 1 WLUK 168.............................................................14.01 Acton v Graham Pearce & Co [1997] 3 All ER 909....................................12.26, 12.81 Adams v Bank of New South Wales [1984] 1 NSWLR 285...............................4.25 Adams v Bracknell Forest BC [2004] UKHL 29, [2005] 1 AC 76, [2004] 3 WLR 89........................................................................................................7.69 Adams v Ford [2012] EWCA Civ 544, [2012] 3 All ER 247, [2012] CP Rep 31 ............................................................................  5.28, 5.38, 5.39; 12.20, 12.24 Adams v Rhymney Valley DC (2001) 33 HLR 41, (2001) 3 LGLR 9, [2000] 3 EGLR 25......................................................................................................2.02 Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255, [2020] 1 All ER 124..............................  6.02, 6.04, 6.09, 6.46; 16.28, 16.46 Adex International (Ireland) Ltd v IBM UK Ltd (unreported, 17 November 2000)............................................................................................................6.75 Adrian Alan Ltd v Fuglers (a firm) [2002] EWCA Civ 1655, [2003] 4 Costs LR 518, [2003] PNLR 305...........................................................................2.05 Adris v Royal Bank of Scotland plc [2010] EWHC 941 (QB), [2010] 4 WLUK 518, [2010] 4 Costs LR 598............................................................13.86 Aegon Insurance Co (UK) Ltd v Registrar of Companies; Re Alan Meek Wagstaff Ltd [2000] 12 WLUK 262............................................................5.39 Aer Lingus plc v Gildacroft Ltd [2006] EWCA Civ 4, [2006] 1 WLR 1173, [2006] 2 All ER 290.....................................................................................7.85 Afzal v Chubb Guarding Services Ltd (formerly Chubb Wardens Ltd) (Costs) [2002] EWHC 822 (QB), [2003] PNLR 33.............................  13.56, 13.64, 13.67 Agip (Africa) Ltd v Jackson [1991] Ch 547, [1991] 3 WLR 16, [1992] 4 All ER 451 ........................................................................................... 4.14, 4.22, 4.23 Agouman v Leigh Day (a firm) [2016] EWHC 1324 (QB), [2016] 6 WLUK 408, [2016] PNLR 32........................................  2.02, 2.18, 2.23; 3.45, 3.62; 12.30 Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102.........4.48 Ahmad v Wood [2018] EWHC 996, [2018] 5 WLUK 207, [2018] PNLR 28.....12.15, 12.82 Ahmed & Co, Re [2006] EWHC 480 (Ch), (2005-06) 8 ITELR 779, (2006) 156 NLJ 512.................................................................................... 4.03, 4.47, 4.49 Ahmed v Ingram; Re Ahmed (a debtor) [2018] EWCA Civ 519, [2018] 3 WLUK 422, [2018] BPIR 535.................................................................4.60, 4.61 Ahmed v Kendrick [1988] 2 FLR 22, (1988) 56 P & CR 120.............................9.22

xxxvi

Table of Cases Aiden Shipping Co Ltd v Interbulk Ltd (The Vimeira) (No 2) [1986] AC 965, [1986] 2 WLR 1051, [1986] 2 All ER 409.........................................  13.81, 13.82 Akasuc Enterprises Ltd v Farmer & Shirreff [2003] EWHC 1275 (Ch).............9.79 Akhter v Solicitors Regulation Authority [2019] EWHC 2650 (Admin) , [2019] 7 WLUK 387....................................................................................16.50 Akita Holdings Ltd v A-G of the Turks & Caicos Islands [2017] UKPC 7, [2017] AC 590, [2017] 2 WLR 1153...........................................................4.21 Albert & Le Compte v Belgium (A/58) (1983) 5 EHRR 533..............................16.42 Al-Dowaisan v Al-Salam [2019] EWHC 301 (Ch), [2019] 2 WLU k123, [2019] 2 BCLC 328.................................................................................4.27, 4.78 Alenco (Holdings) Ltd v Bates [2005] EWHC 1540 (Ch)..................................4.63 Al-Fayed v Comr of Police of the Metropolis (No 1) [2002] EWCA Civ 780, (2002) 99 (30) LSG 39, (2002) SJLB 153...................................................6.72 Alfred McAlpine Construction Ltd v Panatown Ltd (No 1) [2001] 1 AC 518, [2000] 3 WLR 946, [2000] 4 All ER 97.............................................  11.30, 11.34 Alfred Street Properties Ltd v Dunne Stores (Bangor) Ltd [2017] NiCh 19.......6.62 Ali Shipping Corpn v Shipyard Trogir [1999] 1 WLR 314, [1998] 2 All ER 136, [1998] 1 Lloyd’s Rep 643....................................................................6.78 Al-Kandari v JR Brown & Co [1988] QB 665, [1988] 2 WLR 671, [1988] 1 All ER 833 ..............................................................  1.21, 1.25; 3.62; 12.17, 12.25 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229, [1968] 2 WLR 366, [1968] 1 All ER 543.............................................................................12.20 Allen v Unigate Dairies Ltd see Ridehalgh v Horsefield [1994] Ch 205, [1994] 3 WLR 462, [1994] 3 All ER 848 Alliance & Leicester Building Society v Edgestop Ltd (Application for Leave) [1993] 1 WLR 1462, [1994] 2 All ER 38, [1994] 2 EGLR 229......10.194 Alliance & Leicester Building Society v Edgestop [1999] Lloyd’s Rep (PN) 868...........................................................................................................4.11, 4.12 Alliance & Leicester v Wheelers (unreported, 23 January 1997).............. 10.63, 10.155 Allied Finance v Haddow & Co [1983] NZLR 22........................ 1.21, 1.24; 9.29, 9.33 Allied Finance & Investments Ltd v Haddow & Co [1983] NZLR 22................1.24 Allied Irish Bank plc v Maguire & Co [2016] IESC 57, [2016] 10 WLUK 273, [2017] PNLR 6.....................................................................................5.49 Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, [1995] 4 All ER 907, [1996] CLC 153.................................3.11, 3.13, 3.17, 3.22, 3.25; 9.83; 12.42 Allison v Clayhills (1907) 97 LT 709..............................................................4.31; 6.06 Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394, [1984] 1 All ER 685, (1984) 81 LSG 430........................................................................10.119 Al Nehayan v Kent [2018] EWHC 333 (Comm).................................................6.10 Al-Sabah v Ali [1999] EGCS 11...............................................  2.29; 9.07, 9.08; 10.166 Alterskye v Scott [1948] 1 All ER 469, (1948) 92 SJ 220...............................6.76, 6.77 Amalgamated Metal Corpn plc v Wragge & Co (a firm) [2011] EWHC 887 (Comm), [2011] PNLR 24...........................................................................5.25 Amec Foster Wheeler Group Ltd v Morgan Sindall Professional Services Ltd [2015] EWHC 2012 (TCC), [2015] 7 WLUK 381......................................14.03 Amerena v Barling (1993) 69 P & CR 252, [1993] EG 111 (CS), [1993] NPC 90.................................................................................................................9.95 American Cyanamid Co v Ethicon Ltd (No 1) [1975] AC 396, [1975] 2 WLR 316, [1975] 1 All ER 504.............................................................................6.65

xxxvii

Table of Cases American Jewellery Co Ltd v Commercial Corpn Jamaica Ltd [2013] UKPC 5, [2013] 2 WLUK 183............................................................................5.24, 5.25 Amonoo v Grant, Seifert & Grower (unreported, 18 December 1998)...............12.27 Ancient Order of Forresters in Victoria v Lifeplan Australia Friendly Society Ltd [2018] HCA 43, (2018) 21 ITELR 403.................................................4.52 Anderson v British Bank of Columbia (1876) 2 Ch D 644.................................6.46 Anderson v Wilson [2019] CSIH 4, 2019 SC 271, [2020] SCLR 105................11.01 Anderson Properties Ltd v Blyth Liggins (a firm) [2017] EWHC 244 (Ch), [2017] 2 WLUK 409....................................................................................9.37 Andrews v Barnett Waddingham (a firm) [2006] EWCA Civ 93, [2006] PNLR 24, [2006] Pens LR 101...............................................................................3.36 Andrews v Messer Beg Ltd (formerly RWP Solicitors Ltd) [2019] EWHC 911 (Ch), [2019] 4 WLUK 220, [2019] PNLR 23..............................................12.21 Andrews v Retro Computers (unreported, 16 January 2019)..............................13.92 Andrews v SBJ Benefit Consultants Ltd [2010] EWHC 2875 (Ch), [2011] Bus LR 1608, [2011] PNLR 29...................................................................15.37 Anfield (UK) Ltd v Bank of Scotland plc [2010] EWHC 2374 (Ch), [2011] 1 WLR 2414, [2011] 1 All ER 708.................................................................9.22 Angel Solicitors v Jenkins O’Dowd & Barth [2009] EWHC 46 (Ch), [2009] 1 WLR 1220, [2010] Lloyd’s Rep PN 1.........................................................5.48 Angove’s Pty Ltd v Bailey; D & D Wines International (in liquidation), Re [2016] USC 47, [2016] 1 WLR 3179, [2017] 1 All ER 773........................4.12 Antonelli v Allen [2001] Lloyd’s Rep PN 487....................................................5.11 Anwar v Ng Chong [2014] 3 SLR 761................................................................1.28 Arab Bank plc v John D Wood (Commercial) Ltd [2000] 1 WLR 857, [2000] Lloyd’s Rep IR 471, [2000] Lloyd’s Rep PN 173.......................................10.171 Aran Caterers v Stephen Lake Gilbert & Paling (a firm) [2002] 1 EGLR 69, [2002] 01 EG 76, [2001] NPC 139..............................................................9.90 Arbiter Group plc v Gill Jennings & Every [2001] RPC 4, [2000] Lloyd’s Rep PN 669, [2000] PNLR 680...........................................................................2.04 Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883, [2015] Bus LR 1362, [2015] 8 WLUK 50............................................................................7.76 Archer v Hickmotts (evidence) [1996] 11 WLUK 385, [1997] PNLR 318.........2.21 Arklow Investments v Maclean [2000] 1 WLR 594, (2000) 144 SJLB 81......6.05, 6.21 Armagas Ltd v Mundogas SA (The Ocean Frost) [1987] AC 717, [1986] 2 WLR 1063, [1986] 2 All ER 385.................................................................5.19 Armitage v Nurse [1998] Ch 241, [1997] 3 WLR 1046, [1997] 2 All ER 705...4.11 Armory v Delamirie (1722) 1 Str 505, 93 ER 664................ 12.42, 12.47, 12.51, 12.57 Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), [2012] Bus LR 1199, [2012] 3 All ER 425..............................................4.22, 4.24 Aroca Sequer Asociados v Adams [2018] EWCA Civ 1589, [2018] 7 WLUK 86, [2018] PNLR 32.....................................................................................1.08 Arrow Trading & Investments Est 1920 v Edwardian Group Ltd (No 2) [2004] EWHC 1319 (Ch), [2004] BCC 955, [2005] 1 BCLC 696..............14.10 Arthur v A-G of the Turks & Caicos Islandds [2012] UKPC 30, [2012] 8 WLUK 205...................................................................................................4.21 Arthur JS Hall & Co v Simons [2002] 1 AC 615, [2000] 3 WLR 543, [2000] 3 All ER 673 ...........................................................  2.01, 2.22; 12.02, 12.03, 12.04, 12.07, 12.11, 12.16; 13.04 Asian v Clintons [1984] 12 WLUK 44, (1984) 134 NLJ 584..............................9.34

xxxviii

Table of Cases Asiansky Television plc v Bayer Rosin (a firm) [2003] EWCA Civ 1405, (2003) 147 SJLB 1363, [2003] NPC 137.................................................9.39, 9.66 Aslan v Clintons (1984) 134 NLJ 584.................................................................9.34 Assaubayey v Michael Wilson & Partners Ltd [2014] EWCA Civ 1491, [2014] 11 WLUK 563, [2015] PNLR 8...............  5.40; 13.12, 13.79, 13.80; 15.04 Assetco plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291, [2019] 1 WLUK 344........... 3.14, 3.17, 3.21, 3.23, 3.25, 3.38, 3.43, 3.72, 3.73, 3.80; 8.16; 9.60, 9.86, 9.88 Ata v American Express Bank Ltd (The Times, 26 June 1998)...........................4.61 Atkins v Dunn & Baker (a firm) [2004] EWCA Civ 263, [2004] WTLR 477, (2004) 148 SJLB 263...................................................................................11.11 Atlantisrealm Ltd v Intelligent Land Investments (Renewable Energy) Ltd [2017] EWA Civ 1029, [2018] 4 WLR 6, [2017] WLUK 432.....................6.72 Atrium Medical Corpn v DSB Invest Holding SA [2011] EWHC 74 (Pat), [2012] Bus R 133, [2011] RPC 24...............................................................15.06 Attard v Samson (1966) 198 EG 121, 116 NLJ 640, (1966) 110 SJ 249............9.35 Australian Securities & Investment Commission (No 2) [2016] FCA 1552, (2016) 20 ITELR 160...............................................................................4.43, 4.45 Avocet Industrial Estates LLP v Merol Ltd [2011] EWHC 3422 (Ch), [2011] 12 WLUK 622, [2012] L & TR 13..........................................................9.45, 9.94 Avondale Exhibitions Ltd v Arthur J Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB), [2018] 5 WLUK 606, [2019] Lloyd’s Rep IR 104.......2.18 Avraamides v Colwill [2006] EWCA Civ 1533, [2007] BLR 76, (2006) 103 (46) LSG 31.................................................................................................1.10 Awoyomi v Radford [2007] EWHC 1671 (QB), [2008] QB 793, [2008] 3 WLR 34........................................................................................................12.02 Awuah v Secretary of State for the Home Department [2017] UKFTT 555 (IAC), [2017] 6 WLUK 522, [2018] PNLR 7..............................................13.11 Awwad v Geraghty & Co [2001] QB 570, [2000] 3 WLR 1041, [2000] 1 All ER 608...................................................................................................2.12; 15.30 Axa Insurance Ltd (formerly Swiss Insurance Co) v Akther & Darby Solicitors [2009] EWCA Civ 1166, [2010] 1 WLR 1662, [2009] 2 CLC 793...............................................................................  7.16, 7.17, 7.19, 7.22, 7.34 Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026, [1996] 3 All ER 517, [1996] 2 Lloyd’s Rep 233............................................................................17.21 Axa Insurance UK plc v Thermonex Ltd [2012] 8 WLUK 110, [2013] TCLR 3, [2013] Lloyd’s Rep IR 323......................................................................17.10 Aylwen v Taylor Joynson Garrett (a firm) [2001] EWCA Civ 1171, [2002] PNLR 1, [2001] Lloyd’s Rep PN 687.........................................................9.71 Aylwin v Aylwin [1902] P 203.............................................................................11.13 B B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736, [2003] 3 WLR 859...............................................  6.02; 14.12, 14.14; 16.28, 16.29 B v B (Wasted Costs: Abuse of Process) [2001] 1 FLR 843, [2001] 3 FCR 724 ......................................................... 13.17, 13.27, 13.28, 13.29, 13.59, 13.68 B v IVF Hammersmith Ltd [2018] EWCA Civ 2803, [2020] QB 93, [2019] 2 WLR 1094....................................................................................................1.02 B v Pendelbury [2002] EWHC 1797 (QB), [2002] CPLR 743, [2002] Lloyd’s Rep PN 575..................................................................................................13.22

xxxix

Table of Cases BAE Systems Pension Funds Trustees Ltd v Bowmer & Kirkland Ltd [2017] EWHC 2082 (TCC), [2018] 1 WLR 1165, [2017] 7 WLUK 303...............17.43 BBC v HarperCollins Publishers Ltd [2010] EWHC 2424 (Ch), [2010] 10 WLUK 26, [2011] EMLR 6.........................................................................6.25 BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2010] EWHC 2176 (Ch), [2011] Ch 296, [2011] 2 WLR 496.......... 14.05, 14.06, 14.10, 14.26 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FC 1087.............................................................................................................5.36 BICC Ltd v Parkman Consulting Engineers sub nom Cumbrian Industrials Ltd v Parkman Consulting Engineers [2001] EWCA Civ 1621, [2002] BLR 64, [2002] Lloyd’s Rep PN 526..........................................................8.33 BPC Hotels Ltd v Wright Hassall LLP [2016] EWHC 1286 (TCC), [2016] 6 WLUK 90.....................................................................................................2.32 BRB (Residuary) Ltd v Connex South Eastern Ltd (formerly South Eastern Train Co Ltd) [2008] EWHC 1172 (QB), [2008] 1 WLR 2867, (2008) 105 (24) LSG 25..........................................................................................8.20 Babicki v Rowlands [2001] EWCA Civ 1720, [2002] Lloyd’s Rep PN 121.......7.66 Babury Ltd v London Industrial plc [1989] NLJ 1596........................................5.38 Bacciottini v Gotelee & Goldsmith (a firm) [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] 3 WLUK 563................... 3.78, 3.80; 9.36, 9.58, 9.59, 9.64, 9.69 Bacon v Howard Kennedy (a firm) [1999] PNLR 1, [2000] WTLR 169............7.48 Baden v Societe Generale pour Favoriser le Developpement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509, [1992] 4 All ER 161.......4.24 Badger v Ministry of Defence [2005] EWHC 2941 (QB), [2006] 3 All ER 173, [2005] 12 WLUK 521..........................................................................8.16 Baggaley, Re [2015] EWHC 1496 (Fam), [2015] 5 WLUK 647.........................15.04 Bailey v Bullock [1950] 2 All ER 1167, 66 TLR (Pt 2) 791, [1950] WN 482....9.61 Baillie v Bromhead & Co [2014] EWHC 2149 (Ch), [2014] 7 WLUK 51, [2015] FSR 16..............................................................................................2.28 Baird v Hastings (t/a Hastings & Co Solicitors) [2013] NIQB 143, [2013] 8 WLUK 79, [2014] PNLR 17........................................................................2.21 Bairstow v Queen’s Moat Houses plc [2001] EWCA Civ 712, [2002] BCC 91, [2001] 2 BCLC 531...............................................................................4.49 Bairstow Eves London Central Ltd v Smith [2004] EWHC 263 (QB), [2004] 2 EGLR 25, [2004] 29 EG 118....................................................................1.07 Baker & Davies plc v Leslie Wilks Associates [2005] EWHC 1179 (TCC), [2005] 3 All ER 603, [2006] PNLR 3..........................................................7.85 Bakhtiar v Keoshgerian [2003] EWHC 3084 (QB).............................................5.08 Balabel v Air India [1988] Ch 317, [1988] 2 WLR 1036, [1988] 2 All ER 246 ................................................................................ 14.20, 14.21, 14.22, 14.23 Balamoan v Holden & Co (1999) 149 NLJ 898, [1999] All ER (D) 566....... 2.01, 2.02, 2.04, 2.07, 2.11; 12.26 Balfron Trustees Ltd v Peterson [2001] IRLR 758, [2002] Lloyd’s Rep PN 1, [2002] WTLR 157....................................................................................5.08, 5.20 Ball v Banner [2000] Lloyd’s Rep PN 569, [2000] EG 36 (CS), (2000) 97 (12) LSG 45.................................................................................................8.42 Ball v Druces & Atlee (a firm) (No 1) [2002] PNLR 23.....................................6.65 Ball v Druces & Attlee (a firm) (No 2) [2004] EWHC 1402 (QB), [2004] PNLR 39 .....................................................................  1.10, 1.18; 3.25; 4.42; 5.22

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Table of Cases Balli, Re [2011] EWHC 1736 (Ch)......................................................................15.06 Balogun v Boyes Sutton & Perry [2017] EWCA Civ 75, [2017] 2 WLUK 558, [2017] PNLR 20.....................................................................  2.26, 2.30; 9.41 Bamrah v Gempride Ltd [2018] EWCA Civ 1367, [2019] 1 WLR 1545, [2018] 6 WLUK 410............................................  2.10; 13.11, 13.91, 13.92; 15.04 Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452, [1932] All ER Rep 181...............................................................................................................3.66 Bank of Credit & Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, [2000] 3 WLR 1423, [2000] 4 All ER 221.....................................4.24 Bank of India v Riat [2014] EWHC 1775 (Ch), [2014] 6 WLUK 44..................9.13 Bank of Ireland v Faithful & Gould Ltd [2014] EWHC 2217 (TCC), [2014] 7 WLUK 359, [2014] PNLR 28......................................  8.33, 8.40, 8.41, 8.42, 8.46 Bank of Ireland v Jaffery [2012] EWHC 1377 (Ch)............................................4.53 Bank of Ireland Mortgage Bank v Coleman [2009] IESC 38, [2009] 3 IR 699.....5.44, 5.48, 5.49 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664.................................................................................................. 4.43, 4.47, 4.53 Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good Luck) [1992] 1 AC 233, [1991] 2 WLR 1279, [1991] 3 All ER 1.............................................................................................................14.24 Bank of Scotland v Henry Butcher & Co [2003] EWCA Civ 67, [2003] 2 All ER (Comm) 557, [2003] 1 BCLC 575.....................................................5.04, 5.06 Bank of Scotland v Hill [2002] EWCA Civ 1081, [2002] 29 EG 152 (CS), [2003] 1 P & CR DG7.............................................................................9.14, 9.22 Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Pazarlama AS [2009] EWHC 1276 (Ch), [2010] Bus LR D1.............................................4.24 Bank St Petersburg PJSC v Arkhangelsky [2020] EWCA Civ 408, [2020] 4 WLR 55, [2020] 3 WLUK 249...........................................................  16.09, 16.41 Banks v Geddes (Costs) [2012] NIQB 87, [2012] 11 WLUK 86, [2013] PNLR 11......................................................................................................13.10 Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1995] QB 375, [1995] 2 WLR 607, [1995] 2 All ER 769; revs’d [1997] AC 191........... 3.10, 3.26; 7.36; 8.07; 10.185, 10.186, 10.188 Banque Bruxelles Lambert SA v Simmons & Simmons (unreported, 24 November 1995)..........................................................................................14.33 Bao Xiang International Garment Centre v British Airways plc [2015] EWHC 3071 (Ch), [2015] 10 WLUK 685, [2016] CP Rep 8...................................5.39 Baranowski v Rice [2014] NIQB 122, [2016] NI 155, [2014] 11 WLUK 662...2.12 Barclay-White v Guillaume & Son [1996] EGCS 123........................... 9.37, 9.58, 9.63 Barclays Bank plc v Coleman [2001] QB 20, [2000] 3 WLR 405, [2000] 1 All ER 385.........................................................................................................9.14 Barclays Bank plc v Christie Owen & Davies Ltd (t/a Christie & Co) [2016] EWHC 2351 (Ch), [2016] 9 WLUK 525, [2017] PNLR 8............. 10.134, 10.135, 10.175 Barclays Bank v Eustice [1995] 1 WLR 1238, [1995] 4 All ER 511, [1995] BCC 978 ........................................................................  6.46; 14.26, 14.28, 14.29 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, [1968[ 3 WLR 1097, [1968] 3 All ER 651...............  4.06, 4.07, 4.08, 4.10, 4.22, 4.54, 4.74 Barclays Bank plc v Fairclough Building Ltd (No 1) [1995] QB 214, [1994] 3 WLR 1057, [1995] 1 All ER 289.................................................................8.05

xli

Table of Cases Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Comm), [2015] 2 WLUK 602, [2015] 2 BCLC 537....................................  1.30, 1.31, 1.33 Barclays Bank plc v O’Brien [1994] 1 AC 180, [1993] 3 WLR 786, [1993] 4 All ER 417...................................................................................................9.15 Barclays Bank plc v Weeks, Legg & Dean [1999] QB 309, [1998] 3 WLR 656, [1998] 3 All ER 213.............................................. 1.02; 4.10; 10.166, 10.114 Barings plc v Coopers & Lybrand [2003] PNLR 24............................................3.45 Barings plc v Coopers & Lybrand (No 2) [2001] Lloyd’s Rep Bank 85, [2001] Lloyd’s Rep PN 379, [2001] PNLR 22........................................................2.19 Barings plc v Coopers & Lybrand (No 7) [2003] EWHC 1319 (Ch), [2003] Lloyd’s Rep IR 566, [2003] PNLR 34.....................................................2.09, 2.22 Bark v Hawley & Rodgers [2004] EWHC 144 (QB), [2005] PNLR 3......... 2.01; 12.20 Barker v Baxendale Walker Solicitors [2017] EWCA Civ 2056, [2018] 1 WLR 1905, [2018] STC 310................................................  2.01, 2.30; 3.06; 9.41 Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572, 2[006] 2 WLR 1027 3.16 Barlow Clowes International Ltd (in liquidation) v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476, [2006] 1 All ER 333.......  4.17, 4.18, 4.19 Barnes v Hay (1988) 12 NSWLR 337.................................................................3.45 Barness v Ingenious Media Ltd [2019] EWHC 3299 (Ch), [2019] 12 WLUK 21, [2020] PNLR 10.....................................................................................1.28 Barnett v Creggy [2016] EWCA Civ 1003, [2017] Ch 273, [2017] 2 WLR 1054....................................................................................... 4.45, 4.46, 4.47, 4.72 Barnstaple Boat Co Ltd v Jones [2007] EWCA Civ 727, [2008] 1 All ER 1124, (2007) 151 SJLB 987.....................................................................7.74, 7.83 Baron Investments (Holdings) Ltd, Re [2000] 1 BCLC 272...........................6.69, 6.77 Barrett Bros (Taxis) Ltd v Davies [1966] 1 WLR 1334, [1966] 2 All ER 972, [1966] 2 Lloyd’s Rep 1................................................................................17.10 Barrister (Wasted Costs Order) (No 1 of 1991), Re [1993] QB 293, [1992] 3 WLR 662, [1992] 3 All ER 429...................................................................13.75 Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515, [1980] 2 WLR 430, [1980] 2 All ER 92...........................................................................4.62, 4.63 Bass Brewers Ltd v Appleby [1997] 2 BCLC 700, [1996] PNLR 385, (1997) 73 P & CR 165.............................................................................................5.11 Bate v Mishcon de Reya (a firm) [2006] EWCA Civ 597...............................9.47, 9.60 Bates van Winkelhof v Clyde & Co LLP [2014] UKSC 32, [2014] 1 WLR 2047, [2014] 3 All ER 225.......................................................................5.12, 5.13 Bawa-Garba v General Medical Council [2018] EWCA Civ 1879, [2019] 1 WLR 1929, [2019] 1 All ER 500.................................................................16.59 Baxendale-Walker v Law Society [2006] EWHC 643 (Admin), [2006] 3 All ER 675, [2006] 5 Costs LR 696...................................................................16.26 Baxendale-Walker v Law Society [2007] EWCA Civ 233, [2008] 1 WLR 426, [2007] 3 All ER 330.....................................................................................16.56 Bayer v Balkin (1995) 31 ATR 295.....................................................................11.29 Bayley v SG Associates [2014] EWHC 782 (Ch), [2014] 1 WLUK 405, [2014] WTLR 1315.............................................................................  11.20, 11.27 Bearman v ARTS [1949] 1 KB 550, [1949] 1 All ER 465, 65 TLR 389.........4.78; 7.74 Beary v Pall Mall Investments [2005] EWCA Civ 415, [2005] PNLR 35..........3.05 Beer v Ward (1821) Jac 77, 37 ER 779............................................................6.01, 6.04 Behague v R & C Comrs [2013] UKFTT 596 (TC), [2013] 10 WLUK 622, [2014] WTLR 187........................................................................................14.24

xlii

Table of Cases Bell v Peter Browne & Co [1990] 2 QB 495, [1990] 3 WLR 510, [1990] 3 All ER 124 ...............................................................  1.13; 7.12, 7.13, 7.26; 9.49, 9.52 Benedetti v Sawiris [2009] EWHC 1806 (Ch)....................................................4.63 Bennett v Greenland Houchen & Co [1998] PNLR 458.....................................7.07 Bentley v Gaisford [1997] QB 627, [1997] 2 WLR 401, [1997] 1 All ER 842...5.42 Beresford v Royal Insurance Co Ltd [1938] AC 586, [1938] 2 All ER 602, [1938] 5 WLUK 20......................................................................................17.18 Berezovskt v Hine [2011] EWCA Civ 1089, [2011] 10 WLUK 149..........14.08, 14.14 Berlevy v Blyth Dutton [1997] 10 WLUK 23, [1997] EGCS 133 (CS)..............9.06 Bermuda International Securities v KPMG [2001] EWCA Civ 269, [2001] CP Rep 73, [2001] Lloyd’s Rep PN 392...........................................................14.01 Berry v Laytons [2009] EWHC 1591 (QB), [2009] ECC 34..............................2.07 Beswarick (formerly Bulpin) v JW Ripman [2001] Lloyd’s Rep PN 698...........12.23, 12.27 Bhananbhai v IRC Comrs [2007] NZCA 368, [2007] NZLR 478......... 5.42, 5.47, 5.49 Bhullar v Bhullar [2003] EWCA Civ 424, [2003] BCC 711, [2003] 2 BCLC 241...........................................................................................................4.36, 4.39 Bieber v Teathers Ltd (in liquidation) [2012] EWCA Civ 1466, [2012] 11 WLUK 405, [2013] 1 BCLC 248............................................................4.08, 4.10 Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314, [1951] 2 All ER 191, [1951] 2 TLR 159........................................................................................14.39 Biggs v Clay [2019] EWHC 102 (Ch), [2019] 2 WLUK 377.............................14.39 Biggs v Sotnicks (a firm) [2002] EWCA Civ 272, [2002] Lloyd’s Rep PN 331....7.83 Bilkus v Stockler Brunton (a firm) [2010] EWCA Civ 101, [2010] 1 WLR 2526, [2010] 3 All ER 64.............................................................................1.01 Bilta (UK) Ltd (in liquidation) v Natwest Markets plc [2020] EWHC 546 (Ch), [2020] 3 WLUK 159...........................................................................4.14 Bilta (UK) Ltd (in liquidation) v Nazir [2015] UKSC 23, [2016] AC 1, [2015] 2 WLR 1168.................................................................................................17.18 Birds Eye v Roythorne & Co [2015] EWHC 1003 (Ch), [2015] 4 WLUK 159, [2015] WTLR 961..................................................................................6.19; 14.15 Birmingham City Council v Forde [2009] EWHC 12 (QB), [2009] 1 WLR 2732, [2010] 1 All ER 802...........................................................................4.32 Birmingham Midshires Building Society v Ansell [1998] PNLR 237................14.28 Birmingham Midshires Building Society v Infields (a firm) [1999] Lloyd’s Rep PN 874, 66 Con LR 20, [1999] EG 77 (CS).....................................4.42; 7.70 Birmingham Midshires Mortgage Services v David Parry & Co [1998] PNLR 249, [1997] EG 150 (CS), [1997] NPC 153..................10.57, 10.58, 10.59, 10.60, 10.85, 10.100, 10.103 Birmingham Midshires Building Society v Wretham [1999] Lloyd’s Rep PN 133, 63 Con LR 93, [1999] PNLR 685........................................................7.71 Birse Construction Ltd v Haiste Ltd [1996] 1 WLR 675, [1996] 2 All ER 1, [1996] CLC 577...........................................................................................8.20 Bittlestone v Keegan [1997] EG 8 (CS)...............................................................9.41 Black v Taylor [1993] 3 NLR 403.......................................................................6.15 Black Ant Co Ltd (in administration), Re; Urban Ventures Ltd v Thomas [2016] EWCA Civ 30, [2016] 1 WLUK 610, [2016] 2 P & CR DG2.........10.129 Blackmore v Department for Communities & Local Government [2017] EWCA Civ 1136, [2018] QB 471, [2018] 2 WLR 139...............................8.16 Blair v Bromley (1847) 5 Hare 542, 67 ER 1026, 2 Ph 354................................4.73

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Table of Cases Blankley v Central Manchester & Manchester Children’s University Hospitals NHS Trust [2015] EWCA Civ 18, [2015] 1 WLR 4307, [2016] 3 All ER 382...............................................................................................................1.11 Bluck v Information Comr (2007) 98 BMLR 1, [2008] WTLR 1.......................6.09 Blue Circle Industries plc v Ministry of Defence [1999] Ch 289, [1999] 2 WLR 295, [1998] 3 All ER 385...................................................................3.76 Blythe v Northwood [2005] NSWCA 221...........................................................4.29 Boardman v Phipps [1967] 2 AC 46, [1966] 3 WLR 1009, [1966] 3 All ER 721 ....................................................4.27, 4.30, 4.36, 4.79; 6.15, 6.27, 6.30, 6.79 Boateng v Hughmans [2002] EWCA Civ 593, [2002] Lloyd’s Rep PN 449, [2002] PNLR 40.......................................................................................3.11; 9.35 Bogle v Coutts & Co [2003] EWHC 1865 (Ch)..................................................6.62 Bolam v Friern Hospital Management Committee [1957] 1 WLR 582, [1957] 2 All ER 118, [1955-95] PNLR 7............................................................2.01, 2.02 Bolitho (deceased) v City & Hackney Health Authority [1998] AC 232, [1997] 3 WLR 1151, [1997] 4 All ER 771..................................... 2.17; 3.08, 3.47 Bolkiah v KPMG [1999] 2 AC 222, [1999] 2 WLR 215, [1999] 1 All ER 517 .6.01, 6.06, 6.08, 6.12, 6.14, 6.17, 6.22, 6.32, 6.57, 6.58, 6.60, 6.61, 6.62, 6.66, 6.68, 6.75, 6.76 Bolton v Law Society [1994] 1 WLR 512, [1994] 2 All ER 486, [1994] COD 295 ................................................................................ 16.13, 16.62, 16.84, 16.85 Bolton v Law Society [1994] 1 WLR 512, [1994] 2 All ER 486, [1993] 12 WLUK 70............................................................................................  16.82, 16.83 Bond v Livingstone & Co [2001] PNLR 30........................................................2.10 Bond v Livingstone & Co [2001] PNLR 30........................................................12.20 Bonham v Blake Lapthorn Linnell [2006] EWHC 2513 (Ch), [2007] WTLR 189...............................................................................................................11.29 Boodia v Slade (t/a Richard Slade & Co) [2018] EWCA Civ 2667, [2019] 1 WLR 1126, [2018] 11 WLUK 403..............................................................1.12 Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm), [2011] 1 Lloyd’s Rep 482, [2010] 11 WLUK 210.....................................................3.43 Bourns Inc v Raychem Corpn (No 3) [1999] 3 All ER 154, [1999] CLC 1029, [1999] 2 Costs LR 72...................................................................................6.77 Bowdage v Harold Michelmore & Co (1962) 106 SJ 512, 183 EG 233.........2.31; 9.77 Bowie v Southorns [2002] EWHC 1389 (QB), [2002] Lloyd’s Rep PN 564, [2003] PNLR 7.............................................................................................7.65 Bowman v Fels [2005] EWCA Civ 226, [2005] 1 WLR 3083, [2005] 4 All ER 609...............................................................................................................6.52 Bown v Gould & Swayne [1996] PNLR 130, [1996] NPC 5................2.14, 2.15, 2.21; 12.33 Bowser v Caley [2006] EWHC 902 (Ch)............................................................6.32 Boycott v Perrins Guy Williams [2011] EWHC 2969 (Ch).............................7.61, 7.65 Boyle v Thompsons Solicitors [2012] EWHC 36 (QB), [2012] PNLR 17..... 2.01, 2.07, 2.22; 12.26 Braddock Trustee Services Ltd v Nabarro Nathanson [1995] 1 WLR 1405, [1995] 4 All ER 888, [1995] CLC 1495.............................................  11.27, 11.28 Bradford & Bingley Building Society v Boyce Evans Shepherd [1998] PNLR 250...............................................................................................................14.18 Bradford & Bingley plc v Hayes (unreported, 25 July 2001)..............................1.29 Bray v Ford [1896] AC 44...................................................................................4.39

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Table of Cases Brent LBC v Davies [2018] EWHC 2214 (Ch)...........................  4.21, 4.24, 4.73, 4.75, 4.76, 4.78; 7.74 Brent LBC v Kane [2014] EWHC 4564 (Ch), [2014] 11 WLUK 49, [2015] BPIR 576......................................................................................................14.26 Brett v Solicitors Regulation Authority [2014] EWHC 2974 (Admin), [2014] 9 WLUK 310, [2015] PNLR 2.....................................................................16.69 Brewer v Iqbal [2019] EWHC 182 (Ch), [2019] 2 WLUK 127, [2019] PNLR 15.................................................................................................................4.43 Brian Warwicker Partnership plc v HOC International Ltd [2005] EWCA Civ 962, 103 Con LR 112, [2006] PNLR 5........................................................8.45 Bricheno v Thorp (1821) Jac 300, 37 ER 864.................................................6.01, 6.60 Brickenden v London Loan & Savings Co [1934] 3 DLR 465...........................4.53 Bridging Loans v Toombs [2017] EWCA Civ 205, [2017] 2 WLUK 348..........10.158 Brinn v Russell Jones & Walker [2002] EWHC 2727 (QB), [2003] Lloyd’s Rep PN 70, [2003] PNLR 16.....................................................  2.23; 12.24, 12.60 Bristol & West Building Society v Baden, Barnes Groves & Co [2000] Lloyd’s Rep PN 788............................................................................  6.34; 10.112 Bristol & West Building Society v Christie [1996] EG 53 (CS).........................10.182 Bristol & West Building Society v Fancy & Jackson [1997] 4 All ER 582, [1997] NPC 109.................................4.42; 5.31; 8.13; 10.18, 10.44, 10.47, 10.51, 10.63, 10.132, 10.145, 10.148, 10.149, 10.152, 10.157, 10.168, 10.171, 10.176 Bristol & West Building Society v Kramer [1995] NPC 14................................1.02 Bristol & West Building Society v May, May & Merrimans (No 1) [1996] 2 All ER 801, [1996] PNLR 138, [1996] EG 69 (CS)......................4.03, 4.53; 6.33; 10.18, 10.62 Bristol & West Building Society v May, May & Merrimans (No 2) [1998] 1 WLR 336, [1997] 3 All ER 206, [1997 NPC 31..........................................10.171 Bristol & West Building Society v Mothew (t/a Stapley & Co) [1998] Ch 1, [1997] 2 WLR 436, [1996] 4 All ER 698...................  4.01, 4.04, 4.11, 4.26, 4.27, 4.35, 4.36, 4.38, 4.39, 4.41, 4.42, 4.43, 4.47, 4.78; 6.67; 7.81; 10.108, 10.122, 10.145, 10.151; 14.08 British Airways plc v Spencer [2015] EWHC 2477 (Ch), [2015] 8 WLUK 244, [2015] Pens LR 519.............................................................................2.20 British American Tobacco Australia Ltd v Peter Gordon [2007] NSWSC 230...............................................................................................................6.26 British Commonwealth Holdings plc v Barclays Bank plc [1996] 1 WLR 1, [1996] 1 All ER 381, [1996] 5 Bank LR 47.................................................7.08 British Racing Drivers’ Racing Club v Hextall Erskine & Co [1996] 3 All ER 667, [1996] BCC 727, [1997] 1 BCLC 182, [1996] PNLR 523..................3.44 British Sky Broadcasting Group plc v Virgin Media Communications Ltd (formerly NTL Communications Ltd) [2008] EWCA Civ 612, [2008] 1 WLR 2854, [2008] Bus LR 1543.............................................................6.75, 6.76 British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Rlys of London Ltd (No 2) [1912] AC 673............................3.65; 10.187 Broadley v Guy Clapham & Co [1994] 4 All ER 439, [1993] 4 Med LR 328....7.57 Brocklesby v Armitage & Guest [2002] 1 WLR 598, [2001] 1 All ER 172, [1999] Lloyd’s Rep PN 888.........................................................................7.81 Broker House Insurance Services Ltd v OJS Law [2010] EWHC 3816 (Ch), [2011] PNLR 23...........................................................................................10.159

xlv

Table of Cases Bronze Monkey LLC v Simmons & Simmons LLP [2017] EWHC 3097 (Comm), [2017] 12 WLUK 8, [2018] PNLR 14..........................................5.29 Broomhead v National Westminster Bank plc [2018] EWHC 1574 (Ch), [2018] 6 WLUK 671....................................................................................1.13 Broomhead v Solicitors Regulation Authority [2014] EWHC 2772 (Admin), [2014] 7 WLUK 747............................................................................16.57, 16.58 Brown v Bennett [1999] BCC 525, [1999] BCLC 649...................................4.16, 4.22 Brown v Bennett (Wasted Costs) (No 1) [2002] 1 WLR 713, [2002] 2 All ER 273, [2002] Lloyd’s Rep PN 155......................................................... 13.68, 13.70 Brown v Guardian Royal Exchange Assurance plc [1994] 2 Lloyd’s Rep 325, (1994) 91 (9) LSG 40, (1994) 138 SJLB 35............................... 6.19; 14.06, 14.08 Brown v IRC [1965] AC 244, [1964] 3 WLR 511, [1964] 3 All ER 119............4.03 Brown v InnovatorOne plc [2012] EWHC 1321 (Comm)............................ 1.09; 15.29 Brown v KMR Services Ltd (formerly HG Poland (Agencies) Ltd) [1995] 4 All ER 598, [1995] 2 Lloyd’s Rep 513, [1995] CLC 1418..........................3.60 Brownie Wills (a firm) v Simpson [1999] Lloyd’s Rep PN 39, [1999] PNLR 552.1.24 Browning v Brachers (a firm) (Damages) [2005] EWCA Civ 753, [2005] PNLR 44 ..................................................................................12.41, 12.47, 12.51 Browning v Brachers (a firm) (Damages) [2004] EWHC 16 (QB), [2004] PNLR 28 ....................................................................... 12.26, 12.51, 12.54, 12.57 Buckland v Mackesy (1968) 208 EG 969, 118 NLJ 1009, (1968) 112 SJ 841...9.35 Buckley v Lane Herdman & Co [1977] CLY 3143.............................................9.47 Buckley v National Union of General & Municipal Workers [1967] 3 All ER 767, 4 KIR 277, (1968) 112 SJ 292.............................................................12.71 Budana v Leeds Teaching Hospitals NHS Trust [2017] EWCA Civ 1980, [2018] 1 WLR 1965, [2017] 12 WLUK 72..............................................1.11, 1.13 Bunge SA v Nidera BV (formerly Nidera Handelscompagnie BV) [2015] UKSC 43, [2015] 3 All ER 1082, [2015] Bus LR 987............................3.65, 3.82 Burdge & Burdge v John Hodge & Co (unreported, 11 March 1996)........14.33, 14.38 Burdick v Garrick (1869-70) LR 5 Ch App 233..............................................4.03, 4.63 Burkle Holdings Ltd v Laing [2005] EWHC 638 (TCC)....................................14.05 Burmeister v O’Brien [2009] NZHC 2154............................................  1.24; 2.15; 9.08 Burnden Holdings (UK) Ltd v Fielding [2018] UKSC 14, [2018] AC 857, [2018] 2 WLR 885.......................................................................................7.81 Burnden Holdings (UK) Ltd v Fielding [2016] EWCA Civ 557, [2017] 1 WLR 39, [2016] 6 WLUK 445....................................................................4.73 Business Computers International Ltd v Registrar of Companies [1988] Ch 229, [1987] 3 WLR 1134, [1987[ 3 AlL ER 465.........................................1.25 Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223, [1980] 3 WLR 668, [1980] 3 All ER 475.....................................................................................14.10 Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426........................................................................................9.58 Byrne v Hall, Pain & Foster [1999] 1 WLR 1849, [1999] 2 All ER 400, 68 Con LR 110 .............................................................................................7.33, 7.34 Byrne v Sefton Health Authority [2001] EWCA Civ 1904, [2002] 1 WLR 775, (2002) 99 (1) LSG 19............................................. 13.07, 13.08, 13.09, 13.10 C C v Mirror Group Newspapers [1997] 1 WLR 131, [1996] 4 All ER 511, [1996] EMLR 518........................................................................................7.76

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Table of Cases CAS (Nominees) Ltd v Nottingham Forest FC plc (Application for Disclosure) [2001] 1 All ER 954, [2002] BCC 145, (2000) 97 (40) LSG 42.................................................................................................................14.10 CIA Barca de Panama SA v George Wimpey & Co Ltd (No 1) [1980] 1 Lloyd’s Rep 598...........................................................................................14.10 CIBC Mortgages plc v Pitt [1994] 1 AC 200, [1993] 3 WLR 802, [1993] 4 All ER 433.........................................................................................................4.31 CMCS Common Market Commercial Services AVV v Taylor [2011] EWHC 324 (Ch), [2011] 3 Costs LO 259, [2011] PNLR 17...............  13.40, 13.56, 13.73 Caliendo v Mischon de Reya [2016] EWHC 150 (Ch), [2016] 2 WLR 154...1.09, 1.23 Camacho v Law Society (No 2) [2004] EWHC 1675 (Admin), [2004] 1 WLR 3037, [2004] 4 All ER 126...........................................................................16.82 Campbell v Frisbee [2002] EWHC 328 (Ch), [2002] EMLR 31.........................6.08 Campbell (or Pearson) v Imray [2004] PNLR 1, 2003 Rep LR 87, 2003 GWD 14-480..........................................................................................................12.63 Campden Hill Ltd v Chakrani [2005] EWHC 911 (Ch), [2005] NPC 65............5.36 Canada Square v Kinleigh Folkard & Hayward Ltd [2015] 9 WLUK 349, [2016] PNLR 3.......................................................................  7.43; 10.135, 10.158 Cancer Research Campaign v Ernest Brown & Co (a firm) [1997] STC 1425, [1998] PNLR 592.....................................................................  11.06, 11.14, 11.15 Canson Enterprises Ltd v Broughton & Co (1991) 85 DLR (4th) 129...........  4.46, 4.47, 4.51, 4.57, 4.58, 4.59 Caparo Industries plc v Dickman [1990] 2 AC 605, [1990] 2 WLR 358, [1990] 1 All ER 568.................................................................................1.20; 3.37 Cape & Dalgleish v Fitzgerald [2002] UKHL 16, [2002] CP Rep 51, [2002] CPLR 509....................................................................................................8.31 Cape Intermediate Holdings Ltd v Dring [2018] EWCA Civ 1795, [2019] 1 WLR 479, [2019] 1 All ER 804...................................................................14.13 Capita Alternative Fund Services (Guernsey) Ltd (formerly Royal & Sun Alliance Trust (Channel Islands) Ltd v Drivers Jonas (a firm) [2012] EWCA Civ 1417, [2012] 11 WLUK 238, [2013] 1 EGLR 119..................9.63 Capita (Banstead 2011) Ltd v RFIB Group Ltd [2015] EWCA Civ 1310, [2016] QB 835, [2016] PNLR 17............................................................1.13; 7.13 Capital Home Loans Ltd v Bennett Griffin LLP [2013] EWHC 2613 (Ch), [2013] 7 WLUK 607....................................................................................14.09 Capital Home Loans Ltd v Countrywide Surveyors Ltd [2011] 8 WLUK 313, [2011] 3 EGLR 153.....................................................................................10.134 Capital Home Loans Ltd v Hewitt & Gilpin Solicitors Ltd [2016] NICA 45, [2016] 11 WLUK 549, [2017] PNLR 12....................  3.70; 10.56, 10.116, 10.117 Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525, [1964] 2 WLR 600, [1964] 1 All ER 290...................................................................4.14 Carleton (Earl of Malmesbury) v Strutt & Parker (a partnership) [2007] EWHC 999 (QB), 116 Con LR 38, [2007] PNLR 29..............................3.23; 9.64 Carleton (Earl of Malmesbury) v Strutt & Parker (a partnership) [2008] EWHC 424 (QB), [2008] 3 WLUK 431, 118 Con LR 68.......................2.02, 2.07 Carty v Croydon LBC [2005] EWCA Civ 19, [2005] 1 WLR 2312, [2005] 2 All ER 519...................................................................................................2.02 Carl Zeiss Siftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276, [1969] 2 WLR 427, [1969] 2 All ER 367...............................................................4.23, 4.25 Carlton v Fulchers [1997] PNLR 337..................................................................12.20

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Table of Cases Carlton v Goodman [2002] EWCA Civ 545, [2002] 2 FLR 259, [2002] Fam Law 595.......................................................................................................9.07 Carr v Bower Cotton (a firm) [2002] EWCA Civ 1788, (2003) 147 SJLB 147..5.22 Carr-Glynn v Frearsons (a firm) [1999] Ch 326, [1999] 2 WLR 1046, [1998] 4 Alll ER 225 .....................  1.26; 11.02, 11.04, 11.05, 11.06, 11.09, 11.13, 11.18 Carradine Properties Ltd v DJ Freeman & Co (1982) 126 Sol Jo 157............1.17; 9.34 Carradine Properties Ltd v DJ Freeman & Co [1999] Lloyd’s Rep PN 483, [1955-95] PNLR 219, (1989) 5 Const LJ 267.............................................2.26 Carter v Gamlens (a firm) (unreported, 19 April 2000).......................................9.43 Carter v Palmer (1842) 8 Cl & F 657, 8 ER 256.............................................6.16, 6.27 Carter v TG Baynes & Sons [1998] EG 109 (CS)...........................................9.41, 9.71 Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343......6.75 Carty v Croydon LBC [2005] EWCA Civ 19, [2005] 1 WLR 2312, [2005] 2 All ER 519...................................................................................................2.02 Carvin v Dunham Brindley & Linn [1997] EGCS 90 ........................................9.41 Casey v Hugh James Jones & Jenkins [1999] Lloyd’s Rep PN 115............12.23, 12.71 Casson Beckman & Partners v Papi [1991] BCC 68, [1991] BCLC 299............14.02 Caterpillar Logistics Services (UK) Ltd v Huesca de Crean [2012] EWCA Civ 156, [2012] 3 All ER 129, [2012] CP Rep 22.......................................6.61 Cathcart, ex p Campbell, Re (1869-70) LR 5 Ch App 703..................................6.15 Cattley v Pollard [2006] EWHC 3130 (Ch), [2007] Ch 353, [2007] 3 WLR 317...............................................................................................................4.75 Cave v Robinson Jarvis & Rolf [2002] UKHL 18, [2003] 1 AC 384, [2002] 2 WLR 1107................................................................................................7.77, 7.81 Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] PNLR 122, [1998] 1 EGLR 104, [1998] 06 EG 146......................................................3.11 Cemp Properties (UK) Ltd v Dentsply Research & Development Corpn Ltd [1989] 2 EGLR 205, [1989] 37 EG 133, [1989] EG 48 (CS)................. 9.26, 9.65, 9.82, 9.87 Central Bank of Ecuador v Conticorp SA [2015] UKPC 11, [2015] 3 WLUK 617, [2016] 1 BCLC 26...............................................................................4.65 Central Trust Co v Rafuse (1986) 31 DLR (4th) 481............................................2.09 Challinor v Juliet Bellis & Co (a firm) [2011] EWHC 3249 (Ch).................. 4.06, 4.09, 4.10, 4.64 Chamberlains v Lai & Lai [2006] NZSC 70, [2007] 2 NZLR 7..........................12.02 Chandler v Church (1987) 177 NLJ 451..............................................................14.30 Channon v Lindley Johnstone (a firm) (measure of damages) [2002] EWCA Civ 353, [2002] Lloyd’s Rep PN 342, [2002] PNLR 41...........12.26, 12.56, 12.84 Chantrey Martin Ltd v Martin [1953] 2 QB 286, [1953] 3 WLR 459, [1953] 2 All ER 691...................................................................................................14.02 Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19, [2003] 3 WLR 1233........................  1.28; 11.01, 11.02, 11.03, 11.08, 11.15, 11.16, 11.28 Charles v Hugh James Jones & Jenkins [2000] 1 WLR 1278, [2000] 1 All ER 289, [2001] PIQR P1...................................................... 12.64, 12.65, 12.70, 12.80 Charles Russell Speechlys LLP v Pieres [2018] 7 WLUK 476...........................1.12 Charter plc v City Index Ltd [2007] EWCA 1382 (Civ), [2008] Ch 313, [2008] 2 WLR 950.......................................................................... 8.23, 8.30, 8.46 Chelsea Building Society v Goddard & Smith [1996] EG 157 (CS)...................10.182 Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, [2004] 13 EG 127 (CS), (2004) 101 (13) LSG 37........................................................9.22

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Table of Cases Cherney v Neuman [2011] EWHC 2156 (Ch).......................................  4.03, 4.19, 4.49 Cheshire Building Society v Dunlop Haywards (DHL) Ltd [2007] EWHC 403 (QB).............................................................................................................14.18 Cheshire Mortgage Corpn plc v Grandison [2012] CSIH 66, 2012 GWD 30609...............................................................................................................5.32 Chester v Afshar [2004] UKHL 41, [2005] 1 AC 134, [2004] 3 WLR 927.....2.01; 3.05 Chief Constable of North Yorkshire v Audsley [2000] Lloyd’s Rep PN 675......13.21, 13.37 Chief Land Registrar v Caffrey & Co [2016] EWHC 161 (Ch), [2016] 2 WLUK 106, [2016] PNLR 23..................................................................1.28; 9.08 Christensen v Scott [1996] 1 NZLR 273 (CA of NZ).........................................1.10 Chudley v Clydesdale Bank plc (t/a Yorkshire Bank) [2019] EWCA Civ 344, [2020] QB 284, [2019] 3 WLR 661.............................................................1.10 Church of Scientology of California v DHSS [1979] 1 WLR 723, [1979] 3 All ER 97, (1979) 123 SJ 304............................................................................6.77 Chweidan v Mischon De Reya Solicitors [2014] EWHC 2685 (QB), [2014] 7 WLUK 1133, [2014] IRLR 871............................................ 2.01, 2.04, 2.26, 2.31 Cia de Seguros Imperio v Heath (REBX) Ltd (formerly CE Heath & Co (America) Ltd) [2001] 1 WLR 112, [2000] 2 All ER (Comm) 787, [2000] CLC 1543............................................................................ 4.77, 4.78; 7.83 Citadel Management Inc v Thompson sub nom Citadel Management Inc v Equal Ltd [1999] 1 FLR 21, [1998] Fam Law 738, (1998) 95 (36) LSG 32.................................................................................................... 5.42, 5.46, 5.50 Citibase plc v Memery Crystal [2003] EWHC 2673 (Ch), (2003) 147 SJLB 1304, [2003] NPC 131.................................................................................9.43 Clarion Ltd v National Provident Institution [2000] 1 WLR 1888, [2000] 2 All ER 265.........................................................................................................15.26 Clark v Bruce Lance & Co [1988] 1 WLR 881, [1988] 1 All ER 364, (1988) 85 (2) LSG 37..........................................................................  11.04, 11.05, 11.07 Clark v Kirby-Smith [1964] Ch 506, [1964] 3 WLR 239, [1964] 2 All ER 835....9.90 Clark v Lucas Solicitors LLP [2009] EWHC 1952 (Ch), [2010] 2 All ER 955, [2009] 3 EGLR 83......................................................................... 5.44, 5.46, 5.48 Clarke v Iliffes Booth Bennett (a firm) [2004] EWHC 1731 (Ch).......................9.34 Clarke v Marlborough Fine Art (London) Ltd (No 3) [2002] 2 All ER (D) 105..........................................................................................................  2.19, 2.21 Clarke v Milford (1987) 38 DLR (4th) 139..........................................................9.47 Clarke v Securitas UK Ltd [2002] EWCA Civ 1179...........................................5.25 Clarke Boyce v Mouat [1994] 1 AC 428, [1993] 3 WLR 1021, [1993] 4 All ER 268 ....................................................................................................2.31; 4.37 Clydesdale Bank plc v Workman [2016] EWCA Civ 73, [2016] 2 WLUK 194, [2016] PNLR 18.......................................................................................4.14, 4.19 Cobbetts LLP v Hodge [2009] EWHC 786 (Ch), [2010] 1 BCLC 30, (2009) 153 (17) SJLB 29.........................................................................................4.37 Coco v AN Clarke (Engineers) Ltd [1968] FSR 415, [1969] RPC 41.............6.05, 6.18 Cohen v Kingsley Napley (a firm) [2006] EWCA Civ 66, [2006] PNLR 22, (2006) 103 (9) LSG 31.............................................................................7.46, 7.47 Cohen (Justin) v Lorrells LLP (in liquidation) [2019] EWHC 32 (QB), [2019] 1 WLUK 65..................................................................................................17.30 Collard v Paul A Saunders (t/a WGR Saunders & Son) [1971] CLY 11161, (1972) EG 795..........................................................................................9.59, 9.63

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Table of Cases Collen v Wright (1857) 8 E & B 647, 120 ER 241..........................................5.27, 5.28 Collie, ex p Adamson, Re (1878) 8 Ch D 807, [1878] 7 WLUK 22....................4.45 Collins v Brebner [2000] Lloyd’s Rep PN 587....................................................4.53 Collyer Bristow (a firm) v Robichaux [2001] All ER (D) 288............................1.12 Commercial Union Assurance Co plc v Mander [1996] 2 Lloyd’s Rep 640.......14.10 Commodities Research Unit International (Holdings) Ltd v King & Wood Mallesons LLP [2016] EWHC 727 (QB), [2016] 4 WLUK 31, [2016] PNLR 29..................................................................................................2.07, 2.27 Commodity Solution Services Ltd v First Scottish Searching Services Ltd [2019] SAC (Civ) 4, 2019 SC (SAC) 41, [2019] PNLR 13.........................1.28 Company, a (no 006798 of 1995), Re [1996] 1 WLR 491, [1996] 2 All ER 417, [1996] BCC 395...................................................................................13.45 Computastaff Ltd v Ingledew Brown Bennison & Garrett (1983) 268 EG 906, 133 NLJ 598...................................................................................  9.36, 9.40, 9.69 Comrs of Customs & Excise v Barclays Bank plc [2004] EWCA Civ 1555, [2005] 1 WLR 2082, [2005] 1 Lloyd’s Rep 165..........................................1.29 Comrs of Customs & Excise v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181, [2006] 3 WLR 1.........................................................................1.23, 1.25 Connaught Income Fund (Series 1) (in liquidation) v Hewetts Solicitors [2016] EWHC 2286 (Ch), [2016] 9 WLUK 320.........................................10.122 Connell v Odlum [1993] 2 NZLR 257...................................................  1.21, 1.24; 9.20 Connell’s Survey & Valuation Ltd v MPG Investments LLP [2012] EWHC 4071 (Ch), [2012] 11 WLUK 758................................................................9.60 Connolly v Martin-Davis [1999] Lloyd’s Rep PN 790, [1999] PNLR 826, (1999) 96 (23) LSG 35.............................................................................1.25; 9.29 Connor & Labrum v Regoczi-Ritzman (1995) 70 P & CR D 41.................... 3.45; 9.59, 9.67, 9.71 Constantinides v Law Society [2006] EWHC 725 (Admin), (2006) 156 NLJ 680...............................................................................................................16.42 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541...............................................................................................................5.05 Conway v Ratiu see Ratiu v Conway [2005] EWCA Civ 1302, [2006] 1 All ER 571, [2006] 1 EGLR 125 Cook v S [1967] 1 WLR 635...............................................................................3.45 Cook, Re [1999] BPIR 881..................................................................................14.15 Cook v Deeks [1916] 1 AC 554, [1916] 2 WLUK 61.........................................4.30 Cooperative Retail Services Ltd v Taylor Young Partnership Ltd [2002] UKHL 17, [2002] 1 WLR 1419, [2002] 1 All ER (Comm) 918..... 8.19, 8.21, 8.27 Coporacion Nacional de Cobre de Chile v Sogemin Metals Ltd [1997] 1 WLR 1396, [1997] 2 All ER 917, [1997] CLC 435..............................................4.58 Corbett v Bond Pearce (a firm) [2001] EWCA Civ 531, [2001] 3 All ER 769, [2001] PNLR 31...........................................................................................11.10 Corbett v Bond Pearce (a firm) [2006] EWHC 909 (Ch), [2006] WTLR 967....11.23 Corfield v DS Bosher & Co [1992] 1 EGLR 163, [1992] 04 EG 127.........12.74, 12.75 Cosmetic Warriors Ltd v Amazon.co.uk Ltd [2014] EWHC 1316 (Ch), [2014] 5 WLUK 59, [2014] IP & T 519..................................................................6.77 Costa v Georghiou (1983) 1 PN 201....................................................................9.47 Cotterell v Leeds Day (unreported, 21 December 1999).....................................7.48 Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591, [2000] PNLR 557, [2000] EG 48 (CS).............................................  2.15; 9.35, 9.36, 9.73

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Table of Cases Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707, [1999] 2 All ER 457, [1999] EMLR 434........................................................................................4.77 County Ltd v Girozentrale Securities [1996] 3 All ER 834, [1996] 1 BCLC 653...............................................................................................................3.43 County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916, [1987] 1 All ER 289, [1986] 2 EGLR 246..........2.26, 2.30; 3.87; 9.42, 9.44, 9.59, 9.66, 9.68, 9.71 Courtwood Holdings SA v Woodley Properties Ltd [2018] EWHC 2163 (Ch), [2018] 10 WLUK 168..................................................................................4.22 Cowan v Foreman [2019] EWCA Civ 1336, [2020] Fam 129, [2020] 2 WLR 61, [2019] 7 WLUK 491, [2019] WTLR 707, 22 ITELR 280.....................11.26 Cox v Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437, [1995] 5 WLUK 197, [1995] CLC 671......................................................................17.39 Credit & Mercantile plc v Nabarro (a firm) [2014] EWHC 2819 (Ch), [2014] 7 WLUK 261, [2015] PNLR 14...................................................................10.156 Credit Lyonnais v Russell Jones & Walker [2002] EWHC 1310 (Ch), [2003] Lloyd’s Rep PN 7, [2003] PNLR 2.......................................  2.32; 6.36; 9.34, 9.94 Credit Lyonnais Nederland NV (now Generale Bank Nederland NV) v Export Credits Guarantee Dept [2000] 1 AC 486, [1999] 2 WLR 540, [1999] 1 All ER 929...................................................................................................5.18 Creech v Mayorcas (1966) 198 EG 1091........................................................9.50, 9.69 Crema v Cenkos Securities plc [2010] EWCA Civ 1444, [2011] 1 WLR 2066, [2011] 2 All ER (Comm) 676......................................................................2.21 Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553, [1972] 2 WLR 91, [1971] 3 All ER 1192....................................................14.10 Crest Homes plc v Marks [1987] AC 829, [1987] 3 WLR 293, [1987] 2 All ER 1074.......................................................................................................6.76 Crocker v British Coal Corpn (1995) 29 BMLR 159..........................................7.54 Crossley v Crowther (1851) 9 Hare 384, 68 ER 556.......................................2.27, 2.28 Crouch & Lyndon (a firm) v IPG Finance Australia Pty Ltd [2013] QCA 220, [2013] 8 WLUK 114, [2014] PNLR 3.....................................................5.08, 5.10 Cultural Foundation (t/a American School of Dubai) v Beazley Furlongue Ltd [2018] EWHC 1083 (Comm), [2018] Bus LR 2174, [2018] 5 WLUK 122......................................................................................................  17.09, 17.39 Cumbria Waste Management Ltd v Baines Wilson (a firm) [2008] EWHC 786 (QB), [2008] BLR 330.................................................................................14.39 Cygnet Health Care v Elletson & Co (unreported, 18 May 1999).......... 9.39, 9.59, 9.67 D D Morgan plc v Mace & Jones (a firm) [2010] EWHC 3375 (TCC)............. 2.01, 2.10, 2.23; 9.39 D Walter & Co Ltd v Neville Eckley & Co [1997] BCC 331..............................13.58 DB UK Bank Ltd v Edmunds & Co [2013] 11 WLUK 582, [2014] PNLR 12...4.04, 4.68, 4.69 DNB Mortgages Ltd v Bullock & Lees [2000] Lloyd’s Rep PN 290, [2000] PNLR 427, [2000] 1 EGLR 92....................................................................7.43 DSL Group Ltd v Unisys International Services Ltd (1994) 67 BLR 117..........14.39 DW Moore & Co Ltd v Ferrier [1988] 1 WLR 267, [1988] 1 All ER 400, (1988) 132 SJ 227.................................................................  7.02, 7.15, 7.23, 7.24 Dace v Redland Aggregates Ltd [1997] EG 123 (CS).........................................13.65

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Table of Cases Daly v Hubner (wasted costs) [2002] Lloyd’s Rep PN 461.........................13.26, 13.68 Daniel v Tee [2016] EWHC 1538 (Ch), [2016] 4 WLR 115, [2016] 7 WLUK 24...4.61 Daniels v Thompson [2004] EWCA Civ 307, [2004] PNLR 33, [2004] WTLR 511 ............................................................................................. 7.48; 11.06, 11.18 Daniels Corpn International Pty Ltd v Australian Competition & Consumer Commission [2002] HCA 49, (2002) 213 CLR 543....................................14.11 Darbishire v Warran [1963] 1 WLR 1067, [1963] 3 All ER 310, [1963] 2 Lloyd’s Rep 187...........................................................................................3.65 Darlington Building Society v O’Rourke James Scourfield & McCarthy [1999] Lloyd’s Rep PN 33, [1999] PNLR 365............................................10.113 David Lee & Co (Lincoln) Ltd v Coward Chance (a firm) [1991] Ch 259, [1990] 3 WLR 1278, [1991] 1 All ER 668..................................................6.57 David Truex (a firm) v Kitchin [2007] EWCA Civ 618, [2007] 4 Costs LR 587, [2007] PNLR 33.............................................................................2.24; 12.23 David Wylde & Co v Dadourian [2011] EWHC 1517 (QB)...............................1.12 Davies v AIB Group (UK) plc [2012] EWHC 2178 (Ch)...............................9.14, 9.17 Davies v Clough (1837) 8 Sim 262, 59 ER 105..................................................6.01 Davies v Davies [1999] 1 FLR 39.......................................................................6.62 Davies v Ford [2020] EWHC 686 (Ch)...............................................................4.79 Davy-Chiesman v Davy-Chiesman [1984] Fam 48, [1984] 2 WLR 291, [1984] 1 All ER 321..............................................................................  2.10; 13.64 Dawson-Damer v Taylor Wessing LLP [2019] EWHC 1258 (Ch), [2019] 1 WLR 6443, [2019] 5 WLUK 392................................................................14.10 Dawson, Re [1966] 2 SWLR 211........................................................... 4.47, 4.60, 4.63 Day v High Performance Sports Ltd [2003] EWHC 197 (QB)...........................2.22 Day v Mead [1987] 2 NZLR 443.........................................................................4.58 Dayman v Lawrence Graham [2008] EWHC 2036 (Ch), (2008) 105 (35) LSG 23.............................................................................................................2.29; 9.19 Dean v Allin & Watts [2001] EWCA Civ 758, [2001] 2 Lloyd’s Rep 249, [2001] 1 Lloyd’s Rep PN 605......................................1.09, 1.10, 1.21, 1.22, 1.23, 1.24, 1.28; 9.32 De Beer v Kanaar & Co (No 2) [2002] EWHC 688 (Ch)................................4.58; 8.14 Deeny v Gooda Walker Ltd (No 3) [1995] 1 WLR 1206, [1995] 4 All ER 289, [1996] LRLR 176.........................................................................................3.90 Delta Vale Properties Ltd v Mills [1990] 1 WLR 445, [1990] 2 All ER 176, [1989] 12 WLUK 94....................................................................................17.10 Demerara Bauxite Co Ltd v Hubbard [1923] AC 673.........................................4.31 Dempsey v Johnstone [2003] EWCA Civ 1134, [2004] 1 Costs LR 41, [2004] PNLR 2.................................................................................... 13.26, 13.37, 13.49 Dennard v Pricewaterhouse Coopers LLP [2010] EWHC 812 (Ch)...................1.06 Denning v Greenhalgh Financial Services Ltd [2017] EWHC 143 (QB), [2017] 2 WLUK 87, [2017] PNLR 19.........................................................2.32 Denso Manufacturing UK Ltd v Great Lakes Reinsurance (UK) plc [2017] EWHC 391 (Comm), [2018] 4 WLR 93, [2017] 3 WLUK 97....................17.39 Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534.............. 9.39, 9.59, 9.67, 9.73 Dent (JJ) v National Farmers’ Union (unreported, 17 June 1999).......................12.20 Deputy Chief Legal Ombudsman v Young [2011] EWHC 2923 (Admin), [2012] 1 WLR 3227, [2011] 11 WLUK 351................................................15.36 Derby v Weldon (No 2) (unreported, 19 October 1988)......................................6.77 Derry v Peek (1889) 14 App Cas 337, (1889) 5 TLR 625...................................10.193

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Table of Cases De Sena v Notaro [2020] EWHC 1031 (Ch), [2020] 4 WLUK 399....................2.18 Destine Estates Ltd v Muir [2014] EWHC 4191 (Ch), [2014] 12 WLUK 371...9.11 Devine v Jeffreys (a firm) [2001] Lloyd’s Rep PN 301, [2001] PNLR 16..........3.77 Devon Commercial Property Ltd v Barnett [2019] EWHC 700 (Ch), [2019] 3 WLUK 461...................................................................................................2.18 Dhillon v Siddiqui [2008] EWHC 2020 (Ch)......................................................1.15 Diamantides v JP Morgan Chase Bank [2005] EWCA Civ 1612....................4.27; 6.10 Diamond v Campbell-Jones [1961] Ch 22, [1960] 2 WLR 568, [1960] 1 All ER 583.........................................................................................................3.64 Dickinson v Jones Alexander & Co [1993] 2 FLR 521, [1990] Fam Law 137, (1989) 139 NLJ 1525..................................................... 12.25, 12.27, 12.60, 12.72 Dickinson v Rushmer [2002] 1 Costs LR 128.....................................................14.24 Digicel (St Lucia) Ltd v Cable & Wireless plc [2009] EWHC 1437 (Ch), [2009] 6 WLUK 466....................................................................................14.35 Dingles Building (NI) Ltd v Brooks [2003] PNLR 8..........................................8.28 Director of the Serious Fraud Office v Eurasian Natural Resources Corpn Ltd [2018] EWCA Civ 2006, [2019] 1 WLR 791..........................  14.20, 14.23, 14.24 Discovery Land Co LLC v Jirehouse [2019] EWHC 2249 (Ch), [2019] 8 WLUK 85, [2020] PNLR 1............................................................  5.45, 5.46, 5.50 Dixon v Clement Jones [2004] EWCA Civ 1005, [2005] PNLR 6, (2004) 148 SJLB 878................. 12.36, 12.36, 12.37, 12.41, 12.42, 12.48, 12.50, 12.59, 12.77 Dobbie v Medway Health Authority [1994] 1 WLR 1234, [1994] 4 All ER 450, [1994] PIQR P353................................................................................7.57 Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 WLR 433, [1980] 1 All ER 928, 13 BLR 45.............................................................9.58, 9.59 Dogma Properties Ltd v Gale (1984) 136 NLJ 453.........................................9.53, 9.56 Dolling-Baker v Merrett [1990] 1 WLR 1205, [1991] 2 All ER 890, (1990) 134 SJ 806....................................................................................................6.78 Domb v Isoz [1980] Ch 548, [1980] 2 WLR 565, [1980] 1 All ER 942.............5.23 Donmez v Barnes [1996] EG 129 (CS)..........................................................  2.26; 9.93 Donsland Ltd v Van Hoogstraten [2002] EWCA Civ 253, [2002] PNLR 26, [2002] WTLR 497...................................................................................  1.11; 5.34 Doran v Delaney [1998] 2 IR 61......................................................................9.26, 9.29 D’Orta-Ekenaie v Victoria Legal Aid [2005] 214 ALR 92..................................12.02 Dowling v Bennett Griffin [2014] EWCA Civ 1545, [2014] 10 WLUK 391, [2015] Lloyd’s Rep IR 522..........................................................................12.22 Downs v Chappell [1997] 1 WLR 426, [1996] 3 All ER 344, [1996] CLC 1492 .................................................................................  3.06; 8.45, 8.46; 10.122 Downsview Nominees Ltd v First City Corpn Ltd [1993] AC 295, [1993] 2 WLR 86, [1993] 3 All ER 626.....................................................................1.16 Drums & Packaging Ltd v Freeman (unreported, 6 August 1999)......................13.25 Dubai Aluminium Co Ltd v Al-Alawi [1999] 1 WLR 1964, [1999] 1 All ER 703, [1999] 1 All ER (Comm) 1..................................................................14.30 Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366, [2002] 3 WLR 1913...................................4.02, 4.12; 5.08, 5.10, 5.11, 5.16, 5.17, 5.18, 5.19, 5.20, 5.21; 8.32, 8.46 Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172.......... 2.01, 2.07, 2.08, 2.23 Duchess of Kingston’s Case (1776) 20 State TR 355..........................................6.03 Dudarec v Andrews [2006] EWCA Civ 256, [2006] 1 WLR 3002, [2006] 2 All ER 856 ..................................................................................................12.65

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Table of Cases Dudding v Royal Bank of Scotland plc [2017] EWHC 2207 (Ch), [2017] 7 WLUK 524...................................................................................................2.19 Duncan v Cuelenaere, Beaubier, Walters, Kendall & Fisher [1987] 2 WWR 379...............................................................................................................2.25 Dunhill v Brooke & Co (a firm) [2018] EWCA Civ 505, [2018] 3 WLUK 357....2.04, 2.10, 2.22, 2.24 Dunkirk Colliery Co v Lever (1878) 9 Ch D 20..................................................3.65 Dunn v Eairs Blissard, Basrnes & Stowe (1961) 105 SJ 932..............................11.17 Dunn v Hallen (1861) 2 F & F 642, 175 ER 1222...............................................12.32 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (costs) [2004] UKPC 39, [2004] 1 WLR 2807, [2005] 4 All ER 195..................................................13.84 Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch).................................4.65 Dyson Technology Ltd v Strutt [2007] EWHC 1756 (Ch), [2007] 7 WLUK 704, [2007] 4 Costs LR 597.........................................................................17.28 E E Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4 WLR 44, [2016] 4 All ER 229.............................  6.38; 9.21, 9.23; 10.26, 10.42, 10.92, 10.93, 10.94, 10.95, 10.96, 10.107, 10.110, 10.116, 10.117, 10.122, 10.181; 14.08 Earl v Hickson [2000] SKCA 1, (2000) 183 DLR (4th) 45, [2001] WTLR 143 (Saskatchewan CA).................................................................. 11.13, 11.14, 11.20 Earl of Cholmondeley v Lord Clinton (1815) 19 Ves 261...................................6.01 Earl of Malmesbury v Strutt & Parker see Carleton (Earl of Malmesbury) v Strutt & Parker (a partnership) [2008] EWHC 424 (QB) East Asia Co Ltd v PT Satria Tirtatama Energindo (Bermuda) [2019] UKPC 30, [2020] 2 All ER 294, [2019] 6 WLUK 436.......................................5.24; 9.07 Ebhogiaye v Solicitors Regulation Authority [2013] EWHC 2445 (Admin), [2013] 7 WLUK 696, [2014] ACD 13.........................................................16.86 Eccles v Bryant [1948] Ch 93, [1947] 2 All ER 865, [1948] LJR 418................5.23 Ecclesiastical Insurance Office plc v Whitehouse-Grant-Christa [2017] CSIH 33, [2017] SLT 697, [2017] 5 WLUK 615...................................................6.69 Eckersley v Binnie [1988] 18 CLR 1.....................................................  2.01, 2.09, 2.22 Edehomo v Bowling & Co [2011] EWHC 393 (Ch), [2011] 1 WLR 2217, [2011] PNLR 18.......................................................................................7.35; 9.08 Edward Wong Finance Ltd v Johnson, Stokes & Master [1984] AC 296, [1984] 2 WLR 1, (1983) 80 LSG 3163...................... 2.16, 2.17; 9.53, 9.54; 15.23 Edwards v Ashik [2014] EWHC 2454 (Ch), [2014] 7 WLUK 923.....................9.38 Edwards v Hugh James Ford Simey Solicitors [2019] UKSC 54, [2019] 1 WLR 6549, [2020] 1 AlL E R749....................... 12.27, 12.33, 12.35, 12.41, 12.67 Eikon, The see Internaut Shipping GmbH v Fercometal Sarl (The Eikon) El Ajou v Dollar Land Holdings plc (No 1) [1994] 2 All ER 685, [1993] 12 WLUK 13, [1994] 1 BCLC 464..............................................................4.14, 4.21 El Ajou v Dollar Land Holdings plc (No 2) [1995] 2 All ER 213, (1995) 69 P & CR D25....................................................................................................4.63 Elcano Acceptance Ltd v Richmond, Richmond, Stambler & Mills (1989) 68 OR (2d) 165.................................................................................................2.07 Elguzouli-Daf v Comr of Police of the Metropolis [1995] QB 335, [1995] 2 WLR 173, [1995] 1 All ER 833...................................................................1.25 Elland Developments Ltd v Smith [1995] EGCS 141.........................................9.52

liv

Table of Cases Ellis v Goulton [1893] 1 QB 350, [1893] 1 WLUK 96.......................................4.06 Ellis v Property Leeds (UK) Ltd [2002] EWCA Civ 32, [2002] 2 BCLC 175....1.15 Embassy Art Products Ltd, Re (1987) 3 BCC 292, [1988] BCLC 1, [1987] PCC 389.......................................................................................................13.58 Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2017] UKSC 34, [2017] 1 WLR 1373, [2017] 4 All ER 1.....................................3.70 English & American Insurance Co Ltd v Herbert Smith & Co [1988] FSR 232, (1987 137 NLJ 148..............................................................................6.73 Ensor v Archer [2004] EWHC 1541 (QB), [2005] PNLR 5................................12.20 Equitas Ltd v Horace Holman & Co Ltd [2007] EWHC 903 (Comm), [2007] Lloyd’s Rep IR 567.............................................................................  14.03, 14.07 Erlanger v New Sombrero Phosphate Co (1878) LR 3 App Cas 1218................6.31 Esterhuien v Allied Dunbar Assurance plc [1998] 2 FLR 668, [1998] Fam Law 527................................................................................................  2.15; 11.12 Estill v Cowling Swift & Kitchen [2000] Lloyd’s Rep PN 378, [2000] WTLR 417 ................................................................. 2.06, 2.07, 2.10; 3.46; 11.30, 11.34 Etridge v Pricthard Englefield [1999] Lloyd’s Rep PN 702, [1999] PNLR 839....9.19 Eurasian Natural Resources Corpn Ltd v Dechert LLP [2016] EWCA Civ 375, [2016] 1 WLR 5027, [2017] 3 All ER 1084...........  6.47; 14.13, 14.14, 14.35 Euro Pools plc (in administration) v Royal Sun Alliance Insurance plc [2019] EWCA Civ 808, [2019] 5 WLUK 143, [2019] Lloyd’s Rep IR 595.......... 17.04, 17.08, 17.09, 17.11, 17.12 Evans v Pricewaterhousecoopers LLP [2019] EWHC 1505 (Ch), [2019] 6 WLUK 348, [2019] PNLR 28......................................................................7.17 Excel Securities plc v Masood [2010] Lloyd’s Rep PN 165...............................5.32 Extrasure Travel Insurances Ltd v Scattergood [2003] 1 BCLC 598..................4.59 Ezekiel v Lehrer [2002] EWCA Civ 16, [2002] Lloyd’s Rep PN 260............7.10, 7.80 F F v M; C (a child), Re [2015] EWHC 3239 (Fam), [2015[ 11 WLUK 161, [2016] PNLR 13...........................................................................................13.41 F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch), [2012] Ch 613, [2012] 3 WLR 10.............................5.13, 5.14 FB v Rana [2017] EWCA Civ 334, [2017] 5 WLUK 303, [2017] PIQR P17.....2.01 FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250, [2014] 3 WLR 535.............................................................4.82 FHR European Ventures LLP v Mankarious [2011] EWHC 2308 (Ch), [2012] 2 BCLC 39............................................................................. 4.12, 4.27, 4.30, 4.33 FM Capital Partners Ltd v Marino [2017] EWHC 3700 (Comm), [2017] 12 WLUK 439...................................................................................... 4.14, 4.62, 4.65 FM Capital Partners Ltd v Marino [2018] EWHC 1768 (Comm), [2018] 7 WLUK 219...................................................................................................14.14 FSCS v Larnell (Insurances) Ltd (in liquidation) [2005] EWCA Civ 1408, [2006] QB 808, [2006] 2 WLR 751.............................................................7.51 Fairbrother v Gabb & Co [2002] EWCA Civ 803, [2002] 23 EG 119 (CS).......9.89 Fairchild v Glenhaven Funeral Services Ltd (t/a GH Dovener & Son) [2002] UKHL 22, [2003] 1 AC 32, [2002] 3 WLR 89............................................3.04 Fairstar Heavy Transport NV v Adkins [2013] EWCA Civ 886, [2013] 7 WLUK 659, [2013] 2 CLC 272...................................................................14.03 Faragher v Gerber [193] EG 122 (CS)..................................9.38, 9.39, 9.59, 9.63, 9.74

lv

Table of Cases Farm Assist Ltd v Secretary of State for Environment, Food & Rural Affairs [2008] EWHC 3079 (TCC), [2009] BLR 80, , [2009] PNLR 16........ 14.34, 14.35 Farley v Skinner (No 2) [2001] UKHL 49, [2002] 2 AC 732, [2001] 3 WLR 899 ............................................................................................. 9.74; 12.83, 12.84 Farnon v Devonshires Solicitors [2011] EWHC 3167 (QB)................... 2.28, 2.31, 2.32 Farrer v Copley Singletons [1998] PNLR 22, (1998) 76 P & CR 169, [1997] NPC 113.......................................................................................................9.06 Fashion Brokers v Clarke Hayes [2000] Lloyd’s Rep PN 398, [2000] PNLR 473...............................................................................................................9.39 Feakins v Burstow [2005] EWHC 1931 (QB), [2006] PNLR 6 ....... 8.17; 12.09, 12.26, 12.47, 12.57 Feltham v Freer Bouskell [2013] EWHC 1952 (Ch), [2013] 7 WLUK 451, 152 Con LR 124....................................................................................  3.18; 11.22 Fennon v Anthony Hodari & Co [2001] Lloyd’s Rep PN 183.............................7.65 Field, Re; Field v Firmenich & Co [1971] 1 WLR 555, [1971] 1 All ER 1104, [1970] 11 WLUK 115..................................................................................11.19 Filmlab Systems International Ltd v Pennington [1995] 1 WLR 673, [994] 4 All ER 673, (1993) 143 NLJ 1405...............................................................13.29 Finance for Mortgages Ltd v Farley & Co [1998] PNLR 145, [1996] EG 35 (CS), [1996] NPC 19....................................................................................7.70 Financial Reporting Council Ltd v Sports Direct International plc [2018] EWHC 2284 (Ch), [2019] 2 All ER 974......................................................14.24 Financial Reporting Council Ltd v Sports Direct International plc [2018] EWHC 2284 (Ch), [2019] 2 All ER 974, [2018] 9 WLUK 87............ 14.13, 14.24 Finecard International Ltd v Urquart Dyke Lord [2005] EWHC 2481 (Ch), [2006] FSR 27, [2006] PNLR 16.................................................................3.43 Finers v Miro [1991] 1 WLR 35, [1991] 1 All ER 182, (1990) 140 NLJ 1387.............................................................................................................6.46 Finley v Connell Associates [2002] Lloyd’s Rep PN 62.....................................3.25 Fiona Trust & Holding Corpn v Privalov (No 2) [2016] EWHC 2163 (Comm), [2017] 2 All ER 570.....................................................................................9.86 Firma C-Trade SA v Newcastle Protection & Indemnity Association (The Fanti) [1991] 2 AC 1, [1990] 3 WLR 78, [1990] 2 All ER 705...................17.39 First City Insurance Group Ltd v Orchard [2002] Lloyd’s Rep PN 543, [2003] PNLR 9,(2002) 146 SJLB 213.................................................................2.10, 2.24 First City Insurance Group Ltd v Orchard & Gee (Costs) [2002] EWHC 1433 (QB), [2002] Lloyd’s Rep PN 534...............................................................12.26 First City Monument Bank plc v Zumax Nigeria Ltd [2019] EWCA Civ 294, [2019] 3 WLUK 13, [2019] WTLR 511..................................................4.08, 4.10 First National Bank plc v Achampong [2003] EWCA Civ 487, [2004] 1 FCR 18, (2003) 147 SJLB 419.............................................................................9.22 First National Commercial Bank plc v Loxleys [1997] PNLR 211, [1996] EG 174 (CS), (1996) 93(43) LSG 26.................................................... 1.22, 1.30; 9.26 First National Trustco (UK) Ltd v Page [2019] EWHC 1187 (Ch), [2019] 5 WLUK 343...................................................................................................4.22 First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25, [2017] 3 WLR 896.............................................................  4.11, 4.12, 4.73, 4.78, 4.79, 4.82 First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396, [2019] 1 WLR 637, [2018] 6 WLUK 334......................9.27

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Table of Cases Fisher Meredith LLP v JH [2012] EWHC 408 (Fam), [2012] 3 WLUK 110, [2012] PNLR 22...........................................................................................13.56 Fitzgerald v Lane [1989] AC 328, [1988] 3 WLR 356, [1988] 2 All ER 961.....8.31, 8.40 Fladgate LLP v Harrison [2012] EWHC 67 (QB), [2012] 3 Costs LR 483........1.01, 1.08; 2.28 Flatman v Germany [2011] EWHC 2945 (QB), [2012] 2 Costs LR 271............13.87 Fletamentos Maritimos SA v Effjohn International BV (wasted costs) [2003] Lloyd’s Rep PN 26........................ 13.18, 13.44, 13.46, 13.47, 13.59, 13.66, 13.74 Flynn v King (p/a JF Williams & Co) [2017] IEHC 735, [2017] 12 WLUK 105, [2018] PNLR 15...................................................................................2.21 Fogg v Gaulter & Blane (1960) 110 LJ 718........................................................6.09 Fong Maun Yee v Yoong Weng Ho Robert [1997] LRC 138 (Singapore CA)....2.16 Fontaine v Home Office (unreported, 2 March 1999)..........................................13.40 Forbouys v Gadhavi [1993] NPC 122..................................................................9.44 Ford v Financial Services Authority see R (on the application of Ford) v Financial Services Authority Ford v White & Co [1964] 1 WLR 885, [1964] 2 All ER 755, (1964) 108 SJ 542 ................................................................................................  9.41, 9.59, 9.63 Foreman v O’Driscoll & Partners [2000] Lloyd’s Rep PN 720...........................9.39 Foss v Harbottle (1843) 2 Hare 461, 67 ER 189, [1843] 3 WLUK 93................1.14 Football League Ltd v Edge Ellison (a firm)[2006] EWHC 1462 (Ch), [2007] PLR 2, (2002) SJLB 890.............................2.01, 2.21, 2.31; 3.24; 8.17, 8.18; 9.83 Forsikringsaktieselskapet Vesta v Butcher [1986] 2 All ER 488, [1986] 2 Lloyd’s Rep 179............................................................................. 8.05, 8.06, 8.13 Forster v Outred & Co [1982] 1 WLR 86, [1982] 2 All ER 742, (1981) 125 SJ 309 ................................................................................................ 7.18, 7.29, 7.48 Foster v Alfred Truman [2003] EWHC 95 (QB).................................................2.10 Foxley v United Kingdom (Application 33274/96) [2000] 6 WLUK 523, (2001) 31 EHRR 25, 8 BHRC 571..............................................................6.01 Franchi v Franchi [1967] RPC 149......................................................................6.23 Francis v Knapper [2016] EWHC 3093 (QB), [2016] 12 WLUK 25..................9.26 Frank Houlgate Investment Co Ltd v Biggart Baillie LLP [2011] CSOH 160, 2012 SLT 256, [2012] PNLR 2...................................................... 1.21, 1.22; 5.32 Franks v Sinclair [2006] EWHC 3365 (Ch), [2007] WTLR 439.........................11.13 Fraser v Bolt Burdon [2009] EWHC 2906 (QB).............................................2.01, 2.22 Frederick v Positive Solutions (Financial Services) Ltd [2018] EWCA Civ 431, [2018] 3 WLUK 275............................................................................5.19 Freeman v HM Comrs & Excise [2005] EWHC 582 (Ch), [2005] STC 610, [2005] BCC 506.......................................................................................4.10, 4.25 Freeman v Marshall & Co (1966) 200 EG 777....................................................2.04 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, [1964] 2 WLR 618, [1964] 1 All ER 630............................... 5.01, 5.02, 5.24 French v Carter Lemon Camerons LLP [2011] EWHC 3252 (QB)....................1.11 Freudiana Holdings Ltd, Re (The Times, 4 December 1995).....................  13.20, 13.40 Friends Provident Life & Pensions Ltd v Sirius International Insurance Corpn [2005] EWCA Civ 601, [2005] 2 All ER (Comm) 145, [2005] 2 Lloyd’s Rep 517........................................................................................................17.10 Friends Provident Life Office v Hillier Parker May & Rowden [1997] QB 85, [1996] 2 WLR 123, [1995] 4 All ER 260....................................................8.30

lvii

Table of Cases Frost v Wake, Smith & Tofields Solicitors [2013] EWCA Civ 772, [2013] 6 WLUK 530, (2013) 157 (25) SJLB 31........................................................12.31 Fryatt v Preston Mellor Harrison [2015] EWHC 1683 (Ch), [2015] 6 WLUK 399...........................................................................................................2.26; 9.95 Fryer v Royal Institute of Chartered Surveyors [2000] Lloyd’s Rep PN 534......13.23, 13.68 Fuglers LLP v Solicitors Regulation Authority [2014] EWHC 179 (Admin), [2014] 2 WLUK 89, [2014] BPIR 610...............................................  16.80, 16.81 Fulham Leisure Holdings Ltd v Nicholson Graham & Jones (a firm) [2006] EWHC 2017 (Ch), [2006] 4 All ER 1397 (Note), [2007] PNLR 5.....14.37, 14.38 Fulton Shipping Inc of Panama v Globalia Business Travel SAU (formerly Travelplan SAU) of Spain (The New Flamenco) [2017] UKSC 43, [2017] 1 WLR 2581, [2018] 1 All ER 45.............................. 3.73, 3.74, 3.77, 3.79 Funnell v Adams & Remer (a partnership) [2007] EWHC 2166 (QB), [2008] BLR 206, 119 Con LR 193......................................................................9.44, 9.68 G G & K Ladenbau (UK) Ltd v Crawley & De Reya [1978] 1 WLR 266, [1978] 1 All ER 682.................................................................  2.14; 3.64; 9.38, 9.39, 9.71 G (a child) v Kingsmill (No 2) [2001] EWCA Civ 934.........12.27, 12.53, 12.60, 12.70 G (children) (care proceedings: wasted costs), Re [2000] Fam 104, [2000] 2 WLR 1007, [1999] 4 All ER 371......................................................... 13.31, 13.59 GE Capital Commercial Finance Ltd v Sutton [2004] EWCA Civ 315, [2004] BCLC 662, (2004) 101 (14) LSG 25...........................................................14.15 GP & P Ltd v Bulcraig & Davies [1986] 2 EGLR 148, (1986) 280 EG 356 .....9.38, 9.39, 9.59, 9.68 GSD Law Ltd v Craig Wardman of St Gobain Building Distribution [2017] EWCA Civ 2144, [2018] 1 WLR 4205, [2017] 12 WLUK 413..................13.92 Gabriel v Little [2012] EWHC 1193 (Ch)...........................................................10.142 Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360, [1995] 1 All ER 16, [1994] BCC 319.................................................................................3.45; 9.88 Gamlen Chemical Co (UK) Ltd v Rochem Ltd (No 1) [1980] 1 WLR 614, [1980[ 1 All ER 1049, [1983] RPC 1...........................................................14.26 Gandesha v Nandra [2002] Lloyd’s Rep PN 558................... 13.49, 13.53, 13.68, 13.74 Garbutt v Edwards [2005] EWCA Civ 1206, [2006] 1 WLR 2907, [2006] 1 All ER 553...................................................................................  1.01; 2.12; 15.30 Gard Marine & Energy Ltd v China National Chartering Co Ltd [2017] UKSC 35, [2017] 1 WLR 1793, [2018] 1 All ER 832.................................8.21 Gardner v Marsh & Parsons [1997] 1 WLR 489, [1997] 3 All ER 871, [1997] PNLR 362................................................................................................3.75, 3.76 Gardner v Parker [2004] EWCA Civ 781, [2005] BCC 46, [2004] 1 BCLC 417.....................................................................................1.14, 1.15, 1.16; 10.190 Garrett v Wilson Davies & Co (unreported, 2 October 1998).............................12.86 Gartside v Outram (1856) 26 LJ Ch (NS) 113.....................................................6.46 Gartside v Sheffield, Young & Ellis [1983] NZLR 37................................  11.11, 11.20 Gascoine v Ian Sheridan & Co [1945] 5 Med LR 437........................................12.73 Gaud v Leeds Health Authority (1999) 49 BMLR 105.......................................7.08 Gavaghan v Edwards [1961] 2 QB 220, [1961] 2 WLR 948, [1961] 2 All ER 477...............................................................................................................5.24

lviii

Table of Cases Geddes (D) (Contractors) Ltd v Neil Johnson Health & Safety Services Ltd [2017] CSOH 42, [2017] 3 WLUK 343, [2017] PNLR 21..........................17.17 General Mediterranean Holdings SA v Patel [2000] 1 WLR 272, [1999] 3 All ER 673, [1999] CPLR 425............................................................6.01, 6.49; 13.24 Generics (UK) Ltd v Yeda Research & Development Co Ltd [2012] EWCA Civ 726, [2012] CP Rep 39......................................................................6.61, 6.65 Geoffrey Silver & Drake v Baines (t/a Wetherfield Baines & Baines) [1971] 1 QB 396, [1971] 2 WLR 187, [1971] 1 All ER 473......................... 5.43, 5.45, 5.50 Georgian American Alloys Inc v White & Case [2014] EWHC 94 (Comm), [2014] 1 WLUK 805, [2014] 1 CLC 86................................. 6.57, 6.60, 6.62, 6.65 Gerber Garment Technology Inc v Lectra Systems Ltd [1996] 12 WLUK 396, [1997] RPC 443, [1998] Masons CLR Rep 135..........................................1.14 Gerevan Trading Co Ltd v Skjevesland (No 2) [2002] EWCA Civ 1567, [2003] 1 WLR 912, [2003] 1 All ER 1........................................................15.25 Gerrard v Read Hind Stewart (a firm) (unreported, 29 November 2000)............9.39 Geveran Trading Co v Skjevesland [2003] EWCA Civ 1567, [2003]1 WLR 912...............................................................................................................6.58 Gibbon v Pease [1905] 1 KB 810........................................................................14.02 Gibbons v Nelsons (a firm) [2000] Lloyd’s Rep PN 603, [2000] PNLR 734, [2000] WTLR 453......................................................... 11.07, 11.13, 11.14, 11.20 Giles v Royal National Institute for the Blind [2014] EWHC 1373 (Ch), [2014] STC 1631, [2014] 5 WLUK 92........................................................11.25 Giles v Rhind [2002] EWCA Civ 1428, [2003] Ch 618, [2003] 2 WLR 237.....1.15, 1.16 Giles v Rhind (No 2) [2008] EWCA Civ 118, [2009] Ch 191, [2008] 3 WLR 1233.............................................................................................................7.81 Giles v Thompson [1994] 1 AC 142, [1993] 2 WLR 908, [1993] 3 All ER 321...13.81 Gill v Heer Manak [2018] EWHC 2881 (QB), [2018] 10 WLUK 473, [2019] PNLR 10......................................................................................................1.12 Gladman Commercial Properties v Fisher Hargreaves & Proctor [2013] EWCA Civ 1466, [2013] 11 WLUK 347, [2014] PNLR 11........................8.34 Glaister v Greenwood [2001] Lloyd’s Rep PN 412, [2001] PNLR 25............7.54, 7.60 Glencairn IP Holdings Ltd v Product Specialities Inc (t/a Final Touch) [2020] EWCA Civ 609; [2019] EWHC 1733 (IPEC), [2019] 7 WLUK 60, [2019] PNLR 31.......................................................................................6.02, 6.75 Glenn v Watson [2016] EWHC 3259 (Ch), [2017] 4 WLR 48, [2016] 12 WLUK 422 ..................................................................................  4.14, 4.64; 14.34 Global Marine Drillships Ltd v Landmark Solicitors LLP [2011] EWHC 2685 (Ch)..........................................................................................................4.10; 5.44 Globe Equities Ltd v Globe Legal Services Ltd [2000] CPLR 233, [1999] BLR 232.......................................................................................................13.82 Goddard v Nationwide Building Society [1987] QB 670, [1986] 3 WLR 834, [1986] 3 All ER 264.................................................................................6.02, 6.71 Goddard (Theodore) v Fletcher King Services Ltd [1997] 2 WGLR 131, [1997] 32 EG 90.......................................................................................9.44, 9.83 Godefroy v Jay (1831) 7 Bing 413, 131 ER 159.................................................12.20 Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd [2011] 6 Costs LR 1006, [2012] ICR 305, (2011) 155 (34) SJLB 31........................................13.18 Gold v Micoff Science & Gold [2001] Lloyd’s Rep PN 423, (2001) 98 (3) LSG 44, [2001] NPC 6.................................................................... 7.10, 7.11, 7.65

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Table of Cases Goldberg v Miltiadous [2010] EWHC 450 (QB), [2010] 3 WLUK 424.............5.20 Golden Belt 1 Sukuk Co BSC(c) v BNP Paribas [2017] EWHC 3182 (Comm), [2018] 3 All ER 113, [2018] 1 All ER (Comm) 1126..................2.09 Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353, [2007] Bus LR 997............... 3.85, 3.86; 9.58 Goldman v Abbott [1989] 48 EG 151, (1989) 139 SJ 828..............................5.42, 5.45 Goldsmith Williams (a firm) v Travelers Insurance Co Ltd [2010] EWHC 26 (QB), [2010] 1 WLUK 487 [2010] Lloyd’s Rep IR 309.....................17.19, 17.39 Gomba Holdings UK Ltd v Minories Finance Ltd (formerly Johnson Matthey Bankers Ltd) (No 1) [1988] 1 WLR 1231, [1989] 1 All ER 261, (1989) 5 BCC 27...............................................................................................  14.02, 14.07 Gooden (Sydney) v Northamptonshire County Council [2001] EWCA Civ 1744, [2002] PNLR 18, [2002] 1 EGLR 137...............................................9.38 Good Luck, The see Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd (The Good Luck) Goody Baring [1956] 1 WLR 448, [1956] 2 All ER 11, (1956) 100 SJ 320 ......9.04, 9.36, 9.40, 9.48 Goose v Wilson Sandford & Co (No 2) [2001] Lloyd’s Rep PN 189..................4.42 Gordon v JB Wheatley & Co [2000] Lloyd’s Rep PN 605, [2000] PNLR 755, (2000) 97 (24) LSG 40.................................................................................7.30 Gore v Mishcon de Reya; Chiang v Mishcon de Reya [2015] EWCA 164 (Ch), [2015] 1 WLUK 694...........................................................................4.10 Gorham v British Telecommunications plc [2000] 1 WLR 2129, [2000] 4 All ER 867, [2001] Lloyd’s Rep IR 531............................................ 1.28; 3.43; 11.17 Gosden v Halliwell Landu [2020] EWCA Civ 42...............................................9.60 Gosfield School Ltd v Birkett Long (a firm) [2005] EWHC 2905 (QB), [2006] PNLR 19......................................................................................................2.23 Gotha City v Sotheby’s (No 1) [1998] 1 WLR 114, (1997) 94 (30) LSG 28, (1997) 141 SJLB 152...................................................................................14.14 Goyal v Florence Care Ltd [2020] EWHC 659 (Ch), [2020] 3 WLUK 273.......4.10 Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, [1992] 2 WLR 867, [1992] 1 All ER 865..........................  1.21, 1.22, 1.23, 1.24; 5.23; 8.13; 9.26, 9.29 Gravgaard v Aldridge & Brownlee (a firm) [2004] EWCA Civ 1529, [2005] PNLR 19, (2005) 149 SJLB 27....................................................................7.69 Gray, Re (1891) 65 LT 743..................................................................................5.23 Gray v Buss Murton [1999] PNLR 882........................................................  2.27; 11.13 Gray v Going Places Leisure Travel Ltd [2005] EWCA Civ 189, [2005] CP Rep 21, [2005] PNLR 26.....................................................................13.29, 13.30 Gray v Richards Butler (supervision of execution) [2000] WTLR 143...............11.12 Gray v Thames Trains Ltd [2009] UKHL 33, [2009] 1 AC 1339, [2009] 3 WLR 167......................................................................................................4.33 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, [1975] 3 All ER 99, [1975] 2 Lloyd’s Rep 325....................1.02; 2.01 Green v Collyer Bristow [1999] Lloyd’s Rep PN 798, [1999] NPC 56 ........ 2.07, 2.10; 12.17, 12.27, 12.62 Green v Cunnigham John & Co (1995) 46 Con LR 62.......................................12.71 Green v Eadie [2012] Ch 363, [2012] 2 WLR 510, [2012] PNLR 9...................7.34 Green v Eadie [2011] EWHC 824 (Ch), [2012] Ch 363, [2012] 2 WLR 510.....1.13 Green v Hancocks (a firm) [2000] Lloyd’s Rep PN 813, [2001] PNLR 10.........2.10 Green v Hancocks (a firm) [2001] Lloyd’s Rep PN 212.....................................12.26

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Table of Cases Green v Royal Bank of Scotland [2013] EWCA Civ 1197, [2014] Bus LR 168, [2013] 10 WLUK 284..........................................................................15.25 Green v Turner [1999] PNLR 28.....................................................................1.02, 1.22 Greenglade Estates Ltd v Chana [2012] EWHC 1913 (Ch), [2012] 42 EG 138, [2012] 29 EG 85 (CS)..................................................................................5.36 Greenhoff v J Lyons & Co (unreported, 30 June 1998).......................................13.43 Greenpine Investment Holding Ltd v Howard de Walden Estates Ltd [2016] EWHC 1923 (Ch), [2016] 7 WLUK 726.................................................5.41, 5.42 Gregg v Scott [2005] UKHL 2, [2005] 2 AC 176, [2005] 2 WLR 268...........3.15, 3.19 Gregory v Shepherds (a firm) [2000] Lloyd’s Rep PN 724, [2000] PNLR 769, (2001) 81 P & CR 10............................................................ 3.80; 9.36, 9.56, 9.69 Gregory v Tarlo (1964) 108 SJ 219......................................................................12.73 Greymalkin v Copleys (a firm) [2004] EWCA Civ 1155, [2004] PNLR 44.......9.36, 9.56, 9.59, 9.64 Gribbon v Lutton [2001] EWCA Civ 1956, [2002] QB 902, [2002] 2 WLR 842.. 9.78 Griffin v Kingsmill [2001] EWCA Civ 934, [2001] 6 WLUK 135, [2001] Lloyd’s Rep PN 716....................................  2.22, 2.24; 12.27, 12.53, 12.60, 12.70 Griffith v Gourgey [2018] EWHC 1484 (Ch), [2018] 6 WLUK 307, [2018] 3 Costs LR 605...............................................................................................13.78 Griffiths v Fleming [1909] 1 KB 805...................................................................11.17 Griffiths v Last Cawthra Feather [2002] PNLR 27..............................................9.64 Groom v Crocker [1939] 1 KB 194, [1938] 2 AlL ER 394, (1938) 60 Ll L Rep 393 .........................................................................................  1.09, 1.18; 5.22 Group Seven Ltd v Allied Investments Corpn Ltd [2013] EWHC 1423 (Ch), [2013] 2 WLUK 571....................................................................................14.29 Group Seven Ltd v Nasir [2017] EWHC 2466 (Ch), [2018] 10 WLUK 171, [2018] PNLR 6; revs’d in part [2019] EWCA Civ 614, [2019] 3 WLR 1011...........................................................................................  5.10; 16.62, 16.63 Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129, [2019] 3 WLR 1011.................................... 4.01, 4.13, 4.14, 4.16, 4.18, 4.19, 4.20, 4.24, 4.52; 5.17 Grosvenor 52 International Ltd v Holy (The Times, 1 April 2003).....................9.39 Grosvenor 52 International Ltd v Secretary of State for Local Government, Transport & the Regions [2000] Lloyd’s Rep PN 51, [1999] EG 107 (CS), [1999] NPC 99....................................................................................9.46 Grosvenor Chemicals Ltd v UPL Europe Ltd [2017] EWHC 1893 (Ch), [2017] 7 WLUK 591....................................................................................6.76 Grupo Torras SA v Al-Sabah (No 5) [1999] CLC 1469......................... 4.14, 4.16, 4.19 Guardian Ocean Cargoes Ltd v Banco do Brasil (The Golden Med) (No 3) [1992] 2 Lloyd’s Rep 193............................................................................4.63 Guerin v R (1984) 13 DLR (4th) 321....................................................................4.61 Guinness Peat Properties Ltd v Fitroy Robinson Partnership [1987] 1 WLR 1027, [1987] 2 All ER 716, 38 BLR 57.................................................6.02; 14.10 Gupta v Corner [1991] 1 QB 29..........................................................................5.40 Gus Consulting GmbH v Lebeouf Lamb Greene & Macrae [2006] EWCA Civ 683, [2006] CP Rep 40, [2006] PNLR 32.........................................6.62, 6.63 Gwembe Valley Development Co Ltd (in receivership) v Koshy (account of profits: limitations) sub nom DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH v Koshy (account of profits: limitations) [2003] EWCA Civ 1048, [2004] 1 BCLC 131, [2004] WTLR 97.....4.53, 4.78, 4.79

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Table of Cases Gwelhayl Ltd v Midas Construction Ltd [2008] EWHC 2316 (TCC), 123 Co LR 91, [2008] CILL 2637............................................................................14.02 H HF Pension Trustees Ltd v Ellison [1999] Lloyd’s Rep PN 489, [1999] PNLR 894, [1999] OPLR 67.....................................................................  7.63, 7.64, 7.65 HLB Kidsons (a firm) v Lloyds Underwriters [2007] EWHC 1951 (Comm), [2008] 1 All ER (Comm) 769, [2007] 8 WLUK 89................  17.04, 17.08, 17.09, 17.10, 17.12 HML PM Ltd v Canary Riverside Estate Management Ltd [2019] EWHC 3496 (QB), [2019] 12 WLUK 268...............................................................6.26 HSBC Bank plc v Brown [2015] EWHC 359 (Ch), [2015] 2 WLUK 564..........9.15 HU v SU [2015] EWFC 18, [2015] 3 WLUK 65, [2015] PNLR 20...................13.41 Habton Farms v Nimmo [2003] EWCA Civ 68, [2004] QB 1, [2003] 3 WLR 633...........................................................................................................5.36, 5.37 Hackett v Crown Prosecution Service [2011] EWHC 1170 (Admin), [2011] 5 WLUK 172, [2011] Lloyd’s Rep FC 371....................................................9.10 Hadley v Baxendale (1854) 9 Exch 341, 156 ER 145............................ 3.51, 3.52, 3.56 Hagen v ICI Chemicals & Polymers Ltd [2002] IRLR 31, [2002] Em LR 160, [2002] Lloyd’s Rep PN 288.........................................................................3.06 Haigh v Wright Hassall & Co [1994] EG 54 (CS)..........................................2.31; 9.34 Haira v Burbery Mortgage Finance & Savings Ltd [1995] 4 LRC 387...........4.40; 9.03 Haji-Iannou v Frangos [2006] EWCA Civ 1663, [2008] 1 WLR 144, [2007] 3 All ER 938...................................................................................................13.91 Hakendorf v Countess of Rosenborg [2004] EWHC 2821 (QB)...................6.50; 14.13 Halborg v EMW Law LLP [2017] EWCA Civ 793, [2018] 1 WLR 52, [2017] CP Rep 30....................................................................................................5.13 Halewood International Ltd v Addleshaw Booth & Co (a firm) [2000] Lloyd’s Rep PN 298, [2000] PNLR 788...................................................................6.62 Halford v Brookes (No 1) [1991] 1 WLR 428, [1991] 3 All ER 559..................7.55 Halifax v Brookes Parry & Co (unreported, 23 May 2000).................................5.33 Halifax Building Society v Grosse [1997] EG 111 (CS).....................................9.44 Halifax plc v Gould & Swayne [1999] PNLR 184, [1998] 3 EGLR 177, [1998] EG 127 (CS).....................................................................................10.63 Halifax plc v Ringrose & Co [2000] Lloyd’s Rep PN 309, [2000] PNLR 483, (2000) 150 NLJ 58.......................................................................................7.84 Hall v Estate of Bruce Bennett [2003] WTLR 827.....................................  11.04, 11.13 Hall v Meyrick [1957] 2 QB 455, [1957] 3 WLR 273, [1957] 2 All ER 722......11.12 Hall v Saunders Law Ltd [2020] EWHC 404 (Comm), [2020] 2 WLUK 384....4.40 Hallam-Eames v Merrett Sydicates Ltd [1995] CLC 173, [1996] 5 Re LR 110, [1996] 7 Med LR 122..................................................  7.54, 7.57, 7.58, 7.59, 7.60 Hallewell Bunyard, Re (unreported, 5 June 1996)...............................................13.22 Halliwells LLP v NES Solicitors [2011] EWHC 947 (Ch), [2011] PNLR 30.....4.19; 5.07; 17.19 Hallmark Finance Insurance Brokers Ltd v Fraser & Beatty (1990) 1 OR (3d) 641...............................................................................................................2.29 Halsall v Champion Consulting Ltd [2017] EWHC 1079 (QB), [2017] STC 1958, [2017] 5 WLUK 463..........................................................................7.60 Hamilton v Al Fayed (costs) [2002] EWCA Civ 665, [2003] QB 1175, [2003] 2 WLR 128...................................................................................................13.84

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Table of Cases Hamilton-Jones v David & Snape (a firm) [2003] EWHC 3147 (Ch), [2004] 1 WLR 924, [2004] 1 All ER 657..........................................................  12.25, 12.84 Hammonds (a firm) v Danilunas [2009] EWHC 216 (Ch)..................................5.05 Hampton v Minns [2002] 1 WLR 1, [2002] 1 All ER (Comm) 481, (2001) 98 (20) LSG 41.................................................................................................8.22 Hamptons Residential Ltd v Field [1998] 2 Lloyd’s Rep 248, [1998] 5 WLUK 414, (1998) 95 (23) LSG 28.........................................................................17.12 Hanbury v Hugh James Solicitors [2019] EWHC 1074 (QB), [2019] 4 WLUK 416, [2019] PNLR 25...................................................................................12.80 Hanif v Middleweeks (a firm) [2000] Lloyd’s Rep PN 920................  3.23; 9.86; 12.37, 12.41, 12.48, 12.69 Hanley v JC & A Solicitors [2018] EWHC 2592 (QB), [2018] 9 WLUK 367, [2019] PNLR 5.....................................................................................14.02, 14.03 Hanson v Lorenz Jones [1987] 1 FTLR 23, (1986) 136 NLJ 1088.....................4.31 Harcus Sinclair (a firm) v Buttonwood Legal Capital Ltd [2013] EWHC 2974 (Ch), [2013] 10 WLUK 258.........................................................................13.87 Harcus Sinclair LLP v Your Lawyers Ltd [2017] EWHC 2900 (Ch), [2018] 1 WLR 2479, [2017] 11 WLUK 370....................................... 5.07, 5.40, 5.41, 5.43 Harding Evans LLP v Spencer-White see Spencer-White v Harding Evans LLP Harding Homes (East Street) Ltd v Bircham, Dyson Bell (a firm) [2015] EWHC 3329 (Ch), [2015] 11 WLUK 586.........  3.22, 3.23, 3.25; 8.17; 9.86, 9.87 Hardy v Veasey (1867-68) LR 3 Ex 107..............................................................6.01 Harford v Birmingham City Council [1993] 7 WLUK 926, (1993) 66 P & CR 468...............................................................................................................5.25 Harlequin Property (SVG) Ltd v Wilkins Kennedy (a firm) [2016] EWHC 3188 (TCC), [2017] 4 WLR 30, [2016] 12 WLUK 263................. 4.38, 4.40; 6.37 Harley v McDonald [2001] UKPC 18, [2001] 2 AC 678, [2001] 2 WLR 1749..13.19 Harman v Home Office [1983] 1 AC 280, [1982] 2 WLR 338, [1982] 1 All ER 532...............................................................................................................6.76 Harris v Kent [2007] EWHC 463 (Ch)................................................................4.49 Harris v Nantes & Wylde [1997] ECC 570, [1997] NPC 7.............................1.09; 9.19 Harris v Wyre DC see Smith v Eric S Bush (a firm) [1990] 1 AC 831, [1989] 2 WLR 790, [1989] 2 All ER 514 Harrison v Battye [1975] 1 WLR 58, [1974] 3 All ER 830, (1974) 119 SJ 31....9.47 Harrison v Bloom Camillin (costs) [2000] Lloyd’s Rep PN 404.........................12.69 Harrison v Bloom Camillin (No 2) [2000] Lloyd’s Rep PN 89, [2001] PNLR 7, (1999) 96 (45) LSG 32................................... 12.34, 12.50, 12.59, 12.68, 12.69 Hart v Burbidge [2014] EWCA Civ 992, [2014] 7 WLUK 786, [2014] WTLR 1361.............................................................................................................9.11 Hartle v Laceys (a firm) [1999] Lloyd’s Rep PN 315, (2000) 16 Const LJ 44 ...3.25; 9.56; 10.137 Harwood v Taylor Vinters (a firm) [2003] EWHC 471 (Ch), (2003) 100 (21) LSG 30.....................................................................................................2.29; 9.39 Hastings Bass (deceased), Re [1975] Ch 25, [1974] 2 WLR 904, [1974] 2 All ER 193.........................................................................................................11.30 Hastingwood Property Ltd v Saunders Bearman Anselm [1991] Ch 114, [1990] 3 WLR 623, (1990) 140 NLJ 817.......................................  5.41, 5.42, 5.45 Hatswell v Goldbergs (a firm) [2001] EWCA Civ 2084, [2002] Lloyd’s Rep PN 359 .....................................................................................12.43, 12.48, 12.71

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Table of Cases Hatton v Chafes (a firm) [2003] EWCA Civ 341, [2003] PNLR 24, (2003) 147 SJLB 356...........................................................................................7.45, 7.46 Haugesund Kommune v Depfa ACS Bank [2011] EWCA Civ 33, [2011] 3 All ER 655, [2011] PNLR 14.........................................................................3.39, 3.68 Havenledge Ltd v Graeme John [2001] Lloyd’s Rep PN 223, [2001] PNLR 17, [2001] NPC 9.........................................................................................7.34 Haward v Fawcetts (a firm) [2006] UKHL 9, [2006] 1 WLR 682, [2006] 3 All ER 497 ...........................  7.53, 7.54, 7.55, 7.59, 7.60, 7.61, 7.62, 7.65, 7.66, 7.67 Hawkins v Clayton (1988) 78 ALR 69 (HCA).................................11.01, 11.15, 11.16 Hawkins v Harwood (1849) 4 Exch 503, 154 ER 1312.......................................12.32 Hawksford Trustees Jersey Ltd v Halliwells LLP (in liquidation) [2015] EWHC 2996 (Ch), [2015] 10 WLUK 689...................................................3.71 Hayes v Dowding [1996] PNLR 578..........................................................  14.33, 14.34 Hayes v James & Charles Dodd (a firm) [1990] 2 All ER 815, [1988] EG 107 (CS), (1988) 138 NLJ Rep 259.......................  9.59, 9.68, 9.71, 9.74; 12.83, 12.84 Hayim v Citibank NA [1987] AC 730, [1987] 3 WLR 83, (1987) 84 LSG 1573....................................................................................................  11.19, 11.27 Haynes v Department for Business Innovation & Skills [2014] EWHC 643 (QB), [2014] 3 WLUK 194, [2014] 3 Costs LR 475...................................17.28 Heaton v AXA Equity & Law Life Assurance Society plc [2002] UKHL 15, [2002] 2 AC 329, [2002] 2 WLR 1081........................................................8.31 Hedley Burne & Co Ltd v Heller & Partners Ltd [1964] AC 465, [1963] 3 WLR 101, [1963] 2 All ER 575.............................................................. 1.19, 1.20 Hedrich v Standard Bank London Ltd [2007] EWCA Civ 905, [2009] PNLR 3 ......................................................................................2.07; 13.19, 13.56, 13.63 Hellard v Irwin Mitchell [2012] EWHC 2656 (Ch), [2012] 8 WLUK 241, [2013] PNLR 8.............................................................................................14.36 Hellenic Mutual War Risks Association (Bermuda) Ltd v Harrison (The Sagheera) [1997] Lloyd’s Rep 160............................................  6.19; 14.05, 14.06 Helmsley Acceptances Ltd v Lambert Smith Hampton Group Ltd [2010] EWCA Civ 356............................................................................................10.188 Hemmens v Wilson Browne (a firm) [1995] Ch 223, [1994] 2 WLR 323, [1993] 4 All ER 826.................................................................  11.31, 11.32, 11.34 Henderson v Merrett Syndicates Ltd (No 1) [1995] 2 AC 145, [1994] 3 WLR 761, [1994] 3 All ER 506............................................  1.18, 1.20, 1.27, 1.30; 2.07, 2.09; 4.43; 6.07; 7.02 Henderson v Temple Pier Co Ltd [1998] 1 WLR 1540, [1998] 3 All ER 324, [1999] PIQR P61..........................................................................................7.68 Henderson (t/a Henderson Group Development) v Wotherspoon [2013] CSOH 113, [2013] 7 WLUK 246, [2013] PNLR 28...............................................3.60 Henry v Henry [2010] UKPC 3, [2010] 1 All ER 988, [2010] WTLR 1011.......9.51 Hermann v Withers LLP [2012] EWHC 1492 (Ch), [2012] 4 Costs LR 712 .....2.07, 2.09, 2.30; 3.66, 3.71; 9.41, 9.74; 11.23 Heron v TNT [2013] EWCA Civ 469, [2014] 1 WLR 1277, [2013] PNLR 21..13.86 Herring v Shorts Financial Services LLP [2016] 5 WLUK 149, [2016] WTLR 1203....................................................................................................  11.05, 11.29 Hewett v First Plus Financial Group plc [2010] EWCA Civ 312, [2010] 2 FLR 177, [2010] 2 EGLR 51.......................................................................9.11 Heywood v Wellers (a firm) [1976] QB 446, [1976] 2 WLR 101, [1976[ 1 All ER 300 ....................................................................................... 3.11; 12.25, 12.83

lxiv

Table of Cases Hickland v McKeone [2018] NIQB 81, [2018] 10 WLUK 628..........................2.32 Hickman v Blake Lapthorn [2005] EWHC 2714 (QB), [2006] PNLR 20..... 2.02, 2.10, 2.22; 8.45; 12.27, 12.54, 12.55 Hicks v Russell Jones & Walker [2007] EWHC 940 (Ch)..................... 2.04, 2.07, 2.08 High Comr for Pakistan in the United Kingdom v Prince Mukkaram Jah [2016] EWHC 1465 (Ch), [2016] 6 WLUK 486, [2016] WTLR 1763.......4.74 Hill v Harris [1965] 2 QB 601, [1965] 2 WLR 1331, [1965] 2 All ER 358........9.43 Hilton v Barker Booth Eastwood [2005] UKHL 8, [2005] 1 WLR 567, [2005] 1 All ER 651 ................ 1.01; 2.13; 4.01, 4.26, 4.27, 4.31, 4.37, 4.40; 6.04, 6.07, 6.22, 6.37, 6.37, 6.38, 6.39, 6.41; 9.03, 9.04; 10.112 Hinc v Warren Rees & Co [2002] EWCA Civ 764, [2002] 17 EG 157 (CS)......9.73 Hirst v Etherington [1999] Lloyd’s Rep PN 938, (1999) 96 (31) LSG 42, (1999) 149 NLJ 1110............................................................ 5.06, 5.07, 5.11; 6.14 Hirstenstein v Hill Dickinson LLP [2014] EWHC 2711 (Comm), [2014] 7 WLUK 1118................................................................................... 3.08, 3.65; 9.59 Hitchens v Higgens & Bacchus (17 July 1997)...................................................9.84 Hockley Mint Ltd v Ramsden; Winter v Hockley Mint Ltd [2018] EWCA Civ 2480, [2019] 1 WLR 1617, [2019] 2 All ER 1054......................................5.19 Hodge v Clifford Cowling & Co [1990] 2 EGLR 89.......................................9.89, 9.90 Hodgkinson v Simms [1994] 3 SCR 377, (1994) 117 DLR (4th) 161.............4.53, 4.55 Hodgson v Imperial Tobacco Ltd (No 1) [1998] 1 WLR 1056, [1998] 2 All ER 672, [1998] 1 Costs R 14.............................  13.02, 13.69, 13.78, 13.81, 13.83 Holden v Holden & Pearson (1910) 102 LT 398.................................................12.32 Holden & Co v Crown Prosecution Service [1990] 2 QB 261, [1990] 2 WLR 1137, [1990] 1 All ER 368...........................................................................13.80 Hole & Pugsley v Sumption [2001] Lloyd’s Rep PN 419, [2002] PNLR 20, (2002) 99 (10) LSG 32..................................................5.42, 5.46, 5.47, 5.49, 5.50 Holmes v H Kennard & Son (1984) 49 P & CR 202, (1985) 82 LSG 363, (1984) 128 SJ 854........................................................................................9.49 Holt v Holley & Steer Solicitors [2020] EWCA Civ 851....................................7.46 Holt v Payne Skillington (1996) 77 BLR 51, 49 Con LR 99, [1996] PNLR 179...1.18 Holyoake v Candy [2017] EWHC 52 (QB), [2017] 1 WLUK 408............  14.26, 14.30 Homsy v Murphy (1996) 73 P & CR 26, [1996] EG 43 (CS), [1996[ NPC 34...9.96 Hondon Developments Ltd v Powerrise Investments Developments [2006] PNLR 1........................................................................................................9.37 Hoodless v Financial Services Authority [2003] UKFTT FSM007....................16.67 Hooper v Fynmores (a firm) [2002] Lloyd’s Rep PN 18, [2001] WTLR 1019, (2001) 98 (26) LSG 45.................................................................................11.11 Hopkins v Mackenzie [1995] PIQR P43, [1995] 6 Med LR 26, [2001] Lloyd’s Rep PN 600..................................................................................................7.44 Hopkins v TL Dallas Group Ltd [2004] EWHC 1379 (Ch), [2005] 1 BCLC 543...............................................................................................................5.02 Horsfall v Haywards [1999] 1 FLR 1182, [1999] Lloyd’s Rep PN 332, [1999] PNLR 583.................................................................................. 3.70; 11.14, 11.26 Horsfall, ex p (1827) 7 B & C 528, 108 ER 820.................................................14.02 Horsley v Burton [2003] All ER (D) 413.............................................................1.08 Horton v Evans [2006] EWHC 2808 (QB), [2007] LS Law Medical 212, [2007] PNLR 17...........................................................................................3.46 Hosking v Marathon Asset Management LLP [2016] EWHC 2418 (Ch), [2017] Ch 157, [2017] 2 WLR 746..............................................................5.13

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Table of Cases Hospital Products Ltd v United States Surgical Corpn (1984) 156 CLR 41...4.27; 6.07 Housing Loan Corpn plc v William H Brown [1998] 12 WLUK 419, [1999] Lloyd’s Rep PN 185.....................................................................................10.166 Howard & Witchell Ltd v Woodman Matthews & Co [1983] BCLC 117, [1983] Con LR 100, (1983) 133 NLJ 598...............................................  1.10; 9.89 Howell-Smith v Official Solicitor [2006] PNLR 21............................................6.43 Howkins & Harrison v Tyler [2001] Lloyd’s Rep PN 1, [2001] PNLR 27, [2000] EG 91 (CS)............................................................ 8.22, 8.23, 8.27; 10.181 Hudgell, Yeates & Co v Watson [1978] QB 451, [1978] 2 WLR 661, [1978] 2 All ER 363...................................................................................................5.12 Hughes v Richards see Richards (t/a Richards & Co) v Hughes [2004] EWCA Civ 266, [2004] PNLR 35, [2011] WTLR 997 Hughes-Holland v BPE Solicitors; Gabriel v Little [2014] UKSC 21, [2018] AC 599, [2017] 2 WLR 1029.............................  3.26, 3.29, 3.31, 3.32, 3.34, 3.35, 3.39, 3.40; 4.56; 10.119, 10.130, 10.138, 10.142, 10.143, 10.145, 10.146, 10.148, 10.149, 10.151, 10.152, 10.157, 10.158, 10.159, 10.171, 10.177 Humberclyde Finance Group Ltd v Hicks (unreported, 14 November 2001).....1.15 Humblestone v Martin Tolhurst Partnership [2004] EWHC 151 (Ch), [2004] PNLR 26, [2004] WTLR 343.............................................................  11.12, 11.14 Hunter v Chief Constable of West Midlands Police [1982] AC 529, [1981] 3 WLR 906, [1981] 3 All ER 727...............................................  12.03, 12.04, 12.16 Hunter v Mann [1974] QB 767, [1974] 2 WLR 742, [1974] 2 All ER 414.........6.04 Hurlingham Estates Ltd v Wilde & Partners [1997] 1 Lloyd’s Rep 525, [1997] STC 627, [1997] BTC 240.................................. 1.07; 2.06, 2.07, 2.28; 9.35, 9.80 Hurstanger Ltd v Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351, [2008] Bus LR 216..................................................................................................4.37 Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services Ltd [2001] EWCA Civ 1785, [2002] Lloyd’s Rep IR 185, [2002] Lloyd’s Rep PN 195.................................................................8.27 Hussey v Eels [1990] 2 QB 227, [1990] 2 WLR 234, [1990] 1 All ER 449........3.75, 3.76, 3.78 I IBM Corpn v Phoenix International (Computers) Ltd (Discovery) [1995] 1 All ER 413, [1995] 1 All ER 413.................................................................6.72 IG Index plc v Cloete [2013] EWHC 3789 (QB), [2013] 12 WLUK 346...........6.76 IMI v Delta Ltd; WH Newson Holding Ltd v IMI plc [2016] EWCA Civ 773, [2017] Ch 27............................................................................................8.32, 8.33 Ikbal v Sterling law [2013] EWHC 3291 (Ch), [2013] 10 WLUK 973, [2014] PNLR 9....................................................................................................4.69, 4.70 Imageview Management Ltd v Jack [2009] EWCA Civ 63, [2009 Bus LR 1034, [2009] 2 All ER 666 ..........................................................................4.39 Imerman v Tchenguiz [2010] EWCA Civ 908, [2011] Fam 116, [2011] 2 WLR 592......................................................................................................6.26 Immerzeel v Santam Ltd [2005] 12 WLUK 132, [2007] Lloyd’s Rep IR 106...............................................................................................................17.06 Impact Funding Solutions Ltd v Barrington Services Ltd (formerly Lawyers at Work Ltd) [2016] UKSC 57, [2017] AC 73, [2016] 3 WLR 1422..17.03, 17.13, 17.15, 17.16

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Table of Cases Ince Gordon Dadds LLP v Tunstall [2019] 6 WLUK 323, [2019] BCC 1109, [2020] ICR 124............................................................................................5.16 Indata Equipment Supplies Ltd (t/a Autofleet) v ACL Ltd [1998] 1 BCLC 412, [1998] FSR 248, (1997) 141 SJLB 216...............................................6.06 Independent Trustee Services Ltd v GP Noble Trustees Ltd [2010] EWHC 1653 (Ch).....................................................................................................4.21 Inder Lynch Devoy & Co v Subritzky [1979] 1 NZLR 87..................................3.63 Interactive Technologies v Ferster [2018] EWCA Civ 1594, [2018] 7 WLUK 89, [2018] 2 P & CR DG22.........................................................................4.48 Interallianz Finance AG v Independent Insurance Co Ltd [1997] EG 91 (CS)...10.184, 10.186, 10.187 Inter-Leisure Ltd v Lamberts [1997] NPC 49......................................... 9.44, 9.83, 9.86 International Energy Group Ltd v Zurich Assurance plc [2015] UKSC 33, [2016] AC 509, [2015] 2 WLR 1471...........................................................17.28 International Leisure Ltd v First National Trustee Co UK Ltd [2012] EWHC 1971 (Ch), [2013] Ch 346, [2013] 2 WLR 466.......................................1.15, 1.16 Internaut Shipping GmbH v Fercometal Sarl (The Eikon) [2003] EWCA Civ 812, [2003] 2 All ER (Comm) 760, [2003] 2 Lloyd’s Rep 430...................5.39 Inventors’ Friend Ltd v Leathes Prior (a firm) [2011] EWHC 711 (QB), [2011] PNLR 20.......................................................................................2.07, 2.08 Iqbal v Solicitors Regulation Authority [2012] EWHC 3251 (Admin), [2012] 7 WLUK 563................................................................................................16.72 Isaac Partnership v Umm Al-Jawaby Oil Service Co Ltd [2003] EWHC 2539 (QB), [2004] PNLR 9...........................................................................  2.10; 13.37 Islamic Republic of Iran Shipping Lines v Denby [1987] 1 Lloyd’s Rep 367, [1986] 10 WLUK 145, [1987] 1 FTLR 30...................................................4.33 Ismail-Zai v State of Western Australa [2007] WASCA 150...............................6.15 Istil Group Inc v Zahoor [2003] EWHC 165 (Ch), [2003] 2 All ER 252, [2003] CP Rep 39.........................................................................................6.02 Ivey v Genting Casinos (UK) Ltd (t/a Crockfords Club) [2017] UKSC 67, [2018] AC 391, [2017] 3 WLR 1212..................  4.18; 16.62, 16.63, 16.64, 16.65, 16.68, 16.69, 16.70 J J (a minor), Re (unreported, 25 March 1997)..............................................13.59, 13.65 J Jarvis & Sons Ltd v Castle Wharf Developments Ltd [2001] EWCA Civ 19, [2001] Lloyds Rep PN 308, (2001) 17 Const LJ 430..................................1.22 J Rothschild Associates plc v Collyear [1998] 9 WLUK 266, [1998] CLC 1697, [1999] Lloyd’s Rep IR 6....................................................................17.09 J Sainsbury plc v Broadway Malyan [1999] PNLR 286, 61 Con LR 31.............8.33 JD Wetherspoon plc v Van de Berg & Co Ltd [2009] EWHC 639 (Ch), [2009] EG 138 (CS).................................................................................... 4.27, 4.38; 6.10 JEB Fasteners v Marks & Bloom [1983] 1 All ER 583.......................................3.07 JJ Coughlan Ltd v Ruparelia [2003] EWCA Civ 1057, [2004] PNLR 4, (2003) 100 (37) LSG 34.................................................  5.05, 5.06, 5.08, 5.09, 5.10, 5.14 JP Morgan Chase Bank v Springwell Navigation Corpn (application to strike out) [2006] EWHC 2755 (Comm), [2007] 1 All ER (Comm) 549..........2.19, 2.21 JP Morgan Chase Bank v Springwell Navigation Corpn [2005] EWCA Civ 1602.............................................................................................................14.18 JP Morgan Multi-Strategy Fund LP v Macro Fund Ltd [2003] CILR 250..........6.02

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Table of Cases JSC Bank v Ablyazov [2012] EWHC 1252 (Comm), [2012] 5 WLUK 419, (2012) 109 (22) LSG 20.............................................................. 6.46; 14.24, 14.27 JSC BTA Bank v Solodchenko [2011] EWHC 2163 (Ch), [2012] 3 WLR 559, [2012] 1 All ER 735.....................................................................................6.15 Jackson v Greenfield [1998] 1 WLUK 218, [1998] BPIR 699............................17.41 Jackson v Murray [2015] UKSC 5, [2015] 2 All ER 805, 2015 SC (UKSC) 105...............................................................................................................8.16 Jaffray v Marshall [1993] 1 WLR 1285, [1994] 1 All ER 143............................4.61 Jain v Trent Strategic Health Authority [2009] UKHL 4, [2009] AC 853, [2009] 2 WLR 248................................................................................  1.25; 12.17 Jaison Property Development Co Ltd v Swinhoe [2010] EWHC 2467 (QB).....1.10, 1.24 James v Evans [2001] CP Rep 36, [2003] CPLR 163, [2000] 3 EGLR 1...........5.25 James McNaughton Paper Group Ltd v Hicks Anderson & Co [1991] 2 QB 113, [1991] 2 WLR 641, [1991] 1 All ER 134............................................1.20 Jarvis v T Richards & Co (1980) 124 SJ 793..................................................9.59, 9.70 Jassi v Gallagher [2006] EWCA Civ 1065, [2007] PNLR 4, [2006] 31 EG 88.................................................................................................................2.24 Jemma Trust Co Ltd v Kippax Beaumont Lewis [2004] EWHC 703 (Ch), [2004] WTLR 533, (2004) 101 (15) LSG 29...............................................11.16 Jenmain Builders Ltd v Steed & Steed [2000] Lloyd’s Rep PN 549, [2000] PNLR 616, (2000) 97 (13) LSG 45......................................  9.04, 9.32, 9.60, 9.75 Jessup v Lawyers Private Mortgage Pty Ltd [2006] QCA 432............................4.50 Jessup v Wetherell [2006] EWHC 2582 (QB), [2007] PNLR 10, [2007] WTLR 515...................................................................................................7.46 Jewo Ferrous BV v Lewis Moore [2001] PNLR 328............................. 1.09, 1.10, 1.17 John Fox (a firm) v Bannister King & Rigbeys [1988] QB 925, [1987] 3 WLR 480, [1987] 1 All ER 737....................................  5.40, 5.41, 5.45, 5.46, 5.47, 5.50 John Mowlem Construction plc v Neil F Jones & Co [2004] EWCA Civ 768, [2004] BLR 387, [2004] PNLR 925...................................  2.01, 2.31, 2.32; 12.22 Johnson v Agnew [1980] AC 367, [1979] 2 WLR 487, [1979] 1 All ER 883.....5.36 Johnson v Bingley, Dyson & Furey [1997] PNLR 392, [1995] NPC 27 ....... 2.08, 2.14, 2.29; 9.77, 9.85, 9.86; 15.24 Johnson v Chief Constable of Surrey (unreported, 19 October 1992).................7.76 Johnson v EBS Pensioner Trustees Ltd [2002] EWCA Civ 164, [2002] Lloyd’s Rep PN 309.......................................................................  4.31, 4.33, 4.80 Johnson v Gore Wood & Co (No 1) [2002] 2 AC 1, [2001] 2 WLR 72, [2001] 1 All ER 481...................................................................... 1.10, 1.14, 1.15; 10.190 Johnson v Gore Wood & Co (No 2) [2002] EWHC 776 (QB), [2002] NPC 65....1.10, 1.15 Johnson, Assigness of Cochrane, a bankrupt v Marriott (1833) 2 Cr & M 183, 149 ER 725, [1833] 1 WLUK 120...............................................................6.01 Johnson, Assignees of Cochrane, a bankrupt v Marriott (1833) 2 C & M 183, 149 ER 725..................................................................................................6.01 Jolliffe v Charles Coleman & Co (1971) 219 EG 1608.......................................9.90 Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, [2011] 2 WLR 823.......2.06; 12.02 Joseph v Farrer & Co LLP [2017] EWHC 2072 (Ch), [2017] 5 WLUK 552, [2018] PNLR 1...................................................................1.09, 1.28; 11.33, 11.34 Joyce v Bowman Law Ltd [2010] EWHC 251 (Ch), [2010] PNLR 22, [2010] 1 EGLR 129.................................................................................... 9.35, 9.60, 9.71

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Table of Cases Joyce v Darby & Darby [2014] EWCA Civ 677, [2014] 5 WLUK 660, [2014] 3 EGLR 49...................................................................................................9.64 Joyce v Merton, Sutton & Wandsworth Health Authority [1995] 7 WLUK 364, [1996] PIQR P121, [1996] 7 Med LR 1..............................................3.08 K K v P [1993] Ch 140, [1992] 3 WLR 1015, [1993] 1 All ER 521.......................8.46 KJO v XIM [2011] EWHC 1768 (QB), [2011] 7 WLUK 156............................6.23 KR v Royal Sun Alliance plc [2006] EWCA Civ 1454, [2007] 1 All ER (Comm) 161, [2007] Lloyd’s Rep IR 368....................................................17.18 Kaberry v Freethcartwright (a firm) (formerly Freeth Cartwright Hunt Dickens) (No 1) [2002] EWCA Civ 1966...................................................12.20 Kagalovsky v Balmore Invest [2015] EWHC 1337 (QB), [2015] 5 WLUK 268, [2015] PNLR 26.............................................................................6.49; 13.22 Kajima UK Engineering Ltd v The Underwriter Insurance Co Ltd [2008] EWHC 83 (TCC), [2008] 1 All ER (Comm) 855, [2008] 1 WLUK 438.....17.09, 17.12 Kallakis v AIB Group plc [2020] EWHC 460 (Comm), [2020] 2 WLUK 387...1.16; 11.21 Kallincos v Hunt [2005] NSWSC 1181...............................................................6.58 Kamar v Nightingale [2007] EWHC 2982 (QB), [2008] PNLR 15....................7.08 Kandola v Mirza Solicitors LLP [2015] EWHC 460 (Ch), [2015] 2 WLUK 925, [2015] PNLR 19..................................................................... 2.15, 2.26; 9.34 Karpenko v Parojan, Courey, Cohen & Houston (1981) 117 DLR (3d) 383.......2.01, 2.22; 12.27, 12.52 Kearns v McCann Fitzgerald (a firm) (formerly McCann Fitzgerald Roche & Dudley) [2008] IEHC 85, [2008] PNLR 28.................................................7.82 Kecskemeti v Rubens Rabin & Co (The Times, 31 December 1992).................11.13 Kelleher v O’Connor & Co [2010] IEHC 313, [2011] PNLR 3, [2010] 4 IR 380...........................................................................................................9.36, 9.68 Kelly v Cooper [1993] AC 205, [1992] 3 WLR 936, [1994] 1 BCLC 395..... 4.27, 4.38; 6.36, 6.37 Kelly v South Manchester Health Authority [1988] 1 WLR 244, [1997] 3 All ER 274.........................................................................................................13.29 Kennedy v KB Van Emden & Co [1996] PNLR 409, (1997) 74 P & CR 19, [1997] 2 EGLR 137.................................................................................9.46, 9.58 Kenyon-Brown v Banks & Co (unreported, 5 June 1998)...............................2.14; 9.04 Keown v Nahoor [2015] EWHC 3418 (Ch), [2015] 11 WLUK 728...................4.22 Kerman v Akhmedova [2018] EWCA Civ 307, [2018] 4 WLR 52, [2018] 2 WLUK 620 ..............................................................................  14.22, 14.23, 14.26 Kershaw v Whelan [1996] 1 WLR 358, [1996] 2 All ER 404.......... 14.33, 14.34, 14.37 Keydon Estates Ltd v Eversheds LLP [2005] EWHC 972 (Ch), [2005] PNLR 40, [2005] 21 EG 139 (CS)......................................................................9.59, 9.72 Keystone Healthcare Ltd v Parr see Parr v Keystone Healthcare Ltd Khakshouri v Jimenez [2017] EWHC 3392 (QB), [2017] 12 WLUK 578..........9.60 Khan v RM Falvey & Co [2002] EWCA Civ 400, [2002] Lloyd’s Rep PN 369, [2002] PNLR 28..................................................................... 7.44, 7.45, 7.46 Khouj v Acropolis Capital Partners Ltd [2016] EWHC 2120 (Comm), [2016] 8 WLUK 260, [2017] WTLR 83..................................................................14.03

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Table of Cases Kidd v Paull & Williamson LLP [2017] CSOH 16, 2018 SC 193, [2017] 2 WLUK 111................................................. 4.46, 4.53, 4.54, 4.58; 5.13, 5.16; 8.14 Killick v PriceWwaterhouseCoopers (No 1) [2001] 1 BCLC 65, [2001] Lloyd’s Rep PN 17, [2001] PNLR 1............................................... 1.30, 1.31, 1.33 Kilroy v Kilroy [1997] PNLR 66................................................................  13.63, 13.71 King v Hawkins & Co (The Times, 28 January 1982)....................................3.63; 9.41 King v Western Sydney Health Network [2011] NSWSC 1025..........................2.16 Kirkton Investments Ltd v VMH Ltd [2011] CSOH 200, [2012] PNLR 11, 2012 GWD 1-13...........................................................................................9.68 Kitchen v Royal Air Forces Association [1958] 1 WLR 563, [1958] 2 All ER 241, [1955-95] PNLR 18................................................  3.20; 12.40, 12.41, 12.43 Knapp v Ecclesiastical Insurance Group plc [1998] Lloyd’s Rep IR 390, [1998] PNLR 172.........................................................................................7.25 Knight v Haynes, Duffell, Kentish & Co [2003] EWCA Civ 223.................4.49; 12.68 Knight v Rochdale Healthcare NHS Trust [2003] EWHC 1831, [2004] 1 WLR 371, [2003] 4 All ER 416...................................................................7.85 Knight v Tuberville Woodbridge (unreported, 18 March 1999)..........................9.35 Knight Frank LLP v Du Haney [2011] EWCA Civ 404, [2011] 16 EG 78 (CS), (2011) 108 (17) LSG 15.................................................................5.32, 5.34 Knox v Gye (1872) LR 5 HL 656, [1872] 7 WLUK 40......................................4.77 Knox v Till [2000] PNR 67 (New Zealand CA).........................................  11.08, 11.13 Koch Shipping Inc v Richards Butler [2002] EWCA Civ 1280, [2002] 2 All ER (Comm) 957, [2003] PNLR 11..........................................................6.56, 6.62 Konigsberg (a bankrupt), Re [1989] 1 WLR 1257, [1989] 3 All ER 289, [1990] Fam Law 94...................................................................14.05, 14.10, 14.20 Koo Golden East Mongolia v Bank of Nova Scotia [2008] EWHC 1120 (QB), [2008] PNLR 32...........................................................................................13.71 Kooragang Investments Pty Ltd v Richradson & Wrench Ltd [1982] AC 462, [1981] 3 WLR 493, [1981] 3 All ER 65......................................................5.17 Kotowich v Petursson [1994] 3 WWR 669..........................................................9.48 Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350, [1967] 3 WLR 1491, [1967] 3 All ER 686...........................................................................3.53 Kris Motor Spares Ltd v Fox Williams LLP [2009] EWHC 2813 (QB), [2009] 6 Costs LR 931............................................................................................1.11 Kumar v AGF Insurance Ltd [1999] 1 WLR 1747, [1998] 4 All ER 788, [1999] PNLR 269.........................................................................................10.193 Kuwait Airways Corpn v Iraqi Airways Corpn (No 6) [2002] UKHL 19, [2002] 2 AC 883, [2002] 2 WLR 1353...............  3.01, 3.03, 3.26, 3.41, 3.42, 3.77 Kuwait Airways Corpn v Iraqi Airways Corpn (Disclosure: fraud exception) [2005] EWCA Civ 286, [2005] 1 WLR 2734, [2005] CP Rep 32.......14.26, 14.30 L L (children) (care proceedings: cohabiting solicitors), Re [2001] 1 WLR 100, [2000] 2 FLR 887, [2000] 3 FCR 71...........................................................6.58 L Morgan & Co v Jenkins O’Dowd & Barth [2008] EWHC 3411 (Ch).............5.48 LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14.................................................................................................... 6.05, 6.06, 6.79 LIV Bridging Finance Ltd v EAD Solicitors LLP (in administration) [2020] EWHC 1590 (Ch), [2020] 6 WLUK 251.................................................4.11, 4.56

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Table of Cases LSC Finance Ltd v Abensons Law Ltd (t/a Abensons Solicitors) [2015] EWHC 1163 (Ch), [2015] 3 WLUK 299...............................................1.02; 10.65 LSREF II Wight Ltd v Gately LLP [2016] EWCA Civ 359, [2016] 4 WLUK 249, [2016] PNLR 21..........................  3.81, 3.88; 10.130, 10.133, 10.152, 10.179 Lachaux v Independent Print Ltd [2017] EWCA Civ 1327, [2017] 9 WLUK 148, [2018] EMLR 2....................................................................................6.02 Lady Archer v Williams [2003] EWHC 1670 (QB), [2003] EMLR 38...... 13.05, 13.08, 13.26 Lahey v Pirelli Tyres Ltd [2007] EWCA Civ 91, [2007] 1 WLR 998, [2007] 2 WLUK 344...........................................................................................13.91, 13.92 Lake v Bushby [1949] 2 All ER 964, [1950] WN 28, (1950) 94 SJ 82...............9.39 Lakha & Booth, Re (unreported, 6 November 1998)..........................................13.75 Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897, [1996] 3 WLR 493, [1996] 3 All ER 545............................................17.17 Langsam v Beachcroft LLP [2012] EWCA Civ 1230...... 2.01, 2.10, 2.22; 12.52; 13.64 Lantic Sugar Ltd v Baffin Investments Ltd [2009] EWHC 3325 (Comm), [2010] 2 All ER (Comm) 1170, [2010] 2 Lloyd’s Rep 141.........................5.23 Lane v Cullens Solicitors [2011] EWCA Civ 547, [2012] 2 WLR 821, [2011] PNLR 25..................................................................................................7.31, 7.48 Larussa-Chigi v CS First Boston Ltd [1998] CLC 277.......................................15.26 Latchworth v Dryer [2016] EWHC 3424 (Ch), [2016] 12 WLUK 400..............4.16 Lavarello v Kyske Bank (Gibraltar) Ltd (unreported, 18 January 2018).............4.13 Law Society v Adcock & Morcroft [2006] EWHC 3212 (Admin), [2007] 1 WLR 1096, [2007] ACD 63.........................................................................16.44 Law Society v Ete [2019] EWHC 864 (Ch), [2019] 3 WLUK 331.....................16.23 Law Society v KPMG Peat Marwick [2000] 1 WLR 1921, [2000] 4 All ER 540, [2000] Lloyd’s Rep PN 929.................................................................7.28 Law Society v Salsbury [2008] EWCA Civ 1285, [2009] 1 WLR 1286, [2009] 2 All ER 487.................................................................................................16.83 Law Society v Sephton & Co [2006] UKHL 22, [2006] 2 AC 543, [2006] 2 WLR 1091 ............................... 7.15, 7.16, 7.17, 7.18, 7.20, 7.21, 7.22, 7.23,7.24, 7.25, 7.26, 7.28, 7.29, 7.30, 7.31, 7.32, 7.33, 7.34, 7.35, 7.36, 7.46, 7.48, 7.83 Law Society v Shah [2007] EWHC 2841 (Ch), [2009] Ch 223, [2008] 3 WLR 1401.....................................................................................................15.06; 17.38 Law Society v Sibley [2017] EWHC 1453 (Ch), [2017] 3 WLUK 704...... 16.22, 16.23 Law Society of England & Wales v Secretary of State for Justice [2010] EWHC 352 (QB), [2010] 2 WLUK 774, [2010] IRLR 407........................15.33 Layzell v Smith Morton & Long [1992] 1 EGLR 169, [1992] 13 EG 118.........9.70 Le Brocq (Mark) v Liverpool Crown Court [2019] EWCA Crim 1398, [2019] 4 WLR 108, [2019] 7 WLR 569..................................................................13.77 Lee v Sankey (1872-73) LR 15 Eq 204, [1873] 1 WLUK 23..........................4.21, 4.25 Leeds & Holbeck BS v Arthur & Cole [2001] Lloyd’s Rep PN 649, [2002] PNLR 4........................................................................................................4.42 Leeds v Lemos [2017] EWHC 1825 (Ch), [2018] Ch 81, [2018] 2 WLR 73......14.10, 14.20 Lehman Bros International (Europe) (No 2), Re [2011] EWCA Civ 917, [2011] 1 BCLC 184.....................................................................................4.02 Leicestershire County Council v Michael Faraday & Partners Ltd [1941] 2 KB 205, [1941] 2 All ER 483......................................................................14.02

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Table of Cases Lemma Europe Insurance Co Ltd, Re [2016] EWCA Civ 484, [2016] 5 WLUK 499...........................................................................................17.06, 17.12 Les Laboratoires Servier v Apotex Inc [2014] UKSC 55, [2015] AC 430, [2014] 3 WLR 1257.....................................................................................17.17 Levack v Philip Ross & Co (a firm) [2019] EWHC 762 (Comm), [2019] 3 WLUK 535, [2019] PNLR 20..................................................................4.10, 4.54 Levicom International Holding BV v Linklaters [2009] EWHC 812 (Comm), [2009] Lloyd’s Rep PN 156, (2009) 159 NLJ 632.......................... 2.02, 2.30; 3.08 Levicom International Holding BV v Linklaters [2010] EWCA Civ 494, [2010] PNLR 29, (2010) 107 (21) LSG 14..........................................12.27, 12.34 Levy v Solicitors Regulation Authority [2011] EWHC 740 (Admin).................16.54 Lewis, Re [1904] 2 Ch 656..................................................................................11.15 Lewis v Smith (1849) 1 Mac & G 417, 41 ER 1326...........................................6.01 Lexi Holdings (in administration) v Pannone & Partners [2009] EWHC 2590 (Ch)..........................................................................................................4.14, 4.19 Libertarian Investments Ltd v Hall [2014] 1 HKC 368, [2013] HKCFA 93.......4.45, 4.47, 4.48, 4.65 Liles v Terry [1895] 2 QB 679, [1895] 11 WLUK 35.........................................4.32 Lillicrap v Nalder & Son [1993] 1 WLR 94, [1993] 1 All ER 724 ....... 6.47, 6.48, 6.49; 14.19, 14.31, 14.32, 14.33, 14.34 Lim His-Wei Marc v Orix Capital Ltd [2010] SGCA 24....................... 5.05, 5.06, 5.08 Linaker v Keith Turner & Ashton (unreported, 5 November 1998).................2.29; 9.08 Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, [1993] 3 WLR 408, [1993] 3 All ER 417............................... 10.185; 11.30, 11.34 Lister v Hesley Hall Ltd [2001] UKHL 22, [2002] 1 AC 215, [2001] 2 WLR 1311................................................................................................ 5.12, 5.17, 5.19 Lister & Co v Stubbs (1890) 45 Ch D 1, [1890] 5 WLUK 12.............................4.33 Liverpool Roman Catholic Archdiocesen Trustees Inc v Goldberg [2001] 1 WLR 2337, [2001] 4 All ER 950, [2001] BLR 479.....................................7.81 Livingstone v Rawyards Coal (1880) 5 App Cas 25, (1880) 7 R (HL) 1........3.03; 9.58 Lloyd v Grace Smith & Co [1912] AC 716.....................................................5.18, 5.20 Lloyds Bank plc v Crosse & Crosse see Lloyds Bank plc v Burd Pearse Lloyds Bank plc v Burd Pearse; Lloyds Bank plc v Crosse & Crosse [2001] EWCA Civ 366, [2001] Lloyd’s Rep PN 452, [2001] PNLR 34.........7.70; 10.154 Lloyds Bank plc v Parker Bullen [2000] Lloyd’s Rep PN 51, [1999] EG 107 (CS), [1999] NPC 99....................................................................................9.46 Lloyds TSB Bank Ltd v Cooke-Arkwright (unreported, 10 October 2001)........1.29 Lloyds TSB Bank plc v Gravell (unrported, 1 Feburary 2000)...........................9.18 Lloyds TSB Bank plc v Markandan & Uddin [2012] EWCA Civ 65, [2012] 2 All ER 884, (2012) 162 NLJ 328................................  4.05, 4.07, 4.08, 4.49, 4.68, 4.69; 9.31; 10.88, 10.201 Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48, [2003] 4 All ER 43, [2003] 2 All ER (Comm) 665...........................................................................................  17.03, 17.22, 17.23 Locke v Camberwell Health Authority [1990] NLJR 205; aff’d [1991] 2 Med LR 249..........................................................................................2.07, 2.10; 13.64 Lockett v Norman-Wright [1925] Ch 56.............................................................5.23 London & South of England Building Society v Stone [1983] 1 WLR 1242, [1983] 3 All ER 105, (1983) 267 EG 69..................................................3.68, 3.69

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Table of Cases London Executive Aviation Ltd v Royal Bank of Scotland plc [2017] EWHC 1037 (Ch), [2017] 2 WLUK 720..................................................................2.21 Longstaff v Birtles [2001] EWCA Civ 1219, [2002] 1 WLR 470, [2001] 34 EG 98 (CS) ..................................................................................... 4.27, 4.31; 6.06 Lord Ashburton v Pape [1913] 2 Ch 469....................................... 6.02, 6.04, 6.15, 6.19 Lowline (PSV) Ltd v Direct Aviation Ltd (unreported, 8 March 1999)..............13.57 Lubrizol Ltd v Tyndalls (unreported, 8 April 1998)............................................13.32 Luke v Kingsley Smith & Co [2003] EWHC 1559 (QB), [2004] PNLR 12, (2003) 147 SJLB 1116.............................................................................3.46; 8.29 Luke v Wansboroughs (a firm) [2003] EWHC 3151 (QB), [2005] PNLR 2.......2.01, 2.10; 12.27 Lyell v Kennedy (No 3) (1884) 27 Ch D 1..........................................................14.25 Lynds v Fitzherbert Rowe [2017] NZHC 1297...................................................4.53 Lynne v Gordon Doctors & Walton (1991) 135 SJLB 29....................................11.17 Lyons v Fox Williams LLP [2018] EWCA Civ 2347, [2018] 10 WLUK 407, [2019] PNLR 9..................................................................................... 2.32; 12.22 M MA Lloyd & Son (in administration) v PPC International Ltd (t/a Professional Powercraft) [2016] EWHC 2162 (QB), [2016] 8 WLUK 272, [2017] PNLR 1................................................................................................13.11, 13.18 Macaulay v Premium Life Insurance Co Ltd (unreported, 29 April 1999)..........11.06 McCarthy v HM Prison Service [2005] All ER (D) 145.................................5.24, 5.25 MCashback Softeware 6 LLP v R & C Comrs [2013] UKFTT 679 (TC), [2014] SFTD 510.........................................................................................5.13 McCrindle Group Ltd v Maclay Murray & Spens [2013] CSOH 72, [2013] 5 WLUK 336, 2013 GWD 19-389..................................................................9.19 McCullagh v Lane Fox & Partners Ltd [1996] PNLR 205, 49 Con LR 124, [1996] 1 EGLR 35.......................................................................... 1.22, 1.30, 1.31 McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125, [1964] 1 All ER 430, [1964] 1 Lloyd’s Rep 16......................................................................1.09 McE v Prison Service of Northern Ireland sub nom Re C’s Application for Judicial Review [2009] UKHL 15, [2009] 1 AC 908, [2009] 2 WLR 782.....6.52; 14.26 McElroy Milne v Commercial Electronics Ltd [1993] NZLR 39.................  3.63; 9.58, 9.83, 9.87 McFadden v Platfords [2009] EWHC 121 (TCC)...............  2.01, 2.04, 2.10, 2.22, 2.24 McFaddens Solicitors v Chandrasekaran [2006] EWHC 1357 (QB)..................1.08 McFarlane v Wilkinson [1997] 2 Lloyd’s Rep 259, [1997] PNLR 578.......... 2.22, 2.24; 12.24 McGahie v Union of Shop Distributive & Allied Workers 1966 SLT 74............7.08 McIlraith v Ilkin [2007] NSWSC 911.................................................................5.50 McKaskell v Bensemen [1989] 3 NZLR 75........................................................6.18 McKie v Swindon College [2011] EWHC 469 (QB), [2011] IRLR 575............1.28 McKinnon v E-Surv Ltd [2003] EWHC 475 (Ch), [2003] Lloyd’s Rep PN 174, [2003] 2 EGLR 57...........................................................................3.80; 9.58 Maclean v Arklow Investments Ltd see Arklow Investments v Maclean [2000] 1 WLR 594, (2000) 144 SJLB 81 McLeish v Amoo-Gorrfried & Co (1993) 10 PN 102..........................................12.83

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Table of Cases McLellan v Fletcher (1987) 137 NLJ 593...........................................................11.17 McLoughlin v Jones, Espey & Wish t/a Grovers [2001] EWCA Civ 1743, [2002] QB 1312, [2002] 2 WLR 1279.........................................................12.85 McMahon v Grant Thornton UK LLP [2020] CSOH 50, [2020] 5 WLUK 338, 2020 GWD 19-269...............................................................................1.18 McManus Developments Ltd v Barbridge Properties Ltd & Blandy & Blandy [1996] PNLR 431, [1992] NPC 49..............................................................9.37 McManus v European Risk Insurance Co [2013] EWHC 18 (Ch), [2013] 1 WLUK 214, [2013] Lloyd’s Rep IR 533....................... 17.09, 17.10, 17.11, 17.33 McMeekin v Long [2002] 10 WLUK 120, [2003] 2 EGLR 81, [2003] 29 EG 120...............................................................................................................9.82 McNamara v Martin Mears & Co (1982) 127 SJ 69............. 12.60, 12.75, 12.78, 12.79 MacPherson v Wise [2011] EWCA Civ 399, [2011] BPIR 824..........................6.02 MacQuarie Bank Ltd v Myer [1994] 1 VR 350...................................................6.10 Madden v Quirk [1989] 1 WLR 702, [1989] RTR 304, (1989) 133 SJ 752........8.45 Madden (a barrister), Re [2004] EWCA Crim 754, [2004] PNLR 37.........13.75, 13.77 Madley v Cousins Combe & Mustoe [1997] EGCS 63...................................1.09; 9.06 Madoff Securities International Ltd (in liquidation) v Raven [2013] EWHC 3147 (Comm), [2013] 10 WLUK 612, [2014] Lloyd’s Rep FC 95.............4.16 Maes Finance Ltd v Leftleys [1998] PNLR 193..................................................14.19 Maes Finance Ltd v Sharp (unreported, 27 July 1999)........................................4.42 Magner v Royal Bank of Scotland plc [2020] UKPC 5, [2020] 2 WLUK 5.......4.18 Maharaj v Johnson [2015] UKPC 28, [2015] 6 WLUK 458, [2015] PNLR 27..1.13; 7.13, 7.27 Mahon v FBN Bank (UK) Ltd [2011] EWHC 1432 (Ch), [2011] 2 BCLC 83, [2011] BPIR 1029........................................................................................9.13 Mahoney v Purnell [1996] 3 All ER 61, [1996] 4 WLUK 289, [1997] 1 FLR 612...............................................................................................................4.81 Mainwaring v Goldtech (The Times, 19 February 1991)....................................13.83 Maitland-Hudson v Solicitors Regulation Authority [2017] EWHC 3478 (Admin), [2017] 12 WLUK 511..........................................................16.39, 16.50 Malik v Wales [2012] EWHC 4281 (QB), [2012] 7 WLUK 289........................13.11 Malkins Nominees Ltd v Societe Financiere Mirelis SA (Preliminary Issues) [2004] EWHC 2631 (Ch).....................................................................11.16, 11.27 Malouf v Contsantinou [2017] NSWSC 923.......................................................4.33 Malyon v Lawrence Messer & Co [1968] 2 Lloyd’s Rep 539, (1968) 112 SJ 623 ............................................................................................. 3.59; 12.73, 12.83 Manak v Solicitors Regulation Authority [2016] EWHC 1914 (Admin), [2016] 7 WLUK 739....................................................................................16.42 Manches LLP v Green (t/a Green Denman & Co) [2008] EWHC 917 (QB), [20008] 4 WLUK 734, [2008] 6 Costs LR 881...........................................2.28 Manchester BS v Grant Thornton LLP [2018] EWHC 963 (Comm), [2018] 5 WLUK 6, [2018] PNLR 27; appeal outstanding [2019] EWCA Civ 40, [2019] 1 WLR 4610...........................................  3.26, 3.27, 3.28, 3.29, 3.31, 3.34, 3.35, 3.37, 3.38; 8.18 Manitoba Metis Federation Inc v Canada (A-G) [2010] MBCA 71....................4.53 Mannai Investment Co Ltd v Eagle Star Life Assurance Co [1997] AC 749, [1997] 2 WLR 945, [1997] 3 All ER 352....................................................17.10 Man Nutzfahrzeuge AG v Frieghtliner Ltd [2007] EWCA Civ 910, [2007] BCC 986, [2008] PNLR 6............................................................................3.45

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Table of Cases Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469, [2001] 2 WLR 170...................... 4.18; 16.63 Mansion Estates Ltd v Hayre & Co [2016] EWHC 96 (Ch), [2016] 1 WLUK 428.................................................................................................. 2.32; 9.35, 9.63 Mantonella Pty Ltd v Thompson [2009] QCA 80, [2009] 2 Qd R 524...........4.50, 4.53 Manzanilla Ltd v Corton Property & Investments Ltd (No 2) [1997] 3 FCR 389.......................................................................................................13.22, 13.33 Mara v Browne [1896] 1 Ch 199.....................................................................4.25; 5.10 Marex Financial Ltd v Sevilleja [2018] EWCA Civ 1468, [2019] QB 173, [2018] 3 WLR 1412.......................................................................  1.14, 1.15, 1.16 Marks & Spencer plc v BNP Paribas Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742, [2015] 3 WLR 1843......................................1.01; 2.01 Marks & Spencer plc v Freshfields Bruckhaus Deringer [2004] EWHC 1337 (Ch), [2004] 1 WLR 2331, [2004] 3 All ER 773.......... 4.36; 6.62, 6.65, 6.68, 6.69 Marley v Rawlings (Costs) [2014] UKSC 51, [2015] AC 157, [2014] 3 WLR 1015.....................................................................................................11.24; 13.82 Marme Inversiones 2007 SL v Natwest Markets plc [2019] EWHC 366 (Comm), [2019] 2 WLUK 338....................................................................3.06 Marplace (Number 512) v Chaffe Street (a firm) [2006] EWHC 1919 (Ch) ......1.06; 2.29, 2.31, 2.32 Marquess of Aberdeen & Temair v Turcan Connell [2008] CSOH 183, 2009 SCLR 336, [2009] PNLR 18................................................................11.30, 11.34 Marsh v Sofaer [2003] EWHC 3334 (Ch), [2004] PNLR 24................. 6.13, 6.15, 6.43 Marsh v Sofaer [2006] EWHC 1217 (Ch), [2006] PNLR 35..............................13.49 Martin Boston & Co v Roberts [1996] PNLR 45, [1995] NPC 28........ 2.01, 2.07, 2.22, 2.24; 12.25 Martin v Triggs Turner Bartons (a firm) [2009] EWHC 1920 (Ch), [2010] PNLR 3 .......................................................................... 4.70; 11.13, 11.14, 11.15, 11.20, 11.22, 11.23 Maruha Corpn v Amaltal Corpn Ltd [2007] NZSC 40........................................4.53 Masons (a firm) v WD King Ltd [2003] EWHC 3124 (TCC), 92 Con LR 144.....1.08, 1.10 Massingberd’s Settlement, Re (1890) 63 LT 296................................................4.49 Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch), [2009] 1 WLR 881, [2008] 3 All ER 417........................................................... 2.12; 15.27 Masterman-Lister v Brutton & Co [2003] EWCA Civ 1889, [2003] 1 WLR 1511, [2003] 3 All ER 162...........................................................................5.26 Mathiesen v Clintons (a firm) [2013] EWHC 3056 (Ch), [2013] 10 WLUK 341...............................................................................................................2.28 Matlock Green Garages Ltd v Potter Brooke-Taylor & Wildgoose [2000] Lloyd’s Rep PN 935.................................................................................3.61; 9.91 Matrix Securities Ltd v Theodore Goddard [1998] STC 1, [1998] PNLR 290, [1997] BTC 578.............................................................................. 1.03; 2.07, 2.10 Mattis v Pollock (t/a Flamingos Nightclub) [2003] EWCA Civ 887, [2003] 1 WLR 2158, [2004] 4 All ER 85...................................................................5.17 May v Woollcombe, Beer & Watts [1999] PNLR 283, [1998] 3 EGLR 94, [1998] 51 ER 88.......................................................................................2.15, 2.21 Maynard v West Midlands Regional Health Authority [1984] 1 WLR 634, [1985] 1 All ER 635, (1984) 81 LSG 1926..................................................2.01 Mean v Thomas [1998] EGCS 2..........................................................................2.31

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Table of Cases Medcalf v Mardell (wasted costs order) [2002] UKHL 27, [2003] 1 AC 120, [2002] 3 WLR 172........................  6.49; 12.19; 13.04, 13.08, 13.16, 13.19, 13.22, 13.23, 13.25, 13.26, 13.28, 13.68, 13.73; 16.46 Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2019] EWCA Civ 83, [2019] 1 WLR 4481, [2019] 2 All ER 959.............4.37 Mehjoo v Harben Barker (a firm) [2014] EWCA Civ 358, [2014] 4 All ER 806, [2014] PNLR 24...................................................................... 1.13; 2.01, 2.32 Melbourne Mortgages Ltd v Turtle [2004] NIQB 82..........................................2.09 Melchior v Vettivel [2002] CP Rep 24.................................................................13.29 Mellor v Partridge [2013] EWCA Civ 477, [2013] 5 WLUK 112......................4.73 Mellor v Thompson (1886) 31 Ch D 55..............................................................6.46 Mengiste v Endowment Fund for the Rehabilitation of Tigray [2013] EWCA Civ 1003, [2013] 8 WLUK 172, [2014] PNLR 4........................................13.30 Merc Property Ltd, Re [1999] 2 BCLC 286................................................13.21, 13.30 Mercantile Building Society v JW Mitchell Dodds & Co [1993] NPC 99......9.37, 9.63 Mercantile Credit Co Ltd v Fenwick [1999] 2 FLR 110, [1999] Lloyd’s Rep PN 408, [1999] Fam Law 453.................................  1.02; 9.20, 9.21; 10.65, 10.66 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, [1995] 3 WLR 413, [1995] 3 All ER 918........................17.18 Merrett v Babb [2001] EWCA Civ 214, [2001] QB 1174, [2001] 3 WLR 1......1.29 Michael v Hart & Co [1901] 2 KB 867...............................................................4.61 Michael v West Yorkshire Police [2015] UKSC 2, [2015] AC 1732, [2015] 2 WLR 343......................................................................................................1.20 Middleton v Steeds Hudson [1998] 1 FLR 738, [1998] Fam Law 322...............2.28 Midland Bank v Cameron Thom, Peterkin & Duncans 1988 SLT 611,1988 SCLR 209 ...................................................................................... 1.21; 9.26, 9.32 Midland Bank plc v Cox McQueen (a firm) [1999] Lloyd’s Rep Bank 78, [1999] 1 FLR 1002, [1999] Lloyd’s Rep PN 223............1.02; 5.33; 10.66, 10.104 Midland Bank plc v Wallace see Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, [2002] AC 773, [2001] 3 WLR 1021 Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384, [1978] 3 WLR 167, [1978] 3 All ER 571..................................  1.09, 1.10, 1.13, 1.17; 2.01, 2.21; 7.11, 7.13, 7.15 Milligan’s Executors v Hewats [2013] CSOH 60, 2013 SLT 758, [2013] PNLR 23......................................................................................................11.06 Minkin v Cawdery Kaye Fireman & Taylor (t/a CKFT) [2012] EWCA Civ 546, [2012] 3 All ER 1117, [2012] 4 Costs LR 650................................1.11, 1.12 Minkin v Landsberg [2015] EWCA Civ 1152, [2016] 1 WLR 1489, [2015] 11 WLUK 416...................................... 1.07, 1.17; 2.08, 2.28, 2.31, 2.32; 6.36; 12.28 Minter v Priest [1930] AC 558..................................................................... 6.15; 14.22 Mintz (wasted costs order), Re (The Times, 16 July 1999).................................13.75 Mireskandari v Law Society [2009] EWHC 2224 (Ch), [2011] Costs LR Online 125, (2009) 106 (36) LSG 17...........................................................16.23 Moda Brands Ltd v Gateley LLP [2019] EWHC 1326 (QB), [2019] 5 WLUK 422, [2019] PNLR 27...................................................  3.19, 3.23, 3.69; 9.79, 9.86 Moduleco v Carillion Construction Ltd [2009] EWHC 250 (TCC), [2009] 2 WLUK 303...................................................................................................14.01 Moffat v Burges Salmon (a firm) [2002] EWCA Civ 1977, [2004] PNLR 13....12.20 Mohamed v Alaga & Co [2000] 1 WLR 1815, [1999] 3 All ER 699, [2000] CP Rep 87 ........................................................................................... 9.04; 15.30

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Table of Cases Molloy, Re [1997] 2 Cr App Rep 283..................................................................14.15 Monarch Steamship Co Ltd v KA/B Karlshamns Oljefabriker [1949] AC 196, [1949] 1 All ER 1, (1948-49) 82 Ll L Rep 137...........................................3.48 Montagu’s ST, Re [1987] 267..............................................................................4.24 Montgomery v Lanarkshire Health Board [2015] UKSC 11, [2015] AC 1430, [2015] 2 WLR 768.......................................................................................2.01 Montlake v Lambert Smith Hampton Group Ltd [2004] EWHC 938 (Comm), [2004] 3 EGLR 149, [2004] 20 EG 167 (CS)..............................................9.79 Mood Music Publishing Co Ltd v De Wolfe Ltd [1976] Ch 119, [1976] 2 WLR 451, [1976] 1 All ER 763...................................................................14.18 Moody v Cox [1917] 2 Ch 71...............................................4.31, 4.39, 4.40; 6.33, 6.40 Moore v Knight [1891] 1 Ch 547, [1890] 12 WLUK 66.....................................4.73 Morris v Duke-Cohan & Co (1975) 119 SJ 826..................................................9.78 Morris v Roberts (Inspector of Taxes) (wasted costs orde) [2005] EWHC 1040 (Ch), [2006] STC 135, [2005] PNLR 41.........................13.28, 13.37, 13.50 Morris v Wentworth-Stanley [1999] QB 1004, [1999] 2 WLR 470, [1999] 1 FLR 83.........................................................................................................8.34 Mount v Barker Austin [1998] PNLR 493........3.22; 12.42, 12.43, 12.44, 12.45, 12.47, 12.49, 12.53, 12.54, 12.55, 12.56, 12.57, 12.70 Morfoot v WF Smith & Co [2001] Lloyd’s Rep PN 658.....................................7.13 Morkot v Watson & Brown Solicitors [2014] EWHC 3439 (QB), [2014] 10 WLUK 751, [2015] PNLR 9....................................................... 4.42; 10.50, 10.51 Mortgage Business plc v Green [2013] EWHC 4243 (Ch), [2013] 6 WLUK 789...............................................................................................................9.13 Mortgage Business plc v Oliver & Co [2013] EWHC 3240 (QB), [2013] 7 WLUK 868...................................................................................................14.09 Mortgage Business plc v O’Shaughnessy sub nom Re North East Property Buyers Litigation [2012] EWCA Civ 17, [2012] 1 WLR 1521, [2012] HLR 21.........................................................................................................9.81 Mortgage Corpn v Halifax (SW) Ltd (No 2) [1999] Lloyd’s Rep PN 159..........10.137, 10.172 Mortgage Corpn v Lambert & Co [2000] Lloyd’s Rep Bank 207, [2000] BLR 265, [2000] Lloyd’s Rep PN 624.................................................................7.70 Mortgage Corpn v Shaire [2001] Ch 743, [2001] 3 WLR 639, [2001] 4 All ER 364...............................................................................................................5.26 Mortgage Express v Abensons Solicitors [2012] EWHC 1000 (Ch), [2012] 27 EG 90, [2012] 18 EG 103 (CS)....................................................................7.81 Mortgage Express Ltd v Bowerman [1996] 2 All ER 836, [1996] ECC 228, [1996] PNLR 62..............................................2.14; 6.21, 6.34, 6.38; 10.90, 10.92, 10.93, 10.94, 10.96, 10.97, 10.98, 10.100, 10.105, 10.106, 10.107, 10.108, 10.112; 14.08, 14.09 Mortgage Express v Iqbal Hafeez Solicitors [2011] EWHC 3037 (Ch).........4.05; 8.06; 10.68 Mortgage Express Ltd v Newman & Co (No 1) [1996] PNLR 603....... 2.30; 4.14, 4.19 Mortgage Express v Sawali [2010] EWHC 3054 (Ch), [2011] PNLR 11, [2011] 11 EGLR 58.....................................................................  6.04, 6.47; 14.09 Mortgage Express v Sawali (Costs) [2011] 2 Costs LR 288...............................14.29 Morgan v Pooley [2010] EWHC 2447 (QB).......................................................9.27 Morrell v Morrell (1882) LR 7 PD 68.................................................................11.13

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Table of Cases Motor Crown Petroleum Ltd v SJ Berwin & Co [2000] Lloyd’s Rep PN 438, [2000] NPC 26..............................................................................9.35, 9.60; 12.74 Mouchel Ltd v Van Oord Ltd (No 2) [2011] EWHC 1516 (TCC), [2011] BLR 492, [2011] PNLR 26...................................................................................8.33 Moy v Pettman Smith (a firm) [2005] UKHL 7, [2005] 1 WLR 581, [2005] 1 All ER 903.............................................. 2.01, 2.02, 2.04, 2.21, 2.22; 12.24, 12.27 Muller v Linsley & Mortimer [1996] PNLR 74, (1995) 92 (3) LSG 38, (1995) 139 SJLB 43.................................................................................................14.39 Munro, Re [1981] 1 WLR 1358, [1981] 3 All ER 215, (1981) 125 SJ 512.........5.23 Munro-Wilson v Olswang (a firm) [2003] EWHC 721 (QB), (2003) 147 SJLB 538...........................................................................................................1.09, 1.10 Murphy v Young & Co’s Brewery plc [1997] 1 WLR 1591, [1997] 1 All ER 518, [1997] 1 Lloyds Rep 236.....................................................................13.81 Murray v Legal & General Assurance Society Ltd [1970] 2 QB 495, [1970] 2 WLR 465, [1969] 3 All ER 794..........................................................  17.39, 17.44 Murray v Lloyd [1989] 1 WLR 1060, [1990] 2 AlL ER 92, (1989) 21 HLR 525...........................................................................................................9.46, 9.70 Mustad & Son v Dosen [1964] 1 WLR 109 (Note), [1963] 3 All ER 416, [1963] RPC 41.............................................................................................6.09 Myatt v National Coal Board (No 2) [2007] EWCA Civ 307, [2007] 1 WLR 1559, [2007] 4 All ER 1094................................................................  13.85, 13.87 Myers v Elman [1940] AC 282, [1939] 4 All ER 484.....................................5.40, 5.44 N NM Rothschild & Sons Ltd v Berensons [1997] NPC 15.....................1.24, 1.27; 3.10; 9.29; 10.191 NRG Holding NV v Bacon & Woodrow [1995] 1 All ER 976, [1995] 2 Lloyd’s Rep 77 .................................6.18, 6.47; 14.13, 14.21, 14.32, 14.33, 14.34 Nadreph Ltd v Willmett & Co [1978] 1 WLR 1537, [1978] 1 All ER 746, (1978) 122 SJ 744....................................................................................3.79; 9.92 Nahome v Last Cawthra Feather Solicitors [2010] EWHC 76 (Ch), [2010] PNLR 19, (2010) 160 NLJ 766................................................................9.89, 9.91 Napier & Ettrick v RF Kershaw Ltd [1993] 1 Lloyd’s Rep 10, [1992] 7 WLUK 120...................................................................................................4.25 Nash v Eli Lilly & Co [1993] 1 WLR 782, [1993] 4 All ER 383, [1992] 3 Med LR 353.............................................................................................7.54, 7.55 Nash v Phillips (1974) 232 EG 1219............................................  2.14; 9.04, 9.60, 9.71 Nathan v Dollars & Sense Ltd [2008] NZSC 20.................................................5.20 National Crime Agency v Robb [2014] EWHC 4384 (Ch), [2015] Ch 520, [2015] 3 WLR 23.........................................................................................4.14 National Homes Loans Corpn v Giffen, Couch & Archer [1998] 1 WLR 207, [1997] 3 All ER 808, [1998] PNLR 111....................1.17; 6.34, 6.36; 9.23; 10.61, 10.62, 10.90, 10.100, 10.101, 10.104, 10.106, 10.107 National Home Loans Corpn plc v Stevens & Co (unreported, 2 June 1997).....10.49 National Trustees Co of Australasia v General Finance Co of Australasia [1905] AC 373, [1905] 5 WLUK 29............................................................4.70 National Westminster Bank plc v Amin [2002] UKHL 9, [2002] 1 FLR 735, [2002] NPC 33.............................................................................................9.18 National Westminster Bank plc v Bonas [2003] EWHC 1821 (Ch)............... 6.21, 6.79; 14.14, 14.35

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Table of Cases National Westminster Bank plc v Breeds [2001] Lloyd’s Rep Bank 98, (2011) 151 NLJ 170.................................................................................................9.18 Nationwide Building Society v ATM Abdullah & Co [1999] Lloyd’s Rep PN 616................................................................10.97, 10.98, 10.112, 10.165, 10.170 Nationwide Building Society v Adams Delmar [1999] Lloyd’s Rep PN 241, [1999] PNLR 606, [1999] EG 15 (CS)........................................................10.165 Nationwide Building Society v Balmer Radmore see Nationwide Building Society v Various Solicitors (No 3) [1999] Lloyd’s Rep PN 241, [1999] PNLR 606, [1999] EG 15 (CS) Nationwide Building Society v Davisons Solicitors (a firm) [2012] All ER (D) 141........................................................................................  4.05, 4.68, 4.69; 8.06 Nationwide Building Society v Davisons Solicitors [2012] EWCA Civ 1626, [2012] 12 WLUK 308, [2013] PNLR 12.......................................  1.02; 2.14; 5.33 Nationwide Building Society v Dunlop Haywards (DHL) Ltd (t/a Dunlop Heywood Lorenz) [2009] EWHC 254 (Comm), [2010] 1 WLR 258, [2009] 2 All ER (Comm) 715...................  8.33, 8.36, 8.37, 8.39, 8.40, 8.43, 8.44, 8.45; 10.135, 10.182, 10.194 Nationwide Building Society v Goodwin Harte Nationwide Building Society v Various Solicitors (No 3) [1999] Lloyd’s Rep PN 241, [1999] PNLR 606, [1999] EG 15 (CS) Nationwide Building Society v Lewis [1998] Ch 482, [1998] 2 WLR 915, [1998] 3 All ER 143.....................................................................................5.12 Nationwide Building Society v Littlestone & Cowan [1999] Lloyd’s Rep PN 625.......................................................................................................10.84, 10.99 Nationwide Building Society v Richard Grosse & Co [1999] Lloyd’s Rep PN 348.......................................................................................................4.42; 10.164 Nationwide Building Society v Thimbleby & Co [1999] Lloyd’s Rep PN 359, [1999] PNLR 733, [1999] EG 34 (CS)................................................8.03; 10.194 Nationwide Building Society v Vanderpump & Sykes [1999] Lloyd’s Rep PN 422............................................................................  4.04; 10.113, 10.121, 10.194 Nationwide Building Society v Various Solicitors (No 1) [1999] PNLR 52, (1998) 95 (6) LSG 24, (1998) 148 NLJ 241..........6.02, 6.04; 14.09, 14.11, 14.15, 14.20, 14.21, 14.24, 14.25, 14.28, 14.29 Nationwide Building Society v Various Solicitors (No 3) sub nom Nationwide Building Society Balmer Radmore sub nom Nationwide Building Society v Goodwin Harte [1999] Lloyd’s Rep PN 241, [1999] PNLR 606, [1999] EG 15 (CS)............................  2.26, 2.30; 4.04, 4.38, 4.42, 4.53, 4.54, 4.58, 4.59; 6.34; 8.14; 10.05, 10.44, 10.47, 10.49, 10.50, 10.51, 10.57, 10.93, 10.94, 10.96, 10.97, 10.98, 10.99, 10.104, 10.108, 10.113, 10.120, 10.164, 10.165, 10.166, 10.169, 10.201 Natixis SA v Marex Financial [2019] EWHC 2549 (Comm), [2019] 2 Lloyd’s Rep 431, [2019] 10 WLUK 11.....................................................................1.31 Naylor v Beard [2001] EWCA Civ 1201, [2001] CP Rep 104, [2001] 2 FLR 1346.........................................................................................................6.03, 6.76 Nayyar v Denton Wilde Sapte [2009] EWHC 3218 (QB), [2010] Lloyd’s Rep PN 139, [2010] PNLR 15.........................................................................4.33; 5.20 Ndole Assets Ltd v Designer M & E Services UK Ltd [2018] EWCA Civ 2865, [2018] 12 WLUK 566, [2019] BLR 147...................................  15.03, 15.04

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Table of Cases Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (No 1) [1995] 1 All ER 976, [1995] 2 Lloyd’s Rep 77............................................14.22 Needler Financial Services Ltd v Taber [2002] 3 All ER 501, [2002] Lloyd’s Rep PN 32, [2001] Pens LR 253..............................................................3.75, 3.77 Neighbour v Barker [1992] 40 EG 140, [1992] EG 85 (CS), [1992] NPC 76.....2.24; 9.52 Neill v Crown Prosecution Service (1997) 161 JP 153, [1997] COD 171, (1997) 161 JPN 110.....................................................................................13.77 Nelson v Nelson [1997] 1 WLR 233, [1997] 1 All ER 970, [1997] BPIR 702...5.29 Nesbitt v Holt [2007] EWCA Civ 249, [2007] PNLR 24, (2007) 151 SJLB 430...............................................................................................................12.14 Nestle v National Westminster Bank plc [1993] 1 WLR 1260, [1994] 1 All ER 118, [1992] 5 WLUK 51..............................................................................4.61 Newcastle International Airport Ltd Eversheds LLP [2012] EWHC 2648 (Ch).9.06 Newell-Austin v Solicitors Regulation Authority [2017] EWHC 411 (Admin), [2017] 3 WLUK 114, [2017] Med LR 194..................................................16.69 New Islington & Hackney Housing Association Ltd v Pollard Thomas & Edwards Ltd [2001] BLR 74, (2001) 3 TCLR 25, [2001] Lloyd’s Rep PN 243...........................................................................................................7.11; 9.52 Newline Corporate Name Ltd v Morgan Cole (a firm) [2007] EWHC (Comm) 1628, [2007] 7 WLUK 260, [2008] PNLR 2...............................................8.17 New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237, [1997] 7 WLUK 437................................................................17.28 Nielsen v Watson (1981) 125 DLR (3d) 326...................................................9.37, 9.69 Niersmans v Pesticcio sub nom Pesticcio v Huet [2004] EWCA Civ 372, [2004] WTLR 699, (2004) 154 NLJ 653.....................................................9.12 Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2004] EWCA Civ 487, [2004] 2 All ER (Comm) 289, [2004] 2 Lloyd’s Rep 391...............................................................................................................8.30 Nixon v Stephensons (unreported, 3 April 1996)................................................2.31 Nocton v Lord Ashburton [1914] AC 932, [1914-15] All ER Rep 45............ 4.28, 4.29, 4.44, 4.48 Nordea Trust Co (Isle of Man) Ltd, Re [2010] WTLR 1393...............................11.27 Nordstern Allegemeine Versicherungs AG v Internav Ltd [1999] 23 LS Gaz R 33.................................................................................................................13.82 Normans Bay Ltd (formerly Illingworth Morris Ltd) v Coudert Bros [2004] EWCA Civ 215, (2004) 101 (13) LSG 36, (2004) SJLB 296......................3.47 Normid Housing Association v Ralphs & Mansell (Third Party Rights: Mareva Injunction) [1989] 1 Lloyd’s Rep 265, [1988] 7 WLUK 37, 21 Con LR 98....................................................................................................17.41 Nouri v Marvi [2010] EWCA Civ 1101, [2011] CP Rep 6, [2011] PNLR 7 .....1.13; 7.13, 7.16, 7.26, 7.35; 9.08 Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908, [2015] QB 499, [2015] 2 WLR 526...................................................................................4.15, 4.52 Nyckeln Finance Ltd (in administration) v Edward Symmons & Partners (No 1) [1996] PNLR 245....................................................................................14.19 Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (Inteerest on Damages) [1997] 1 WLR 1627, [1998] 1 All ER 305, [1998] Lloyd’s Rep Bank 39.........................7.03, 7.20, 7.21, 7.36, 7.38, 7.39, 7.40; 8.07; 10.133, 10.139, 10.143, 10.144, 10.145, 10.148, 10.157, 10.158

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Table of Cases O O (a minor) (costs: liability of legal aid board), Re [1997] 1 FLR 465, [1997] Fam Law 242...............................................................................................13.34 OPM Property Services Ltd v Venner [2004] EWHC 427 (Ch)..........................5.23 OT Computers Ltd (in administration), Re [2004] EWCA Civ 653, [2004] Ch 317...............................................................................................................17.40 Oates v Pittman & Co [1998] PNLR 683, (1998) 7 P & CR 490, [1998] EG 82 (CS) .................................................................................. 9.39, 9.59, 9.66, 9.71 O’Brien v Chief Constable of South Wales Police [2005] UKHL 26, [2005] 2 AC 534, [2005] 2 WLR 1038.......................................................................14.18 Oceanic Finance Co Ltd v Norton Rose (unreported, 26 March 1997)...............14.39 O’Donnell v Reichard [1975] VR 916.................................................................3.11 O’Rourke v Darbishire [1920] AC 581............................................... 6.46; 14.26, 14.29 Offer-Hoar v Larkstore Ltd [2006] EWCA Civ 1079, [2006] 1 WLR 2926, [2007] 1 All ER (Comm) 104......................................................................10.183 Ogilvy & Mather Ltd v Rubinstein Callingham Polden & Gale (unreported, 20 July 1999).......................................................................................  12.27, 12.52 O’Hara v ACC Bank plc [2011] IEHC 367, [2012] PNR 3.................................7.21 O’Hare v Coutts & Co [2016] EWHC 2224 (QB), [2016] 9 WLUK 160...........2.01 Oldham v Kyrris [2003] EWCA Civ 1506, [2004] BCC 111, [2004] PNLR 18.1.24 Omega Trust Co Ltd v Wright Son & Pepper (No 1) [1997] PNLR 424, (1998) 75 P & CR 57, [1997] 18 EG 120...................................... 1.30, 1.33; 9.30 Omega Trust Co Ltd v Wright Son & Pepper (No 2) [1998] PNLR 337............2.14 Orientfield Holdings Ltd v Bird & Bird LLP [2017] EWCA Civ 348, [2017] 5 WLUK 168, [2017] 1 EGLR 26..............................................................9.35, 9.38 Osborne v Follett Stock (a firm) [2017] EWHC 1711 (QB), [2017] 7 WLUK 288, [2017] PNLR 35...................................................................................11.12 O’Sullivan v Management Agency & Music Ltd [1985] QB 428, [1984] 3 WLR 448, [1985] 3 All ER 351...................................................................4.63 Otter v Church, Adams, Tatham & Co [1953] Ch 280, [1953] 1 WLR 156, [1953] 1 All ER 168............................................................................ 11.17, 11.18 Owen v Fielding [1998] EG 110 (CS)...........................................3.78; 9.39, 9.59, 9.66 Owners of Cargo Laden on Board the Albacruz v Owners of the Albazero [1977] AC 774, [1976] 3 WLR 419, [1979] 3 All ER 129.................10.190; 11.30 Owners of the Ship Front Act v Owners of the Ship Vicky 1 [2008] EWCA Civ 101, [2008] 2 All ER (Comm) 42, [2008] 2 Lloyd’s Rep 45................3.15 Owners of the Steamship Enterprises of Panama Inc v Owners of SS Ousel (The Liverpool) (No 2) [1963] P 64, [1960] 3 WLR 597, [1960] 3 All ER 307...............................................................................................................3.68 P P & P Property Ltd v Owen White & Catlin LLP; Dreamvar (UK) Ltd v Mary Monson Solicitors Ltd [2018] EWCA Civ 1082, [2018] PNLR 29........ 1.08, 1.19, 1.21, 1.22; 2.14, 2.29; 4.01, 4.03, 4.05, 4.06, 4.07, 4.08, 4.66, 4.67, 4.69, 4.70, 4.74; 5.26, 5.27, 5.29, 5.32, 5.33, 5.34, 5.44; 9.07, 9.08, 9.26, 9.31, 9.53; 10.72, 10.77, 10.88, 10.195, 10.196, 10.197, 10.198 PCCW-HKT Telephone Ltd v Aitken [2009] 2 HKC 342...................................6.61 PH Law v Brown (t/a Integrum Law) [2018] EWCA Civ 1629, [2018] 7 WLUK 339, [2018] 4 Costs LR 823............................................................2.12

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Table of Cases Padden v Bevan Ashford [2011] EWCA Civ 1616, [2012] 1 WLR 1759, [2012] 2 All ER 718...............................................................2.01; 9.16, 9.17, 9.20 Padhiar v Patel [2001] Lloyd’s Rep PN 328................................................13.56, 13.63 Page v Hewetts Solicitors [2012] EWCA Civ 805, [2012] 6 WLUK 319, [2012] WTLR 1427......................................................................................4.72 Pal (t/a Tapas Bar Cerveceria) v R & C Comrs [2006] EWHC 2016 (Ch), [2008] STC 2442, [2007] BTC 5967...........................................................5.12 Palermo, The (1884) LR 9 PD 6..........................................................................14.25 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1988] 2 Lloyd’s Rep 505, aff’d [1989] 1 Lloyd’s Rep 568....................................................11.28 Parabola Investments Ltd v Browallia Cal Ltd (formerly Union Cal Ltd) [2010] EWCA Civ 486, [2011] QB 477, [2010] 3 WLR 1266............... 3.15, 3.84; 4.55; 9.72 Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400, (1998) 95 (35) LSG 36, (1998) 142 SJLB 243................................................ 4.12, 4.79; 7.83 Paragon Finance plc (formerly National Home Loans Corpn) v Freshfields [1999] 1 WLR 1183, [2000] CP Rep 81, [1999] Lloyd’s Rep PN 446... 6.03, 6.47; 14.13, 14.31, 14.34, 14.35, 14.36, 14.37, 14.38 Paragon Finance plc (formerly National Home Loans Corpn) v Hare (The Times, 1 April 1999)....................................................................................10.194 Paragon Finance plc (formerly National Home Loans Corpn) v Pender [2005] EWCA Civ 760, [2005] 1 WLR 3412, [2005] NPC 84...............................10.189 Paratus AMC Ltd v Countrywise Surveyors Ltd [2011] EWHC 3307 (Ch), [2012] PNLR 12..........................  10.164, 10.166, 10.167, 10.170, 10.174, 10.189 Parker v Rolls (1854) 14 CB 691, 139 ER 284................................................9.47, 9.56 Parker v SJ Berwin & Co [2008] EWHC 3017 (QB), [2009] PNLR 17.............3.14 Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12, [1990] 3 WLR 767, [1990] 2 All ER 577.............................................................................11.27 Parkin v Alba Proteins Ltd [2013] EWHC 2036 (QB), [2013] 7 WLUK 1008.............................................................................................................7.79 Parr v Keystone Healthcare Holdings Ltd [2019] EWCA Civ 1246, [2019] 4 WLR 99, [2019] 7 WLUK 223................................................................4.30, 4.52 Parry-Jones v Law Society [1969] 1 Ch 1, [1968] 2 WLR 397, [1968] 1 All ER 177 ...................................................................6.05, 6.51; 14.12; 16.29, 16.30 Partco Ltd v Wragg [2002] 1 Lloyd’s Rep 320................................................1.29, 1.30 Patel v Daybells [2001] EWCA Civ 1229, [2002] PNLR 6, [2001] 32 EG 87 (CS) ....................................................................  2.14, 2.17; 5.50; 9.54, 9.55, 9.56 Patel v Freddy’s Ltd [2017] EWHC 73 (Ch), [2017] 1 WLUK 406....................2.23 Patel v Hooper & Jackson [1999] 1 WLR 1792, [1999] 1 All ER 992, [1999] Lloyd’s Rep PN 1............................................................................ 9.59, 9.65, 9.74 Patel v Mirza [2016] UKSC 42, [2017] AC 467, [2016] 3 WLR 399.............4.33; 9.57 Patel v Solicitors Regulation Authority [2012] EWHC 3373 (Admin), (2012) 156 (47) SJLB 31.........................................................................................16.80 Paton v Rosesilver Group Corpn [2017] EWCA Civ 158, [2017] 3 WLUK 585...........................................................................................................4.37, 4.38 Payne, Re (1912) 28 TLR 201.............................................................................2.27 Payroller Ltd (in liquidation) v Little Panda Consultants [2020] EWHC 391 (QB), [2020] 2 WLUK 309..........................................................................4.14 Pearless de Rougemont & Co v Pilbrow [1999] 3 All ER 355, [1999] 2 Costs LR 109, [1999] 2 FLR 139..........................................................................2.05

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Table of Cases Pearson v Sanders Witherspoon [2000] Lloyd’s Rep PN 151, [2000] PNLR 110........................................................................................................  3.37; 12.26 Peel Port Shareholder Finance Co Ltd v Dornoch Ltd [2017] EWHC 876 (TCC), [2017] 2 All ER (Comm), [2017] Bus LR 1663.....................  17.40, 17.46 Pegasus Management Holdings SCA v Ernst & Young (a firm) [2010] EWCA Civ 181, [2010] 3 All ER 297, [2010] PNLR 23................... 7.17, 7.20, 7.21, 7.27 Pegasus Management Holdings SCA v Ernst & Young [2012] EWHC 738 (Ch), [2012] PNLR 24, [2012] STI 1387.....................................................10.183 Pegrum v Fatharly [1996] SR 92 (SC of WA).....................................................1.09 Pelling v Bruce-Williams (unreported, 1 December 1998)..................................13.73 Penn v Bristol & West BS [1997] 1 WLR 1356, [1997] 3 All ER 470, [1997] 3 FCR 789....................................................................................................2.29 Penn v Bristol & West BS [1995] 2 FLR 938, [1996] 2 FCR 729, [1996] Fam Law 28.........................................................................................................15.24 Penn v Bristol & West BS [1997] 1 WLR 1356, [1997] 3 All ER 470, [1997] 3 FCR 789.......................................................  5.31, 5.34, 5.38; 9.07, 9.08; 10.197 Pepper (Inspector of Taxes) v Hart [1993] AC 593, [1992] 3 WLR 1032, [1993] 1 All ER 42.......................................................................................15.09 Pepper (UK) Ltd t/a Engage Credit v Fox [2016] NICh 1, [2016] 1 WLUK 171, [2016] PNLR 27...................................................................................14.07 Perotti v Collyer-Bristow (a firm) (liability: negligence) [2003] EWHC 25 (Ch), [2003] WTLR 1473........................................................................1.11, 1.12 Perry v Moysey [1998] PNLR 657......................................................................7.65 Perry v Raleys Solicitors [2019] UKSC 5, [2020] AC 352, [2019] 2 WLR 636.................................................. 3.01, 3.09, 3.12, 3.13, 3.16, 3.20, 3.24; 12.33, 12.34, 12.35, 12.36, 12.38, 12.41 Persaud (Luke) v Persaud (Mohan) [2003] EWCA Civ 394, [2004] 1 Costs LR 1, [2003] PNLR 26........................................................................  13.23, 13.37 Petrodel Resources Ltd v Prest [2013] UKSC 34, [2013] 2 AC 415, [2013] 3 WLR 1..........................................................................................................4.27 Peyman v Lanjani [1985] Ch 457, [1985] 2 WLR 154, [1984] 3 All ER 703.....2.26; 9.52 Phelps v Hillingdon LBC [2001] 2 AC 619, [2000] 3 WLR 776, [2000] 4 All ER 504 ....................................................................................................2.01, 2.03 Phelps v Stewarts (a firm) [2007] EWHC 1561 (Ch), [2007] PNLR 32, [2007] WTLR 1267.................................................................................... 1.07; 2.26, 2.28 Philex plc v Golban (The Times, 9 July 1993)....................................................13.45 Philips & Co v Whatley [2007] UKPC 28, [2008] Lloyd’s Rep IR 111, [2007] PNLR 27.................................................................................. 12.41, 12.47, 12.48 Phillips-Higgins v Harper [1954] 1 QB 411, [1954] 2 WLR 782, [1954] 2 All ER 51 (Note)................................................................................................7.82 Phippen v Palmers (a firm) [2002] 2 WLUK 592, [2002] 2 FLR 415, [2002] Fam Law 593...............................................................................................12.27 Pickersgill v Riley [2004] UKPC 14, [2004] Lloyd’s Rep IR 795, [2004] PNLR 31......................................................................  2.26, 2.31, 2.32; 9.76, 9.83 Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543, [2009] 6 WLUK 267, [2009] PNLR 31...........................................................................................5.39 Picton Jones v Arcadia Developments Ltd [1989] 03 EG 85..............................15.25 Pilkington v Wood [1953] Ch 770, [1953] 3 WLR 522, [1953] 2 All ER 810 ...3.62, 3.64, 3.68, 3.69; 9.48, 9.59, 9.63, 9.71; 11.25

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Table of Cases Pilkington v Wood [1953] Ch 770, [1953] 3 WLR 522, [1953] 2 All ER 810....11.25 Pilmer v Duke Group Ltd (2001) 207 CLR 165..................................................8.14 Pine v Law Society sub nom Re a Solicitor (The Telegraph, 5 December 2000)............................................................................................................16.35 Piper v Daybell Court-Cooper & Co (1969) 210 EG 1047.................... 9.41, 9.59, 9.63 Pizzey v Ford Motor Co Ltd [1994] PIQR P15...................................................6.72 Platform Funding Ltd v Bank of Scotland plc (formerly Halifax plc) [2008] ECA Civ 930, [2009] QB 426, [2009] 2 WLR 1016...................................1.02 Platform Funding Ltd v Miller Parris Solicitors (unreported, 29 March 2012)............................................................................................................10.64 Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190, [1999] 2 WLR 518, [1999] 1 All ER 833.........................  8.07, 8.08, 8.09, 8.10, 8.11, 8.12; 10.130, 10.143, 10.144, 10.161, 10.170, 10.172, 10.178 Playboy Club London Ltd v Banca Nazionale de Lavoro SpA [2018] UKSC 43, [2018] 1 WLR 4041, [2019] 2 All ER 478............................................1.19 Polley v Warner Goodman & Street [2003] EWCA Crim 1013, [2003] PNLR 40...................................................................................................  7.44, 7.45, 7.46 Porter & Co v R & C Comrs [2018] UKFTT 264 (TC), [2018] 5 WLUK 184, [2018] STI 1137...........................................................................................15.04 Port of Sheerness Ltd v Brachers [1997] IRLR 214...................................  12.75, 12.79 Portman Building Society v Bevan Ashford [2000] Lloyd’s Rep Bank 96, [2000] Lloyd’s Rep PN 354, [2000] PNLR 344................ 10.132, 10.148, 10.149, 10.157, 10.159 Portman Building Society v Hamlyn Taylor Neck [1998] 4 All ER 202, [1998] PNLR 664, (1999) 77 P & CR 66...........................................  4.25; 10.200 Potters v Loppert [1973] Ch 399, [1973] 2 WLR 469, [1973] 1 All ER 658......9.78 Pounds v Eckford Rands (a firm) [2003] Lloyd’s Rep PN 195...........................7.08 Powell v Whitman Breed Abbott & Morgan [2003] EWHC 1169 (QB), [2005] PNLR 1 ...................................................................................................9.46, 9.66 Pratt Holdings Pty Ltd v Comr of Taxation (2004) 136 FCR 357, 207 ALR 217...............................................................................................................14.24 Precis (521) plc v William M Mercer Ltd [2005] EWCA Civ 114, [2005] PNLR 28, [2005] OPLR 89.........................................................................1.30 Preferred Mortgages Ltd v Countrywide Surveyors Ltd [2005] EWHC 2820, [2006] PNLR 9, [2005] 31 EG 81 (CS)................ 10.124, 10.125, 10.126, 10.169 Premium Real Estate Ltd v Stevens [2009] NZSC 15.....................................4.53, 4.37 Presentaciones Musicales SA v Secunda [1994] Ch 271, [1994] 2 WLR 660, [1994] 2 All ER 737.....................................................................................5.39 President of India v La Pintada Compania Navigacion SA (The La Pintada) [1985] AC 104, [1984] 3 WLR 10, [1984] 2 All ER 773.............................4.65 Prestige Properties Ltd v Scottish Provident Institution [2002] EWHC 330 (Ch), [2003] Ch 1, [2002] 3 WLR 1011..................................................2.15, 2.23 Prestwich v Poley (1865) 18 CB (NS) 806..........................................................5.23 Primavera v Allied Dunbar Assurance plc [2002] EWCA Civ 1327, [2003] Lloyd’s Rep PN 14, [2003] PNLR 12......................................................3.75, 3.77 Pritchard v Co-operative Group Ltd [2011] EWCA Civ 329, [2012] QB 320, [2011] 3 WLR 1272.....................................................................................8.03 Pritchard, Joyce & Hinds (a firm) v Batcup [2009] EWCA Civ 369, [2009] PNLR 28, [2009] 19 EG 110 (CS)......................................................  2.01; 12.24

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Table of Cases Procter v Raley v Solicitors [2015] EWCA Civ 400, [2015] 4 WLUK 570, [2015] PNLR 24..................................................................................  9.35; 12.29 Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] EWHC 3341 (Ch), [2016] 4 WLR 3, [2015] 11 WLUK 531...................................6.72 Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756, [1991] 3 All ER 878.................................................................................................6.77 Prudential Insurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, [1982] 2 WLR 31, [1982] 1 All ER 354......................................................1.14 Pulvers v Chan [2007] EWHC 1814 (Ch), [2008] PNLR 8............................4.13, 4.21 Pulvers (a firm) v Chan [2007] EWHC 2406 (Ch), [2007] 10 WLUK 745, [2008] PNLR 8.............................................................................................11.29 Punford v Gilberts Accountants [1999] ECC 91, [1998] PNLR 763..........  11.04, 11.05 Punjab National Bank v de Boinville [1992] 1 WLR 1138, [1992] 3 All ER 104, [1992] 1 Lloyd’s Rep 7....................................................................1.10, 1.22 Purrunsing v A’Court & Co [2016] EWHC 789 (Ch), [2016] 4 WLR 81, [2016] 4 WLUK 292 ..........................................................................  4.69; 15.32 Q Qualifying Insurers Subscribing to the ARP v Ross & Co [2004] EWHC 1181 (Ch), [2004] 5 WLUK 577, [2004] UKCLR 1483......................................17.01 Queen Elizabeth’s Grammar School Blackburn Ltd v Banks Wilson (a firm) [2001] EWCA Civ 1360, [2001] Lloyd’s Rep PN 840, [2002] PNLR 14...2.30; 9.41 Quilter v Hodson Developments Ltd [2016] EWCA Civ 1125, [2016] 11 WLUK 483, [2017] PNLR 7..........................................................  3.78, 3.81; 9.64 Quinn Direct Insurance Ltd v Law Society of England and Wales [2010] EWCA Civ 805, [2011] 1 WLR 308, [2010] Lloyd’s Rep IR 655......... 6.04, 6.52; 14.11, 14.12, 14.13; 17.01, 17.10, 17.11 Quinn v CC Automotive Group Ltd t/a Carecraft [2010] EWCA Civ 1412, [2011] 2 All ER (Comm) 584......................................................................9.07 R R v A (wasted costs order) [2000] PNLR 628............................................  13.64, 13.77 R v Ahmati (Agron) (order for costs) [2006] EWCA Crim 1826, [2007] PNLR 3........................................................................................................13.90 R v Basra (wasted costs Order) [1998] PNLR 535..............................................13.77 R v Bonython [1984] SASR 45...........................................................................2.19 R v Camden London Borough Council, ex p Martin [1997] 1 WLR 359, [1997] 1 All ER 307, [1997] 1 FLR 950......................................................13.32 R v Central Criminal Court, ex p Francis & Francis (a firm) [1989] 1 AC 346, [1988] 3 WLR 989, [1988] 3 All ER 77.............................................  6.46; 14.27 R v Cornelius (Benjamin Jason) [2012] EWCA Crim 500, [2012] PNLR 23, [2012] Lloyd’s Rep FC 435................................................................  10.41, 10.61 R v Cox (Richard Cobden) sub nom R v Railton (Richard Johnson) (1884-85) LR 14 QBD 153, [1881-85] All ER Rep 68........................................  14.26, 14.30 R v Derby Magistrates Court, ex p B [1996] AC 487, [1995] 3 WLR 681, [1995] 4 All ER 526...............................  6.01, 6.02, 6.03, 6.04, 6.48; 13.24; 16.28 R v Duffy (Michael) [2004] EWCA Crim 330, [2004] PNLR 36.......................13.77 R v Hayes (Justin) [2004] EWCA Crim 2844, [2005] 1 Cr App R 33................5.25

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Table of Cases R v Horsham District Council, ex p Wenman [1995] 1 WLR 680, [1994] 4 All ER 681, (1995) 7 Admin LR 73...................................................................13.57 R v Immigration Appeal Tribunal, ex p Gulsen [1997] COD 430.......................13.32 R v Luton Family Proceedings Court, ex p R [1998] CLY 496...........................13.64 R v Manchester Crown Court, ex p R (legal professional privilege) [1999] 1 WLR 832, [1999] 4 Al ER 35, [1999] 2 Cr App R 267......................  14.22, 14.24 R v Neill [2002] 3 SCR 631, 2002 SCC 70.........................................................4.36 R v Newell (Alan) [2012] EWCA Crim 650, [2012] 2 Cr App R 10, (2012) 176 JP 273................................................................................................5.23, 5.25 R v Newton (1982) 4 Cr App R (S) 388..............................................................16.54 R v Pearson [2005] EWCA Crim 1424................................................................6.46 R v Qadi [2000] PNLR 137.................................................................................13.77 R v SVS (wasted costs) [2012] EWCA Crim 319, [2012] 3 Costs LR 502, [2012] PNLR 21...........................................................................................13.77 R v Secretary of State for the Home Office, ex p Wong (Tim Fat) [1995] COD 331...............................................................................................................13.73 R v Snaresbrook Crown Court, ex p DPP [1988] QB 532, [1987] 3 WLR 1054, [1988] 1 All ER 315...........................................................................14.27 R v Westminster London Borough, ex p Geehan & Butler [1995] COD 204...............................................................................................................13.56 R v Wood Green Crown Court, ex p DPP [1993] 1 WLR 723, [1993] 2 All ER 656, (1993) 157 JP 516................................................................................13.75 R & C Comrs v City of London Magistrates’ Court [2000] 1 WLR 2020, [2000] 4 All ER 763, [2000] 2 Cr App R 348..............................................13.76 R & C Comrs v Pal see Pal (t/a Tapas Bar Cerveceria) v R & C Comrs [2006] EWHC 2016 (Ch), [2008] STC 2442, [2007] BTC 5967 R (on the application of B) v X Crown Court [2009] EWHC 1149 (Admin), [2009] PNLR 30, [2010] Crim LR 145........................................................13.30 R (on the application of the DPP) v Cheshire Justices [2002] EWHC 466 (Admin), [2002] PNLR 36...........................................................................13.77 R (on the application of Dean & Dean) v The Law Society [2008] EWHC 2980 (Admin)......................................................................................  16.22, 16.23 R (on the application of Deputy Chief Ombudsman) v French [2012] EWHC 113 (Admin), (2012) 162 NLJ 139..............................................................15.36 R (on the application of Ford) v Financial Services Authority [2012] EWHC 997 (Admin), [2012] Lloyd’s Rep FC 461...................................................6.73 R (on the application of Ford) v Financial Services Authority [2011] EWHC 2583 (Admin), [2012] 1 All ER 1238, [2012] 1 BCLC 622...............  14.06, 14.10 R (on the application of Ford) v Financial Services Authority [2012] EWHC 997 (Admin), [2012] 4 WLUK 267, [2012] Lloyd’s Rep FC 461...............6.73 R (on the application of Hallinan, Blackburn-Gittings & Nott (a firm)) v Middlesex Guildhall Crown Court [2004] EWHC 2726 (Admin), [2005] 1 WLR 766...................................................................................................14.30 R (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service [2008] EWCS Civ 642, [2008] Bus LR 1486, (2008) 158 NLJ 897.....................................................................................15.35 R (on the application of Hide) v Staffordshire CC [2007] EWHC 2441 (Admin), [2008] PNLR 13, [2008] ACD 3..................................................13.73 R (on the application of Holden) v Solicitors Regulation Authority [2012] EWHC 2067 (Admin)..................................................................................16.79

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Table of Cases R (on the application of Howe) v South Durham Magistrates’ Court [2004] EWHC 362 (Admin), (2004) 168 JP 424, [2005] RTR 4............................14.24 R (on the application of IFG Financial Services Ltd) v Financial Ombudsman Service [2005] EWHC 1153 (Admin), [2006] 1 BCLC 534.......................15.35 R (on the application of Jet2.com Ltd) v Civil Aviation Authority [2018] EWHC 3364 (Admin), [2018] 12 WLUK 127, [2019] ACD 28..................14.23 R (on the application of Latchman) v Secretary of State for the Home Department [2004] EWHC 2795 (Admin)..................................................13.42 R (on the application of Malik Law Chambers Solicitors) v Legal Complaints Service (The Law Society) [2010] EWHC 981 (Admin), [2010] ACD 62, (2010) 107 (20) LSG 18...............................................................................15.33 R (on the application of Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2002] UKHL 21, [2003] 1 AC 563, [2002] 2 WLR 1299.......6.02, 6.46, 6.51, 6.52; 14.11, 14.12; 16.28, 16.29, 16.30 R (on the application of Ngole) v University of Sheffield [2019] EWCA Civ 1127, [2019] 7 WLUK 20, [2019] ELR 443................................................16.02 R (on the application of Putt) v General Pharmaceutical Council [2017] EWHC 809 (Admin), [2017] 4 WLUK 263, (2017) 156 BMLR 222.........16.02 R (on the application of Prudential plc) v Income Tax Special Comr [2010] EWCA Civ 1094, [2011] QB 669, [2011] 2 WLR 50.................................6.03 R (on the application of Thompson) v Law Society [2004]EWCA Civ 167, [2004] 1 WLR 2522, [2004] 2 All ER 113..................................................16.11 RBS (rights issue litigation), Re [2016] EWHC 3161, [2017] 1 WLR 1991, [2016] 12 WLUK 201..............................................................  14.23, 14.24, 14.25 RBS (rights issue litigation), Re [2015] EWHC 3433 (Ch), [2015] 11 WLUK 717...............................................................................................................2.19 RG Carter Building Ltd v Kier Business Services Ltd [2018] EWHC 729 (TCC), [2018] 1 WLR 4598, [2018] 4 All ER 456......................................7.85 RSPCA v Sharp [2010] EWCA Civ 1474, [2011] 1 WLR 980, [2011] STC 553...............................................................................................................11.14 Raviu v Marlbray Ltd [2016] EWCA Civ 476, [2016] 1 WLR 5147, [2016] 5 WLUK 529...................................................................................................5.36 Radford v De Froberville [1977] 1 WLR 1262, [1978] 1 All ER 33, 7 BLR 35............................................................................................................  3.67; 9.70 Radford & Co v Charles [2003] EWHC 3180 (Ch), [2004] PNLR 25................13.10 Rahim v Arch Insurance Co (Europe) Ltd [2016] EWHC 2967 (Comm), [2016] 11 WLUK 558..................................................................................17.19 Rahman v Arearose Ltd [2001] QB 351, [2000] 3 WLR 1184, (2001) 62 BMLR 84.................................................................................................3.46; 8.29 Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2019] EWHC 3 (Comm), [2019] 1 WLUK 57..........................  6.04; 14.11, 14.22, 14.24 Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm), [2011] 1 Lloyds Rep 123, [2011] Bus LR D65......3.06 Raineri v Miles [1981] AC 1050, [1980] 2 WLR 847, [1980] 2 All ER 145.......9.61 Raintree v Holmes (1984) 134 NLJ 522..........................................................9.38, 9.39 Raja v Austin Gray (a firm) [2002] EWCA Civ 1965, [2003] BPIR 725, [2003] Lloyd’s Rep PN 126.........................................................................1.24 Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831.................... 6.01, 6.21, 6.57, 6.61 Rama v Millar [1996] 1 NZLR 257.....................................................................4.53

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Table of Cases Ratiu v Conway [2005] EWCA Civ 1302, [2006] 1 All ER 571, [2006] 1 EGLR 125 .................................................  2.14; 4.27; 6.06, 6.10, 6.29, 6.30, 6.79 Rawnsley v Weatherall Green & Smith North Ltd [2009] EWHC 2482 (Ch), [2009] 9 WLUK 507, [2010] 1 BCLC 658..................................................1.15 Rayner v Wolferstans (a firm) [2015] EWHC 2957 (QB), [2015] 10 WLUK 634...............................................................................................................7.08 Reader v Molesworths Bright Clegg Solicitors [2007] EWCA Civ 169, [2007] 1 WLR 1082, [2007] 3 All ER 107..............................................................1.25 Reaveley v Safeway Stores plc [1998] PNLR 526........................................2.10; 13.64 Recover Ltd (in liquidation), Re sub nom Hornan v Latif Group SL [2003] EWHC 536 (Ch), [2003] BCC 976, [2003] 2 BCLC 186........................6.71, 6.77 Recovery Partners GP Ltd Revoke LLP v Rukhartze [2018] EWHC 2918 (Comm), [2019] Bus LR 116, [2018] 11 WLUK 15...................................5.13 Redbridge LBC v Johnson [2011] EWHC 2861 (QB)........................................6.02 Redbus LMDS Ltd v Jeffrey Green Russell (a firm) [2006] EWHC 2938 (Ch), [2007] PNLR 12...........................................................................................3.46 Reddy v Lachlan [2000] Lloyd’s Rep PN 858..............................................  5.42; 15.27 Redman v Zurich Insurance plc [2017] EWHC 1919 (QB), [2018] 1 WLR 280. [2017] 7 WLUK 630............................................................................17.37 Redmayne Bentley Stockbrokers v Isaacs [2010] EWHC 1504 (Comm)...........15.26 Redstone Mortgages Ltd v B Legal Ltd [2014] EWHC 3398 (Ch), [2014] 10 WLUK 571...............................................................................................2.26; 9.39 Reeves v Metropolitan Police Comr [2000] 1 AC 360, [1999] 3 WLR 363, [1999] 3 All ER 897.................................................................................3.41; 8.03 Reeves v Thrings & Long (No 1) [1996] PNLR 265, [1993] EG 196 (CS) , [1993] NPC 159...........................................................  2.30, 2.31; 9.41, 9.58, 9.67 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, [1942] 1 All ER 378........4.30, 4.79 Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9....1.13; 2.09, 2.10; 13.17, 13.64 Rentokil Initial 1927 plc v Goodman Derrick LLP [2014] EWHC 2994 (Ch), [2014] 9 WLUK 349....................................................................................9.76 Rey v Graham & Oldham [2000c] BPIR 354......................................................12.83 Ricci v Masons [1993] 38 EG 154...................................................................9.89, 9.90 Richard Buxton v Mills-Owens [2010] EWCA Civ 122, [2010] 1 WLR 1997, [2010] 4 All ER 405.....................................................................................1.12 Richards v Cox [1943] KB 139, [1942] 2 All ER 624, (1942) 74 Ll L Rep 23...2.04 Richards v Law Society [2009] EWHC 2087 (Admin).......................................4.31 Rickards v Jones (No 2) [2002] EWCA Civ 1344, [2003] PNLR 13..................9.35 Richard Buxton (Solicitors) v Mills-Owens [2010] EWCA Civ 122, [2010] 1 WLR 1997, [2010] 4 All ER 405.................................................................1.11 Richards (t/a Richards & Co) v Hughes sub nom Hughes v Richards [2004] EWCA Civ 266, [2004] PNLR 35, [2011] WTLR 997...............  1.10, 1.28; 11.32 Riddick v Thames Board Mills Ltd [1977] QB 881, [1977] 3 WLR 63, [1977] 3 All ER 677 ............................................................................................6.76, 6.77 Ridehalgh v Horsefield sub nom Allen v Unigate Dairies Ltd [1994] Ch 205, [1994] 3 WLR 462, [1994] 3 All ER 848...................  2.01, 2.09, 2.10, 2.11; 6.46; 13.04, 13.05, 13.16, 13.18, 13.19, 13.24, 13.25, 13.28, 13.36, 13.38, 13.42, 13.44, 13.45, 13.51, 13.52, 13.53, 13.57, 13.60, 13.64, 13.67, 13.70, 13.73, 13.75, 13.77

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Table of Cases Ridgewood Properties Group Ltd v Kilpatrick Stockton LLP [2014] EWHC 2502 (Ch), [2014] 7 WLUK 928, [2014] PNLR 31.....................................12.16 Riley v Reddish LLP [2019] 6 WLUK 96...........................................................5.14 Rind v Theodore Goddard (a firm) [2008] EWHC 459 (Ch), [2008] PNLR 24, [2009] BTC 8037....................................................1.28; 7.48; 11.06, 11.07, 11.18 Robert Irving & Burns v Stone [1997] 10 WLUK 295, [1997] CLC 1593, [1998] Lloyd’s Rep IR 258..........................................................................17.06 Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 240, [2010] 2 WLR 1227....11.19, 11.20 Roberts v JW Ward & Son (1981) 125 SJ 120.....................................................9.94 Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4, [2018] AC 736, [2018] 2 WLR 595.........................................................................1.20 Robinson v Ness & Co (a firm) [2017] EWHC 2305 (Ch), [2017] 9 WLUK 263...........................................................................................................4.33; 9.36 Robinson v PE Jones (Contractors) Ltd [2011] EWCA 9, [2012] QB 44, [2011] 3 WLR 815.......................................................................................1.19 Robinson v Robinson (1851) 1 De GM & G 247, 42 ER 547.............................4.61 Rochpion Properties (4) LLP v Hill Dickinson LLP [2019] EWHC 2354 (TCC), [2019] 9 WLUK 243, [2020] PNLR 11...........................................3.04 Roe v Robert McGregor & Sons [1068] 1 WLR 925, [1968] 2 All ER 636, (1968) 112 SJ 235........................................................................................12.26 Roiter Zucker (a firm) v Khadijeh Minai [2005] EWHC 2676 (QB)..................9.36 Roker House Investments Ltd v Saunders [1997] 10 WLUK 407, [1997] EGCS 137................................................................................................9.71, 9.87 Rondel v Worsley [1969] 1 AC 191, [1967] 1 WLR 142, [1967] 3 WLR 1666.....12.02 Rooks Rider v JR Steel [1993] 4 All ER 716, (1993) 143 NLJ 1063..............5.45, 5.50 Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2012] EWCA Civ 1021, [2013] 1 All ER (Comm) 308, [2013] Bus LR 543........................ 4.37, 4.38; 6.37 Ross v Caunters [1980] Ch 297, [1979] 3 WLR 605, [1979] 3 All ER 580 .......1.26, 1.27; 11.02, 11.03, 11.12, 11.23 Ross River Ltd v Waveley Commercial Ltd [2012] EWHC 81 (Ch)...... 4.27; 6.07, 6.10 Rowe v Turner, Hopkins & Partners [1980] 2 NZLR 550...................................8.05 Royal Bank of Scotland v Chandra [2010] EWHC 105 (Ch), [2010] 1 Lloyd’s Rep 677 ................................................................................  9.11, 9.13, 9.14, 9.15 Royal Bank of Scotland v Etridge (No 2) sub nom Midland Bank plc v Wallace [2001] UKHL 44, [2002] AC 773, [2001] 3 WLR 1021........... 9.09, 9.11, 9.13, 9.14, 9.15, 9.16, 9.17, 9.18, 9.19, 9.21, 9.22, 9.23, 9.24, 9.25; 10.85, 10.87 Royal Bank of Scotland plc v Bannerman Johnstone Mclay [2005] CSIH 39, 2005 1 SC 437, [2006] BCC 148.................................................................1.30 Royal Brompton NHS Trust v Hammond (No 3) [2002] UKHL 14, [2002] 1 WLR 1397, [2002] 2 All ER 801............... 8.19, 8.20, 8.22, 8.23, 8.24, 8.25, 8.26, 8.27, 8.28, 8.30, 8.38, 8.39, 8.42 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, [1995] 3 WLR 64, [1995] 3 All ER 97............................................  4.13, 4.15, 4.17, 4.18, 4.24; 11.27 Royal Mail Group v DAF Trucks Ltd [2018] CAT 19, [2018] 12 WLUK 709...14.25 Rubenstein v HSBC Bank plc [2012] EWCA Civ 1184, (2012) 156 (35) SJLB 31.................................................................................................................3.56 Rumsey v Owen, White & Caitlin (1977) 245 EG 225.......................................3.63 Ruparel v Awan [2001] Lloyd’s Rep PN 258................................. 5.07, 5.08, 5.43, 5.44

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Table of Cases Rushmer v Mervyn Smith (t/a Mervyn E Smith & Co) [2009] EWHC 94 (QB), [2009] 1 WLUK 590, [2009] Lloyd’s Rep PN 41.............................1.14 Russell v Fraser (1980) 118 DLR (3d) 733.........................................................11.13 Rybak v Langbar International Ltd [2011] EWHC 451 (Ch), [2011] 2 WLUK 586, [2011] PNLR 16...................................................................................13.57 S S v S (application to prevent solicitor acting); ZS v RS [2017] EWHC 2660 (Fam), [2017 10 WLUK 555, [2018] 1 FCR 263........................................6.61 SCF Tankers Ltd (formerly Fiona Trust & Holding Corpn) v Privalov [2016] EWHC 2163 (Comm), [2017] EWCA Civ 1877, [2018] 1 WLR 5623, [2017] 11 WLUK 479..................................................................................4.55 SEB Trygg Aktiebolag v Manches [205] EWHC 35 (Comm), [2005] 1 Lloyd’s Rep 129.......................................... 1.08; 5.24, 5.25, 5.26, 5.28, 5.29, 5.39 SES Contracting Ltd v UK Coal plc [2007] EWCA Civ 791, [2007] CP Rep 46, [2007] 5 Costs LR 758...........................................................................14.01 SITA v Wyatt Co (UK) Ltd [2002] EWHC 2025 (Ch)........................................2.24 SRJ v Persons Unknown [2014] EWHC 2293 (QB), [2014] 7 WLUK 386, [2014] Info TLR 242..............................................................................6.15; 14.24 Saab v Angate Consulting Ltd [2019] EWHC 1558 (Comm), [2019] 6 WLUK 321, [2019] Lloyd’s Rep FC 542.................................................................6.46 Saif Ali v Sydney Mitchell & Co [1980] AC 198......................  1.03; 2.01, 2.22; 12.02, 12.18, 12.20; 13.51 St Anselm Development Co Ltd v Slaughter & May (a firm) [2013] EWHC 125 (Ch), [2013] 2 WLUK 7........................................................................9.89 St Dominics Ltd v Royal Bank of Scotland plc [2015] EWHC 3822 (QB), [2016] 1 WLUK 1........................................................................................2.21 St Paul Travelers Insurance Co Ltd v Okpuruah [2006] EWHC 2107 (Ch)........10.182 St Vincent European General Partner Ltd v Robinson [2018] EWHC 1230 (Comm), [2018] 5 WLUK 464, [2019] 1 BCLC 706..................................1.16 Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 2 All ER 841, [2011] 1 Lloyd’s Rep 462............................................................................17.18 Sampson v John Boddy Timber Ltd [1995] NLJR 851.......................................13.55 Sangster v Biddulphs [2005] EWHC 568 (Ch), [2005] PNLR 33.......................5.12 Sansom v Metcalfe Hambleden [1997] 12 WLUK 356, 57 Con LR 88, [1998] PNLR 542....................................................................................................2.21 Santander UK plc v Fletcher [2018] EWHC 2778 (Ch), [2018] 10 WLUK 365, [2019] 2 P & CR 4...............................................................................9.22 Santander UK plc v RA Legal Solicitors [2014] EWCA Civ 183, [2014] 2 WLUK 723, [2014] Lloyd’s Rep FC 282...........................  4.66, 4.68, 4.69; 10.88 Sarwar v Alam [2001] EWCA Civ 1401, [2002] 1 WLR 125, [2001] 4 All ER 541...............................................................................................................12.21 Sasea Finance Ltd v KPMG [2000] 1 All ER 676, [2000] BCC 989, [2000] 1 BCLC 236....................................................................................................3.45 Satnam Investments Ltd v Dunlop Heywood [1999] 3 All ER 652, [1999] 1 BCLC 385, [1999] Lloyd’s Rep PN 201......................................................6.21 Saunders v Anglia Building Society (formerly Northampton Town & County Building Society) [1971] AC 1004, [1970] 3 WLR 1078, [1970] 3 All ER 961...............................................................................................................9.10 Sawrij v Lynx (Helping Abused Animals) Ltd (unreported, 21 February 1997)....13.71

xc

Table of Cases Scarf v Jardine (1882) 7 App Cas 345, [1882] All ER Rep 651, [1882] 6 WLUK 45.....................................................................................................5.30 Schering Chemicals Ltd v Falkman Ltd [1982] QB 1, [1981] 2 WLR 848, [1981] 2 All ER 321.................................................................................6.24, 6.25 Schubert Murphy v Law Society [2017] EWCA Civ 1295, [2017] 4 WLR 400, [2017] 8 WLUK 287............................................................................9.38 Schumann v Veale Wasbrough [2015] EWCA Civ 441, [2015] 5 WLUK 118, [2015] PNLR 25.......................................................................................7.63, 7.65 Schuppan (a bankrupt) (No 1), Re [1996] 2 All ER 664, [1997] 1 BCLC 211, [1996] BPIR 486..........................................................................................6.77 Schyde Investments Ltd v Cleaver [2011] EWCA Civ 929, [2011] 2 P & CR 21........................................................................................... 9.26, 9.27, 9.35, 9.82 Science Research Council v Nasse [1980] AC 1028, [1979] 3 WLR 762, [1979] 3 All ER 673.....................................................................................6.76 Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] EWCA Civ 688, [2003] 2 All ER (Comm) 190, [2003] 5 WLUK 510...................................17.21 Scott v Cousins (2001) 37 ETR (2d) 113 (Ontario SC).......................................11.13 Scott & Scott v Kennedys [2011] EWHC 3808 (Ch)............................. 9.38, 9.68, 9.73 Scott v Solicitors Regulation Authority [2016] EWHC 1256 (Admin), [2016] 5 WLUK 673................................................................................................16.69 Scullion v Bank of Scotland plc (t/a Colleys) [2010] EWHC 2253 (Ch), [2011] PNLR 5.............................................................................................1.30 Seale v Perry [1982] VR 193......................................................................  11.03, 11.12 Searles v Cann & Hallett [1999] PNLR 494.................................. 1.09, 1.10, 1.17, 1.28 Seaton v Seddon [2012] EWHC 735 (Ch).............................................. 4.77, 4.78; 7.83 Seavision Investment SA v Evennett (The Tiburon) [1992] 2 Lloyd’s Rep 26...11.23 Sebry v Companies House [2015] EWHC 115 (QB), [2016] 1 WLR 2499, [2015] 4 All ER 681.....................................................................................1.28 Secretary of State for the Environment, Transport & the Regions v Unicorn Consultancy Services (unreported, 19 October 2000).............................9.45, 9.94 Secretary of State for Trade & Industry v Bairstow [2003] EWCA Civ 321, [204] Ch 1, [2003] 13 WLR 841.................................... 12.11, 12.12, 12.13, 12.16 Secured Residential Funding Ltd v Nationwide Building Society [1997] NPC 147...............................................................................................................10.192 Seery v Leathes Prior (a firm) [2017] EWHC 80 (QB), [2017] 1 WLUK 397, [2017] PNLR 14...........................................................................................12.28 Segelman (deceased), Re [1996] Ch 171, [1996] 2 WLR 173, [1995] 3 All ER 676...............................................................................................................11.14 Segenhoe Ltd v Atkins [1990] ACSR 691, (1992) 29 NSWLR 569....................3.69 Selangor United Rubber Estates v Craddock (No 3) [1968] 1 WLR 1555, [1968] 2 All ER 1083, [1968] 2 Lloyd’s Rep 289........................................4.14 Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v IRC Comrs [2007] UKHL 34, [2008] 1 AC 561, [2007] 3 WLR 354................... 4.63; 10.137, 10.144 Sevilleja v Marex Financial Ltd [2020] UKSC 31..............................................1.14 Seymour v Caroline Ockwell & Co [2005] EWHC 1137 (QB), [2005] PNLR 39.................................................................................................... 2.07, 2.13; 3.91 Shade v Compton Partnership [2000] Lloyd’s Rep PN 81, [2000] PNLR 218...7.08 Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350, [2003] 2 WLR 922.................................................................................................. 1.14, 1.15, 1.16 Shah v Singh [1996] PNLR 83............................................................................13.62

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Table of Cases Shaker v Steggles Palmer (a firm) [2002] EWCA Civ 1452, [2003] Ch 530, [2003] 2 WLR 922...............................................  10.148, 10.157, 10.159, 10.177 Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281, [2005] 2 WLR 1213.............................................................................................................4.14 Sharif v Garrett & Co [2001] EWCA Civ 1269, [2002] 1 WLR 3118, [2002] 3 All ER 195.......................................................... 12.42, 12.43, 12.47, 12.49, 12.50 Sharma v Hunters [2011] EWHC 2546 (Fam), [2012] 2 Costs LR 237, [2012] PNLR 6...............................................................................................  13.29, 13.71 Sharpe v Addison (t/a Addison Lister) [2003] EWCA Civ 1189, [2004] PNLR 23..............................................................................................12.43, 12.48, 12.51 Sharratt v London Central Bus Co Ltd (No 3) sub nom Hollins v Russell [2003] EWCA Civ 718, [2003] 1 WLR 2487, [2003] 4 All ER 590......  2.04, 2.14 Shaw v Fraser Southwell [1999] Lloyd’s Rep PN 633.................  3.78; 9.46, 9.59, 9.64 Shaw v Halifax (SW) Ltd (t/a Hartnell Taylor Cook Residential) [1996] PNLR 451, 66 Con LR 86, (1997) 13 Const LJ 127...................................3.83 Shaw v Leigh Day [2018] EWHC 2034 (QB), [2018] WLUK 735, [2019] PNLR 2........................................................................................................12.26 Sheldon v RHM Outhwaite (Underwirting Agencies) Ltd [1996] AC 102, [1995] 2 WLR 570, [1995] 2 All ER 558....................................................7.80 Shell UK Ltd v Total UK Ltd sub nom Colour Quest Ltd v Total Downstream UK plc [2010] EWCA Civ 180, [2011] QB 86, [2010] 3 WLR 1192.........1.28; 11.01, 11.03, 11.28 Shepherd Construction Ltd v Pinsent Mason LLP [2012] EWHC 43 (TCC), [2012] BLR 213, 141 Con LR 232..............................................................1.08 Sherlock Holmes International Society Ltd [2016] EWHC 1392 (Ch), [2016] 4 WLR 173, [2016] 6 WLUK 352.................................................. 5.30, 5.35, 5.38 Sherman v Fitzhugh Gates (a firm) [2003] EWCA Civ 886, [2003] PNLR 39, [2003] WTLR 973........................................................................................13.56 Shlosberg v Avonwick Holdings Ltd [2016] EWCA Civ 1138, [2017] Ch 210, [2017] 2 WLR 1075..................................................6.02, 6.72, 6.73; 14.10, 14.15 Shogun Finance Ltd v Hudson [2004] UKHL 62, [2004] 1 AC 919, [2003] 3 WLR 1371....................................................................................................5.32 Shore v Sedgwick Financial Services Ltd [2008] EWCA Civ 863, [2009] Bus LR 42, [2008] PNLR 37..........................................................................  7.21, 7.60 Siasati v Bottoms & Webb [1997] EGCS 22, [1996] PNLR 409................... 2.26, 2.28; 9.46, 9.68 Siddiqui v Masters & Scholars of the University of Oxford [2018] EWHC 184 (QB), [2018] 2 WLUK 156, [2018] ELR 320.......................................2.02 Sigoia Wealth Ltd v Vector Trustees Ltd [2018] EWHC 1774 (Ch), [2018] 7 WLUK 214...................................................................................................14.18 Silversafe Ltd (in liquidation) v Hood [2006] EWHC 1849 (Ch), [2007] STC 871, [2006] STI 1988...................................................................................14.18 Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA Civ 1413, [2019] 4 WLR 112, [2019] 8 WLUK 35......................................................4.13 Simmons v Overbury Steward & Eaton (unreported, 31 July 2001)...................2.30 Simmons v Pennington & Son [1955] 1 WLR 183, [1955] 1 All ER 240, (1955) 99 SJ 146 .........................................................................................9.82 Simms v Conlon & Harris sub nom Conlon v Simms [2006] EWCA Civ 1749, [2008] 1 WLR 484, [2007] 3 All ER 802...................... 12.13, 12.14, 12.15 Simms v The Law Society [2005] EWHC 408 (Admin)............................  14.12; 16.29

xcii

Table of Cases Simple Simon Catering Ltd v JE Binstock Miller & Co (1973) 228 EG 527, (1973) 117 SJ 529........................................................................................9.43 Simpson v Grove Tompkins & Co (1982) 126 SJ 347...........................  9.47, 9.59, 9.61 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administration) [2011] EWCA Civ 347, [2012] Ch 453, [2011] 4 All ER 335...............................................................................................................4.24 Singh v Sardar Investments Ltd [2002] All ER (D) 243......................................5.36 Singla v Stockler [2012] EWHC 1176 (Ch), (2012) 162 NLJ 713......  6.19, 6.58; 14.10 Sino Channel Asia Ltd v Dana Shipping & Trading Pte Singapore [2017] EWCA Civ 1703, [2018] 1 All ER (Comm) 1046, [2018] 1 Lloyd’s Rep 17.................................................................................................................5.23 Skylight Maritime SA v Ascot Underwriting Ltd [2005] EWHC 15 (Comm), [2005] PNLR 25, (2000) 155 NLJ 139.......................................... 5.35, 5.36, 5.38 Slater v Bissett (1986) 85 FLR 118.....................................................................6.18 Smith v Claremont Haynes & Co (The Times, 3 September 1991).....................11.11 Smith v Eric S Bush (a firm) sub nom Harris v Wyre DC [1990] 1 AC 831, [1989] 2 WLR 790, [1989] 2 All ER 514.............................. 1.20, 1.29, 1.30, 1.32 Smith v Eversheds (a firm) [2014] EWHC 2622 (Ch), [2014] 6 WLUK 326.....5.42 Smith v Linskills [1996] 1 WLR 763, [1996] 2 All ER 353, (1996) 146 NLJ 209...............................................................................................................12.16 Smith v Mansi [1963] 1 WLR 26, [1962] 3 All ER 857, (1962) 106 SJ 876......9.04 Smith v South Gloucestersire District Council [2002] EWCA Civ 1131, [2002] 3 EGLR 1, [2002] 38 EG 206.....................................................  9.59, 9.70 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, [1996] 3 WLR 1051, [1996] 4 All ER 769............. 3.84, 3.87, 3.88; 10.194 Snipper v Enever Freeman & Co [1991] 2 EGLR 270, [1990] EG 100 (CS).....3.63 Société Commerciale de Réassurance v Eras International Ltd (formerly Eras (UK)) [1992] 2 All ER 82 (Note), [1992] 1 Loyd’s Rep 570.................  7.09, 7.52 Société Internationale de Telecommunications Aeronautiques SC v Wyatt Co (UK) Ltd [2002] All ER (D) 122.................................................................2.15 Society of Lloyds v Kitson Environmental Services Ltd (1994) 67 BLR 102....14.39 Sodi (Sadhana) (appeal against a wasted costs order), Re [2019] EWCA Crim 1304, [2019] 4 WLR 103, [2019] 7 WLUK 360..........................................13.76 Solicitor (No 6119/92), a, Re (1994) 144 NLJ 707, (1994) 138 SJLB 100.........16.39 Solicitor, a, (wasted costs order) (No 1 of 1994), Re [1996] 1 Cr App R 248, [1996] 1 FLR 40, [1996] 3 FCR 365...........................................................13.75 Solicitor (Chinese Walls), Re [1999] PNLR 950.................................................6.62 Solicitor (Lincoln), Re [1966] 1 WLR 1604, [1966] 3 All ER 52, [1966] 3 WLUK 30.....................................................................................................5.50 Solicitors, a, Re [1997] Ch 1, [1996] 3 WLR 16, [1995] 3 All ER 482.......... 6.15, 6.16, 6.21, 6.32, 6.56, 6.57, 6.60, 6.73 Solicitos, Re [1992] QB 959, [1992] 2 WLR 809, [1992] 1 All ER 353.............6.57 Solicitors Regulation Authority v Ahmad (24 January 2018) [2018] EWHC 1596 (Admin), [2018] 6 WLUK 58....................................................  16.70, 16.71 Solicitors Regulation Authority v Ali; R (on the application of Solicitors Regulation Authority) v Solicitors Disciplinary Tribunal [2013] EWHC 2584 (Admin), [2013] 6 WLUK 722...........................................................2.03 Solicitors Regulation Authority v Chan [2015] EWHC 2659 (Admin), [2015] 9 WLUK 510............................................................................  16.42, 16.67, 16.69

xciii

Table of Cases Solicitors Regulation Authority v Charles Henry & Co [2015] EWHC 552 (QB), [2015] 1 WLUK 648..........................................................................16.25 Solicitors Regulation Authority v Dar [2019] EWHC 2831 (Admin), [2019] 10 WLUK 384...........................................................................16.59, 16.71, 16.85 Solicitors Regulation Authority v Day [2018] EWHC 2726 (Admin), [2018] 10 WLUK 336..............................................................................................16.73 Solicitors Regulation Authority v Emeana [2013] EWHC 2130 (Admin), [2013] 7 WLUK 544, [2014] ACD 14.........................................................16.69 Solicitors Regulation Authority v Howell Jones LLP (unreported, 14 November 2018)..........................................................................................4.34 Solicitors Regulation Authority v Howell Jones LLP (unreported, 4 December 2018)............................................................................................................16.75 Solicitors Regulation Authority v Inyang, Coker, Adetoye & Wagharanta (unreported, 11 Devember 2018).................................................................16.70 Solicitors Regulation Authority v James [2018] EWHC 3058 (Admin), [2018] 4 WLR 163, [2019] 2 All ER 527................................................................16.84 Solicitors Regulation Authority v Libby [2017] EWHC 973 (Admin), [2017] 5 WLUK 34, [2017] ACD 81.......................................................................16.72 Solicitors Regulation Authority v Locke Lord (unreported, 10 November 2017)...................................................................................................  16.52, 16.86 Solicitors Regulation Authority v Lorrell [2019] EWHC 981 (Admin), [2019] 4 WLUK 349................................................................................................16.85 Solicitors Regulation Authority v Naqvi [2019] EWHC 1420 (Admin), [2019] 4 WLUK 610, [2019] ACD 75.....................................................................16.48 Solicitors Regulation Authority v Slaw [2019] EWHC 2737 (Admin), [2019] 10 WLUK 259................................................................ 16.59, 16.64, 16.79, 16.85 Solicitors Regulation Authority v Solicitors Disciplinary Tribunal [2016] EWHC 2862 (Admin), [2016] 11 WLUK 326, [2017] ACD 17........  16.03, 16.16, 16.36 Solictors Regulation Authority v Spector [2016] EWHC 37 (Admin), [2016] 4 WLR 16, [2016] 1 WLUK 184............................................................16.14, 16.51 Solicitors Regulation Authority v Wingate [2018] EWCA Civ 366, [2018] 1 WLR 3969, [2018] 3 WLUK 141...................... 16.57, 16.59, 16.65, 16.66, 16.67, 16.69, 16.70, 16.72, 16.72 Somasundaram v M Julius Melchior & Co [1988] 1 WLR 1394, [1989] 1 All ER 129, (1988) NLJ Rep 253......................................................................12.07 Somatra Ltd v Sinclair Roche & Temperley (No 2) [2003] EWCA Civ 1474, [2003] 2 Lloyd’s Rep 855......................................................... 12.26, 12.53, 12.55 Somerset, Re [1894] 1 Ch 231, [1893] 11 WLUK 48.........................................4.72 Sonardyne Ltd v Firth & Co [1997] EGCS 84................................................9.44, 9.69 South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191, [1996] 3 WLR 87, [1996] 3 All ER 365 ...................... 3.02, 3.26, 3.27, 3.28, 3.29, 3.32, 3.33, 3.34, 3.35, 3.36, 3.37, 3.38, 3.39, 3.40, 3.41, 3.43, 3.44, 3.55, 3.57, 3.58, 3.63, 3.84; 4.01, 4.50; 7.36; 8.07, 8.08, 8.09, 8.11, 8.12, 8.42; 9.73, 9.87; 10.04, 10.119, 10.130, 10.133, 10.138, 10.139, 10.140, 10.143, 10.144, 10.145, 10.146, 10.147, 10.148, 10.153, 10.154, 10.155, 10.156, 10.157, 10.158, 10.159, 10.160, 10.194; 12.67, 12.68, 12.82

xciv

Table of Cases South Buckinghamshire DC v Flanagan [2002] EWCA Civ 690, [2002] 1 WLR 2601, [2002] 3 PLR 47.......................................................................5.25 South Island Commercial (2004) Ltd v Kiwi Green Island Club Ltd [2008] NSC 2032.....................................................................................................6.75 Spector v Ageda [1973] Ch 30, [1971] 3 WLR 498, [1971] 3 All ER 417..........4.34; 6.32, 6.40 Speight v Gaunt (1883) 22 Ch D 727, (1883) 9 App Cas 1.................................4.43 Spencer v Secretary of State for Work & Pensions [2008] EWCA Civ 750, [2009] QB 358, [2009] 2 WLR 593.............................................................7.31 Spencer-White v Harding Evans LLP [2017] EWCA Civ 434, [2017] 6 WLUK 214...............................................................................................1.11; 4.26 Spikins v Wickham & Fine (unreported, 18 November 1998)............................4.37 Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248...........................6.58 Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc [2018] EWCA Civ 317, [2019] 1 All ER (Comm) 294, [2018] 3 WLUK 41.............  17.15, 17.21 Sports Direct International plc v Financial Reporting Council [2020] EWCA Civ 177, [2020] 2 WLUK 196............................................................  16.28, 16.29 Sprecher Grier Halberstam LLP v Walsh; Walsh v Staines [2008] EWCA Civ 1324, [2008] 12 WLUK 84, [2009] CP Rep 16...........................................1.25 Spring v Guardian Assurance plc [1995] 2 AC 296, [1994] 3 WLR 354, [1994] 3 All ER 129.....................................................................................1.21 Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, [2007] 2 WLR 831.........4.12; 9.07 Standard Chartered Bank v Pakistan National Shipping Corpn (Nos 2 & 4) [2002] UKHL 42, [2003] AC 959...................  4.58; 8.02, 8.03, 8.04, 8.13; 10.194 Stanton v Callaghan [2000] QB 75, [1999] 2 WLR 745, [1998] 4 All ER 961...2.06 Starglade Properties Ltd v Nash [2010] EWCA Civ 1314, [2011] Lloyd’s Rep FC 102, [2011] 1 P & CR DG17.................................................................4.18 Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG [2014] EWHC 3068 (Comm), [2015] 2 All ER (Comm) 747, [2014] 2 Lloyd’s Rep 579........................................................................................................1.10 Stathams (wasted costs order), Re sub nom Banks v Woodhall Duckham Ltd (No 2) [1997] PIQR P464............................................................................13.60 Steel v NRAM Ltd (formerly NRAM plc) [2018] UKSC 13, [2018] 1 WLR 1190, [2018] 3 All ER 81.............................................  1.19, 1.25; 9.26, 9.29, 9.32 Steidl v Enyo Law LLP [2011] EWHC 2649 (Comm), [2012] PNLR 4........ 6.02, 6.72, 6.73 Stevens v Premium Real Estate Ltd [2009] NZSC 15............................ 4.37, 4.38; 6.37 Stewart v Canadian Broadcasting Commission [1997] 150 DLR (4d) 24...........6.25 Stinchcombe & Cooper Ltd v Addison, Cooper, Jesson & Co (1971) 115 SJ 368...........................................................................................................9.52, 9.60 Stoffel & Co v Grondona [2018] EWCA Civ 2031, [2018] 9 WLUK 153, [2018] PNLR 36...........................................................................................9.57 Stokes v Law Society [2001] EWHC Admin 1101..............................................16.39 Stoll v Wacks Caller (a firm) [2009] EWHC 2299 (Ch), [2010] PNLR 4, [2009] NPC 109...........................................................................................9.47 Stone Heritage Developments Ltd v Davis Blank Furniss [2007] EWCA Civ 765, [2007] 31 EG 80 (CS), [2007] 31 EG 80.......................2.31, 2.32; 3.19; 9.34 Stovold v Barlows [1996] CLC 228, [1996] ECC 101, [1996] PNLR 91...........3.25 Strother v 3464920 Canada Inc [2007] SCC 24, [2007] 281 DLR (4th) 640.......4.43

xcv

Table of Cases Strover v Harrington [1988] Ch 390, [1988] 2 WLR 572, [1988] 1 All ER 769....5.02; 9.38, 9.41 Suleman v Shahsavari [1988] 1 WLR 1181, [1989] 2 All ER 460, (1989) 57 P & CR 465...................................................................................  5.33, 5.36; 10.198 Sumitomo Corpn v Credit Lyonnais Rouse Ltd [2001] EWCA Civ 1152, [2002] 1 WLR 479, [2002] 4 All ER 68......................................................14.25 Summit Advances Ltd v Bush [2015] EWHC 665 (QB), [2015] 2 WLUK 18, [2015] PNLR 18...........................................................................................1.29 Summit Financial Group Ltd v Slaughter & May (The Times, 2 April 1999).....2.04, 2.30 Summit Property Ltd v Pitmans (unreported, 2 October 2000)...........................9.47 Supershield Ltd v Siemens Building Technologies Ltd [2010] EWCA Civ 7, [2010] 2 All ER (Comm) 1185, [2010] 1 Lloyds Rep 349......................3.56, 3.58 Surface Technology plc v Young [2002] FSR 25.................................................14.10 Sutherland v Public Trustee [1980] 2 NZLR 536.......................................  11.07, 11.14 Sutherland Professional Funding Ltd v Bakewells (a firm) [2011] EWHC 2658 (QB)....................................................................................................17.13 Sutton v Drax (1815) 2 Phill Ecc 323, 161 ER 1158...........................................11.08 Svenska Handelsbanken v Sun Alliance & London Insurance plc [1995] 2 Lloyd’s Rep 84.............................................................................................14.10 Swain v Law Society [1983] 1 AC 598, [1982] 3 WLR 261, [1982] 2 All ER 827 ...................................................................... 9.04; 15.28, 15.29, 15.30; 17.03 Swain Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177; revs’d in part [2012] EWCA Civ 498, [2012] STC 1760, [2012] 4 WLUK 418...................................... 1.01, 1.07; 2.06, 2.07, 2.27, 2.32; 6.73; 11.29 Swansea Building Society v Bradford & Bingley (t/a BBG Surveyors) [2003] PNLR 38......................................................................................................7.70 Swindle v Harrison [1997] 4 All ER 705, [1997] PNLR 641, [1997] NPC 50...4.29, 4.51, 4.53 Swingcastle Ltd v Alastair Gibson (a firm) [1991] 2 AC 223, [1991] 2 WLR 1091, [1991] 2 All ER 353...................................................... 8.07; 10.130, 10.131 Swinney v Chief Constable of Northumbria Police Force (No 1) [1997] QB 464, [1996] 3 WLR 968, [1996] 3 All ER 449............................................6.05 Swynson Ltd v Lowick Rose LLP (in liquidation) (formerly Hurst Morrison Thomson LLP) [2017] UKSC 32, [2018] AC 313, [2017] 2 WLR 1161....3.68, 3.81; 10.187 Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113, [1970] 3 WLR 273, [1970] 2 All ER 471.............................................2.30; 3.09; 9.06, 9.43 Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] EWHC 542 (Comm), [2010] 2 Lloyd’s Rep 81, [2010] 1 CLC 470.......3.51, 3.56 Symphony Group plc v Hodgson [1994] QB 179, [1993] 3 WLR 830, [1993] 4 All ER 143........................................................................................  13.81, 13.82 Szarfer v Chodos (1988) 66 OR (2d) 250............................................................6.26 T T & A (children) (risk of disclosure), Re [2000] 1 FLR 859, [2000] 1 FCR 659, [2000] Lloyd’s Rep PN 452.................................................................6.61 TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826, [1999] Lloyd’s Rep PN 956, [2000] PNLR 384.................................................. 6.19; 14.05, 14.06

xcvi

Table of Cases TFS Stores Ltd v Designer Retail Outlet Centres (Mansfield) General Partner Ltd [2019] EWHC 1363, [2019] Bus LR 1970, [2020] 1 P & CR 6...........5.22, 5.23, 5.25 TJ Hooper, The 60 F 2d 737 (2nd cir 1932)..........................................................2.16 Tain Investments Ltd v Loxleys (a firm) [2004] EWHC 2708 (Ch)....................2.15 Talisman Property Co (UK) Ltd v Norton Rose [2006] EWCA Civ 1104, [2006] 3 EGLR 59, [2006] 45 EG 192........................................................9.92 Tang Ying Loi v Tang Ying Ip [2017] HKCFA 3, (2017) 20 ITELR 318............4.45 Taray Investments Ltd v Gateley Heritage LLP [2020] EWHC 716 (QB)......9.38, 9.73 Target Holdings Ltd v Redferns [1996] AC 421, [1995] 3 WLR 352, [1995] 3 All ER 785........................................4.01, 4.03, 4.04, 4.11, 4.12, 4.44, 4.45, 4.46, 4.47, 4.48, 4.49, 4.50, 4.52, 4.57, 4.60 Taylor v Blacklow (1836) 3 Bing NC 235, 132 ER 401......................................6.01 Taylor v Davies [1920] AC 636, [1919] 12 WLUK 169......................................4.76 Taylor v Ribby Hall Leisure Ltd [1998] 1 WLR 400, [1997] 4 All ER 760....5.45, 5.47, 5.49, 5.50 Taylor v Warners (unreported, 21 July 1987)......................................................9.07 Taylor Walton v Laing [2007] EWCA Civ 1146, [2008] BLR 65, [2008] PNLR 11..............................................................................................12.15, 12.16 Teasdale v Williams & Co (1983) 269 EG 1040..............................................9.89, 9.90 Tee-Hillman v Heppenstalls (unreported, 26 June 2001)....................................9.07 Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 (Ch), [2007] WTLR 1103............................................................... 4.10, 4.49; 5.42 Tennant Radiant Heat v Warrington Development Corpn [1988] 1 EGLR 41, [1988] 11 EG 71, (1988) 4 Const LJ 321.....................................................8.05 Test Claimants in the FII Group Litigation v R & C Comrs [2012] UKSC 19, [2012] 2 WLR 1149, [2012] Bus LR 1033..................................................7.82 Thake v Maurice [1986] QB 644, [1986] 2 WLR 337, [1986] 1 All ER 479......1.02 Thaker v Solicitors Regulation Authority [2011] EWHC 660 (Admin)..............16.42 Thames Chambers Solicitors v Miah [2013] EWCA Civ 1003, [2013] 8 WLUK 172, [2014] PNLR 4...............................................................  13.17, 13.41 Thames Trains Ltd v Adams [2006] EWHC 3291........................................  9.04; 15.24 Thames Valley Housing Association Ltd v Elegant Homes (Guernsey) Ltd [2009] EWHC 2647 (Ch), [2010] 1 EGLR 73, [2010] 2 EG 86..................5.48 Thanakham Kasikom Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) HKCFAR 479...................................................................................9.07 Thomas v Alhutt [2015] EWHC 2187 (Ch), [2015] 7 WLUK 785, [2015] PNLR 29......................................................................................................12.43 Thomas v Agnew (p/a Conor Agnew & Co Solicitor) [2017] NICh 28, [2017] 11 WLUK 224, [2018] PNLR 18.............................................................5.42, 5.49 Thomas v Albutt [2015] EWHC 2187, [2015] 7 WLUK 785, [2015] PNLR 29............................................................................................................  3.06, 3.22 Thomas v Hugh James Ford Simey Solicitors [2017] EWCA Civ 1303, [2017] 9 WLUK 11, [2018] PNLR 5................................................................  2.31; 12.29 Thompson v Foy [2009] EWHC 1076 (Ch), [2010] 1 P & CR 16, [2009] 22 EG 119 (CS).............................................................................................9.11, 9.22 Thorman v New Hampshire Insurance Co (UK) Ltd [1988] 1 Lloyd’s Rep 7, [1987] 10 WLUK 67, 39 BLR 41................................................................17.06 Thorpe v Chief Constable of Greater Manchester Police [1989] 1 WLR 665, [1989] 2 All ER 827, 87 LGR 537......................................................  14.17, 14.19

xcvii

Table of Cases Thorpe v Fellowes LLP sub nom Hill v Fellowes Solicitors LLP [2011] EWHC 61 (QB), (2011) 118 BMLR 122, [2011] PNLR 13........................2.01 Three Rivers District Council v Bank of England (Disclosure) (No 3) [2003] EWCA Civ 474, [2003] QB 1556, [2003] 3 WLR 667............14.11, 14.22, 14.23 Three Rivers District Council v Bank of England (Disclosure) (No 4) [2004] UKHL 48, [2005] 1 AC 610, [2004] 3 WLR 1274................... 6.02, 6.03; 14.11, 14.22, 14.23, 14.24 Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35, [2012] 1 WLR 1887, [2012] 2 All ER 1113...................................................................................5.12 Tinseltime Ltd v Roberts [2012] EWHC 2628 (TCC), (2012) 162 NLJ 1290.............................................................................................................13.87 Titan Europe 2006-3 plc v Colliers International plc (in liquidation) [2015] EWCA Civ 1083, [2016] 1 All ER (Comm) 999, [2016] PNLR 7..... 1.14; 10.190, 10.191 Titanic Investments Ltd v MacFarlanes [1997] NPC 105................................9.94, 9.95 Tito v Waddell (No 2) [1977] Ch 106, [1977] 2 WLR 496, [1977] 3 All ER 129...............................................................................................................4.31 Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd [2017] UKSC 77, [2017] 1 WLR 4627, [2018] 2 All ER 203...........3.81; 10.125, 10.126, 10.127, 10.128 Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, [1996] 2 All ER 556, [1996] PNLR 335............... 13.02, 13.18, 13.44, 13.46, 13.80, 13.81, 13.82, 13.83 Tom Hoskins plc v EMW Law (a firm) [2010] EWHC 479 (Ch), [2010] ECC 20, (2010) 160 NLJ 584........................................................  2.32; 3.44; 9.86, 9.88 Tonitto v Bassal (1992) 28 NSWLR 564.............................................................9.94 Tournier v National Provincial & Union Bank of England [1924] 1 KB 461.....6.16, 6.44 Tradegro (UK) Ltd v Wigmore Street Investments Ltd (in administration) [2011] EWCA Civ 268, [2011] 2 BCLC 616..........................................4.10; 5.44 Trainer v Cramer Pelmont [2019] EWHC 2501 (QB), [2020] PNLR 3......... 7.53, 7.66, 7.67, 7.69 Transportation Agency Ltd v Jenkins (1972) 223 EG 1101............................9.43, 9.68 Trasfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, [2009] 1 AC 61, [2008] 3 WLR 345...........................  3.51, 3.53, 3.55, 3.56, 3.58, 3.63 Trend Publishing (HK) Ltd v Vivien Chan & Co [1996] 2 HKLR 227...............1.22 Trusted v Clifford Chance [2000] WTLR 1219..........................................  11.04, 11.14 Tucker v MB Allen & Co [2001] PNLR 37, [2011] 26 EG 161 (CS), [2000] NPC 132.......................................................................................................9.41 Tugushev v Orlov [2019] EWHC 2031 (Comm), [2019] 7 WLUK 424.............12.25 Turner Page Music Ltd v Torres Design Associates Ltd (The Times, 3 August 1998)...................................................................................................  13.18, 13.56 Twin Benefits Ltd v Barker [2017] EWHC 177 (Ch), [2017] 4 WLR 42, [2017] 2 WLUK 326....................................................................................14.10 Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164, [2002] 2 WLR 802 .................................................. 4.01, 4.03, 4.06, 4.08, 4.09, 4.10, 4.14, 4.16, 4.17, 4.18, 4.19, 4.21, 4.22, 4.23, 4.74; 5.06 Tyrrell v Bank of London (1862) 10 HL Cas 26, 11 ER 934, [1862] 2 WLUK 147...............................................................................................................4.33

xcviii

Table of Cases U UCB Bank plc v Halifax (SW) Ltd (striking out: want of prosecution) [1999] Lloyd’s Rep PN 154.....................................................................................7.42 UCB Corporate Services Ltd (formerly UCB Bank plc) v Clyde & Co [2000] 2 All ER (Comm), [2000] Lloyd’s Rep PN 653, [2000] PNLR 841....... 1.02; 5.33; 8.16; 10.66 UCB Corporate Services Ltd v Williams [2002] EWCA Civ 555, [2002] 3 FCR 448, [2003] 1 P & CR 12.................................................................9.12, 9.18 UCB Home Loans Corpn Ltd v Carr [2000] Lloyd’s Rep PN 754......... 4.72; 7.83, 7.84 UCB Loans Ltd v Grace & Co (unreported, 14 December 2010).......................4.05 UCP plc v Nectrus Ltd Damages [2019] EWHC 3274 (Comm), [2019] 11 WLUK 487, [2020] PNLR 9....................................................................1.14, 1.16 USP Strategies plc v London General Holdings Ltd [2004] EWHC 373 (Ch)...14.14, 14.24 UTB LLC v Sheffield United Ltd [2019] EWHC 914 (Ch), [2019] 3 All ER 698, [2019] 2 All ER (Comm) 910...............................  14.16, 14.22, 14.25, 14.29 Udall (t/a Udall Sheet Metal & Co) v Capri Lighting Ltd [1988] QB 907, [1987] 3 WLR 465, [1987] 3 All ER 262...........  5.41, 5.44, 5.45, 5.46, 5.47, 5.50 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), [2006] FSR 17, [2007] WTLR 835..........................................................................  4.16, 4.39, 4.45 Umeweni v JB Wheatley & Co [1990] EG 57 (CS)............................................9.08 Underwood, Son & Piper v Lewis [1894] 2 QB 306...........................................1.11 United Bank of Kuwait v Hammoud [1988] 1 WLR 1051, [1988] 3 All ER 418, (1988) 138 NLJ Rep 281.....................................  5.06, 5.07, 5.11, 5.23; 6.14 United Dominions Trust v Western [1976] QB 513, [1976] 2 WLR 64, [1975] 3 All ER 1017...............................................................................................9.10 United Mirahi Bank Ltd v Doherty [1998] 1 WLR 436......................................4.23 United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461....................................................................................................6.31 United States v Phillip Morris Inc (No 1) [2004] EWCA Civ 330, [2004] 1 CLC 811, (2004) 148 SJLB 388..................................................................14.22 University of Keele v Price Waterhouse [2004] EWCA Civ 583, [2004] PNLR 43.................................................................................................................1.06 Uxbridge Permanent Building Society v Pickard [1939] 2 KB 248, [1939] 2 All ER 344, [1939] 3 WLUK 36..................................................................5.08 Uzinterimpey JSC v Standard Bank plc [2008] EWCA Civ 819, [2008] Bus LR 1762, [2008] 2 Lloyd’s Rep 465............................................................4.21 V Van Laun, ex p Chatterton, Re [1907] 2 KB 23...................................................6.05 Van Wagner UK Ltd v Brown [2005] EWHC 1505 (Ch)....................................4.62 Various Claimants v Giambrone & Law [2017] EWCA Civ 1193, [2017] 7 WLUK 765, [2018] PNLR 2.....................  3.28, 3.31, 3.34; 4.01, 4.03, 4.11, 4.50, 4.67, 4.68; 8.14; 10.160; 15.32 Various Claimants v Wm Morrison Supermarkets plc [2020] UKSC 12, [2020] 2 WLR 941, [2020] 3 WLUK 454................................................5.17, 5.20 Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475, [2010] 12 WLUK 677..........3.15 Veasy v Millfeed Co Ltd [1997] PNLR 100...............................................  12.24; 13.61 Veitch v Avery [2007] EWCA Civ 711, 115 Con LR 70, [2008] PNLR 7......3.21, 3.82

xcix

Table of Cases Ventouris v Mountain (The Italia Express) (No 1) [1991] 1 WLR 607, [1991] 3 All ER 472, [1991] 1 Lloyd’s Rep 441.....................................................14.26 Verderame v Commercial Union Assurance Co plc [1992] BCLC 793, [2000] Lloyd’s Rep PN 557, [1955-95] PNLR 612.................................................9.74 Villeneuve v Gaillard [2011] UKPC 1.................................................................4.62 Vinton v Fladgate Fielder (a firm) [2010] EWHC 904 (Ch), [2010] STC 1868, [2010] PNLR 26...............................................................1.28; 11.06, 11.17, 11.18 Virgin Management Ltd v De Morgan Group plc [1996] EG 16 (CS), [1996] NPC 8...........................................................................................................2.31 Virgin Media Communications Ltd v British Sky Broadcasting Group plc see British Sky Broadcasting Group plc v Virgin Media Communications Ltd (formerly NTL Communications Ltd) Vision Golf Ltd v Weightmans [2005] EWHC 1675 (Ch) [2005] 32 EG 66 (CS), [2005] All ER (D) 675..........................................................  3.46; 8.29; 9.91 Vitol SA v Capri Marine Ltd [2010] EWHC 458 (Comm), [2011] 1 All ER (Comm) 366, [2010] 3 WLUK 239.............................................................6.76 Vlarnaki v Sookias & Sookias (a firm) [2015] EWHC 3334 (QB), [2015] 11 WLUK 524, [2015] 6 Costs LO 827........................................................1.11, 1.12 W W v Edgell [1990] 1 Ch 108................................................................................6.45 WH Holdings Ltd v E20 Stadium LLP [2018] EWCA Civ 2652, [2018] 11 WLUK 511 .........................................................................................  14.25, 14.26 Waddington Ltd v Chan Chun Hoo [2008] HKCFAR 370, [2009] 2 BCLC 82.. 1.16 Wagstaff v Colls (Wasted Costs Order) [2003] EWCA Civ 469, [2003] CP Rep 50, [2003] PNLR 29.................................... 13.09, 13.10, 13.22, 13.23, 13.29 Walker v Boyle [1982] 1 WLR 495, [1982] 1 All ER 634, (1982) 44 P & CR 20.............................................................................................................9.27, 9.35 Walker v Burton [2012] EWHC 978 (Ch), [2012] 4 WLUK 236........................2.15 Walker v Chruszc [2006] EWHC 64 (QB)..........................................  2.22, 2.24; 12.27 Walker v Geo H Medlicott & Son [1999] 1 WLR 727, [1999] 1 All ER 685, [1999] 1 FLR 1095..........................................................  3.70; 11.14, 11.25, 11.26 Walker v Giffen, Couch & Archer [1988] EGCS 64............................................9.41 Walker v Hall [1984] Fam Law 21, (1983) 80 LSG 2139, (1983) 127 SJ 550....9.07 Walker v Stones [2001] QB 902, [2001] 2 WLR 623, [2000] 4 All ER 412.......1.16; 4.19; 5.11 Walkin v South Manchester Health Authority [1995] 1 WLR 1543, [995] 4 All ER 132, [1996] 7 Med LR 211..............................................................7.08 Wall v Lefever [1998] 1 FCR 605........................................  13.18, 13.23, 13.54, 13.67 Wall v Royal Bank of Scotland pc [2016] EWHC 2460, [2017] 4 WLR 2, [2016] 10 WLUK 127..................................................................................14.24 Wallace v Litwiniuk (2001) 92 Alta LR (3d) 249 (Alberta CA)..........................8.26 Wallace Smith Trust Co Ltd (in liquidation) v Deloitte Haskins & Sells [1997] 1 WLR 257, [1996] 4 All ER 403, [1997] BCC 29.....................................6.76 Wallersteiner v Moir (No 2) [1975] QB 373, [1975] 2 WLR 389, [1975] 1 All ER 849.........................................................................................................4.63 Walpole v Partridge & Wilson [1994] QB 106, [1993] 3 WLR 1093, [1994] 1 All ER 385...............................................................................  12.05, 12.06, 12.32 Walsh v Greystone Financial Services Ltd (unreported, 31 July 2019)...............1.11

c

Table of Cases Walsh v Needleman Treon (a firm) [2014] EWHC 2554 (Ch), [2014] 7 WLUK 930...................................................................................................5.12 Walsh v Shanahan [2013] EWCA Civ 411, [2013] 4 WLUK 552, [2013] 2 P & CR DG7...................................................................................................6.08 Wapshott v Davies Donovan & Co [1996] PNLR 361, (1996) 72 P & CR 244, [1995] EG 199 (CS)......................................................9.37, 9.59, 9.64, 9.71, 9.74 Waraich v Ansari Solicitors (a firm) [2019] EWHC 1038 (Comm), [2019] 4 WLUK 394, [2019] PNLR 24..................................................... 3.22; 12.71, 12.76 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 (Australia HC)..............................................................................................7.22 Warmington v McMurrays [1936] 2 All ER 745.................................................1.11 Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354.........................6.77 Warren v Warren [1997] QB 488, [1996] 3 WLR 1129, [1996] 4 All ER 664....13.18, 13.52 Watkins v Jones Maidment Wilson (a firm) [2008] EWCA Civ 134, 118 Con LR 1, [2008] PNLR 23.................................................................................7.27 Wattret v Thomas Sands Consulting Ltd [2015] EWHC 3455 (TCC), 2015] 12 WLUK 4, [2016] PNLR 15.....................................................................2.21 Watts v Bell & Scott WS [2007] CSOH 108, 2007 SLT 665, [2007] PNLR 30.. 9.60 Watts v Morrow [1991] 1 WLR 1421, [1991] 4 All ER 937, 54 BLR 86............9.59 Watts v Public Trustee [1980] WAR 97...............................................................11.12 Waugh v HB Clifford & Sons [1982] Ch 374, [1982] 2 WLR 679, [1982] 1 All ER 1095 .................................................................................. 5.06, 5.23, 5.25 Webb v Barclays Bank plc & Portsmouth Hospital Trust [2001] EWCA Civ 1141, [2002] PIQR P8, [2001] Lloyd’s Rep Med 500.............................3.46; 8.29 Webb v Macdonald [2010] EWHC 93 (Ch), [2010] BPIR 503, [2010] Lloyd’s Rep PN 287..............................................................................................2.01, 2.22 Webber v Gasquet, Metcalfe & Watson (1982) 132 NLJ 665.............................9.07 Webb Resolutions Ltd v E Sury Ltd [2012] EWHC 3653 (TCC), [2012] 12 WLUK 730, [2013] PNLR 15.........................................................  10.162, 10.173 Webster v Cooper & Burnett [2000] Lloyd’s Rep PN 167, [2000] PNLR 240...7.69 Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542, [2009] PNLR 37 .....................................................................................  1.15, 1.16; 11.27 Weld-Blundell v Stephens [1919] 1 KB 520................................. 6.05, 6.12, 6.44, 6.46 Weller v Phillips [2010] NSWCA 323.................................................................2.16 Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch), [2014] 3 WLUK 217, [2014] PNLR 22; revs’d in part [2015] EWCA Civ 1146, [2016] Ch 529, [2016] 2 WLR 1351.........  2.27, 2.28; 3.15, 3.16, 3.17, 3.25, 3.49, 3.50, 3.57, 3.59, 3.60, 3.61, 3.64; 4.55; 8.17; 9.68, 9.72 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, [1996] 2 WLR 802, [1996] 2 All ER 961.......................4.12, 4.65 Western Avenue Properties Ltd v Soni [2017] EWHC 2650 (QB), [2017] 10 WLUK 637, [2018] PNLR 10..................................................................6.60, 6.62 Western Trust & Savings Ltd v Clive Travers & Co Ltd [1997] PNLR 295, (1998) 75 P & CR 200........................................................................  3.70; 10.177 Westlake v JP Cave & Co [1998] NPC 3.............................................................3.78 Westlaw Services Ltd v Boddy [2010] EWCA Civ 929, [2010] 6 Costs LR 934, [2011] PNLR 4..............................................................................  2.12; 15.30 West London Observer v Parsons (1955) 166 EG 749........................................9.93

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Table of Cases West London Pipeline & Storage Ltd v Total UK Ltd [2008] EWHC 1729 (Comm), [2008] 2 CLC 258.........................................................................14.25 Westmelton (Vic) Pty Ltd v Archer [1982] VR 305............................................4.32 Westminster International BV v Dornoch Ltd [2009] EWCA Civ 1323, [2009] 9 WLUK 75..................................................................................................14.35 West Wallasey Car Hire Ltd v Berkson & Berkson (a firm) [2010] PNLR 14....2.10, 2.22; 7.44 Westway Homes Ltd v Moores [1991] 2 WLUK 251, (1992) 63 P & CR 480, [1991] 2 EGLR 193.....................................................................................5.23 Wheatcroft, Re (1877) 6 Ch D 97........................................................................14.02 Whelton Sinclair v Hyland [1992] 41 EG 112, [1992] 2 EGLR 158............. 1.08, 1.11; 9.89, 9.90 White v Jones [1995] 2 AC 207, [1995] 2 WLR 187, [1995] 1 All ER 691... 1.22, 1.26, 1.27, 1.28; 11.02, 11.03, 11.07, 11.08, 11.11, 11.12, 11.15, 11.20, 11.24, 11.30, 11.31, 11.32 White v Paul Davidson & Taylor [2004] EWCA Civ 1511, [2005] PNLR 15, (2004) 148 SJLB 1373.................................................................................3.05 White v Withers LLP [2008] EWHC 2821 (QB), [2009] 1 FLR 383, [2009] Lloyd’s Rep PN 1.........................................................................................6.26 Whitehead v Searle sub nom Hibbert Pownall & Newton v Whitehead [2008] EWCA Civ 285, [2009] 1 WLR 549, (2000) 102 BMLR 57................ 1.25; 11.22; 12.66, 12.67 Whitehouse v Jordan [1981] 1 WLR 246, [1981] 1 All ER 267, (1981) 125 SJ 167...............................................................................................................2.24 Whittingham v Crease [1978] 88 DLR (3d) 353........................................  11.11, 11.20 Willers v Joyce [2018] EWHC 3424 (Ch), [2018] 12 WLUK 698......................13.88 William Sindall plc v Cambridgeshire County Council [994] 1 WLR 1016, [1994] 3 All ER 932, 92 LGR 121...............................................................9.27 Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] AC 1189, [2014] 2 WLR 355................................................................. 4.12, 4.75, 4.76, 4.79 Williams v Fanshaw, Porter & Hazelhurst [2004] EWCA Civ 157, [2004] 1 WLR 3185, [2004] 2 All ER 616.................................................... 7.10, 7.78, 7.79 Williams v Glyn Owen & Co [2003] EWCA Civ 750, [2004] PNLR 20, [2004] 1 EGLR 67...................................................................................3.66, 3.70 Williams v Lishman, Sidwell, Campbell & Price Ltd [2010] EWCA Civ 418, [2010] 4 WLUK 307, [2010] PNLR 25.......................................................7.80 Williams v Solicitors Regulation Authority [2017] EWHC 1478 (Admin), [2017] 6 WLUK 422........................................... 16.42, 16.53, 16.57, 16.67, 16.69 Williams v Thompson Leathedale (a firm) [2008] EWHC 2574 (QB), [2009] 2 FLR 730, [2008] 3 FCR 613)................................... 2.04, 2.09, 2.22, 2.24; 12.27 Williams v Lishman, Sidwell, Campbell & Price Ltd [2009] EWHC 1322 (QB). [2009] PNLR 34............................................................................7.61, 7.80 Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830, [1998] 2 All ER 577, [1998] BCC 428.............................................................................1.20 Williams-Ashman v Price & Williams [1942] Ch 219, [1942] 1 All ER 310, [1941] 12 WLUK 44....................................................................................4.25 Williams (Douglas) v Glyn Owen & Co [2003] EWCA Civ 750, [2004] PNLR 20, [2004] 1 EGLR 67......................................................................9.56 Willis v Baron [1902] AC 271, [1902] 5 WLUK 31............................................4.32

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Table of Cases Wilsher v Essex Area Health Authority [1987] QB 730, [1987] 2 WLR 425, [1986] 3 All ER 801.................................................................................2.23; 3.11 Wilson v Bloomfield (1979) 123 SJ 860..............................................................9.26 Wilson v MF Global UK Ltd [2011] EWHC 138 (QB)......................................15.26 Wilson v Rastall (1792) 4 Term Rep 753, 100 ER 1283.................................6.04, 6.09 Wilson v Specter Partnership [2007] EWHC 133 (Ch), [2007] 6 Costs LR 802, [2007] BPIR 649..................................................................................1.01 Windsor Steam Coal Co (1901) Ltd, Re [1929] 1 Ch 151, [1928] 10 WLUK 12.................................................................................................................4.66 Winnetka Trading Corpn Julius Baer International Ltd, Bank Julius baer & Co Ltd [2011] EWHC 2030 (Ch), [2011] 7 WLUK 888, [2012] 1 BCLC 588.2.13 Winters v Mishcon de Reya [2008] EWHC 2419 (Ch), (2008) 158 NLJ 1494...6.58; 14.10 Winterthur Swiss Insurance Co v AG (Manchester) Ltd [2006] EWHC 839 (Comm) .............................................................. 14.06, 14.08, 14.10, 14.11, 14.15 Wintle v Nye [1959] 1 WLR 284, [1959] 1 All ER 552......................................11.13 Wisniewski v Central Manchester Health Authority [1998] 4 WLUK 14, [1998] PIQR P324, [1998] Lloyd’s Rep Med 223.......................................10.118 Withers LLP v Harrison [2010] EWHC 2769 (QB)........................................2.06, 2.23 Wollenberg v Casinos Austria International Holding GmbH [2011] EWHC 103 (Ch).......................................................................................................4.32 Wood v Commercial First Business Ltd (in liquidation) [2019] EWHC 2205 (Ch), [2019] 11 WLUK 29, [2020] CTLC 1............................................4.77, 4.82 Wood v Watkin [2019] EWHC 1311 (Ch), [2019] BPIR 1265, [2019] 2 P & CR DG15.....................................................................................................9.07 Woodfine Leeds Smith (a firm) (formerly Leeds Smith) v Russell [2007] EWHC 603 (QB)..........................................................................................2.24 Woodward v Wolferstans [1997] NPC 51............................................................9.32 Worby v Rosser [1999] Lloyd’s Rep PN 972, [2000] PNLR 140, (1999–2000) 2 ITELR 59.................................................................... 11.02, 11.04, 11.08, 11.19 Workman v Deansgate 123 LLP [2019] EWHC 360 (QB), [2019] 2 WLUK 432, [2019] PNLR 18........................................................................... 12.08, 12.16 Workman v Pannone & Partners [2002] EWHC 2366 (QB)...............................7.46 Worth Recycling Pty Ltd v Waste Recycling & Processing Pty Ltd [2009] NSWCA 354................................................................................................6.75 Wright v Carter [1903] 1 Ch 27, [1902] 11 WLUK 62.......................................4.32 Wright v Castle (1817) 3 Mer 12, 36 ER 5..........................................................5.23 Wright v Lewis Silkin LLP [2016] EWCA Civ 1308, [2016] 12 WLUK 633, [2017] PNLR 16.............................................................................. 2.07; 3.51, 3.60 Wright v Paton Farrell [2006] CSIH 7, 2006 SC 404, [2007] PNLR 7............... 12.02 Wright v Troy Lucas & Co [2019] EWHC 1098 (QB), [2019] 3 WLUK 375....2.04 Wright (a child) v Cambridge Medical Group [2011] EWCA Civ 669, [2011] Med LR 496.............................................................................................3.46; 8.29 X X (a child) v Woollcombe Yonge (a firm) [2001] Lloyd’s Rep PN 274, [2001] WTLR 301...................................................................................................11.11 X v Y Ltd [2018] 8 WLUK 94, [2019] IRLR 516...............................................14.26 XKF v BBC [2018] EWHC 1560 (QB), [2018] 5 WLUK 233...........................6.25

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Table of Cases Xenakis v Birkett Long LLPP [2014] EWHC 171 (QB), [2014] 2 WLUK 23, [2014] PNLR 14...........................................................................................9.69 Y Yager v Fishman & Co [1944] 1 All ER 552, (1944) 77 Ll L Rep 268...........2.26; 9.93 Yardley v Coombes (1963) 107 SJ 575................................................................12.73 Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174, [1995] 2 WLR 49, [1995] 3 All ER 211 ............................................................................... 14.02, 14.03, 14.07 Yazhou Travel Investment Co Ltd v Bateson Starr (a firm) [2005] PNLR 31.....1.29 Yonge v Toynbee [1910] 1 KB 215....................  1.11; 5.26, 5.27, 5.28, 5.30, 5.33, 5.38 Yorkshire Bank plc v Tinsley [2004] EWCA Civ 816, [2004] 1 WLR 2380, [2004] 3 All ER 463.....................................................................................9.18 Youlton v Charles Russell (a firm) [2010] EWHC 1032 (Ch), [2010] Lloyd’s Rep PN 227.....................................................................................1.28; 2.09; 9.47 Young v Clifford Chance (unreported, 21 December 1995)................................1.23 Young v Hamilton [2014] NICA 48, [2014] 6 WLUK 869, [2014] PNLR 30....2.21 Young v Murphy [1996] 1 VR 279......................................................................11.27 Young v Purdy [1996] 2 FLR 795, [1997] 1 FCR 632, [1997] PNLR 130.........3.43 Young v Robson Rhodes (a firm) [1999] 3 All ER 524, [1999] Lloyd’s Rep PN 641.....................................................................................................1.11; 6.62 Young Legal Associates Ltd v Zahid (a firm) [2006] EWCA Civ 613, [2006] 1 WLR 2562, [2006] 5 WLUK 425................................................................5.12 Youyang Pt Ltd v Minter Ellison Morris Fletcher [2003] HCA 15, [2003] CLR 484................................................................................. 4.43, 4.49, 4.50, 4.53 Yudt v Leonard Ross & Craig [1998] ITELR 53.................................................11.34 Yunghanns v Elfic Pty Ltd [1999] VSC 291........................................................6.15 Yussouf v Solicitors Regulation Authority [2018] EWHC 211 (Admin)............16.11 Z Z (Restraining Solicitors from Acting), Re [2009] EWHC 3621 (Fam), [2010] 2 FLR 132, [2010] Fam Law 458................................................................6.62 Zivancevic v Solicitors Regulation Authority [2019] EWHC 1950 (Admin), [2019] 1 WLUK 595....................................................................................16.71 Zoya Ltd v Ahmed (t/a Property Mart) (No 2) [2016] EWHC 2249 (Ch), [2016] 4 WLR 174, [2016] 10 WLUK 132............................ 5.30, 5.33, 5.34, 5.38 Zurich Professional Ltd v Brown [2010] EWHC 3300 (Ch), [2010] 12 WLUK 488, [2011] Lloyd’s Rep IR 607..................................................................17.32 Zurich Professional Ltd v Karim [2006] EWHC 3355 (QB), [2006] 12 WLUK 405...................................................................................................17.19 Zwebner v Mortgage Corpn Ltd [1997] PNLR 504, [1997] NPC 42..................2.04 Zwebner v The Mortgage Corpn Ltd [1998] PNLR 769, [1998] EG 104 (CS)...1.02; 5.31; 10.66

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Section A

Civil Law Claims

Part 1

General Principles

Chapter 1

The solicitor’s duties in contract and tort

A  DUTIES IN CONTRACT 1 Introduction 1.01 The relationship of solicitor and client is primarily a contractual one and, as with any contractual relationship, a solicitor’s retainer is governed by the terms of the contract agreed with his or her client.1 This relationship is also regulated both by statute and by the SRA  Standards and Regulations which came into force on 25  November 2019.2 The Solicitors Act 1974 imposes certain constraints on the freedom of solicitor and client to contract.3 The rules of professional conduct regulate the conduct of the profession as a whole.4 But subject to these constraints, the contract between solicitor and client need take no special form and need contain no specific terms.5 The contract may be express or implied and oral or written.6 In practice it is more likely to be a written one and it is for the firm of solicitors to set out in an engagement letter the express terms of their remuneration, the procedure for complaints and the individual solicitors with conduct of the matter in accordance with the SRA Code of Conduct7 or the SRA Standards and Regulations (whenever the contract of retainer was made).8 The nature and scope of the work which a solicitor undertakes to carry out ought therefore to be the subject of detailed written instructions9 although the failure to comply with any conduct rules in relation to a contract of retainer will not render it invalid or unenforceable.10 But it is often impossible to specify with precision the precise scope of the retainer and the legal work required. For this reason, claims for professional negligence are mainly concerned with the standard of reasonable care to be expected of a reasonably competent solicitor judged against the backdrop of the practice commonly adopted by the profession. But because the relationship between solicitor and client is primarily a contractual one, any consideration of a solicitor’s retainer must begin with the express terms agreed between the parties.   1 ‘A solicitor’s duty to his client is primarily contractual and its scope depends on the express and implied terms of his retainer’: Hilton v Barker Booth Eastwood [2005] UKHL 8, [2005] 1  WLR  567, at [28] (Lord Walker of Gestingthorpe). See also Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177 (Arnold J), at [144]. The decision was upheld by the Court of Appeal at [2012] EWCA Civ 498.   2 The Standards and Regulations replaced the SRA Code of Conduct 2011 and the SRA Handbook and came into force on 25 November 2019. The conduct rules in force since 1999 are set out in Chapter 15 at paras 15.10 to 15.13. Where relevant, we state both the current and former

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1.01  The solicitor’s duties in contract and tort provisions in this book given that the practitioner will need be aware of both regimes for some time to come in dealing with either civil claims or regulatory proceedings.   3 The Act principally regulates the recovery of remuneration and confers jurisdiction on the court to order a solicitor to deliver a bill: see s 68. It also distinguishes between ‘Non-contentious business agreements’ (‘NCBAs’), which are regulated by s  57 and the Solicitors (NonContentious Business) Remuneration Order 2009, and ‘Contentious business agreements’ (‘CBAs’), which are regulated by ss  60–66. The purpose of these provisions is to exclude assessment where the parties have entered into a written agreement which contains agreed terms for remuneration. A  client still has the right to challenge either an NCBA or a CBA on the grounds that the agreement is unfair or unreasonable: see ss 57(5) and 61(2). Sections 57(5) and 61(4B) also provide a limited opportunity for a client to have a bill issued under either an NCBA or a CBA assessed where the agreement provides for an hourly rate only. In the case of contentious business this is particularly important because, in the absence of a CBA, the solicitor may not enforce a bill unless he or she has complied with s 69 and the client has the right to insist on assessment under s 70. For the issue of whether a client care letter gives rise to a CBA, see Wilson v Specter Partnership [2007] EWHC 133 (Ch). Note also that s 60(3) preserves the indemnity principle for the recovery of costs in litigation and prevents the enforcement of CFAs and champertous agreements except where expressly permitted by other legislation. For discussion of the legislative framework and the differences between a CBA and an NCBA more generally, see Bilkus v Stockler Brunton [2010] EWCA Civ 101 (where it was held that a solicitor could not amend a final bill presented under a CBA to claim an uplift).  4 For detailed discussion of the effect of the conduct rules (both current and future) on the liabilities of solicitors see Chapter 15, section C, paras 15.22 to 15.33.   5 It is possible to argue that it is an implied term of any contractual retainer that the solicitor must comply with the practice rules which were in force at the relevant time. But we consider that the better view is that no term to this effect should be implied into a solicitor’s retainer as a matter of course: see paras 15.26 and 15.27. In Hilton v Barker Booth Eastwood [2005] UKHL 8, [2005] 1 WLR 567 where a solicitor acted for two parties to a property transaction, the House of Lords held that the solicitor was in breach of a contractual duty by failing to report to one client that the other client had criminal convictions (of which the solicitor was aware). The case was argued on the basis that the solicitor owed a contractual duty of confidence and of loyalty to his or her client that was identical (or, at least, very similar) to his fiduciary duties. One reading of the speech of Lord Walker suggests that the solicitor owed a contractual duty to comply with Practice Rule 6 of the Solicitors’ Practice Rules 1990: see [28]–[31]. It is suggested that he was not intending to go that far but only to state that a breach of Practice Rule 6, which was designed to prevent a solicitor from placing himself or herself in a position of conflict, might well involve a breach of the solicitor’s contractual duty. It is also suggested that an implied obligation to comply with the SRA Standards and Regulations 2019 does not satisfy any of the standard tests for an implied term and the contract of retainer would not lack commercial or practical coherence without it: see Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742. The primary basis for enforcement should therefore be disciplinary proceedings.   6 Section 57(3) of the Solicitors’ Act 1974 provides that an NCBA must be in writing. But it has never been suggested that a failure to comply with the subsection renders the contract of no effect or prevents either party from suing on it (including the solicitor suing for his or her remuneration). In Hilton v Barker Booth Eastwood (above), for example, there were no written instructions and no documentary evidence of the retainer: see [28]. See also Fladgate LLP v Harrison [2012] EWHC 67 (QB) where Lang J held that an oral or implied agreement was enforceable. She stated (at [41]): ‘The giving of a retainer is equivalent to the making of a contract for the solicitor’s employment, and creates the solicitor’s right to be paid. In determining whether or not a retainer has come into existence, the general principles of contract law apply.’   7 Chapter 1 of the 2011 Code covered client care and required that clients be informed in writing at the outset of their right to complain and the procedures for complaining, both to the firm and to the Legal Ombudsman: O(1.9) and O(1.10). Clients also had to ‘receive the best possible information, both at the time of engagement and when appropriate as their matter progresses,

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Duties in contract  1.02 about the likely overall cost of their matter’: O(1.13). The Indicative Behaviours which suggested achievement of these outcomes included: ‘IB(1.1) Agreeing an appropriate level of service with your client, for example the type and frequency of communications; IB(1.2) explaining your responsibilities and those of your client; IB(1.3) ensuring that the client is told, in writing, the name and status of the person dealing with the matter and the name and status of the person responsible for its overall supervision; IB(1.4) explaining any arrangements, such as fee sharing arrangements, which are relevant to the client’s instructions; IB(1.5) explaining any limitations of conditions on what you can do for the client, for example, because of the way the client’s matter is funded.’ These Indicative Behaviours closely followed the provisions of the 2007 Code at rr 2.02–2.04, themselves an elaboration on the position before 1  July 2007, when Practice Rule 15 required solicitors to ‘(a) give information about costs and other matters, and (b) to operate a complaints handling procedure in accordance with the Solicitors’ Costs Information and Client Care Code’.  8 Chapter 8 of the new Code of Conduct for Individuals 2019 covers client care and it is incorporated into the Code of Conduct for Firms 2019. It deals with client identification, complaints handling and client information and publicity. It provides as follows: ‘8.6 You give clients information in a way they can understand. You ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them. 8.7 You ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred. 8.8 You ensure that any publicity in relation to your practice is accurate and not misleading, including that relating to your charges and the circumstances in which interest is payable by or to clients. 8.9 You do not make unsolicited approaches to members of the public, with the exception of current or former clients, in order to advertise legal services provided by you, or your business or employer. 8.10 You ensure that clients understand whether and how the services you provide are regulated. This includes: (a) explaining which activities will be carried out by you, as an authorised person; (b) explaining which services provided by you, your business or employer, and any separate business are regulated by an approved regulator; and (c) ensuring that you do not represent any business or employer which is not authorised by the SRA, including any separate business, as being regulated by the SRA. 8.11 You ensure that clients understand the regulatory protections available to them.  9 The SRA  Transparency Rules 2019 require solicitors to publish costs and complaints information: see, in particular, rule 1.5. The SRA also issued guidance on client care letters on 23 July 2019 (updated on 25 November 2019): see https://www.sra.org.uk/solicitors/guidance/ ethics-guidance/client-care-letters/ 10 The failure to comply with the Costs Information and Client Care Code did not render the contract of retainer unenforceable: see Garbutt v Edwards [2005] EWCA Civ 1206, [2006] 1 All ER 553. Under the 2011 Code it was no longer mandatory to provide costs information in writing (as it was under the former r 2.03(5)). But IB(1.19) envisaged solicitors ‘providing information in a clear and accessible form which is appropriate to the needs and circumstances of the client.’ However, given the mandatory requirement to provide written information about the procedure for complaints it is suggested that in most cases it will continue to be standard practice for solicitors to provide a client care letter setting out at least the firm’s charging structure. Paragraph 8.2 of the Code of Conduct for Individuals 2019 also imposes a duty to inform the client in writing about the complaints procedure but paras 8.6 and 8.7 which deal with costs and client care information do not refer to writing.

1.02 The terms of the contract may impose a strict obligation on the solicitor and, if it does, he or she may be sued for a breach of that obligation in contract whether or not the court would characterise that breach of contract as a failure to take reasonable care. There is no reason in principle why the client should not instruct the solicitor to undertake more onerous obligations than the common law would normally impose if the client wishes to do so.1 But by 7

1.02  The solicitor’s duties in contract and tort accepting instructions to act in a particular matter, a solicitor does not normally agree to undertake a strict obligation to achieve a particular outcome or give a warranty that this outcome will be achieved.2 In Platform Funding Ltd v Bank of Scotland plc3 Rix LJ stated that it was impossible to lay down a general rule about the construction of a professional retainer. But he helpfully summarised the effect of the authorities in the following four propositions: ‘(1) that the default obligation is one limited to the taking and exercise of reasonable care; (2) that it requires special facts or clear language to impose an obligation stricter than that of reasonable care; (3) that a professional man will not readily be supposed to undertake to achieve a guaranteed result; and(4) that if he is undertaking with care that which he was retained or instructed to do, he will not readily be found to have nevertheless warranted to be responsible for a misfortune caused by the fraud of another.’ A  number of the authorities to which he referred are solicitors’ cases and illustrate these propositions. In Barclays Bank plc v Weeks, Legg & Dean,4 a solicitor acting for a purchaser gave his client’s bank an undertaking to apply the bank’s funds solely for the purpose of acquiring a good marketable title to the property which his client was about to purchase. The undertaking was construed by the court as an undertaking to apply those funds for the purpose of acquiring a title which ‘a reasonably competent solicitor acting with proper skill and care would accept as a good marketable title’. To construe the undertaking otherwise would impose a greater duty to the bank than the solicitor owed to his client and would require him in effect to guarantee the title to the property. The same approach was adopted in Midland Bank plc v Cox McQueen.5 In that case the solicitor agreed to carry out a bank’s instructions to ‘act on our behalf by obtaining the signatures of’ a husband and wife to a number of documents. The bank’s instructions also contained a request to ‘explain the implications of our mortgage form’. The wife never signed the documents because the husband had her impersonated by an employee of his. Because of the duty to explain the Court of Appeal held that the obligation to obtain the wife’s signature was not absolute but ‘better suited to a requirement to exercise a reasonable standard of care’. In reaching this conclusion the court gave the following general guidance for the construction of legal instructions, particularly from commercial clients:6 ‘If commercial institutions such as banks wish to impose an absolute liability on members of a profession they should do so in clear terms so that the solicitors can appreciate the extent of the obligations which they are accepting. Frequently this sort of task is undertaken by small firms of solicitors who are already finding it difficult to remain viable. This is partly because they are heavily burdened by the costs of insurance. If they are to be liable for very substantial sums of damages as a result of the fraud of customers of the bank which they cannot prevent, then either they will have to withdraw from providing those 8

Duties in contract  1.03 services or they will have to charge for their services at a rate which is very different from that which was charged here. Neither result is in the interests of the banks or their customers or the public. The result is not in the interests of the banks’ customers as they will not benefit from the explanation of the transaction from a member of the legal profession who is qualified to give an explanation. It is not in the interests of banks as they will have to pay higher fees which they may or may not seek to recover from their customers. It is not in the interests of the public because it is important that legal services are readily available and this will not be the case if small firms are unable to survive. Unless the language used in a retainer clearly has this consequence, the courts should not be ready to impose obligations on solicitors which even the most careful solicitor may not be able to meet.’ In Nationwide Building Society v Davisons Solicitors7 the Court of Appeal considered all of these authorities and held that a provision in the CML Handbook8 to ensure that the lender obtained a first legal charge over the relevant property was not the equivalent of a guarantee and went no further than an obligation to exercise reasonable skill and care.9 1 For early examples in lenders’ cases see Bristol and West Building Society v Kramer (1995) Independent, 26  January, [1995]  NPC  14 and Zwebner v The Mortgage Corpn Ltd [1998] PNLR 769, CA. 2 See Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, CA in which Lord Denning said this at 1110D: ‘The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.’ See also the House of Lords in the same case to the same effect in (1978) 11 BLR 29 at 49–52 and Thake v Maurice [1986] QB 644 at 687–8, CA holding that a strict duty will be imposed on a professional only in ‘special circumstances’. For a more recent example see Green v Turner [1999]  PNLR  28 (HHJ Hegarty QC). 3 [2008]  EWCA  Civ 930; [2009]  QB  426. For recent consideration of the decision in a very different context see B v IVF Hammersmith Ltd [2018] EWCA Civ 2803, [2020] QB 93 at [49]– [53] (Nicola Davies LJ). 4 [1999] QB 309 at 327H–328A, CA. 5 [1999] Lloyd’s Rep PN 223. 6 Per Lord Woolf MR. Zwebner v The Mortgage Corporation Ltd [1998] PNLR 769, CA was distinguished on a number of specific grounds which are considered at para 10.66, below. On the general question of construction the court considered that it should not be given a wide application. This approach was followed in Mercantile Credit Co Ltd v Fenwick [1999] Lloyd’s Rep PN  408, CA and UCB  Corporate Services Ltd v Clyde & Co [2000]  PNLR  84, CA. In LSC Finance Limited v Abensons Law Ltd [2015] EWHC 1163 (Ch), HHJ Hodge QC found Zwebner and all three of the authorities referred to in the text helpful in construing a particular undertaking in the context of an identity fraud: see, in particular, at [82]–[102]. 7 [2012] EWCA Civ 1626, [2013] PNLR 12. 8 ‘On completion, we require a fully enforceable first charge by way of legal mortgage over the property executed by all owners of the legal estate. All existing charges must be redeemed on or before completion, unless we agree that an existing charge may be postponed …’ (cited by Sir Andrew Morritt C, at [13]). 9 At [51]–[58].

1.03 In the same way it is also important to recognise that the duty to exercise reasonable care is not a duty to achieve a particular result. This 9

1.04  The solicitor’s duties in contract and tort is illustrated by Matrix Securities Ltd v Theodore Goddard1 in which the defendants, a firm of solicitors and a barrister, were instructed by the claimant with the aim of obtaining tax clearance for a particular scheme. Tax clearance was obtained and then successfully challenged by the Inland Revenue on the grounds essentially of non-disclosure. It was argued that ‘if reasonable skill and care could have achieved a letter which, if replied to favourably, would stand no risk that the Revenue would revoke that reply, then each defendant was bound to achieve that result and is in breach of duty and liable for the fact that it was not achieved’.2 The judge rejected this argument stating:3 ‘I  hold that the duty… was to exercise such skill and care as a reasonably competent practitioner in the relevant sector of the profession would have done with a view to securing such a clearance. I  do not accept that their duties were to secure a clearance which was 100% reliable, or to do so if the exercise of reasonable skill and care could achieve such a thing. That formulation turns the common law position set out in Saif Ali4 by Lord Diplock on its head. Instead of imposing legal liability on the professional only if he does that which no reasonably competent member of the relevant profession or part of the profession would have done in the same situation, he would be rendered liable for breach of duty if he omitted anything which any one of the reasonably competent members of the relevant group or class would have done, even if, as might be the case in an area involving judgment between different choices, the steps that a number of reasonably competent members of the profession would reasonably have taken would be incompatible with each other. That is not the law.’ 1 [1998]  PNLR  290 (Lloyd J). See also Turner v Eversheds [2007]  EWHC  401 (QB) (HHJ Wilkinson QC) (solicitors engaged to re-negotiate terms of investment contract) at [24]: ‘The duty of a solicitor is to act in the manner of a reasonably competent member of that profession. It does not extend to a requirement to achieve a particular result. In this case the result desired by Mr Turner was beyond achievement by the route that he now suggests would have succeeded.’ 2 [1998] PNLR 290 at 318O. 3 [1998] PNLR 290 at 321E–G. 4 See para 2.02, below.

1.04 Apart from the express terms agreed between the parties, the principal term implied by the law into the contract of retainer is that the solicitor should take reasonable care in providing legal services. Chapter 2 is devoted to exploring the standard to be expected of a solicitor to comply with this obligation. There is no difference between the content of this obligation which is implied into each contract of retainer and the general tortious duty of care considered below. The only practical difference between the two duties is that caused by the different limitation periods in contract and tort. That difference is considered and explored in Chapter 7. The statutory source of the term depends on when the contract was made. For contracts of retainer made before 10

Duties in contract  1.05 1 October 2015 such a term is implied by the Supply of Goods and Services Act 1982, s 13.1 For contracts of retainer made after 1 October 2015 between a solicitor and a consumer1 such a term is implied by the Consumer Rights Act 2015, s 49. For other contracts the term implied by the Supply of Goods and Services Act 1982, s 13 remains unaffected.2 1 Section 2 defines ‘consumer’ as ‘an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession’. The explanatory notes state that the protection afforded by the Act does not apply to small businesses or legally incorporated organisations (e.g. companies formed by groups of residents). 2 The Supply of Goods and Services Act 1982 was amended to exclude consumer contracts with effect from that date under the Consumer Rights Act 2015, s 100(5) and Sch 1, para 38(c).

2  Exclusion or limitation of liability 1.05 Again, it is unusual for a solicitor to seek to exclude liability to his or her client altogether for the consequences of negligence or any other breach of duty. The Solicitors Act 1974 expressly prohibits a solicitor undertaking contentious business from excluding liability for any breach of duty. Contentious business is defined by the Act as ‘business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator’ and it provides that any agreement to exclude liability for negligence or liability for ‘any responsibility to which he would otherwise be subject as a solicitor’ is void.1 There used to be no equivalent prohibition for non-contentious business. Before 1 October 2015 such a term imposed by a consumer contract had to satisfy the Unfair Contract Terms in Consumer Contracts Regulations 1999 (UCTCCR).2 However, such a term imposed by a consumer contract after 1 October 2015 is not binding.3 It remains the position that such a term imposed by a business contract must satisfy the reasonableness requirement of the Unfair Contract Terms Act 1977 (‘UCTA’). 1 Solicitors Act 1974, ss 59, 60(5) and 87 and Administration of Justice Act 1985, Sch 2, para 24. A CBA expressly excludes non-contentious probate business as defined by the Supreme Court Act 1981, s 128. For the question of whether work is contentious or non-contentious see Bilkus v Stockler Brunton [2010] EWCA Civ 101 at [39]–[48]. Work carried out pursuant to a final judgment or order is not contentious work because it is not carried out in or for the purposes of proceedings but as a consequence of those proceedings. 2 SI 1999/2083. If the exclusion was in a standard form engagement letter, it had to satisfy the test of fairness. Regulation 5(1) provided that a contractual term ‘which has not been individually negotiated’ should be regarded as unfair ‘if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer’. Regulation 5(2) provided that a term was always regarded as not individually negotiated where it had been drafted in advance. Even if the exclusion was not in a standard form, reg 7(1) imposed an obligation upon the supplier to satisfy the plain language requirement: ‘to ensure that any written term of a contract is expressed in plain intelligible language’. 3 See the Consumer Rights Act 2015, s  57(1). A  term which purports to restrict liability (ie  a limitation clause) to less than the contract price or the value of any other consideration is not binding either: see s 57(3). After 1 October 2015, s.3 of UCTA ceased to apply to consumer contracts: see para 5 of Sch 4 to the Consumer Rights Act 2015.

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1.06  The solicitor’s duties in contract and tort 1.06 A distinction also needs to be made between limitations of liability in business and consumer contracts. Limitations of liability contained in engagement letters or standard terms of business which limit liability to the solicitor’s insurance cover are likely to be held enforceable where the client is not a consumer, provided always that the insurance cover is adequate for the particular engagement.1 The current position broadly reflects the position taken by the Law Society and the SRA in the conduct rules since 1999. The Guide to the Professional Conduct of Solicitors stated that as a matter of principle it was acceptable for a solicitor to limit any liability in excess of his or her insurance cover.2 The 2007 Code also contained a specific rule to this effect.3 The SRA Code of Conduct 2011 also permitted such a term, subject to nonmandatory guidance to the effect that the term should be in writing and drawn to the client’s attention.4 Although the enforceability of a contractual term limiting a solicitor’s liability to a client to a specified amount has never been tested,5 the courts are likely to uphold clauses in business contracts which complied with the conduct rules from time to time in force. In contrast, the position in relation to consumer contracts is more difficult. The relevant provisions of both the UCTCCR and the Consumer Rights Act 2015,6 and the non-statutory guidance given by the Office of Fair Trading and now the Competition and Markets Authority,7 all suggest that any limitation of liability which purports to prevent a consumer from obtaining full compensation will be treated as unfair. The SRA Standards and Regulations 2019 do not contain any specific guidance on the limitation of liability (possibly because of the difference between business and consumer contracts).8 But it is suggested that no change of principle was intended and that a term in an engagement letter to a business client limiting liability to the solicitor’s cover will be enforceable if the solicitor has obtained adequate cover for the engagement.10 1 Paragraph 5.6 of the Code of Conduct for Individuals 2019 provides as follows: ‘If you are a solicitor … you must ensure that the body takes out and maintains indemnity insurance that provides adequate and appropriate cover in respect of the services that you provide, whether or not they comprise reserved legal activities’. Rule 3.1 of the SRA Indemnity Insurance Rules 2019 imposes an obligation upon an authorised body to take out and maintain ‘adequate and appropriate cover in respect of current or past practice taking into account any alternative arrangements the body or its clients may make’. Rule 3.2 then provides that an authorised body must not exclude or attempt to exclude liability below the minimum level of cover required under the rules. For further discussion in the context of the MTC: see Chapter 17, para 17.02. 2 See the Guide to the Professional Conduct of Solicitors (1999), Principle 12.11: ‘Although it is not acceptable for solicitors to attempt to exclude by contract all liability to their clients, there is no objection as a matter of conduct to solicitors seeking to limit their liability provided that such limitation is not below the minimum level of cover required by the Solicitors’ Indemnity Rules.’ For the original guidance given by the Law Society see the Council’s statement at (1987) 84 LSG at 1545. 3 See r 2.07 which provided: ‘If you are a principal in a firm you must not exclude or attempt to exclude by contract all liability to your clients. However, you may limit your liability, provided that such limitation: (a) is not below the minimum level of cover required by the Solicitors’ Indemnity Insurance Rules for a policy of qualifying insurance; (b) is brought to the client’s attention; and (c) is in writing.’ Paragraph 68 of the guidance specifically stated that r 2.07 was ‘subject to the position at law’. Paragraph 69 specifically warned solicitors that ‘if you want to limit your firm’s liability to a figure above the minimum level for qualifying insurance but within

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Duties in contract  1.07 your firm’s top-up insurance cover, you will need to consider whether the top-up insurance will adequately cover a claim arising from the matter in question’. 4 The SRA Code of Conduct 2011 provided that solicitors had to achieve the following outcomes: ‘O(7.13) you assess and purchase the level of professional indemnity insurance cover that is appropriate to your current and past practice, taking into account potential levels of claim by your clients and others and any alternative arrangement you or your client may make’. See also: ‘O(1.8) clients have the benefit of your compulsory professional indemnity insurance and you do not exclude or attempt to exclude liability below the minimum level of cover required by the SRA Indemnity Insurance Rules’. This outcome was supported by IB(1.8): ‘if you seek to limit your liability to your client to a level above the minimum required by the SRA Indemnity Insurance Rules, ensuring that this limitation is in writing and is brought to the client’s attention.’ 5 For a consideration of the application of both UCTA and the UCTCCR see Arnull, ‘Professional advisers and limitations on liability’ (2003) 19 PN 494 where it was suggested that there was no difference between the test of reasonableness under UCTA and the fairness requirement under the UCTCCR. The only reported decision on the scope of an exclusion clause in an engagement letter appears to be University of Keele v Price Waterhouse [2004] EWCA Civ 583, [2004]  PNLR  43 (accountant). The validity of the clause under UCTA or the UCTCCR was not, however, addressed because the clause was held not to cover the relevant loss. In Marplace (Number 512) v Chaffe Street (A Firm) [2006] EWHC 1919 (Ch) the engagement letter contained a clause limiting the firm’s liability to £20m. Although the judge did not need to decide whether the clause was valid (because he found that the solicitors were not negligent), he considered the clause under s 11 of UCTA and concluded that it was reasonable. A clause in a valuer’s engagement letter limiting liability to £1m was held in Dennard v PricewaterhouseCoopers LLP [2010] EWHC 812 (Ch) to satisfy the requirement of reasonableness where the claimants were sophisticated commercial clients who were aware that the defendants used limitation clauses and could have sought to negotiate the extent of the limitation clause. 6 See Sch  2 to the Consumer Rights Act 2015 and the UCTCCR which set out an indicative and non-exhaustive list of terms which may be regarded as unfair. Paragraph 2 of the former (which repeats para 1(b) of the latter) indicates that terms which have the object or effect of ‘inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations’ will be regarded as unfair. 7 The Unfair Contract Terms Guidance was first published in February 2001 and updated in September 2008 by the Office of Fair Trading (‘Unfair Contract Terms Guidance: Guidance for the Unfair Terms in Consumer Contract Regulations 1999, OFT311’). Paragraph 2.3.1 stated: ‘If a contract is to be fully and equally binding on both trader and consumer, each party should be entitled to full compensation where the other fails to honour its obligations.’ Paragraph 5.6.1 of the current guidance published by the CMA on 31 July 2015 (‘Unfair contract terms guidance’) is to similar effect: ‘If a contract is to be fully and equally binding on both trader and consumer, each party should be entitled to full compensation where the other fails to honour its obligations. Clauses which limit the trader’s liability are open to the same objections as those which exclude it altogether.’ Limitations of liability are included in the ‘Grey List’ which is intended to contain illustrations of unfairness which show how the legislation was intended to work. 8 The SRA’s guidance on client care letters originally published on 23 July 2019 and updated on 25 November 2019 draws attention to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, SI 2013/3134. But it does not deal with limitation of liability.

1.07 The effect of a provision that purports to exclude liability to third parties is considered separately below in the context of duties to third parties.1 More difficult is the question whether a solicitor may be permitted to limit the scope of the specific retainer which he or she is prepared to undertake, for example by excluding tax advice or advice on detailed technical matters such 13

1.07  The solicitor’s duties in contract and tort as the specification for building works. In Hurlingham Estates Ltd v Wilde & Partners2 Lightman J held, albeit obiter, that a limitation imposed by a solicitor upon his clients at a meeting without their ‘fully informed consent’ would not be binding upon them. He stated his decision in the following terms: ‘The second remarkable feature is that there is no written record of the alleged (but disputed) agreement to limit the solicitors’ duties. Any such agreement must plainly, if it is to have any legal effect, be clear and unambiguous: the client must be fully informed as to the limited reliance he may place on his solicitor and the reason for it (i e the solicitor’s lack of any basic knowledge or competence), that this limitation is not a normal term of a solicitor’s engagement, and that the client may be better advised to go to another solicitor who is not so handicapped and can be retained with no such limitation on his duties. Common sense requires that all these matters should also be recorded in an attendance note of the meeting where they are discussed and agreed, and should subsequently be recorded in a letter to the client.’ In that case the solicitor agreed to act in relation to the purchase of shares, the acquisition of a lease and the grant of a sub-lease. At a meeting with the clients he attempted to limit his duties to drafting the relevant documents for the structure agreed by the clients but to exclude any duty to give advice on the financial and tax consequences of that structure. In Minkin v Landsberg,3 Jackson LJ was more cautious. He stated that this passage reflected good practice in appropriate cases but doubted that it embodied a universally applicable rule of law. He also pointed out that in many situations the client cannot afford to pay for all relevant research or advice and that the choice may be between a limited retainer and no retainer at all. It is suggested that the decision in Hurlingham Estates Ltd v Wilde can be justified on the basis that the solicitor should have advised them to consider instructing another solicitor with the relevant expertise before agreeing to the proposed limitation. Whether or not the reasoning can be supported on that basis, it is suggested that the court would have struck such a limitation in a consumer contract down under the UCTCCR or the Consumer Rights Act 2015. It was unfair for the solicitor to attempt to impose such a limitation without informing the clients that he did not have the necessary expertise and suggesting that they should consider instructing a solicitor who did before agreeing to instruct him.4 1 See paras 1.31–1.33. 2 [1997] 1 Lloyd’s Rep 525 at 526. The decision has been cited for a number of propositions and, in particular, that the scope of a solicitor’s duty may extend beyond the express instructions given by the client: see eg Phelps v Stewarts [2007] EWHC 1561 (Ch) (Bernard Livesey QC), at [26], Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177 at [153] (Arnold J) (upheld on the merits but reversed on costs at [2012] EWCA Civ 498, [2012] STC 1760) and Minkin v Landsberg (below). For further discussion on the standard of care to be expected of the solicitor in this situation see para 1.17 below) and Chapter 2, para 2.06. 3 [2015] EWCA Civ 1152, [2016] 1 WLR 1489. 4 The Consumer Rights Act 2015, s 62 contains the statutory test of fairness. It provides that a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the

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Duties in contract  1.08 parties’ rights and obligations under the contract to the detriment of the consumer: see s 62(4). The Act excludes the application of this test to the ‘core exemption’ where the term limits or restricts the main subject matter of the contract: see s  64(1)(a). The position was the same before 1 October 2015: see UCTRR, reg 6(2). It is suggested that the core exemption does not apply and the solicitor has to satisfy the fairness requirement where he or she seeks to exclude a standard duty (eg to report on title to the purchaser of a property) or (as in Hurlingham Estates Ltd v Wilde) cannot properly accept instructions to act on a limited basis without exposing the client to a risk of loss. Lightman J also criticised the defendant for failing to put the limitation in writing and giving the client an opportunity to take it away and consider it. It should be noted that reg  6(2) only excludes the fairness requirement if the plain language requirement has already been satisfied. The CMA’s unfair contract terms guidance contains useful charts for deciding whether the core exemption applies: see 3.16 and 3.33. It also points out that in order to benefit from the core exemption the term must be ‘prominent’ and ‘transparent’ and the average consumer must be aware of it: see 3.17 to 3.32. For judicial consideration of the core terms exemption in the context of professional services see Bairstow Eves London Central Ltd v Smith [2004] EWHC 263 (QB), [2004] 2 EGLR 25 (Gross J) at [25]. The core exemption did not apply to price escalation or default provisions.

3  Formation and duration of the retainer 1.08 A solicitor is normally retained by express agreement. The agreement may be oral or written but the usual way in which the contract is formed or recorded is for the solicitor to send an engagement letter which the client is requested to countersign or the terms of which the client is asked to agree.1 Moreover, each new instruction will ordinarily give rise to a separate contract of retainer. Shepherd Construction Ltd v Pinsent Masons LLP2 provides a good example of this principle. Standard form contractual terms which the solicitors had drafted for the client, a leading construction contractor, had become obsolete as a result of a change in the law. The client sought to argue that because of its long-lasting and extensive relationship there was an overarching retainer or single contract which imposed a duty on the solicitors to review the suitability of standard amendments and advice in the light of legislative changes. This claim was rejected on the basis that the allegation that there was a single contract was unsustainable. Akenhead J stated this:3 ‘Essentially, the Single Contract relied upon by Shepherd is in effect a general and continuing retainer by which the relevant firm was required to review all advice and drafting which it had previously done. One has only to summarise this position to realise that it is hopelessly wide. There is no need to imply such a retainer simply because there was a large number of specific commissions and because much the same personnel on the solicitors’ side were involved. The fact that there were specific commissions militates against the implication of such a general retainer. The involvement of the same personnel even over many years is unsurprising in a commercial legal context and does not give rise to any such implication either. Again, the fact that there has been a long-standing relationship between individual partners or employees and a client is simply a fact of life rather than something which gives rise to an implication of some general retainer.’ 15

1.08  The solicitor’s duties in contract and tort In order to comply with the Money Laundering Regulations4 a solicitor must also carry out detailed checks to establish and confirm the identity of a new client5 and the CML Lenders’ Handbook imposes an express obligation upon a solicitor retained by a mortgage lender to check the borrower’s identity.6 As between solicitor and client, however, the failure to comply with these requirements will not prevent a contract coming into existence and a solicitor may be retained by express agreement in the most casual of circumstances. In Whelton Sinclair v Hyland7 it was held that a telephone call by the claimant to an unidentified person (who might have been a secretary or receptionist) brought a retainer into existence8 and in Aroca Sequer Asociados v Adams8 it was held that the arrangement of an appointment at the lawyers’ offices amounted to acceptance of an offer to act and brought a retainer into existence. 1 The circumstances leading to the formation of the retainer must be capable of being analysed by reference to offer and acceptance in the normal way. For an analysis of this kind see Masons v WD King Ltd [2003] EWHC 3124 (TCC) (HHJ Humphrey Lloyd QC) at [15]–[16] and [55]– [57]. For an example of a case in which the client unsuccessfully sought to argue that the terms of the engagement letter were not binding on the basis that the terms were not intended to be enforceable unless the client succeeded in the litigation see McFaddens v Chandrasekaran [2006] EWHC 1357 (QB) (Irwin J). For another example where the client sought to argue (again unsuccessfully) that there was no contract of retainer because he never signed and returned the engagement letter, see Fladgate LLP v Harrison [2012] 67 (QB) (Lang J). 2 [2012]  EWHC  43 (TCC), [2012]  PNLR  31. See also Patten, ‘A  duty to review?’ (2012) 28(2) PN 145–148. 3 At [34]. 4 The current regulations (which came into force on 26 June 2017) are the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692 (‘MLR’). On 10 January 2020 the MLR were amended by the EU’s 5th Money Laundering Directive. The MLR repealed and replaced the Money Laundering Regulations 2007, SI 2007/2157 which came into place on 15 December 2007, replacing the 2003 Regulations. It may be relevant to consider good practice at various points in time before the 10  January 2020 and the Law Society’s guidance to the regulations was originally contained in the Guide to Good Practice (2009), which summarised current practice notes and guidance. The practice notes themselves were updated regularly on the Law Society’s website and the most recent version before the directive came into force was a Practice Note dated 6 March 2018 which itself replaced an earlier note dated 6 October 2011. 5 The SRA issued general guidance on 2  March 2018 (updated on 25  November 2019). For detailed guidance, however, since the directive came into force see the Law Society’s Antimoney laundering Guidance for the Legal sector also dated 10  January 2020. Section 4 provides detailed guidance in relation to customer due diligence (CDD) for all types of client (both individual and corporate). Section 4.9.4 provides detailed guidance in relation to CDD on beneficial owners (which will be relevant where the solicitor is instructed by or through a third party). The guidance is not mandatory but highlights particular requirements of the regulations (which themselves provide only indicative guidance as to the steps to be taken to achieve compliance). The onus is on the solicitor to assess the risks of a particular transaction and to ‘consider’ which methods of customer identification are appropriate. For earlier guidance see para 1.07 and footnote 5 to the third edition. In P&P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273, Patten LJ provided a useful summary of the effect of the regulations so far as they apply to solicitors: see [29]–[31]. He pointed out that although they may deter or prevent fraud, that is not the purpose of the MLR and that any civil liability which attaches to the solicitors and agents who act for the fraudster must be established as a matter of general law. He stated nevertheless that they provide important background features in determining what (if any) liability should be imposed on solicitors. 6 See Section 3 headed ‘Safeguards’.

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Duties in contract  1.09 7 [1992] 2 EGLR 158, CA. Contrast Horsley v Burton [2003] All ER (D) 413 (David Clarke J) in which an informal letter of advice and a short meeting (for which the solicitor refused to accept payment) did not give rise to a contract of retainer. For a further (and more complex) example in which a client was held to have instructed a solicitor to act and thereby ratified his conduct of arbitration proceedings principally on the basis of a telephone conversation see SEB Trygg Aktiebolag v Manches [2005] EWHC 35 (Comm), [2005] 1 Lloyd’s Rep 129 (Gloster J) (a point that was not considered in the CA). 8 [2018] EWCA Civ 1589, [2018] PNLR 32 at [34]–[37] (David Richards LJ).

1.09 Equally, a solicitor may be retained by a client under an implied contract. The question whether such a contract should be implied often arises where the solicitor has already been instructed to act by one party and the issue is whether he or she has also been retained by any other party or parties. Common relationships in which this issue arises involve corporate clients and their shareholders or directors, parent companies and subsidiaries, co-owners of property, trustees and beneficiaries and joint venture parties. The circumstances in which a solicitor may be taken to have assumed a duty of care to a related party in tort are examined in section B.21 of this chapter and one rationalisation for the range of circumstances in which liability in tort is imposed is that the relationship between the solicitor and the third party is closely analogous or akin to a contract. There may be circumstances, however, in which a genuine contract can be implied between the solicitor and a party who is not the direct source of his instructions. According to Scott LJ in Groom v Crocker:2 ‘The relationship is normally started by a retainer but will be presumed if the conduct of the parties shows that the relationship of solicitor and client has in fact been established between them.’ The question is an objective one and a retainer will only be implied where on an objective assessment the solicitor either appreciated or ought to have appreciated that he or she was being instructed by the client or prospective client. In those circumstances a collateral contract may genuinely be implied between the solicitor and persons or bodies other than the individual from whom the solicitor receives instructions, and it is no answer for the solicitor to argue that he has not been instructed by, or on behalf of, the claimant expressly.3 The appreciation of the solicitor in question will carry great weight where the solicitor is careful and competent4 and the solicitor’s fee note may also be a powerful indication that there is an implied retainer although this is not conclusive.5 In Dean v Allin & Watts6 the court gave the following guidance: ‘“All the circumstances” include the fact, if such be the case (as it is here), that the party in question is not liable for the solicitor’s fees and did not directly instruct the solicitors. These are circumstances to be taken into account but are not conclusive. Other circumstances to be taken into account include whether such a contractual relationship has existed in the past, for where it has, the court may be readier to assume that the parties intended to resume that relationship, and 17

1.10  The solicitor’s duties in contract and tort where there has been such a previous relationship the failure of the solicitor to advise the former client to obtain independent advice may be indicative that such advice is not necessary because the solicitor is so acting.’ In Caliendo v Mischcon de Reya7 Arnold J held that there was no difference between the test in Dean v Allin & Watts (above) and the normal test for an implied contract8 and that the test could be summarised as follows: was there conduct by the parties which was consistent only with the firm of solicitors being retained as solicitor for C? 1 Paragraphs 1.19 to 1.29, below. 2 [1939] 1 KB 194 at 222, CA. This passage was cited by Oliver J in Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384 at 396D and by Ipp J in Pegrum v Fatharly [1996] WSR 92 (SC of WA) who added this gloss (which was cited by Goldring J in Munro-Wilson v Olswang [2003] EWHC 721 (QB) at [6]): ‘A contractual retainer of solicitor and client will therefore be presumed if it is proved that the relationship of solicitor and client de facto existed between a solicitor and another person. Upon proof of that kind it would not be necessary to prove when, where, by whom or in what particular words the agreement was made … the de facto relationship … has to be a necessary and clear inference from the proved facts before a retainer will be presumed.’ 3 See Searles v Cann & Hallett [1999] PNLR 494 at 503D cited by Lightman J in Dean v Allin & Watts [2001]  EWCA  Civ 758, [2001] Lloyd’s Rep PN  605 at [22] and by Goldring J  in Munro-Wilson v Olswang [2003] EWHC 721 (QB) at [6]: ‘No such retainer should be implied for convenience, but only where an objective consideration of all the circumstances make it so clear an implication that [the solicitor] ought to have appreciated it.’ See also Jewo Ferrous BV v Lewis Moore [2001] PNLR 328 at 340 (Chadwick LJ): ‘In determining the effect of what was said in the course of the conversation on February 2, 1990 it is, in my view, helpful to recall the passage in the Scottish textbook Gloag on Contract (2nd edn) p 7 cited by Lord Reid in McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125 at 128: “The judicial task is not to discover the actual intentions of each party; it is to decide what each was reasonably entitled to conclude from the attitude of the other”.’ 4 See Jewo Ferrous BV v Lewis Moore [2001] PNLR 328 at 340 (Chadwick LJ). 5 See Jewo Ferrous BV v Lewis Moore [2001] PNLR 328 at 341 (Chadwick LJ). In that case the solicitor had rendered a fee note to the claimant but the judge accepted his evidence that he was asked to render the fee note to the claimant directly and that this did not make the claimant his client. See also Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384 at 396A (Oliver J): ‘Who actually paid the bill, however, does not. I think, matter.’ 6 [2001] EWCA Civ 758, [2001] Lloyd’s Rep PN 605 at [22]. Lightman J gave Madley v Cousins Combe & Mustoe [1997]  EGCS  63, CA as an example of the kind of case in which a new retainer was presumed from a previous retainer and the failure to advise the former client to take independent advice. For a similar example see Harris v Nantes & Wylde [1997] NPC 7, CA. In Joseph v Farrer & Co LLP 2017] EWHC 2072 (Ch), [2018] PNLR 1 HHJ Purle QC followed Dean v Allin & Watts citing this passage and although there had been an earlier retainer between C and Ds this was insufficient to give rise to a new implied retainer: see [21]–[23]. 7 [2016] EWHC 150 (Ch) at [679]–[682]. 8 As set out in Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) (Hamblen J) at [1014]– [1016].

1.10 In a number of cases the court has found the existence of an implied retainer between solicitors or other professionals, usually in circumstances where the claimant is so closely connected with another client that a separate or collateral contract should be implied.1 In other cases, where the parties are 18

Duties in contract  1.10 on separate sides of a transaction, the court has refused to imply the existence of a retainer (where, eg, a solicitor is asked to draw up a document on behalf of one party but the other party fails to obtain separate advice).2 In situations of this kind it is possible that one or more of the parties might take advantage of the Contracts (Rights of Third Parties) Act 1999 even where there is no implied retainer or no duty of care in tort. But under the Act, a party is only entitled to sue on the contract of retainer where the parties intend to confer a benefit on that party and the party is mentioned by name.3 1 Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch  384 at 395–6 (Oliver J) (retainer implied between a number of family members and family solicitors); R P Howard Ltd v Woodman Matthews & Co [1983] BCLC 117 (HHJ Finlay QC) (where Ds were held to owe a contractual duty of care to both a company and its principal shareholder in relation to a lease renewal); Punjab National Bank v de Boinville [1992] 3 All ER 104, CA at 114g–116g (implied retainer between bank and insurance brokers); Christensen v Scott [1996] 1  NZLR 273 (CA of NZ) (where it was held arguable that accountants owed a duty to directors and shareholders guaranteeing a company’s debts although the court’s approach to the recoverability of damages was disapproved in Johnson v Gore Wood & Co [2002] 2 AC 1 (below)); Johnson v Gore Wood & Co [2002]  EWHC  776 (Ch) (Hart J) at [74]–[87] (contractual duty of care owed to both company and shareholder in relation to the conduct of litigation); Ball v Druces & Attlee (No 2) [2004] EWHC 1402 (QB), [2004] PNLR 39 (Nelson J) (Ds instructed to set up a charitable trust also held to be acting for the promoters individually); and Hughes v Richards [2004] EWCA Civ 266, [2004] PNLR 706 at [31] (Jacob LJ) (accountant owed contractual duties to parents and children). 2 Searles v Cann & Hallett [1999] PNLR 494 (Philip Mott QC) (no implied retainer between private mortgagee and solicitors instructed by the mortgagor to draw up the charge); Jewo Ferrous BV v Lewis Moore [2001] PNLR 328, CA (no implied retainer between supplier and solicitors instructed by purchaser to prepare a debenture); Dean v Allin & Watts [2001]  EWCA  Civ 758, [2001] Lloyd’s Rep PN 605, CA (no implied retainer between private lender and solicitors instructed by the borrower to prepare promissory notes); Munro-Wilson v Olswang [2003] EWHC 721 (QB) (Goldring J) (no implied retainer between litigation solicitors instructed by company and largest shareholders – on the facts it was held that Ds expressly refused to act unless C agreed to provide money on account which he failed to do); Masons v WD King Ltd [2003] EWHC 3124 (TCC) (HHJ  Humphrey Lloyd QC) at [15]–[16] and [55]–[57] (Ds who were expressly retained by company A in relation to a development were not retained by company B which was a special purpose vehicle); Jaison Property Development Co Ltd v Swinhoe [2010]  EWHC  2467 (QB) (Simon Picken QC) (no implied retainer where company’s sole shareholder asked to provide a guarantee because he was not liable for the fees and there was no pre-existing relationship between him and the solicitors). The judge usefully characterised the issue (at [100]) as whether ‘Swinhoe was so intertwined with Lydian that he could not be separated from the company, so as to mean that LSG was acting under a dual retainer’. 3 It is unlikely however that the Act will provide a remedy unless the parties entered into the contract of retainer on the express basis that it would apply. Section 1 provides that: ‘… a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if- (a) the contract expressly provides that he may, or (b) subject to subsection (2), the term purports to confer a benefit on him. (2) Subsection (1) (b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party. (3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.’ There is clear authority that the third party must be expressly identified either by name or class: see Avraamides v Colwill [2006] EWCA Civ 1533. See also Starlight Shipping Co v Allianz Marine & Aviation Versicherungs AG [2014] EWHC 3068 (Comm), [2014] 2 Lloyd’s Rep 579 (Flaux J) at [87] and [88] (where the term ‘Underwriters’ was held to include their servants and agents). Both decisions were considered in Chudley v Clydesdale Bank plc [2019] EWCA Civ 344 where a customer of the bank issued an irrevocable letter of instruction to hold funds in a

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1.11  The solicitor’s duties in contract and tort segregated client account and only to release them against a solicitor’s undertaking. The Court of Appeal held that this was enforceable under s 1(3) by third party investors in the customer even though they were not named: see Flaux LJ at [77]–[79]. See also the Law Commission Report No 242 (1996) which preceded the Act at paras 7.19–7.27 (dealing, in particular, with the disappointed beneficiary cases). Longmore LJ found the report a useful guide in Chudley (above): see [90]–[94].

1.11 If a solicitor wishes to decline instructions from a client, he or she owes a duty to the potential client to inform them immediately. Otherwise, the solicitor may be held to have assumed a limited duty of care to the potential client.1 Once a solicitor has accepted instructions the normal contractual rule is that it is an implied term of the contract that the solicitor may terminate the retainer only on reasonable notice and for good reason. This is because the contract of retainer between a solicitor and client is traditionally construed as an entire contract. In Underwood, Son & Piper v Lewis,2 it was held that the retainer of a nineteenth-century solicitor who accepted instructions to act on behalf of a client in litigation gave rise to an entire contract which the solicitor could terminate only on reasonable notice. In Richard Buxton v Mills-Owens,3 the Court of Appeal had an opportunity to reconsider the position in the light of modern practice. The Court had no doubt that the contract of retainer (which in this case related to a statutory appeal against planning permission) was an entire contract. As a consequence the solicitor is only permitted to terminate the retainer upon reasonable notice and with good cause.4 It is theoretically possible for a solicitor’s standard terms of business to depart from the normal contractual rule.5 The existence of an entire contract does not prevent the solicitor suing for his or her fees if the client terminates the retainer before the work is complete.6 A solicitor’s retainer may even survive the mental incapacity of the client even though the normal rule is that mental incapacity terminates a solicitor’s authority.7 1 Whelton Sinclair v Hyland [1992] 2 EGLR 158 at 161B–C, CA. Consider the position in which a solicitor carries out a conflict check but fails to advise the client promptly, with the consequence that a limitation period expires. 2 [1894] 2 QB 306, CA. Before Richard Buxton v Mills-Owens (referred to in the main text) the decision was distinguished by Goddard J in Warmington v McMurrays [1936] 2 All ER 745 on the ground that a series of separate retainers to conduct a series of transactions arose. It was cited by Tuckey LJ in Donsland Ltd v Van Hoogstraten [2002] EWCA Civ 253, [2002] PNLR 26 at 608 and applied by Laddie J in Young v Robson Rhodes [1999] Lloyd’s Rep PN 641 where forensic accountants were held to be in repudiatory breach of contract for declining to act further when their firm merged with the defendants. See also Perotti v Collyer Bristow [2003] EWHC 25 (Ch) at [137] where Jonathan Parker J considered it unnecessary to decide whether Underwood, Son & Piper v Lewis was still good law because he held that as a matter of long practice an engagement to act in an administration action does not give rise to an entire contract. See also Minkin v Cawdery Kaye Fireman & Taylor [2012] EWCA Civ 546 at [4] where Ward LJ cited Underwood with approval. A CFA also appears to be an entire contract: see Budana v The Leeds Teaching Hospitals NHS Trust [2017] EWCA Civ 1980, [2018] 1 WLR 1965 at [84] (Davis LJ). 3 [2010] EWCA Civ 122, [2010] 1 WLR 1997, where Dyson LJ (with whom Maurice Kay LJ and Sir Mark Potter agreed) approved the following statement of Lord Esher MR at [1894] 2 QB 306, 310: ‘[W]hen a man goes to a solicitor and instructs him for the purpose of bringing or defending such an action, he does not mean to employ the solicitor to take one step, and then give him fresh instructions to take another step, and so on; he instructs the solicitor as a skilled person to act for

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Duties in contract  1.12 him in the action, to take all necessary steps in it, and to carry it on to the end.’ In Vlamaki v Sookias & Sookias [2015] EWHC 3334 (QB) Walker J also put it in these terms (at [10]): ‘A solicitor’s retainer is an example of what, although known as an “entire contract”, is perhaps better described as involving an “entire obligation”: a solicitor can generally only claim remuneration when all work has been completed, or when there is a natural break.’ 4 The decision was followed in French v Carter Lemon Camerons LLP [2012] EWCA Civ 1180, [2013] PNLR 2 at [26] where it was held that the firm had not repudiated the retainer but the client had terminated it after making a serious complaint against an individual solicitor. Compare Walsh v Greystone Financial Services Ltd (unreported, 31 July 2019) where Nugee J held that the solicitors had terminated the retainer but applied French to the issue of the solicitor’s lien over documents (considered in Chapter 14). The same principle does not necessarily apply to CFAs: see Kris Motor Spares Ltd v Fox Williams LLP [2009] EWHC 2813 (QB) (Holroyde J). 5 The Solicitors’ Code of Conduct 2007, r 2.01(2) provided as follows: ‘You must not cease acting for a client except for good reason and on reasonable notice.’ But this is no longer a mandatory rule. The SRA Standards and Regulations 2019 do not contain a specific reference to termination of the retainer but there are general provisions in both codes dealing with quality of client service which would prevent a solicitor imposing unreasonable or unfair rights of termination. 6 See Harding Evans LLP v Spencer-White [2017] EWCA Civ 434 (where the Court of Appeal rejected an argument that the solicitor could not sue for his fees where the client terminated because the contract was an entire contract). 7 See Blankley v Central Hospitals NHS Trust [2015] EWCA Civ 18, [2015] 1 WLR 4307 where it was held that the retainer was not terminated automatically or frustrated by the client’s mental incapacity. Although the solicitor had no authority to continue representing the client in litigation, instructions could be given by a receiver or deputy (once appointed). The Court of Appeal also indicated that the rule in Yonge v Toynbee [1910]  KB  215 (discussed in Chapter 5) ought to be reconsidered. The decision (which might at first sight seem surprising) was argued in the context of costs. C’s solicitors had acted under a CFA and were seeking to recover their costs from Ds (who were arguing that the CFA had been automatically terminated or frustrated). The Law Society has published a practice note on ‘Meeting the needs of vulnerable clients’ dated 2  July 2015 which suggests that mental incapacity generally terminates a solicitor’s retainer automatically and that Blankley is an exception to the general rule: see p 15.

1.12 The existence of an entire contract does not prevent the solicitor from rendering interim bills or bringing proceedings to recover those sums (provided that they are ‘statute’ bills and comply with s 69 of the Solicitors Act 1974).1 Moreover, if solicitor and client enter into a CBA the solicitor has a statutory right to withdraw if the client fails to make a payment on account within a reasonable time.2 A solicitor is only permitted to serve interim statutory bills either by express agreement or where there is a ‘natural break’ in the proceedings.3 But it is unnecessary for interim statute bills to include both profit costs and disbursements and a solicitor may issue separate bills for each.4 It is rare for most firms to include such a term in the terms and conditions and more usual to include provision for payment on account. The difference between a payment on account and an interim statute bill is that the solicitor will be entitled to enforce statute bills if the client does not take advantage of the statutory right to assessment immediately whereas the client will always be entitled to have the bills assessed at the end of the retainer if the terms and conditions provide for payment on account only.5 In deciding whether the terms and conditions provide for interim statutory bills or payments on account, the court will resolve any ambiguity in favour of the client and against the factual background that one party is a firm of solicitors but the other is not 21

1.12  The solicitor’s duties in contract and tort a lawyer.6 If the solicitor terminates the retainer on reasonable notice and for good reason the solicitor is entitled to payment for the work done.7 However, if the solicitor terminates the retainer in breach of the implied term this will amount to a repudiatory breach of the contract of retainer and the solicitor will be unable to recover any outstanding fees.8 1 For a detailed description of the legal principles and their history see Boodia v Richard Slade and Co Solicitors [2018] EWCA Civ 2667, [2019] 1 WLR 1126 at [1]–[19] (Newey LJ). The relevant legal principles were helpfully set out by Spencer J in Bari v Rosen [2012] EWHC 1782 (QB), [2012] 5 Costs LR 851 at [13] and [14]: ‘Where a solicitor issues to his client a bill of costs which complies with the requirements of the Solicitors Act 1974 it is known colloquially as a “statute bill”. Section 70(1) of the Act gives the client the right, within one month of delivery of the bill, to apply to the High Court for the bill to be assessed, without requiring any sum to be paid into court. If no such application is made, the absolute right to assessment is lost. However, if a statute bill has not been paid and the client applies to the High Court for assessment of the bill within twelve months from delivery of the bill, the combined effect of s 70(2) and (3) is that the High Court may allow assessment (and I am advised by my assessors usually does allow assessment), on such terms as the court thinks fit. If the bill remains unpaid and twelve months have expired from delivery of the bill, the court may only order an assessment if special circumstances are shown. The position after a statute bill has been paid is somewhat different. The client still has the absolute right to an assessment before the expiry of one month from delivery of the bill. After that, but only up to twelve months from the date of payment, if the client applies for assessment, special circumstances need to be shown. No assessment at all can be ordered after the expiration of twelve months from payment. Section 70(4) creates an absolute bar.’ 2 Section 65(2) of the Solicitors Act 1974 provides that: ‘If a solicitor who has been retained by a client to conduct contentious business requests the client to make a payment of a sum of money, being a reasonable sum on account of the costs incurred or to be incurred in the conduct of that business, and the client refuses or fails within a reasonable time to make that payment, the refusal or failure shall be deemed a good cause whereby the solicitor may, upon giving reasonable notice to the client, withdraw from the retainer.’ See Collyer Bristow v Robichaux [2001] All ER (D) 288 (where Crane J  held that solicitors gave notice within a reasonable time and were entitled to rely on the section) and Minkin v Cawdery Kaye Fireman & Taylor [2012] EWCA Civ 546 (where Ward LJ summarised the effect of the section at [29]). 3 See Abedi v Penningtons [2000] 2 Costs LR 205, CA (applied in David Wylde & Co v Dadourian [2011] EWHC 1517 (QB)). 4 See Boodia v Richard Slade and Co Solicitors [2018] EWCA Civ 2667, [2019] 1 WLR 1126. 5 See Vlamaki v Sookias & Sookias [2015] EWHC 3334 (QB) (Walker J) followed in Charles Russell Speechlys LLP v Pieres [2018] 7 WLUK 46 (Master Rowley). 6 See Vlamaki (above) at [15] and [16]. In that case Walker J held that there was no power to issue interim statute bills. Contrast Pieres (above) where the Master found that there was. He placed particular emphasis on the fact that the bills carried interest: see [48]. Both decisions reached differing conclusions about whether a final bill had been rendered entitling the client to an assessment or whether the application for an assessment was premature because no final bill had been rendered. Pieres also contains useful discussion of the requirements for the validity of the bill (signature, delivery and sufficient information about the work done): see [52]–[70]. 7 This was the case in Perotti v Collyer Bristow [2003] EWHC 25 (Ch), Richard Buxton v MillsOwens [2010] EWCA Civ 122, [2010] 1 WLR 1997 and in Minkin v Cawdery Kaye Fireman & Taylor [2012] EWCA Civ 546 (QB) where it was held that the client terminated the retainer because of a breakdown of trust and confidence. It was also held that the solicitor was entitled to accept the termination but receive payment of his outstanding fees: see [43] and [44]. 8 Cranston J  held that this was the case in Minkin v Cawdery Kaye Fireman & Taylor [2011] EWHC 177 (QB) (at first instance) and the judgment contains a useful statement of the legal principles at [22]–[38]. In Gill v Heer Manak [2018] EWHC 2881 (QB), [2019] PNLR 10

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Duties in contract  1.13 a firm of solicitors terminated the retainer without notice upon the intervention by the Law Society. Although the solicitors could no longer practise, they were held to have terminated the retainer unlawfully.

1.13 Even if the solicitor terminates the contract of retainer by repudiatory breach, the client does not have to accept it.1 But even if the client refuses to accept the solicitor’s termination or neither party attempts to terminate the retainer, it will not continue indefinitely. In the normal case it will be relatively easy to identify the time when the solicitor’s retainer is terminated (the date on which he or she closes the file or renders a final bill). It is well accepted that there is no such thing as a ‘general retainer’ in the sense that a solicitor may be obliged to continue to act for a client indefinitely without instructions2 although there may be special circumstances in which a solicitor has a specific, continuing duty to the client. In Midland Bank Co Ltd v Hett Stubbs and Kemp3 Oliver J held that a family solicitor owed a continuing duty to register an option because the solicitor had retained the document, kept the file open and the son (who had the benefit of the option) consulted him from time to time. In Bell v Peter Browne & Co,4 however, solicitors acting for a husband on a divorce failed to document or register his continuing interest in the matrimonial home. The Court of Appeal held that there was no continuing duty with all of the members of the court distinguishing the Midland Bank case on various grounds. In Capita (Banstead 2011) Ltd v RFIB Group Ltd5 Popplewell J followed the Midland Bank case and held that a firm of benefit consultants owed a continuing duty to implement amendments to a pension scheme which were ineffective for failure to comply with s 67 of the Pensions Act 1995. The Court of Appeal allowed an appeal on the basis that the decision in Bell v Peter Browne & Co had effectively overruled Oliver J’s decision in the Midland Bank case and that there was no continuing duty to correct a mistake (even in the context of a continuing retainer).6 In his concurring judgment, Henderson J drew a useful distinction between a breach of contract which has not been remedied and a continuing obligation ‘to maintain a state or condition of affairs’ which arises every day.7 1 See Budana v The Leeds Teaching Hospitals NHS  Trust [2017]  EWCA  Civ 1980, [2018] 1 WLR 1965 at [37]–[41] (Gloster LJ with whom Beatson LJ agreed) and [85]–[89] (Davis LJ). The issue arose in the context of the transfer of a CFA from one firm to another following the Legal Aid, Sentencing and Punishment of Offenders Act 2012. 2 See Midland Bank Co Ltd v Hett Stubbs and Kemp [1979] Ch 384 at 402G–H (Oliver J). See also Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9 at [34] (Peter Gibson LJ): ‘[T]here is no such thing as a general retainer imposing a duty to consider all aspects of the client’s interests whenever the solicitor is consulted.’ See also Mehjoo v Harben Barker [2014] EWCA Civ 358, [2014] PNLR at [27] (Patten LJ): ‘… there is no such thing as a general retainer and the terms and limits of the retainer and any consequent duty of care therefore depend on what the professional is instructed to do’; and [69] (Lewison LJ). 3 [1979] Ch 384. 4 [1990] 2 QB 495, CA. The decision was followed in Nouri v Marvi [2010] EWCA Civ 1101, [2011] PNLR 7, Green v Eadie [2011] EWHC 824 (Ch), [2012] Ch 363 (Mark Cawson QC) and Maharaj v Johnson [2015] UKPC 28, [2015] PNLR 27. 5 [2015] EWCA Civ 1310, [2016] QB 835. The decision was followed in Broomhead v National Westminster Bank Plc [2018]  EWHC  1574 (Ch) (HHJ KIein) and Davy v 01000654 Ltd [2019] EWHC 353 (QB) (HHJ Russen QC).

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1.14  The solicitor’s duties in contract and tort 6 See [14]–[23]. He stated at [19]: ‘The obtaining and receiving of advice after a mistake has been made (even if the mistake can be easily rectified) cannot to my mind mean that an obligation to correct one’s mistake or negligence continues to accrue and give a fresh cause of action every day after the mistake has been made.’ Gloster LJ dissented but Henderson J agreed with Longmore LJ. 7 See [50]: ‘Conceptually, there is of course a class of contractual duties which do give rise to a continuing obligation to perform them which arises afresh from day to day. Examples are given by Nicholls LJ in the Bell case, at p 501D–E (repairing clauses in a lease), and by Dixon J in Larking v Great Western (Nepean) Gravel Ltd (1940) 64 CLR 221, 236 cited by the judge at the end of para 11 of his judgment [2014] EWHC 2197 (Comm). To quote Dixon J, a duty of this nature is one “to maintain a state or condition of affairs”.’

4  The Prudential Principle 1.14 Although a solicitor may be found to have assumed a duty to act for two clients under an express or implied retainer on the basis explained above, it does not follow that both clients will be able to recover damages for a breach of contract if one of those clients is a company and the other client is a shareholder. Where the shareholder’s loss is the fall in value of their shares or the loss of dividends, those losses are not recoverable. In Prudential Insurance Co Ltd v Newman Industries Ltd (No 2)1 the Court of Appeal explained why: ‘The shareholder does not suffer any personal loss. His only ‘loss’ is through the company, in the diminution in the value of the net assets of the company …The plaintiff’s shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property.’ In Sevilleja v Marex Financial Ltd2 the Supreme Court has recently considered the scope of the Prudential principle.3 Lord Reed explained it in the following terms:4 ‘In summary, therefore, Prudential decided that a diminution in the value of a shareholding or in distributions to shareholders, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, is not in the eyes of the law damage which is separate and distinct from the damage suffered by the company, and is therefore not recoverable. Where there is no recoverable loss, it follows that the shareholder cannot bring a claim, whether or not the company’s cause of action is pursued. The decision had no application to losses suffered by a shareholder which were distinct from the company’s loss or to situations where the company had no cause of action.’ Marex confirms that the Prudential principle is a principle of company law. It is not a principle of the law of damages based on causation or measure of damage. Nor is it intended to prevent double recovery.5 The principle is also reflected in 24

Duties in contract  1.15 Titan Europe 2006-3 Plc v Colliers International UK plc6 which illustrates the relationship between the rule and the ‘black hole’ cases considered in Chapter 10.7 In that case Longmore LJ also relied on the rule as justification for the conclusion that the company had suffered a loss even though the noteholders had no recourse themselves against the issuer.8 1 [1982] 1 Ch 204 at 229. 2 [2020] UKSC 31. The decision was made by a panel of seven members of the court. Lord Reed (with whom Lady Black and Lord Lloyd-Jones agreed) gave the leading judgment and Lord Hodge gave a separate judgment agreeing with Lord Reed. Lord Sales (with whom Lady Arden and Lord Kitchen agreed) gave a separate judgment agreeing with the result but based on very different reasoning. 3 This was the description given to the rule by Peter Gibson LJ in Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350 at [2]. In Gardner v Parker [2004] EWCA Civ 78, [2004] 1 BCLC 417 Neuberger LJ called this principle the rule against reflective loss: see [23]. In view of the decision in Marex we have abandoned that description. 4 See [39] (Lord Reed). 5 See [9] (Lord Reed): ‘As appears from that summary, the decision in Prudential established a rule of company law, applying specifically to companies and their shareholders in the particular circumstances described, and having no wider ambit.’ Some formulations of the rule were expressed in terms of causation rather than company law: see, eg, Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 at 471 and Rushmer v Mervyn Smith [2009] EWHC 94 (QB), [2009] Lloyd’s Rep PN 41. For an example where both points were argued see UCP plc v Nectrus Ltd Damages [2019] EWHC 3274 (Comm), [2020] PNLR 9 (Sir Michael Burton). In that case reliance on the principle failed because the claimant was not a member of the company at the time when the claim was made. 6 [2015] EWCA Civ 1083, [2016] PNLR 7. 7 See paras 10.183—10.192. 8 See [32]–[38]. At [38] he stated: ‘Titan’s relationship with the Noteholders is analogous to that of a company with its shareholders; no one suggests that, because the shareholders may be the ultimate losers in a case of this kind, the company has not suffered a loss.’

1.15 Before Marex the leading authority was a solicitors’ case: Johnson v Gore Wood.1 In that case a company brought a claim against its former solicitors which was settled at trial for almost the full value of the claim. J (who owned almost all the shares in the company and was its managing director) then brought proceedings against the solicitors alleging that they had also acted in breach of a duty owed to him personally and that he had suffered personal losses. The House of Lords held that two of the heads of loss should be struck out. The first was a claim for the fall in the value of J’s shares. The second was a claim for loss in respect of the value of a pension policy taken out by the company for his benefit.2 In Marex the Supreme Court accepted that the decision was correct but disapproved of the reasoning. Lord Reed stated this:3 ‘In summary, Johnson gives authoritative support to the decision in Prudential that a shareholder is normally unable to sue for the recovery of a diminution in the value of his shareholding or in the distributions he receives as a shareholder, which flows from loss suffered by the company, for the recovery of which it has a cause of action, even if it has declined or failed to make good that loss. Lord Bingham’s speech is consistent with the reasoning in Prudential. On 25

1.15  The solicitor’s duties in contract and tort the other hand, the reasoning in the other speeches, especially that of Lord Millett, departs from the reasoning in Prudential and should not be followed.’ The principle was also considered in a number of cases following Johnson v Gore Wood (often in the context of an application to strike out the claim and often involving professional negligence claims).4 In the light of Marex care should now be taken before applying any of those cases. The Supreme Court overruled the influential decision in Gardner v Parker5 where the Court of Appeal had held that the Prudential principle applied not only to the diminution in value of shares and future dividends but also to future remuneration, directors’ fees and pension entitlements6 and also to payments which a shareholder could have expected to receive from the company as a creditor.7 In Marex8 itself the Supreme Court unanimously agreed that the Prudential principle had no application to claims by a creditor who was not a shareholder even if that loss reflected the loss suffered by the company. In that case, C obtained judgment against two BVI companies which went into liquidation. It later brought proceedings against D as the controller and ultimate beneficial owner of the companies for conspiracy and other economic torts. It was held that the principle did not prevent a claim by a creditor for loss caused by the abstraction of money from the companies.9 1 [2001] 2 AC 1 2 Lord Reed’s analysis of this second claim in Marex is important. He described it as an ‘alternative to the payment of dividends or bonuses’: see [2020] UKSC 31 at [65]. 3 See [67]. Lord Reed accepted Lord Bingham’s reasoning in Johnson v Gore Wood: see [41] to [48] and [66]. By contrast, Lord Sales did not: see [177]. Both were critical of Lord Millett’s reasoning: see [56] to [63] and [178] to [188]. 4 The principal cases involving professional liability are: Johnson v Gore Wood & Co [2002] 2 AC 1 and Johnson v Gore Wood & Co (No 2) [2002] EWHC 776 (Ch) (Hart J) and [2003] EWCA Civ 1728, CA) (solicitors); Day v Cook [2001] EWCA Civ 592, [2002] 1 BCLC 1, CA (solicitors); Ellis v Property Leeds (UK) Ltd [2002] EWCA Civ 32, [2002] 2 BCLC 175, CA (valuers); (Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350, CA (solicitors); Dhillon v Siddiqui [2008] EWHC 2020 (Ch) (Bernard Livesey QC) (tax adviser); Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542 (solicitors); Rawnsley v Weatherall Green & Smith North Ltd [2009] EWHC 2482 (Ch), [2010] 1 BCLC 658 (valuers); Rushmer v Mervyn Smith [2009] EWHC 94 (QB), [2009] Lloyd’s Rep PN 41 (Jack J) (auditors); International Leisure Ltd v First National Trustee Co UK Ltd [2012] EWHC 1971 (Ch), [2013] Ch 346 (Edward Bartley Jones QC) (administrative receivers). 5 [2004] EWCA Civ 78, [2004] 1 BCLC 417. 6 See [31]–[32]. See also Johnson v Gore Wood & Co [2002] 2 AC 1 at 67B-H (Lord Millett) and Humberclyde Finance Group Ltd v Hicks (Neuberger J, unreported, 14 November 2001) at [29]–[34]. In Giles v Rhind [2002] EWCA Civ 1428, [2003] Ch 618 it was held that the benefits which C might have expected to earn following the termination of his employment were not reflective of the company’s loss although they flowed from the unlawful conduct of D: see [81]. 7 See [33]. See also Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542 where the claim by the shareholder to recover his liabilities under a personal guarantee of the company’s debts was struck out: see [54]. A claim for loss of earnings and alternative employment was permitted to go to trial (and the Court regarded the issue as one of remoteness not reflective loss): see [53]. 8 [2020] UKSC 31.

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Duties in contract  1.16 9 See [90] to [92]. The Court of Appeal accepted that the principle applied to intentional torts and there was no appeal against this conclusion. Nor was there was a challenge to the decision in Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350 that the principle applies to claims for breach of fiduciary duty: see [73] and [91]. Lord Reed also left open the possibility that the issue of double recovery might have some impact on a creditor’s claim. But this is likely to depend on the solvency of the company, the rights of the creditor against it and the creditor’s ability to be subrogated to the claims of the company against third parties: see [86] to [88]. See also [161] to [164] (Lord Sales).

1.16 In Giles v Rhind1 the Court of Appeal identified an exception to the rule where the wrongdoer’s conduct had prevented the company from pursuing its claim. Despite criticism in Hong Kong the exception was recognised and followed in England.2 In Marex3 the Court of Appeal held that the exception was a narrow one and only applicable where the company no longer had a cause of action and it was impossible for it to bring a claim or for a claim to be brought in its name by a third party. In the Supreme Court the claimant succeeded on the basis that the Prudential principle does not apply to claims by creditors at all. However, the court also overruled Giles v Rhind and held that there was no exception to the principle for claims by shareholders. Whether or not the company has brought a claim the shareholder has not suffered a recoverable loss4 and where the company is prevented from bringing the claim by the wrongdoer, the remedy is to bring a derivative action.5 The principle has never applied to claims by a secured creditor.6 Finally, it remains to be seen whether the principle will continue to apply where a beneficiary of a trust has a claim against the trustees for breach of trust but they are also liable to the company which forms the trust’s principal asset for breach of their duties as directors.7 The principle does not apply to trustees and beneficiaries more generally, however, although only exceptionally may a beneficiary sue to recover losses suffered by the trustees.8 1 [2002] EWCA Civ 1428, [2003] Ch 618 at [63]–[80]. The company was placed in administrative receivership following D’s breaches of duty and unable to pursue its claims because D applied for security for costs. 2 See Waddington Ltd v Chan Chun Hoo [2008] HKCFAR 370, [2009] 2 BCLC 82 at [84]–[88] (where Lord Millett NPJ accepted the existence of the exception but considered that Giles v Rhind was wrongly decided); Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542 at [42]–[46] (where the Court of Appeal considered itself bound by Giles v Rhind); St Vincent European General Partner Ltd v Robinson [2018] EWHC 1230 (Comm) at [94] (where Males J emphasised the limited scope of the exception and the demanding nature of the test of impossibility which C had to meet); and UCP plc v Nectrus Ltd Damages [2019] EWHC 3274 (Comm), [2020] PNLR 9 (Sir Michael Burton) at [18] (explaining when the exception did not apply). 3 [2018] EWCA Civ 1468, [2019] QB 173 at [57] and [58]. 4 [2020] UKSC 31. See [70] (Lord Reed): ‘That conclusion does not depend on whether the company is financially able to bring proceedings or not. If the shareholder has not suffered a recoverable loss, he has no claim for damages, regardless of whether, or why, the company may have failed to pursue its own cause of action.’ 5 See [71]. 6 See, for example, Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295 where a mortgagee or receiver was held to owe a duty to a subsequent secured creditor. See also International Leisure Ltd v First National Trustee Co UK Ltd [2012] EWHC 1971 (Ch), [2013]

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1.17  The solicitor’s duties in contract and tort Ch 346 (Edward Bartley Jones QC) at [46], where the court rejected the argument that the principle applied to a secured creditor. 7 See Walker v Stones [2001] QB 902, CA and Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350, CA. Both cases suggest that the rule may be applied more restrictively in the context of claims for breach of trust and that there must be complete identity between the two losses. In Shaker v Al-Bedrawi (above) at [83] Peter Gibson LJ stated: ‘In our judgment the Prudential principle does not preclude an action brought by a claimant not as a shareholder but as a beneficiary under a trust against his trustee for a profit unless it can be shown by the defendants that the whole of the claimed profit reflects what the company has lost and which it has a cause of action to recover.’ In Walker v Stones [2001] QB 902 at 922–3 Sir Christopher Slade suggested that there might be policy reasons why the rule should not always afford a defence. For a case involving derivative claims brought by both a shareholder and a beneficiary see Kallakis v AIB Group plc [2020] EWHC 460 (Comm). In that case Moulder J held that the beneficiary claim was arguable, the Prudential principle applied to the claim but it was arguable that the exception applied. The reasoning must now be considered in the light of Marex. 8 See Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542 at [31] and [47]–[52] (Lord Clarke MR).

B  DUTY OF CARE IN TORT 1  Duty to the client 1.17 In Midland Bank Co Ltd v Hett, Stubbs & Kemp1 Oliver J held that solicitors owed a concurrent duty of care to their client independently of their contractual obligations and his decision has now been approved by the House of Lords in Henderson v Merrett Syndicates.2 He explained the nature of the solicitor’s duty as follows:3 ‘The extent of his duties depends upon the terms and limits of [the] retainer and any duty of care to be implied must be related to what he is instructed to do. Now no doubt the duties owed by a solicitor to his client are high, in the sense that he holds himself out as practising a highly skilled and exacting profession, but I think that the court must beware of imposing upon solicitors – or upon professional men in other spheres duties – which go beyond the scope of what they are requested or undertake to do. It may be that a particularly meticulous and conscientious practitioner would, in his client’s general interests, take it upon himself to pursue a line of inquiry beyond the strict limits comprehended by his instructions. But that is not the test. The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession.’ In Minkin v Landsberg4 Jackson LJ cited this passage and reviewed the relevant authorities in which it had been cited and applied.5 He summarised the law in the following five propositions:6 ‘(i)  A solicitor’s contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake. 28

Duty of care in tort  1.18 (ii)  It is implicit in the solicitor’s retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out. (iii) In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client. (iv)  In relation to (iii), it is not possible to give definitive guidance, but one can give fairly bland illustrations. An experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client. (v)  The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor’s retainer. As a matter of good practice the solicitor should confirm such agreement in writing. If the solicitor does not do so, the court may not accept that any such restriction was agreed.’ 1 [1979] Ch 384. 2 [1995] 2 AC 145 at 190B. 3 At 402G–403B. 4 [2015] EWCA Civ 1152, [2016] 1 WLR 1489. 5 Carradine Properties Ltd v D J Freeman & Co (1982)126 Sol Jo 157 (now reported at [2003] Lloyd’s Rep PN 483), National Home Loans Corpn v Giffen, Couch & Archer [1998] 1 WLR 207 at 2136–H, CA, Searles v Cann [1999] PNLR 494 (Philip Mott QC) at 504B–F, Jewo Ferrous BV v Lewis Moore [2001] PNLR 328, CA at [49]–[51]. For his further comments see para 1.07 (above). 6 At [38]. The scope of the duty to give incidental advice is considered in greater detail in Chapter 2, para 2.32.

1.18 Whilst these authorities suggest that the nature and scope of the duty in tort assumed by the solicitor will be determined by the contract of retainer and its terms, the Court of Appeal has recognised that the duty in contract and the duty in tort may not be precisely the same. This issue is closely related to the question whether a solicitor may owe a duty to give incidental advice in accordance with Jackson LJ’s five propositions. But it is not precisely the same. In Holt v Payne Skillington1 it was held that as a matter of principle a professional (in this case an agent and valuer) may owe a more extensive duty of care in tort than he or she does under the terms of his or her contractual retainer and this duty is particularly important where the terms of the contractual retainer are unclear. Furthermore, by accepting instructions, the solicitor may owe a duty to clarify those instructions:2 ‘The retainer when given puts into operation the normal terms of a contractual relationship, including in particular the duty of the solicitor to protect the client’s interest and carry out his instructions in the matters to which the retainer relates, by all proper means. It is an incident of that duty that the solicitor shall consult with his client on 29

1.19  The solicitor’s duties in contract and tort all questions of doubt which do not fall within the express or implied discretion left to him, and shall keep the client informed to such an extent as may be reasonably necessary according to the same criteria.’ In appropriate circumstances, therefore, the client is entitled to rely on the solicitor to take further instructions if the original instructions were either unclear or inadequate to enable the solicitor to protect the client’s interests. In Ball v Druces & Attlee (No  2)3 two joint venture partners established a charitable trust to create and then hold the Eden Project in Cornwall. They instructed the defendant solicitors to act for them in forming the trust although it was made clear to the solicitors that they anticipated some kind of profitsharing arrangement. When the relationship later broke down, one of them claimed damages against the defendants for failing to protect his personal interests as well as the interests of the joint venture. The court held that they owed a duty to take further instructions when the trust was formed and to advise the partners to enter into binding heads of terms which would have entitled the claimant to some element of profit. 1 (1996) 77 BLR 51 at 73B–H, CA (also reported in [1996] PNLR 179). It may be that this was no more than a pleading point. 2 Groom v Crocker [1939] 1 KB 194, CA at 222 (Scott LJ). See also McMahon v Grant Thornton UK LLP [2020] CSOH 50 at [66] (Lord Doherty). 3 [2004] EWHC 1402 (QB), [2004] PNLR 745 (Nelson J). The judge found that it was no defence to advise the client to take separate advice from accountants or from counsel.

2  Duty to third parties 1.19 Although the liability of solicitors and other professionals is ordinarily governed by contract, a professional may yet be liable to a third party for economic loss suffered as a result of a negligent misstatement or negligent advice despite the absence of any contractual relationship. Earlier versions of this book contained a discussion of the three different approaches to the imposition of liability: the threefold test (foreseeability, proximity and reasonableness), the incremental test (analogy with decided cases) and the assumption of responsibility test (analogy or equivalence with contract).1 This analysis is no longer necessary because the Supreme Court has recently affirmed the primacy of the assumption of responsibility test in claims by third parties against solicitors. In NRAM v Steel2 a solicitor acting for a commercial borrower carelessly sent an email to the lender (who was not her client) stating that the whole of the loan was being repaid and requesting the lender to release the security. The loan review team forwarded the email to the administration team without checking its accuracy (which it could easily have done) and the administration team released the security. The borrower continued to service the loan for some years but when it defaulted and went into liquidation, the lender realised that its security for the loan had been discharged and brought a claim for misrepresentation against the solicitor. The claim failed on the ground that the solicitor did not owe a duty of care to the lender. Lord Wilson (with 30

Duty of care in tort  1.20 whom the other members of the Supreme Court agreed) stated that the concept of assumption of responsibility ‘remains the foundation of the liability’.3 The appeal in question was a Scottish appeal but it has been followed by both the Court of Appeal and the Supreme Court in English appeals.4 1 See the third edition, paras 1.13 to 1.22. 2 [2018] UKSC 13, [2018] 1 WLR 1190. For commentary see Salzedo, ‘When can an opposing solicitor be trusted’ (2018) 6  JIBFL  339 and Gordon, ‘Out with the old, in with the older? Hedley Byrne reliance takes centre stage’ [2018] CLJ 251–255. 3 At [21]. For similar statements in other professional fields compare Robinson v PE  Jones (Contractors) Ltd [2011]  EWCA  9, [2012]  QB  44 at [75] (Jackson LJ): ‘In my view, the conceptual basis upon which the concurrent liability of professional persons in tort to their clients now rests is assumption of responsibility.’ 4 See P&P  Property Ltd v Owen White & Catlin LLP ([2018]  EWCA  Civ 1082, [2019] Ch 273 (Patten LJ) at [75] and Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] UKSC 43, [2018] 1 WLR 4041 at [7] (Lord Sumption).

1.20 From his analysis of the earlier cases Lord Wilson identified reasonable reliance as the basis for a finding that a solicitor has assumed responsibility to a third party. There are two elements of the reasonable reliance test. It is necessary to show both that the third party reasonably relied upon the solicitor and also that the solicitor reasonably foresaw that the third party would do so.1 He took as his starting point the reasoning in Hedley Byrne v Heller & Partners.2 He stated: ‘What is noteworthy for present purposes is the emphasis given in the decision in the Hedley Byrne case to the need for the representee reasonably to have relied on the representation and for the representor reasonably to have foreseen that he would do so. This is expressly stressed in the speech of Lord Hodson at p 514. In fact it lies at the heart of the whole decision: in the light of the disclaimer, how could it have been reasonable for the appellant to rely on the representation? If it is not reasonable for a representee to have relied on a representation and for the representor to have foreseen that he would do so, it is difficult to imagine that the latter will have assumed responsibility for it. If it is not reasonable for a representee to have relied on a representation, it may often follow that it is not reasonable for the representor to have foreseen that he would do so. But the two inquiries remain distinct.’ He pointed out that it had been a common misunderstanding for years that the threefold test of foreseeability, proximity and reasonableness favoured by Lord Griffiths in Smith v Bush3 had been endorsed in Caparo4 and demonstrated that the House of Lords had instead reasserted the need for reasonable reliance.5 He referred to recent Supreme Court decisions6 in which the Supreme Court had corrected this misunderstanding and to an important statement by Neill LJ in James McNaughton Paper Group Ltd v Hicks Anderson & Co7 which is of particular relevance in cases involving solicitors (where the parties to a transaction can usually be expected to retain their own advisers). Finally, 31

1.21  The solicitor’s duties in contract and tort he also referred to three important House of Lords decisions8 which were all decided by reference to the concept of assumption of responsibility. 1 At [19]–[24]. 2 [1964] AC 465. 3 At [20]–[22]. 4 [1990] 1 AC 831. 5 [1990] 2 AC 605. 6 Michael v West Yorkshire Police [2015]  AC  1732 and Robinson v Chief Constable of West Yorkshire Police [2018] AC 736. 7 [1991] 2 QB 113 at 126G–127A: ‘One should therefore consider whether and to what extent the advisee was entitled to rely on the statement to take the action that he did take. It is also necessary to consider whether he did in fact rely on the statement, whether he did use or should have used his own judgment and whether he did seek or should have sought independent advice. In business transactions conducted at arms’ length it may sometimes be difficult for an advisee to prove that he was entitled to act on a statement without taking any independent advice or to prove that the adviser knew, actually or inferentially, that he would act without taking such advice.’ 8 Spring v Guardian Assurance plc [1995] 2 AC 296, Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830.

1.21 Lord Wilson did not state in terms that a duty of care will only arise where there is (i) reasonable reliance by the third party and (ii) reasonable foreseeability of reliance by the solicitor. He also recognised that ‘cautious incremental development’ may be required in cases to which the concept of assumption of responsibility did not easily fit. However, he looked at the reasoning in six well-known cases in which the issue had been considered and in each one he identified a finding or conclusion that there was reasonable reliance.1 It would be reasonable to assume, therefore, that both limbs of the reasonable reliance test must be satisfied. Furthermore, he stated that it is ‘presumptively inappropriate’ for one party to a transaction to rely on the opposite party’s solicitor.2 But it would be a mistake to assume that this requires a finding that the solicitor consciously assumed a duty or obligation to the third party. As Patten LJ stated in P&P Property Ltd v Owen White & Catlin LLP:3 ‘As Lord Wilson JSC explains in his judgment, the requirement that there should be an assumption of responsibility is to some extent a legal construct in the sense that in many cases the defendant solicitor or other professional will be treated as having assumed responsibility to the third party for his actions by virtue of the proximity between them and the obvious effect which any failure on his part would have on the third party. There will rarely be an actual, conscious and voluntary assumption of responsibility not least because the solicitor or other professional will have a client to whom he is contractually bound. But, on the basis that the court is deciding whether to treat the defendant as having assumed legal responsibility to the third party, non-client, for his actions, it will be necessary to balance the foreseeability that the third party will rely on the professional to perform their task in a competent manner against any other factors which would make such an imposition of liability unreasonable or unfair.’ 1 The six cases were (1) Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22, (2) Midland Bank plc v Thom, Peterkin & Duncans [1988] SLT 611, (3) Al-Kandari v J R Brown &

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Duty of care in tort  1.22 Co [1988] QB 665, CA, (4) Gran Gelato Ltd v Richcliff Ltd [1992] Ch 560, (5) Connell v Odlum [1993] 2 NZLR 22 and (6) Dean v Allin & Watts [2001] EWCA Civ 758, [2001] Lloyd’s Rep PN 605, CA. All are considered below and in Chapter 9. 2 At [29]. 3 [2018] EWCA Civ 1082, [2019] Ch 273 at [76]. See also Frank Houlgate Investment Co Ltd v Biggart Baillie [2011] CSOH 160, [2012] PNLR 2 at [24] (Lord Glennie) for a similar statement and a very useful direction for the application of the test.

(a)  Commercial transactions 1.22 In Gran Gelato Ltd v Richcliff Ltd1 Sir Donald Nicholls V-C held that a solicitor acting for a vendor in a standard conveyancing transaction owed no duty of care to the purchaser for inaccurate replies to pre-contract inquiries although the vendor was itself liable for misrepresentation. Although Gran Gelato was cited with approval by Lord Goff in White v Jones,2 Hobhouse LJ had reservations about the decision in McCullagh v Lane Fox & Partners Ltd3 because it appeared to suggest that an agent could not be held liable where the third party had an effective remedy against the principal.4 However, in P&P Property Ltd v Owen White & Catlin LLP5 Patten LJ considered that the better view is that: ‘the decision in the Gran Gelato case simply establishes the need (as in any other case where liability for economic loss is claimed on the basis of a tortious duty of care) to take all relevant factors into account including that the solicitor is providing the replies on behalf of his client and will often be dependant on the client for the content of those replies.’ In Gran Gelato there were no special factors present and no assumption of responsibility by the solicitor for the accuracy of the replies.6 In P&P Property the court carried out a similar exercise and identified no special factors either. In both conjoined appeals the purchasers were the victims of identify fraud and brought claims against the solicitors acting for the fraudsters who were pretending to be the vendors. Both firms were instructed in arm’s length transactions and the highest it could be put was that they should have realised that the purchasers would rely on them to carry out AML checks competently. But the MLR did not create a statutory duty which gave rise to a cause of action at the suit of the purchasers. Their purpose was to deter money laundering and terrorism rather than to combat identity fraud. Adopting the incremental approach, there was also a material difference between cases like White v Jones7 and Dean v Allin & Watts8 where the third party was in as proximate a position as a client or the situation was equivalent to contract.9 1 [1992] Ch 560 at 571D–E. 2 [1995] 2 AC 207 at 256D. The decision was followed by the High Court of Hong Kong in Trend Publishing (HK) Ltd v Vivien Chan & Co [1996] 2 HKLR 227, in Green v Turner [1999] PNLR 28 (HHJ Hegarty QC). In Dean v Allin & Watts [2001] EWCA Civ 758, [2001] Lloyd’s Rep PN 605 it was cited with approval by both Robert Walker LJ at [69] and Lightman J at [36] although the agency point was not considered. The decision was also cited with approval by the Court of Appeal in J  Jarvis & Sons Ltd v Castle Wharf Developments Ltd [2001]  EWCA  Civ 19, [2001] Lloyds Rep PN 308 at [51] (Peter Gibson LJ) and in Frank Houlgate Investment Co Ltd v Biggart Baillie LLP [2011] CSOH 160, [2012] PNLR 2 at [18]–[27] (Lord Glennie). 3 [1996] 1 EGLR 35 at 44G–J, CA.

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1.23  The solicitor’s duties in contract and tort 4 He suggested that it was inconsistent with the decision of the Court of Appeal in Punjab National Bank v de Boinville [1992] 1 Lloyd’s Rep 7 and [1992] 3 All ER 104 where a firm of insurance brokers and the individual employees were held to have owed duty of care in respect of a placing to a bank for the assignment of marine policies. However, the majority of the court (Sir Christopher Slade and Nourse LJ) found it unnecessary to consider this point. In First National Commercial Bank plc v Loxleys [1997] PNLR 211 at 215B–C the Court of Appeal accepted that it was arguable that the decision was wrongly decided and that a disclaimer would be ineffective to prevent that duty arising. 5 [2018] EWCA Civ 1082, [2018] 3 WLR 1244 at [71]. 6 For a more detailed examination of pre-contract inquiries and other duties which a solicitor may owe to third parties in relation to a real estate transaction see Chapter 9, paras 9.26 to 9.33. 7 [2001] EWCA Civ 758, [2001] Lloyd’s Rep PN 605. 8 [1995] 2 AC 207. 9 At [77]–[81].

1.23 Dean v Allin & Watts1 by contrast involved a private mortgage where only one party was represented. The lender was an unsophisticated small businessman who agreed to provide a loan to the borrower on the security of a property owned by an associate. The solicitors acting for the borrower knew that he had no solicitor of his own and the Court of Appeal held that the solicitors owed a duty of care to him to ensure that he obtained an effective security (in this case a deposit of the title deeds). One argument rejected in Gran Gelato was that a duty of care to an opposing party would expose the solicitor to a potential conflict of interest.2 In Dean v Allin & Watts the conflict between the interests of the parties did not prevent the imposition of a duty of care either.3 However, Lightman J was careful to point out that:4 ‘In a situation such as the present where (to the knowledge of both parties) a solicitor is retained by one party and there is a conflict of interest between the client and the other party to a transaction, the court should be slow to find that the solicitor has assumed a duty of care to the other party to the transaction, for such an assumption is ordinarily implausible.’ In Caliendo v Mishcon de Reya5 solicitors were retained by a holding company in relation to the sale of a football club. They were not retained by the majority shareholders who were also selling their interests and had retained their own tax and financial consultants. Arnold J  rejected the argument that there was an implied retainer.6 But he also rejected the argument that the existence of a conflict or potential conflict was sufficient to negate a duty of care. He held that the solicitors owed a limited duty of care to the shareholders to exercise reasonable skill and care in the negotiation and execution of the transactional documents but only in so far as their interests were aligned with the interests of the solicitors’ own clients and they were not receiving advice from their own advisers. Crucially, he held that there was no duty to explain the nature and effect of the relevant documents because the solicitors were entitled to assume that their own advisers would do that and ask questions if they did not understand anything.7 1 [2001] EWCA Civ 758, [2001] Lloyd’s Rep PN 605. The decision was approved by Lord Bingham in Customs & Excise Comrs v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181 at [22].

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Duty of care in tort  1.24 2 [1992] Ch 560 at 571B–D. 3 [2001]  EWCA  Civ 758, [2001] Lloyd’s Rep PN  605 at [34] (Lightman J) and [69] (Robert Walker LJ). 4 See [33] (cited by Arnold J in Caliendo v Mishcon De Reya [2016] EWHC 150 (Ch) at [714]). Compare Young v Clifford Chance (Popplewell J, 21 December 1995, unreported) where it was held that the client and third party had a community of interest but not an identity of interest but this was insufficient to justify the imposition of a duty of care. 5 [2016] EWHC 150 (Ch). 6 See para 1.09 (above). 7 See [716]–[717].

1.24 In Gran Gelato1 the judge recognised that there would be cases in which a duty of care to a third party would be imposed on a solicitor. He characterised those instances as cases in which the solicitor steps outside his or her role as solicitor for the client and assumes ‘a direct responsibility’ to the third party. The clearest indication that a solicitor has stepped outside his original retainer and undertaken a responsibility to C is where there are direct discussions or communications between the solicitor and the third party.1 Even if a contract cannot be implied the court is likely to impose a duty of care if the third party has informed the solicitor that he or she is relying on the solicitor’s advice and the solicitor has expressly or impliedly accepted this. Where for instance the solicitor is asked by the client to provide a certificate of title to a third party lender or to certify that he or she has given the borrower independent advice the court is likely to impose a duty of care unless there is a clear and effective disclaimer.2 There are even exceptional cases in which the absence of direct communication between C and D may not prevent the solicitor from assuming a duty of care because the proximity of the parties is so close. In N M Rothschild & Sons Ltd v Berensons3 Ds, who were acting for a purchaser, were held to owe a duty of care to C (one of a syndicate of banks) for the accuracy of a request for funds. The solicitors did not act for C but for the proposed mortgagee to whom C was providing finance under a revolving credit facility. C did not see or receive the funds request which was addressed to the lead bank and it had no communication of any kind with Ds. But Saville LJ held that there was a duty of care on the basis that it should have been ‘selfevident to any reasonably competent solicitor that all those lending would be doing so on the basis that the solicitors had provided to Barclays Bank a true and accurate Funds Request’. 1 See Jason Property Development Co Ltd v Swinhoe [2010] EWHC 2467 (QB) where a solicitor assumed a duty of care to a director of a limited company to advise him that a personal guarantee was required by a creditor: see [103]–[115]. The judge distinguished the New Zealand decision in Brownie Wills v Simpson [1999] PNLR 552 on the facts. 2 See Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22 cited by Nicholls V-C in Gran Gelato as a ‘stepping outside’ case: see [1992] Ch 560 at 572A–B. The decision is considered further in the context of conveyancing transactions at paras 9.29 and 9.33. See also Connell v Odlum [1993] 2 NZLR 257 considered in the context of certificates to a lender in 9.20. In Burmeister v O’Brien [2009] NZHC 2154 Asher J distinguished Haddow (and also Dean v Allin & Watts) and dismissed a claim that a solicitor owed a duty of care to a couple who had been induced to enter into a fraudulent land transfer. The solicitor signed the statutory certificate to the Land Registrar required under the New Zealand statute. He also inserted the details into a blank transfer. Neither was held to give rise to a duty of care (or a fiduciary duty).

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1.25  The solicitor’s duties in contract and tort 3 [1995]  NPC  107, [1997]  NPC  15, CA. Compare A  & J  Fabrication (Batley) Ltd v Grant Thornton [1999] PNLR 811 where Astill J held that solicitors acting for a liquidator owed no duty of care to a creditor for permitting the time limit for bringing misfeasance proceedings to expire. Unless there is a direct assumption of responsibility professionals acting for office holders do not ordinarily owe a duty of care to individual creditors or guarantors: see Raja v Austin Gray [2003] Lloyd’s Rep PN 126, CA (no duty of care owed by surveyors acting for receivers to the guarantor of the principal debtor) and Oldham v Kyrris [2003] EWCA Civ 1506, [2004] PNLR 317 (no duty owed by administrators to creditors where the directors would have owed no duty).

(b) Litigation 1.25 No duty of care is ordinarily owed by parties to litigation or their solicitors to each other.1 However, in Al-Kandari v J R Brown & Co2 a solicitor in a custody dispute who had agreed to hold D’s passport (which was also his children’s passport) to the order of the court was held liable to C personally for releasing the passport to an official of the Kuwaiti embassy and then failing to get it back the following day when D obtained it from the embassy and abducted his children. The Court of Appeal confirmed the general rule.3 However, they held that the solicitor was liable on the basis that ‘in voluntarily agreeing to hold the passport to the order of the court the solicitors had stepped outside their role as solicitors for the client and accepted responsibilities towards both their client the plaintiff and the children’.4 This test was applied again in Abrams v Abrams.5 But it was held on the facts of that case that a solicitor acting for one party in litigation assumed no duty of care for the accuracy of representations made to the other party in the course of the litigation.6 In subsequent cases the court has also refused to impose a duty of care upon a litigation solicitor even to closely related parties in relation to connected claims.7 1 See Business Computers International Ltd v Registrar of Companies [1988] Ch 229 at 241 (Scott J): ‘[T]here is no duty of care owed by one litigant to another as to the manner in which the litigation is conducted, whether in regard to service of process or in regard to any other step in the proceedings. The safeguards against impropriety are to be found in the rules and procedure that control the litigation and not in tort.’ The decision was cited with approval in Customs & Excise Comrs v Barclays Bank plc [2006]  UKHL  28, [2007] 1 AC  181 and followed in Jain v Trent Strategic Health Authority [2009] UKHL 4, [2009] AC 853. See also Elguzouli-Daf v Comr of Police of the Metropolis [1995] QB 335 where the Court of Appeal held that the Crown Prosecution Service owed no duty of care to a defendant in the conduct of a prosecution. Finally, see Customs & Excise Comrs v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181 where Lord Bingham considered the fact that no duty of care is owed by opposing parties in litigation to be decisive. He stated (at [18]): ‘Secondly, it cannot be suggested that the customer owes a duty to the party which obtains an order, since they are opposing parties in litigation and no duty is owed by a litigating party to its opponent: … It would be a strange and anomalous outcome if an action in negligence lay against a notified party who allowed the horse to escape from the stable but not against the owner who rode it out.’ 2 [1988] QB 665, CA. 3 See 672A (Lord Donaldson MR) and 675F–G  (Bingham LJ). See also Sprecher Grier Halberstam LLP v Walsh [2008] EWCA Civ 1324 at [47]. The position is same for counsel: see Connolly v Martin-Davis [1999] PNLR 826 at 834 (Brooke LJ) 4 See 672D. The decision was approved by Lord Bingham in Customs & Excise Comrs v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181 at [21]. Lord Wilson also found the analysis that

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Duty of care in tort  1.27 the solicitors owed a duty of care to the opposite party because they stepped outside their normal role to be of assistance in NRAM plc v Steel [2018] UKSC 13, [2018] 1 WLR 1190 at [32]. 5 [1996] PNLR 129 (Gage J). 6 The decision on this issue was strictly obiter because Gage J  found that the representations alleged by the claimant had not been made and that the representations actually made were not false: see [1996] PNLR 129 at 134–6. 7 See Reader v Molesworths Bright Clegg [2007] EWCA Civ 169, [2007] 1 WLR 1082 (where it was held that a solicitor instructed by the administratrix of a man killed in a car accident owed no duty of care to his children for negligently compromising his personal injury claim) and Whitehead v Searle [2008] EWCA Civ 285, [2009] 1 WLR 549 (where it was held that a firm of solicitors owed no duty of care to the husband of a client who had brought a ‘wrongful birth’ claim but later committed suicide in relation to his personal claim against the health authority). Both cases do, however, illustrate the fact sensitive nature of the inquiry.

(c)  The beneficiary principle: White v Jones 1.26 In Ross v Caunters1 it was held at first instance that a solicitor engaged by a testator owed a duty of care to a potential beneficiary in the preparation and execution of a will. In White v Jones2 the House of Lords confirmed by a majority of three to two that a solicitor did indeed owe such a duty to carry out a client testator’s wishes promptly and to prepare a new will for execution. Although the members of the majority each drew comfort from the existing law, it appears that the imposition of liability in such a case should be regarded more as an anomalous exception to the principle upon which a duty of care will be imposed rather than as a development or extension of that principle. Lord Goff considered that Ross v Caunters could not be justified on existing principles but relying on the European concept of ‘transferred loss’ was prepared to ‘fashion a remedy to fill a lacuna in the law’. Lord BrowneWilkinson agreed that the case did not fall within the existing categories of relationship to which the law attaches a duty of care but that it was appropriate to develop a novel category of negligence on the basis that there was a close analogy with existing categories of special relationship giving rise to a duty of care.3 In Carr-Glynn v Frearsons4 the Court of Appeal confirmed that the duty of care owed by a solicitor to a disappointed beneficiary should be regarded as an exceptional one and this has been emphasised in all subsequent cases. 1 [1980] Ch 297 (Sir Robert Megarry V-C). 2 [1995] 2 AC 207. 3 [1995] 2 AC 207 at 267H–268F, 274E–275E and 292F–295D. Lord Nolan, who agreed with Lord Goff, did not address the novel features of the case. It may be that he would not have imposed a duty of care in every case of a disappointed beneficiary and considered that the involvement and reliance of the beneficiaries in the process of drawing up the will was important, if not critical. 4 [1999] Ch 326, CA. Chadwick LJ identified the ratio decidendi of White v Jones as the passages in the speech of Lord Goff between 268B and 269D: see [1999] Ch 326 at 334H–335E. For detailed discussion of the beneficiary principle and its application see Chapter 11, paras 11.02 to 11.11.

1.27 The duty of care owed by a solicitor to a disappointed beneficiary is exceptional for two principal reasons. First, reasonable reliance is normally central to the imposition of a duty of care and in almost all other cases it will 37

1.28  The solicitor’s duties in contract and tort be necessary to show that the claimant relied on the solicitor either directly or indirectly.1 In White v Jones,2 by contrast, it was held that reliance is not an essential ingredient of liability. If it were necessary for the beneficiary to establish reliance he or she would not be able to do so. The beneficiary may know about the will and its contents and may have an expectation that the testator will not change it. But the testator is free to change the will at any time. Secondly, where a solicitor acts negligently in the preparation or execution of a will there will be no liability to anyone at all unless a duty of care to the disappointed beneficiary is imposed. Because the will takes effect on death the testator suffers no loss during his or her lifetime as a consequence of the solicitor’s negligence. The estate suffers no loss either because, however much the testator’s wishes have been frustrated, the net assets in the estate remain the same. If a solicitor owes no duty to the disappointed beneficiary or to the client (who has suffered no loss), he or she could escape liability for negligence altogether.3 In White v Jones this reason was considered by Lord Goff to be critical to the imposition of a duty of care.4 1 See N M Rothschild & Sons Ltd v Berenson [1997] NPC 15, CA (referred to in para 1.28) for an example of ‘indirect reliance’. In that case no one from the claimant read the report on title which was submitted to the lead bank, Barclays. But the claimant would not have permitted CFL to draw down the credit facility without it. 2 See Sir Donald Nicholls V-C in the Court of Appeal [1995] 2 AC 207 at 221H–222B and Lord Browne-Wilkinson at 272D–G. Lord Goff suggested at 262C that it may be a requirement in the normal case. But compare his views in Henderson v Merrett Syndicates [1995] 2 AC 145 at 180E–F. 3 See Ross v Caunters [1980] 1 Ch 297 (Sir Robert Megarry V-C) at 303A: ‘The only person who has a valid claim has suffered no loss, and the only person who has suffered a loss has no valid claim.’ 4 See [1995] 2 AC 207 at 268E and 276D. See also Stapleton ‘Duty of Care: Peripheral Parties and Alternative Opportunities for Deterrence’ (1995) 111  LQR  301 esp at 324-6 and Evans, Lawyers’ Liabilities (2nd edn, 2002), ch 1, 1–30.

1.28 In White v Jones1 the House of Lords recognised as a matter of policy the unique importance of solicitors in the preparation of wills and the nature and scope of the exception are considered in detail in Chapter 11. But the principle of transferred loss has also been applied to analogous transactions outside the context of wills. Claims by beneficiaries in relation to revocable lifetime gifts have generally failed.2 But in Hughes v Richards3 the Court of Appeal refused to strike out a claim brought by children, who were the beneficiaries of a life time settlement, and in Gorham v British Telecommunications plc4 the Court of Appeal found that a pension provider owed a duty of care to the dependants of a customer who purchased pension and life cover. Finally, in Chappell v Somers & Blake5 it was held that an executrix was entitled to bring a claim on behalf of the beneficiaries of an estate on the basis that the solicitors whom she had instructed to administer the estate owed a duty of care to her directly. Neuberger J  identified two points of policy which justify the imposition of a duty of care in cases of this kind.6 ‘The first is that it would be wrong if the solicitors escaped any liability in a case such as this, merely because they 38

Duty of care in tort  1.28 could identify a dichotomy between the person who can claim against them for a breach of duty, namely the executrix, and the person who can be said to have suffered the damage, namely the beneficiary.’ ‘The second policy principle appears to me to be that, given that any damages would ultimately come to the beneficiary, irrespective of who has the right to sue, the question of whether it is the executrix or the beneficiary who can bring the proceedings is not of great significance. The essential point is to ensure that there cannot be double recovery (ie the same damages cannot be recovered twice, once by the beneficiary and once by the executor).’ Finally, in order to rely on the principle in White v Jones there must be a close analogy between the relevant claim and the duty which a solicitor owes to a disappointed beneficiary.7 Cases in which the court has applied the principle outside the solicitor client relationship may also be of assistance.8 1 See [1995] 2 AC 207 at 260E–G (Lord Goff) and 276A–C (Lord Browne-Wilkinson). 2 See Chapter 11, paras 11.31 to 11.34. For the most recent decision see Joseph v Farrer & Co LLP [2017] EWHC 2072 (Ch), [2018] PNLR 1 (HHJ Purle QC). 3 [2004] EWCA Civ 266, [2004] PNLR 706. See also O’Sullivan ‘Professional liability to third parties for inter vivos transactions’ (2004) 21 PN 142. See paras 11.32 and 11.33, below. 4 [2000] 4 All ER 867, CA. 5 [2003] EWHC 1644 (Ch), [2004] Ch 19. For the facts see para 11.19, below. For further discussion, see chapter 11. The decision was approved by the Court of Appeal in Shell UK Ltd v Total UK Ltd [2010] EWCA Civ 180 [2011] QB 86 at [139]–[143]. Waller LJ stated (at [143]): ‘We must confess to being somewhat influenced as was Neuberger J (in para 16) by what Lord Goff of Chieveley in White v Jones [1995] 2 AC 207, 259–260 called “the impulse to do practical justice”.’ 6 At [16] and [17]. 7 In Dean v Allin & Watts [2001]  EWCA  Civ 758, [2001] Lloyd’s Rep PN  605 the Court of Appeal placed some reliance on White v Jones in reaching the conclusion that a solicitor owed a duty of a care to a third party but did not go so far as to suggest that it was a case of transferred loss and Robert Walker LJ did not consider the case to be an extension of the White v Jones principle. In Searles v Cann & Hallett [1999] PNLR 494 (Philip Mott QC) the court also relied on White v Jones in reaching the conclusion that a firm of solicitors acting for a borrower owed a duty of care to a lender to perfect an assignment of a security. In Rind v Theodore Goddard [2008] EWHC 459 (Ch) Morgan J declined to strike out a claim by the residuary beneficiary in relation to the failure to mitigate inheritance tax on his mother’s estate. In Youlton v Charles Russell [2010] EWHC 1032 (Ch) at [220]–[227] Warren J held that the solicitors owed a duty of care to a trustee of a pension fund in his personal capacity (although there was no contractual retainer). In Vinton v Fladgate Fielder [2010]  EWHC  904 (Ch), [2010]  STC  1868 Norris J extended the principle to an inheritance tax saving scheme which related to the allotment of shares in a private company which was intended to attract business property relief. In Anwar v Ng Chong [2014] 3 SLR 761 the Court of Appeal of Singapore held that a solicitor owed a duty of care to the sons of his client who owned a property and inadvertently assumed a personal liability for the debts of the client’s company: see Kum, Loke and Ong, ‘The conceptual basis of the solicitor’s liability to a third party related to the client: reconstructing the White v Jones principle in Singapore’ (2016) 32 PN 32–49. Finally, in Chief Land Registrar v Caffrey & Co [2016] EWHC 161 (Ch) Master Matthews held that solicitors assumed a duty of care for the accuracy of statements made to the Land Registry. However, Ds did not appear or challenge the scope of the representations. 8 See McKie v Swindon College [2011] EWHC 469 (QB) where HHJ Denyer QC imposed a duty of care on a former employer in relation to the provision of information about an employee to a new employer. See also Sebry v Companies House [2015]  EWHC  115 (QB), [2016] 1 WLR 2499 where Edis J held that the Registrar of Companies had a duty to any company which was not in liquidation but which was wrongly recorded on the register as having been

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1.29  The solicitor’s duties in contract and tort wound up to take reasonable care to ensure that the order was not registered against the wrong company. See also Commodity Solution Services Ltd v First Scottish Searching Services Ltd [2019] SAC (Civ) 4; [2019] PNLR 13 where the Sheriff Appeal Court held that a private firm of searchers searching in a public register owed a duty of care to a creditor who had registered an inhibition. See also Barness v Ingenious Media Ltd [2019] EWHC 3299 (Ch) [2020] PNLR 10 where Nugee J struck out claims against banks that they owed a White v Jones duty of care to borrowers who invested in the ‘Ingenious’ tax schemes: see [58]–[67].

(d)  An employee’s duty of care 1.29 In Merrett v Babb1 an employed valuer was held to be personally liable to a borrower for negligently carrying out a building society valuation. He was held to have assumed a personal responsibility to the borrower because he provided a professional service and signed the valuation certificate personally (giving his qualifications). The Court of Appeal applied the decision of the House of Lords in Harris v Wyre DC2 where a staff valuer employed by a local authority was held to owe a personal duty of care to the borrower under a local authority mortgage. Merrett v Babb has been cited or followed without comment on a number of occasions.3 But in Bradford & Bingley plc v Hayes4 McKinnon J declined to follow it and a similar approach has been taken more recently in Summit Advances Ltd v Bush.5 The position in relation to solicitors (whether they are employees of a limited company, a partnership or an LLP) is also unclear. There is one Hong Kong authority which suggests that a member or employee will be personally liable.6 But the issue ought to be academic in all but the most exceptional of cases. In Merrett v Babb the valuer was employed by a firm whose sole principal had been made bankrupt and who had no insurance against the claim and the employee (who had no insurance either) was held to be liable. If a claim is made against an employed solicitor personally he or she can expect to be indemnified by the firm’s insurers.7 1 [2001] EWCA Civ 214, [2001] QB 1174, CA. 2 [1990] 1 AC 831. In Merrett (above) at [44] May LJ held that the following statement by Lord Griffiths at 865G applied just as much to the employee of a private firm as it did to a local authority staff valuer: ‘The essence of the decision is that the professional person who carries out the inspection and makes the valuation is the person on whom the purchaser relies to exercise proper skill and judgment.’ Wilson J agreed with May LJ. But Aldous LJ dissented on the basis that there was no personal assumption of responsibility by the employee. 3 The decision was cited in Partco Ltd v Wragg [2002] 1 Lloyd’s Rep 320 at [17] and [18] (where the point was the extent to which an employee can be personally liable) and in Lloyds TSB Bank Ltd v Cooke-Arkwright (Wright J, 10 October 2001, unreported). It was also referred to by Longmore LJ in the Court of Appeal in Customs & Excise Comrs v Barclays Bank plc [2004] EWCA Civ 1555, [2005] 1 Lloyd’s Rep 165, CA at [44]. 4 (25 July 2001, unreported) at [17]: ‘I do not believe that it would be right or fair to ignore the limited liability status of the principal defendant or its clear liability (assuming negligence to have been proved) to the claimant society. To do otherwise would be seriously to undermine “the separate legal personality of the company”. Further, there is no call to resort to any imposition of liability upon the valuer in the instant case, as there was in Smith -v- Bush and, indeed, Merrett for the claimant in the instant case has all the rights it could possibly need against the principal defendant, the limited company.’

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Duty of care in tort  1.30 5 [2015] EWHC 665 (QB), [2015] PNLR 18 (HHJ Seymour QC). 6 See Yazhou Travel Investment Co Ltd v Bateson Starr [2005]  PNLR  31 where HHJ  Mutrie (sitting as a judge of the Court of First Instance) held that there was a special relationship between solicitor and client: ‘I  venture to suggest that in most cases, simply because of the personal nature of the solicitor-client relationship, there will be such a special relationship. The solicitor deals directly with the client, takes instructions from him and gives advice. The client sees the solicitor as “my solicitor” and relies on him as such, whether he is a partner or an employee and indeed may continue to instruct that same solicitor if he moves to another firm.’ See [44]–[66]. 7 The SRA’s Minimum Terms ensure that one or more of the original principals will be insured against the claim even if the employee is no longer employed by the firm and the firm no longer exists. Even if the employee is sued personally (eg because there is some doubt about the name or make up of the firm at the date on which the cause of action accrued), he or she should be expressly or impliedly indemnified against the claim. It is only where the principals are uninsured (and the employee is also uninsured against the claim) that the decision in Merrett v Babb will work hardship by imposing liability upon an employee who is uninsured. This is only likely to be in cases where the principal was a sole practitioner who has gone bankrupt and failed to maintain any run-off cover. For further discussion see Chapter 17, paras 17.05 and 17.18.

(e)  Exclusion of liability 1.30 One important question in determining whether a solicitor has undertaken a duty of care is whether he or she disclaims any responsibility to the third party for the consequences of the inaccuracy of information provided or advice tendered. In Smith v Bush1 it was held both that UCTA applied to a disclaimer of liability made by a valuer to a potential purchaser, with whom he had no direct contractual relationship, and that the disclaimer could not negative the existence of a duty of care so that the defendant could escape its provisions.2 In Henderson v Merrett Syndicates,3 however, it was suggested that an appropriately worded disclaimer might be effective to prevent a duty of care arising at all. The point was then considered in McCullagh v Lane Fox & Partners Ltd4 where it was held that a disclaimer given by an estate agent to the purchaser of a property marketed by him was effective to negative the existence of a duty of care. In both that case and in Omega Trust Co Ltd v Wright Son & Pepper5 it was accepted that a disclaimer would be effective to negative the existence of a duty of care if it satisfied the test of reasonableness prescribed by UCTA, s 11(3).6 Finally, in Barclays Bank plc v Grant Thornton UK LLP7 the court had to consider the standard Bannerman clause8 in which an auditor reports to a company but disclaims all responsibility to third parties. Cooke J also held that the disclaimer was effective to prevent a duty of care arising if it satisfied the test of reasonableness. However, where the solicitor assumes a duty of care to the third party, he or she cannot rely on a disclaimer contained in a contract of retainer with their own client (or a contract with another party) where the third party does not see the disclaimer at all.9 1 [1990] 1 AC 831, at 848D and 861D. The decision was recently followed in Scullion v Bank of Scotland plc [2010] EWHC 572 (Ch) at [93] to [98] (Richard Snowden QC) where a disclaimer in a mortgage application was held ineffective to exclude a duty of care by the valuer to the borrower. The Court of Appeal reversed the decision but this issue was not the subject of the appeal: see [2011] EWCA Civ 693, [2011] 1 WLR 3212.

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1.31  The solicitor’s duties in contract and tort 2 See UCTA, ss 1(1), 2(2), 11(3) and 13(1). It is clear that UCTA was intended to apply the test of reasonableness to a notice purporting to disclaim a common law duty of care although there is little authority on the meaning of the word ‘notice’. UCTCCR (discussed in para 1.05, above) is of no application in this context because it applies only to contractual terms. 3 [1995] 2 AC 145 at 181D–E. 4 [1996] 1 EGLR 35, CA. The decision was obiter because a majority held that no duty arose in any event. 5 [1997] PNLR 424, CA. 6 The issue has been considered on a number of strike out or summary judgment applications: see First National Commercial Bank Plc v Loxleys [1997] PNLR 211, CA, where it was held arguable on a strike out that a disclaimer ought to be taken into account when deciding whether a vendor’s solicitor owed a duty of care to the purchaser for inaccurate answers. It was decided before Omega but after McCullagh v Lane Fox & Partners Ltd which was cited to the court. See also Killick v PWC [2001] PNLR 1 at [14]–[23] where Neuberger J also held that it was arguable that a limitation clause was effective to restrict a duty of care. A similar conclusion was reached by Leveson J in Partco Ltd v Wragg [2002] 1 Lloyd’s Rep 320 where the court refused to strike out a claim that directors of a target company owed a duty of care to the takeover bidder and it was held arguable that a disclaimer in a confidentiality agreement did not satisfy UCTA, s 2(2): see [26] and [35]. In both cases it was assumed that UCTA would apply. Leveson J accepted that oral assurances might negative the effect of the disclaimer altogether: see [28]–[32]. 7 [2015] EWHC 320 (Comm), [2015] 2 BCLC 537. 8 After the Scottish decision Royal Bank of Scotland Plc v Bannerman Johnstone Maclay [2005] CSIH 39, [2006] BCC 148. 9 See Precis (521) plc v William M  Mercer Ltd [2005]  EWCA  Civ 114, [2005]  PNLR  28 at [25]–[28] (Arden LJ). In Killick v PWC [2001] PNLR 1 (Neuberger J) at [36]–[39] this issue was permitted to go to trial although the court gave a strong indication that D was likely to fail. In Killick the court also considered that the question whether C had seen the limitation clause was likely to be significant in determining whether it satisfied the test of reasonableness under UCTA. Finally, in Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Comm), [2015] 2 BCLC 537 at [40] Cooke J considered the first issue to determine was whether the disclaimer had been sufficiently brought to the attention of the bank.

1.31 It appears to be reasonably settled, therefore, that the two-stage approach adopted by Hobhouse LJ in McCullagh v Lane Fox & Partners Ltd1 ought to be applied to direct disclaimers. First, if D gives C a disclaimer, that disclaimer is not to be construed as a contractual provision but to be treated ‘as one of the facts relevant to answering the question whether there has been an assumption of responsibility’ by D  for the relevant statement or advice. The court must ask whether a reasonable person would understand that D was assuming responsibility for the statement or advice in the light of both the disclaimer and all other relevant facts. If the court concludes that D assumed no responsibility to C for the statement or advice, the court must nevertheless go on to consider whether D is precluded from relying on the disclaimer by any statutory control. As with contractual exclusion or limitation clauses, there are now separate statutory regimes for consumers. Where the third party is not a consumer, however, UCTA will continue to apply. 1 See [1996] 1  EGLR  35, at 45F–M, CA, followed by Cooke J  in Barclays Bank plc v Grant Thornton UK LLP  [2015]  EWHC  320, [2015] 2  BCLC  537 (Comm) at [41]. In Killick v PriceWaterhouseCoopers [2001]  PNLR  1 Neuberger J  reached the conclusion that auditors owed a duty of care to shareholders notwithstanding the limitation of liability: see [50]–[53]. See also Natixis SA  v Marex Financial [2019]  EWHC  2549 (Comm), [2019] 2 Lloyd’s Rep 431 where Bryan J  held that a disclaimer was effective to negate a duty of care owed by a

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Duty of care in tort  1.33 commodities broker: see [358] and [359]. He also held it to be reasonable under UCTA: see [517]–[534].

(i)  Consumer notices 1.32 The UCTCCR did not apply to disclaimers and s 2 of UCTA continued to apply to them until the Consumer Rights Act 2015 came into force. Part 2 of the Consumer Rights Act 2015 now applies to ‘consumer notices’ and replaces s  2 of UCTA in relation to a trader’s liability to consumers.1 Section 61(4) provides that Part 2 of the Consumer Rights Act 2015 applies to a notice (defined as a ‘consumer notice’2) to the extent that it (a) relates to rights or obligations as between a trader and a consumer or (b) purports to exclude or restrict a trader’s liability to a consumer.3 For this purpose, it does not matter ‘whether the notice is expressed to apply to a consumer, as long as it is reasonable to assume it is intended to be seen or heard by a consumer’.4 The section will therefore apply to a disclaimer which may be directed to another party (who is not a consumer) or, indeed, the world in general. Moreover, in deciding whether D assumed a duty of care to C, one of the issues which the court will consider is whether the disclaimer could reasonably have been expected to come to C’s attention. If the Consumer Rights Act applies to the notice, the fairness test in s 21 will apply to it.5 There is no clear guidance that a disclaimer of the kind found in Smith v Bush (ie a disclaimer in a valuation report prepared for the benefit of a lender but provided to the borrower) would be found unfair.6 But it is likely that a standard form disclaimer which purported to prevent the borrower relying upon it would be found unfair. 1 For the definition of ‘consumer’ see para 1.04 (above). 2 Section 61(7). A ‘notice’ is defined as ‘an announcement, whether or not in writing, and any other communication or purported communication’: see s.61(8). 3 Section 61(4). 4 Section 61(6). 5 A term is unfair ‘if, contrary, to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer’. 6 Paragraphs 5.5.8 to 5.5.10 of the current guidance published by the CMA on 31  July 2015 (‘Unfair contract terms guidance’) deal with gratuitous services (and, in particular, additional free services provided with goods).

(ii)  Other notices 1.33 If UCTA continues to apply, the burden is then on D  to satisfy the court that the disclaimer is reasonable.1 In doing so, the court will take into account all of the relevant factors including the relative bargaining strengths of the parties.2 It will be particularly significant if both C and D are commercial parties and C could have asked D to assume a duty of care for a reasonable fee or obtained separate advice for a reasonable fee without difficulty. The court will also take into account the practical effect of the disclaimer. In Barclays Bank plc v Grant Thornton UK LLP3 Cooke J  held that the disclaimer was reasonable for essentially the following reasons: 43

1.33  The solicitor’s duties in contract and tort ‘The disclaimer of responsibility was clear on its face and would have been read and understood by anyone at Barclays who had read the two page Reports for the years ending 2006 and 2007. These reports should have been read and the terms of the disclaimer observed. The Disclaimer could not have been misunderstood. Furthermore, Barclays, having in other circumstances deliberately engaged Grant Thornton to provide services to it so that it would be responsible to it for them, even when it was fulfilling the self-same functions for the company (the Brandchart engagement) did not seek such an engagement or assumption of responsibility in relation to these particular reports. In the face of an express disclaimer it is not enough to say that both Grant Thornton and Barclays expected Barclays to rely upon the terms of the report in the context of the 2006 Facility. Barclays was being told expressly that it relied on the reports at its own risk. Grant Thornton made it clear that it was not prepared to assume responsibility to Barclays in respect of these Reports. There was nothing unreasonable in that stance, as between two sophisticated commercial parties, where the approach of auditors limiting their responsibilities is well known and, in the statutory context, is the subject of a standard form ICAEW clause. Barclays should have anticipated the existence of such a clause and, in my view, must have expected some such clause to be present.’4 1 See Omega Trust Co Ltd v Wright Son & Pepper [1997] PNLR 424, CA and Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320, [2015] 2 BCLC 537 (Comm) at [43]. 2 For the different factors which the court will take into account see Omega (above) at 429–430 and Grant Thornton UK LLP at [43]. In Killick v PriceWaterhouseCoopers [2001] PNLR 1 at [19] Neuberger J set out the following list of factors: ‘The way in which the term came into being and is used generally; the strength and the bargaining position of the parties relative to each other; whether the client had an opportunity of entering into a similar contract without having to accept a similar term; how far it would have been practical and convenient to go elsewhere; the reality of the consent of the customer to the term; the size of the limit compared with other limits and widely used standard terms; the availability of insurance to the supplier; the possibility of allowing for an option to contract without the limitation clause but with a price increase in lieu.’ 3 [2015] EWHC 320 (Comm). 4 At [89]. See also Omega (above) at 430 where Henry LJ came to a similar conclusion for similar reasons in relation to a disclaimer by a valuer. The purpose and clarity of the disclaimer were important as was the fact that the bank could have obtained its own valuation very easily.

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Chapter 2

Breach of duty

A  THE STANDARD OF CARE 1 Introduction 2.01 There should be no need to distinguish between the standard of reasonable care to be expected of a solicitor in complying with his or her contractual obligations and the standard of reasonable care by which a solicitor’s acts or omissions will be judged in the law of tort. The source of the contractual duty is a statutory term implied by virtue of s 13 of the Supply of Goods and Services Act 1982 or s 49 of the Consumer Rights Act 2015.1 It is therefore a term implied as a matter of law.2 Occasionally, it has been suggested that the standard of reasonable care is different in contract and tort.3 But no reported case has turned on such a distinction. The standard of care has also been defined or explained in various ways:4 ‘[W]here you get a situation which involves the use of some special skill or competence, then the test as to whether there has been negligence or not is not the test of the man on the top of the Clapham omnibus, because he has not got this special skill. The test is the standard of the ordinary skilled man exercising and professing to have that special skill; it is well established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.’5 ‘The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession.’6 ‘Those who hold themselves out as qualified to practise other professions, although they are not liable for damage caused by what in the event turns out to have been an error of judgment on some matter upon which the opinions of reasonably informed and competent members of the profession might have differed, are nevertheless liable for damage caused by their advice, acts or omissions in the course of their professional work which no member of the profession who was reasonably well-informed and competent would have given or done or omitted to do.’7 ‘The standard of care to be applied in negligence actions against an advocate is the same as that applicable to any other skilled professional 45

2.01  Breach of duty who has to work in an environment where decisions and exercises of judgment have to be made in often difficult and time-constrained circumstances. It requires a plaintiff to show that the error was one which no reasonable competent member of the relevant profession would have made.’8 ‘The law does not, however, demand either omniscience or infallibility in lawyers any more than it does in doctors or architects. The law’s standard of reasonable competence means not only that there will be errors which are not compensable but that legal advisers are not expected to divine every claim that a client may theoretically have.’9 1 See para 1.04. 2 In Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742 at [15] Lord Neuberger distinguished between two types of implied term: ‘The first, with which this case is concerned, is a term which is implied into a particular contract, in the light of the express terms, commercial common sense, and the facts known to both parties at the time the contract was made. The second type of implied terms arises because, unless such a term is expressly excluded, the law (sometimes by statute, sometimes through the common law) effectively imposes certain terms into certain classes of relationship.’ From time to time it is suggested that it is a term of the first kind: see, eg Football League Ltd v Edge & Ellison [2006] EWHC 1462 (Ch), [2007] PNLR 2 at [266]. But it is suggested that it is properly an implied term of the second kind. 3 See Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 at 183 (Megarry J): ‘The essence of the contract of retainer, it may be said, is that the client is retaining the particular solicitor or firm in question, and he is therefore entitled to expect from that solicitor or firm a standard of care and skill commensurate with the skill and experience which that solicitor or firm has. The uniform standard of care postulated for the world at large in tort hardly seems appropriate when the duty is not one imposed by the law of tort but arises from a contractual obligation existing between client and the particular solicitor or firm in question.’ In FB v Rana [2017] EWCA Civ 334, [2017]  PIQR P17 at [61] Jackson LJ stated that the position in contract may be ‘more nuanced’ and pointed out that the contractual cases were not entirely consistent on this point. 4 In Dunhill v Brooke & Co [2018] EWCA Civ 505 at [45]–[48] Sir Brian Leveson P cited or set out most of the key passages in the authorities set out below. This passage is a useful single source for the different formulations of the standard of care. 5 Bolam v Friern Hospital Management Committee [1957] 1 WLR 582 at 586 (McNair J), cited with approval in Greaves & Co (Contractors) Ltd v Baynham Meikle [1975] 1  WLR  1095, CA at 1101F (Lord Denning MR), Maynard v West Midlands Regional Health Authority [1984] 1 WLR  634, HL at 638 (Lord Scarman), Eckersley v Binnie [1988] 18  CLR  1 at 79, CA (‘applied and approved time without number’, per Bingham LJ) and Chester v Afshar [2004]  UKHL  41, [2005] AC  134 at [51] (Lord Hope): ‘the standard of the ordinary skilled man exercising and professing to have that special skill’. In Phelps v Hillingdon LBC [2001] 2 AC  619 at 672F  Lord Clyde stated of the Bolam test: ‘That is deliberately and properly a high standard in recognition of the difficult nature of some decisions which those to whom the test applies require to make and of the room for genuine differences of view on the propriety of one course of action as against another.’ For application in solicitors’ cases see D Morgan plc v Mace & Jones [2010] EWHC 3375 (TCC) at [66] (Coulson J), Fraser v Bolt Burdon [2009] EWHC 2906 (QB) at [49]–[64] (HHJ Seymour QC) and Barker v Baxendale Walker Solicitors [2017]  EWCA  Civ 2056, [2018] 1  WLR  1905 at [49]. In Montgomery v Lanarkshire Health Board [2015]  UKSC  11, [2015]  AC  1430 the Supreme Court departed from the Bolam test in disclosure of risk cases in medical negligence: see [26] and [40]. For a useful discussion of the Bolam test in medical negligence following Montgomery see Swoboda ‘Bolam: going, going … gone’, 1 (2018)  JPI  Law, 9. Montgomery was cited to Kerr J  in O’Hare v Coutts & Co [2016]  EWHC  2224 (QB) and he accepted the submission that ‘the required extent of communication between financial adviser and client to ensure the

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The standard of care  2.02 client understands the advice and the risks attendant on a recommended investment’ was not governed by the Bolam test: see [204]. However, the Court of Appeal found it unnecessary to deal with this point in Barker v Baxendale Walker Solicitors (above): see [64]. 6 Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384 at 403 (Oliver J), cited with approval in Martin Boston & Co v Roberts [1996]  PNLR  45, CA at 50, Balamoan v Holden & Co [1999] All ER (D) 566, CA, John Mowlem Construction plc v Neil F Jones & Co [2004]  EWCA  Civ 768, [2004]  PNLR  925 at [15], in Padden v Bevan Ashford [2011]  EWCA  Civ 1616 at [26] (Lord Neuberger MR) and Mehjoo v Harben Barker [2014] EWCA Civ 358, [2014] PNLR 24 at [69] (where Lewison LJ described the full passage in Oliver J’s judgment as ‘wise words’). For examples of the application of the test see: Thorpe v Fellowes LLP [2011] EWHC 61 (QB), [2011] PNLR 13 (Sharp J) and Boyle v Thompsons [2012] EWHC 36 (QB) (Coulson J). See, in particular, the latter at [54] which contains a useful checklist for a litigation solicitor. 7 Saif Ali v Sydney Mitchell & Co [1980]  AC  198 at 218D–E  (Lord Diplock). See also to similar effect: 220D. See also Ridehalgh v Horsefield [1994] Ch 205, CA at 233C–D, Bark v Hawley & Rodgers [2004] EWHC 144 (QB), [2005] PNLR 3 at [34] and Luke v Wansbroughs [2003]  EWHC  3151 (QB), [2005]  PNLR  2 (Davis J) at [86] and [87]. See also Langsam v Beachcroft LLP [2012] EWCA Civ 1230 at [83] (applying the same test). 8 Arthur J S Hall & Co v Simons [2002] 1 AC 615 at 737G (Lord Hobhouse) cited with approval in Moy v Pettman Smith [2005]  UKHL  7, [2005] 1  WLR  581 at [25] (Baroness Hale) and McFaddens v Platfords [2009] EWHC 126 (TCC) at [37] (HHJ Toulmin QC). See also Moy v Pettman Smith at [59] where Lord Carswell cited Lord Salmon in Saif Ali (above) at 231 and approved the dictum of Anderson J in the High Court of Ontario in Karpenko v Paroian, Courey, Cohen & Houston (1981) 117 DLR (3d) 383 at 397–8 (a passage also relied on by Vos J in Webb v Macdonald [2010] EWHC 93 (Ch) at [68]). 9 Pritchard, Joyce & Hinds v Batcup [2009]  EWCA  Civ 369 at [103] (Sedley LJ) (applied in Chweidan v Mishcon de Reya Solicitors [2014] EWHC 2685 (QB) (Simler J) at [86]). See also Sullivan LJ at [97] (who cited Saif Ali) and then stated: ‘Even if it is too simplistic to expect that a blatant error should “leap out of the page”, the need to carry out a minutely detailed reconstruction with the assistance of thousands of documents of events going back over many years before any finding could be made even as to what the error might have been, is perhaps a pointer to the conclusion that if error there was, it was certainly not so blatant as to amount to negligent professional conduct.’

2.02 The burden of proof is on C  to establish that the solicitor failed to meet the relevant standard. In other professions it is accepted that this burden is a high one and also that it may be impossible to resolve it without expert evidence.1 In the case of solicitors (or barristers) the situation is more problematic because the court may be inclined to apply a higher standard than it would apply in relation to other professions.2 It is suggested that the appropriate way to resolve this difficulty in cases where the standard of care is in issue is to consider the conduct of the solicitor in two stages: first, whether the advice given or action taken was wrong and, secondly, whether the mistake was one which no reasonable member of the profession would have made.3 If the advice was correct there is no need to consider the second stage (whatever the process of reasoning).4 1 See Phelps v Hillingdon LBC  [2001] 2  AC  619 at 672F (cited in Carty v Croydon LBC [2005] EWCA Civ 19, [2005] 2 All ER 519 at [36]) (both education cases). For recent application of these principles outside solicitors’ negligence see Siddiqui v Masters & Scholars of the University of Oxford [2018] EWHC 184 (QB), at [89] and [90]. 2 See Hoffmann ‘The Reasonableness of Lawyer’s Lapses’ (1994) 10 PN 6, Moy v Pettman Smith [2005] UKHL 7, [2005] 1 WLR 581 at [26] (Baroness Hale). See the observations of Brooke LJ to similar effect in Balamoan v Holden & Co [1999] All ER (D) 566, CA.

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2.03  Breach of duty 3 This was the approach adopted by Jack J in Hickman v Blake Lapthorn [2005] EWHC 2714 (QB), [2006]  PNLR  20 at [43]: ‘I  accept that this two stage approach may often be helpful, provided that the circumstances are such that a distinction readily appears between what is wrong, or in error, and what is negligent.’ He applied the same approach in Earl of Malmesbury v Strutt & Parker [2008] EWHC 424 (QB) 118 ConLR 68 at [48]. 4 See Adams v Rhymney Valley DC [2000] 3 EGLR 25, CA. Sir Christopher Staughton explained the reason for this (at [43]): ‘Nor can it be a requirement of the Bolam test that the defendant should have considered and reflected upon the alternative courses available and made a conscious choice between them … The consultant who naturally chooses one method out of long experience is as much entitled to rely on the Bolam doctrine as one who sits down in his chair and goes through the whole process of choice again.’ Morritt LJ added (at [60]): ‘the question is whether the failure to make a conscious choice between two alternative nonnegligent courses of action only one of which could lead to the damage in fact sustained can constitute a breach of the duty owed by the council to the Adams family in this case. If that is the correct way to analyse the problem then the answer is obvious; liability does not depend on hindsight.’ Andrew Smith J summarised the effect of Adams in Levicom International Holding BV  v Linklaters [2009]  EWHC  812 (Comm) at [280] (overruled at [2010]  EWCA  Civ 494, [2010] PNLR 29 on other grounds): ‘What matters is the advice itself, not how it came to be given’. See also Agouman v Leigh Day [2016]  EWHC  1324 (QB), [2016]  PNLR  32 at [99] (also Andrew Smith J): ‘At least in cases of professional negligence, the law is concerned with whether the defendant acted consistently with the requisite standard, not with how (s)he came so to act or the thought-processes that led to the act or omission of which the claimant complains.’

2  The standard of reasonable competence (a)  Level of expertise 2.03 There is obviously no ideal norm of a solicitor with certain qualifications and experience against which the court can measure the conduct of a defendant. In order to practise a solicitor must hold a valid practising certificate.1 There are also a number of specific functions carried out by a solicitor’s firm which can only be carried out by an authorised person within the meaning of the Legal Services Act 2007.2 Although many tasks will be carried out by unqualified staff (trainees, legal executives or paralegals) the SRA Code of Conduct for Individuals 20193 and the SRA Code of Conduct for Firms 20194 impose a duty upon their principals and the managers of the firm to provide adequate supervision. The SRA  Code of Conduct 2011 also contained similar provisions.5 Where an unqualified individual is or has been involved in a legal practice and has been guilty of misconduct, s  43 of the Solicitors Act 1974 also empowers the Solicitors Disciplinary Tribunal to make an order that no solicitor shall employ or remunerate them.6 1 Solicitors Act 1974, ss 1 and 1A and the SRA Authorisation of Individuals Regulations 2019, reg 6. 2 Under the 2007 Act, only persons authorised by an approved regulator (including the SRA) may carry on reserved legal activities which include the exercise of a right of audience, the conduct of litigation, reserved instrument activities, probate activities, notarial activities and the administration of oaths: see Sch 2 to the 2007 Act. It is an offence to carry out one of the reserved activities without authorisation: see ss 14–16. For further discussion see Chapter 15, para 15.04, below. 3 See para 3.5: ‘Where you supervise or manage others providing legal services: (a) you remain accountable for the work carried out through them; and (b) you effectively supervise work being

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The standard of care  2.04 done for clients. 3.6 You ensure that the individuals you manage are competent to carry out their role and keep their legal, ethical and regulatory obligations up to date.’ 4 See para 4.3: ‘You ensure that your managers and employees are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.’ 5 The 2011 Code, O(7.7) required solicitors to ‘comply with the statutory requirements for the direction and supervision of reserved legal activities and immigration work.’ O(7.8) also required solicitors to ‘have a system for supervising clients’ matters, to include the regular checking of the quality of the work by suitably competent and experienced people’. The technical requirements for supervision were governed by the SRA Practice Framework Rules 2011. Rule 7 prohibited unqualified managers or employees of authorised bodies from being held out in any way which suggests that they were (or were entitled to) practise as a lawyer of England and Wales. The rules also prohibited unqualified staff from carrying out certain reserved activities altogether but permitted them to carry out certain reserved activities under instructions from someone qualified to supervise. 6 See, eg SRA v Ali [2013] EWHC 2584 (Admin) (Wilkie J).

2.04 Most clients would not expect every aspect of the work which they entrust to their solicitor to be carried out by a fully qualified member of staff.1 The authorities show that a solicitor may delegate appropriate tasks to suitably qualified person.2 However, it may be negligent to entrust work to an individual who is insufficiently skilled or experienced to undertake it competently without providing adequate supervision.3 It will be negligent for an unqualified person to provide services which require the expertise of a qualified solicitor4 and where the particular task does require the expertise of a qualified solicitor, there is also some authority for a ‘seniority test’.5 But whether or not the solicitor must be judged by the standard of the reasonable solicitor with the same level of seniority, no allowance will be made for inexperience.6 In the same way as it may be negligent to entrust a task to an unqualified person, it will be negligent to entrust that task to a solicitor who is insufficiently experienced to carry it out. 1 For a factual description of the way in which unqualified staff were used in conveyancing (and which the court considered to be perfectly acceptable): see Zwebner v Mortgage Corpn Ltd [1997]  PNLR  504 at 512D–513D (Lloyd J) (affirmed on appeal [1998]  ECGS  104, [1998] PNLR 769, CA). 2 See Arbiter Group plc v Gill Jennings & Every [2000] Lloyd’s Rep PN 669 at [20] (Swinton Thomas LJ): ‘A  professional man in appropriate circumstances is entitled to delegate tasks. Whether he is entitled to delegate a particular task will depend upon the nature of the task. He is entitled to delegate some tasks to others but is not entitled to delegate others. It all depends on the nature of the task involved. If he does delegate he must delegate to a suitably qualified and experienced person.’ This decision was followed in Sharratt v London Central Bus Co Ltd [2003] EWCA Civ 718, [2003] 4 All ER 590 at [181]–[185] where the court also referred to r 13 of the Solicitors Practice Rules 1990 and Annex 21G of the Guide to the Professional Conduct of Solicitors (1999). The court also received written submissions from the Law Society. 3 See Richards v Cox [1943] KB 139, CA (solicitor’s clerk) applied in Balamoan v Holden & Co [1999] All ER (D) 566, CA (Brooke LJ): ‘A one-man firm cannot expect a lower standard of care to be applied to it merely because it delegates the conduct of its client’s affairs to an unqualified member of its staff, however experienced. If the conduct of that member of staff falls below the standard appropriate for a solicitor, and he does not seek appropriate advice from counsel or from a solicitor in the firm when need arises, then the firm cannot complain about a finding of negligence against it.’ See also Summit Financial Group Ltd v Slaughter & May [1999] All ER (D) 264 where the judge held that the defendants were negligent because the drafting of

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2.05  Breach of duty a complicated document was split between two departments without one person assuming overall responsibility and the tax lawyer dealing with it was only very recently qualified and inexperienced. See also Hicks v Russell Jones & Walker [2007]  EWHC  940 (Ch) where the defendants were held to be negligent in failing to take advice from leading counsel in relation to an appeal and to respond to certain affidavits filed by the opposing party. Henderson J held (at [147]) that the junior fee-earner required ‘effective and supportive supervision’ but that this was ‘signally lacking’. The decision was upheld (after the Court of Appeal remitted the appeal for further findings of fact): see [2008] EWCA Civ 340. 4 In Wright v Troy Lucas & Co [2019] 3 WLUK 375 Eady J held that an unqualified legal adviser who had held himself out as having the skills of a competent legal professional owed a duty of care to his client to advise him to that standard. Through his mishandling of the case the client lost the chance of settling his personal injury claim for £300,000 rather than £20,000 and suffered an adverse costs order. See also Freeman v Marshall & Co (1966) 200 Estates Gazette 777 where Lawton J held that an unqualified surveyor with limited experience had to satisfy the standard of a trained surveyor when carrying out a professional task. 5 See Moy v Pettman Smith [2005]  UKHL  7, [2005] 1 WLR  581 at [60] (Lord Carswell) and Williams v Leatherdale [2008] EWHC 2574 (QB) (Field J) at [67]: ‘The relevant standard of care is that expected of a competent barrister of Mr Francis’ seniority in 2000 who holds himself as being an expert in ancillary relief.’ However, such a test was doubted in McFaddens v Platford [2009] EWHC 126 (TCC) (HHJ Toulmin QC) at [49] and [50]. 6 See Chweidan v Mischcon De Reya Solicitors [2014]  EWHC  2685 (QB) (Simler J) at [85]. See also Dunhill v Brooke & Co [2018] EWCA Civ 505 at [68] (Sir Brian Leveson P) at [49]: ‘Similarly, the same standard of care applies regardless of the level of experience obtained. As such, given that Mr Brook chose to delegate the responsibility of attending court to his trainee, Mr Marsh, that does not in and of itself permit them to fall below that standard.’ However, he also added obiter at [68]: ‘I consider there to be merit in the proposition that it fulfils the solicitors’ duty of care to permit a trainee to accompany properly instructed counsel to a split trial provided that he or she has instructions that a solicitor (preferably having the conduct of the case) is available if the need arises.’

2.05 Nevertheless, if the client insists on being represented by a fully qualified solicitor, it will be a breach of duty not to ensure that this instruction is carried out. Moreover, where the level of expertise required is not addressed by the parties, the client is entitled to assume that conduct of their matter is in the hands of a qualified solicitor. In Pearless de Rougemont v Pilbrow1 the client called the firm and asked for an appointment. The receptionist put him through to an unqualified legal executive. Throughout the retainer he assumed that she was qualified and she did not correct this impression. This was held to be a breach of contract. Moreover, because the firm had failed to provide the very thing which it had contracted to provide, namely, the services of a solicitor, it was not entitled to recover any of its fees.2 The decision was followed in Adrian Alan Ltd v Fuglers.3 In Manches LLP v Green4 C resisted payment of Ds’ fees for litigation of a commercial claim on the basis that it was conducted by an unqualified but experienced ‘old style managing clerk’. Underhill J applied Pilbrow but held that Ds’ fees were recoverable because he found on the facts that C  had been given a proper explanation. He also expressed the view that it is not uncommon (although the practice is declining) for experienced legal executives or managing clerks to have the conduct of quite major litigation. 1 [1999] 3 All ER 355, CA. The claim was not a claim for negligence and the defence that the work was carried out by an unqualified employee was held to be a defence to the claim. SRA Code

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The standard of care  2.07 of Conduct 2011, Chapter 1 included the following indicative behaviour (IB(1.3)): ‘ensuring that the client is told, in writing, the name and status of the person(s) dealing with the matter and the name and status of the person responsible for its overall supervision.’ Rule 1.5(c) of the SRA Transparency Rules 2019 now provides that an authorised body must publish on its website costs information which includes ‘the experience and qualifications of anyone carrying out the work, and of their supervisors’. The SRA also issued guidance on 2 October 2018 (updated on 25 November 2019) on transparency in price and service which should eradicate the confusion illustrated by the cases in this paragraph. 2 [1999] 3 All ER 355 at 359h-i (Schiemann LJ). 3 [2002] EWCA Civ 1655, [2003] PNLR 305. It was held that the client was entitled to recover fees of £20,350 incurred between 1994 and 1997 on the grounds that the defendant firm had employed a struck off solicitor who had misled the client into believing that he was a qualified solicitor. 4 [2008] EWHC 917 (QB), [2008] 6 Costs LR 881 at [84]. He expressed no view whether the fees were reasonable because this issue was adjourned for assessment.

2.06 It may also be negligent for a firm or a fully qualified individual to undertake work that calls for particular expertise where the individual defendant or firm has insufficient experience in the relevant field.1 For instance, it may be negligent for a firm to take on the drafting of a deed of trust or settlement if it is unable to give tax advice on the consequences of the deed. In Hurlingham Estates Ltd v Wilde & Partners2 Lightman J held that a solicitor who had ‘next to no knowledge of tax law and was quite unqualified to give tax advice’ was negligent in failing to appreciate the application of s  34 of the Income and Corporation Taxes Act 1988, to advise the client of the potential exposure to a tax charge and to structure a commercial agreement to avoid it. He stated that the test to be derived from the authorities was whether, having regard to the terms of the retainer in all the circumstances which were known or should reasonably have been known by the solicitor, the solicitor should reasonably have appreciated that the client needed his advice and guidance in respect of the tax liabilities to which entry into the transaction would expose him. 1 The 2011 Code required solicitors to ‘have the resources, skills and procedures to carry out your client’s instructions’ (O(1.4)). The SRA Code of Conduct for Individuals 2019 now provides as follows: ‘3.3 You maintain your competence to carry out your role and keep your knowledge and skills up to date. 3.4 You consider and take account of your client’s attributes, needs and circumstances.’ It is suggested that a solicitor ought to advise the client to seek advice elsewhere if his own firm does not have the requisite skills: see para 1.06 (above). 2 [1997] 1 Lloyd’s Rep 525 followed by Arden J  in Estill v Cowling, Swift & Kitchin [2000] Lloyd’s Rep PN 378 at 394, by Sharp J in Withers LLP v Harrison [2010] EWHC 2769 (QB) at [129] and by Arnold J in Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177 at [153] (upheld on appeal at [2012] EWCA Civ 498). In Stanton v Callaghan [2000] QB 75 at 107 the decision was also treated as authority for the proposition that if the solicitor’s scope of work is not defined at the outset of the retainer, it is assumed to include all areas where advice is customarily provided. Stanton was overruled by the Supreme Court on the issue of expert immunity in Jones v Kaney [2011]  UKSC  13, [2011] 2 AC  398 but it is suggested that this formulation remains a useful one. For further discussion on the scope of retainer point see paras 1.07 and 1.17.

2.07 Where the nature of the task requires the services of a qualified solicitor, the standard to be expected of D is that of a practitioner with a reasonable level of experience and knowledge. In Duchess of Argyll v Beuselinck1 Megarry J left 51

2.07  Breach of duty open the question whether the standard of care to be expected of a solicitor is that of the solicitor in general practice or whether a higher standard is required if he or she is an expert in a particular field.2 But it is now clear that the relevant standard is that of a solicitor practising in the area or areas in which D practises or has held himself or herself out has having expertise.3  A  solicitor with a predominantly commercial practice should be judged by the standard of his or her peers whereas a High Street firm whose practice consists, for the most part, of domestic conveyancing and general litigation, should be judged by the standards of an experienced practitioner of that type. In Locke v Camberwell Health Authority4 Morland J  held that a litigation solicitor in a medical negligence case was not required to have the specialised expertise of a partner in a firm specialising in medical negligence work but rather that of a solicitor, engaged in litigation in general practice. But if solicitors hold themselves out as having certain expertise which is greater than that normally to be expected of the reasonably competent solicitor and the retainer requires a solicitor with that expertise, the court will usually require them to demonstrate it.5 This is consistent with the approach adopted by the court to other professions.6 Nevertheless, there may be cases in which it is negligent for a solicitor in general practice to accept instructions without having or obtaining some knowledge of a specialist area sufficient to enable them to give adequate instructions to counsel or to appreciate that counsel’s advice does not cover a key point.7 In Hicks v Russell Jones & Walker8 (where D  was a well-known firm with specific litigation expertise but acting for a legally aided client) Henderson J summarised the law in the following five propositions:9 ‘(1)  H must establish that RJW failed to meet the standard of what a reasonably competent solicitor would do having regard to the standards normally adopted in his profession. (2) RJW should not be judged by the standard of a “particularly meticulous and conscientious practitioner”. Nor are they liable for what may in the result turn out to have been errors of judgment, “unless the error was such as no reasonably well-informed and competent member of that profession could have made”. (3) However, the standard to be applied is in my judgment that of a reasonably competent solicitor with experience in the fields of commercial litigation and insolvency, including the conduct of complex appeals. RJW are a well-known City of London firm, and it would be absurd to judge them by the same standard as a small country firm. (4)  The conduct of RJW must be judged in the light of events as they appeared at the time, and not with the benefit of hindsight.10 (5) H  and S  were legally aided, RJW were bound to act on their behalf as if they were private clients of moderate means.11’   1 [1972] 2 Lloyd’s Rep 172 at 185 col 1.   2 The point was also left open in Martin Boston & Co v Roberts [1996] PNLR 45 at 50E, CA.

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The standard of care  2.07   3 For a helpful summary see Wright v Lewis Silkin LLP [2015] EWHC 1897, [2015] PNLR 718 (Hamblen J) at [110]–[116] (reversed in part but not on this point at [2016] EWCA Civ 1308, [2017]  PNLR  16 and followed in Commodities Research Unit International (Holdings) Ltd v King & Wood Mallesons LLP  [2016]  EWHC  727 (QB), [2016]  PNLR  29 (Dingemans J) at [14]). Paragraph 3.30 of the SRA Code of Conduct for Individuals 2019 also imposes the following conduct obligation which supports this proposition: ‘You maintain your competence to carry out your role and keep your professional knowledge and skills up to date.’   4 [1990] NLJR 205, affd at [1991] 2 Med LR 249. See also Hedrich v Standard Bank London Ltd [2007] EWCA Civ 905 (a wasted costs case) where Ward LJ stated (at [67]): ‘We have to judge negligence by the standards of a solicitor of ordinary competence, the competence, that is, of a typical, reasonably well-informed high street solicitor, just like Mr Zimmer, not the Rolls Royce standards which the big City firms like Jones Day must and do uphold.’  5 See Elcano Acceptance Ltd v Richmond, Richmond, Stambler & Mills (1989) 68  OR  (2d) 165 at 177b where the test applied was the ‘reasonably competent solicitor engaged in commercial practice’; Hurlingham Estates Ltd v Wilde & Partners [1997] Lloyd’s Rep 525 at 529 where Lightman J  applied the test of ‘any reasonably competent solicitor practising in the field of conveyancing or commercial law’; Matrix-Securities Ltd v Theodore Goddard [1998] PNLR 290 where Lloyd J used ‘such skill and care as a reasonably competent solicitor in the relevant sector of the profession’; Balamoan v Holden & Co [1999] All ER (D) 566, CA (in the passage immediately before the one quoted above) Brooke LJ applied ‘the standard of care reasonably to be expected of a reasonably careful litigation solicitor who holds himself out as competent to practise in the field of law in which his client has engaged his services’; Green v Collyer Bristow [1999] Lloyd’s Rep PN 798 (Douglas Brown J) at 809: ‘a reasonably competent practitioner specialising in whatever area of law the Defendant holds himself out as specialising’; Mason v Mills & Reeve [2011]  EWHC  410 (Ch), [2011]  STC  1177 (Arnold J) at [153] (upheld on appeal at [2012] EWCA Civ 498) at [149] and [198] (applying Matrix-Securities): ‘Mills & Reeve are to be judged by the standard of competence of the firms of solicitors with specialist tax departments’; Inventors’ Friend Ltd v Leathes Prior [2011]  EWHC  711 (QB), [2011]  PNLR  20 (Cranston J): ‘an expert in commercial and intellectual property law issues’; Boyle v Thompsons [2012] EWHC 36 (QB) (Coulson J) at [54]: ‘the standard of care to be expected from them was that of the reasonably competent specialist PI firm pursuing a CICA claim’; and in Herrmann v Withers LLP [2012] EWHC 1492 (Ch) at [67] where Newey J had regard to the fact that the defendants ‘are a City of London firm and pride themselves on offering an excellent service to their clients’.  6 See, eg Henderson v Merrett Syndicates [1996] PNLR 32 at 37C (Cresswell J) (accountants and Lloyd’s managing agents); Seymour v Caroline Ockwell & Co [2005] EWHC 1137 (QB), [2005] PNLR 39 (HHJ Havelock-Allen QC) at [91] (financial adviser), Earl of Malmesbury v Strutt & Parker [2007] EWHC 999 (QB), [2007] PNLR 29 (Jack J) at [110] (surveyor) and O’Hare v Coutts & Co [2016] EWHC 2224 (QB) (Kerr J) at [201] (private banker).  7 See Estill v Cowling, Swift & Kitchin [2000] Lloyd’s Rep PN  378 in which D’s practice consisted of ‘acting for private clients in mainly conveyancing and probate matters. He had been in practice for over 40 years.’ Arden J held that he was negligent in failing to appreciate that C would be exposed to an IHT liability by transferring shares in to a discretionary trust rather than adopting another alternative. She stated (at [85]): ‘To carry out what he had undertaken to do, a reasonably competent solicitor would in my view have taken steps to give himself some general knowledge of the subject. In other words, as respects the tax considerations, he would have read some general outline of the tax implications of setting up a trust, and (having discovered IHT applied to all transfers of value subject to exemption) looked to see what exemptions were available. The point was not some obscure point of tax law.’   8 [2007] EWHC 940 (Ch) at [138]. The decision was followed by Sharp J in Berry v Laytons [2009] EWHC 1591 (QB) at [55] and in Herrmann v Withers LLP [2012] EWHC 1492 (Ch), [2012] PNLR 28 at [67] (Newey J).   9 Individual citations and additional commentary has been removed. 10 The passage from Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 at 185 is quoted in para 2.29, below. 11 For legally-aided clients Henderson J added the further limitations set out below.

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2.08  Breach of duty

(b)  Level of fees 2.08 It has been suggested from time to time that if a solicitor charges a low level of fees, eg, to carry out a basic conveyancing service, the standard of care which the law should impose on him or her should be commensurately lower.1 In Johnson v Bingley, Dyson & Furey2 expert evidence was admitted to show that in ‘cut price conveyancing’ a solicitor would not necessarily communicate with his or her client in person. The judge found that this practice did not affect the standard of care to be expected of a solicitor. In Inventors’ Friend Ltd v Leathes Prior3 Cranston J also held that a solicitor’s agreement to give advice in relation to two agreements for the licence and distribution of a new invention for a fixed fee of £500 did not limit the standard of care which he was expected to achieve or the advice which he was expected to provide. He held that the solicitor ought to have revised his fee estimate on receipt of the two drafts. He also held that where solicitors undertake work at a specific fee they are generally speaking obliged to complete the work to the ordinary standard of care even if it was no longer remunerative. It followed that the solicitor was required to do everything that a solicitor in his position should reasonably have done to ensure that the client’s interests were properly protected despite the fee.4 However, there is nothing to prevent a solicitor from undertaking a limited retainer for a limited fee provided that the scope of the retainer is clearly expressed and confirmed in writing.5 1 See Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 at 183 col 1. No comment was made on this issue in Boston v Roberts [1996] PNLR 45, CA. 2 [1997] PNLR 392 at 406G–407C (Mr Benet Hytner QC). 3 [2011] EWHC 711 (QB), [2011] PNLR 20. 4 See [76]. Johnson v Bingley, Dyson & Furey was not cited to the court (or not directly). But Cranston J’s decision is consistent with the earlier decision. 5 See Minkin v Landsberg [2015]  EWCA  Civ 1152, [2016] 1  WLR  1489 at [39] discussed in para 1.07. In Hicks v Russell Jones & Walker [2007] EWHC 940 (Ch) (upheld at [2008] EWCA Civ 340) at [138], proposition (5) set out in para 2.7 (above) Henderson J stated that it was an express (or alternatively an implied) term of the retainer that a solicitor remunerated by legal aid would not be required to carry out any work for which legal aid was not available.

(c)  Knowledge of the law 2.09

According to Bingham LJ in Eckersley v Binnie:1

‘[A] professional man should command the corpus of knowledge which forms part of the professional equipment of the ordinary member of his profession. He should not lag behind other ordinary assiduous and intelligent members of his profession in knowledge of new advances, discoveries and developments in his field. He should have an awareness as an ordinarily competent practitioner would of the deficiencies in his knowledge and the limitations on his skill. He should be alert to the hazards and risks inherent in any professional task 54

The standard of care  2.09 he undertakes to the extent that other ordinarily competent members of the profession would be alert. He must bring to any professional task he undertakes no less expertise, skill and care than other ordinarily competent members of his profession would bring, but need bring no more. The law does not require of a professional man that he be a paragon, combining the qualities of polymath and prophet.’ There are, however, some basic principles or rules of law which a reasonable solicitor can be expected either to know or to understand in sufficient detail or with sufficient familiarity that they know to check them before giving advice or drafting a document. This view was well expressed in the Canadian decision Central Trust Co v Rafuse2 where it was stated that: ‘[A] solicitor must have sufficient knowledge of the fundamental issues or principles of law applicable to the particular work he has undertaken to enable him to perceive the need to ascertain the law on the relevant points.’ Because D should have realised when it was necessary to research a point or take counsel’s advice it will rarely be a defence that he or she failed to identify a point of law.3 But where D identifies the point but fails to reach the right answer after adequate consideration, the court is far less likely to find negligence.4 1 (1988) 18 Con LR 1 at 79, [1955–95] PNLR 348 at [17]–[34], CA (cited most recently by Males J in Golden Belt 1 Sukuk Company BSC(c) v BNP Paribas [2017] EWHC 3182 (Comm) at [211]). See also Henderson v Merrett Syndicates [1996] PNLR 32 (managing agent) at 35 (Cresswell J); Barings plc v Coopers & Lybrand [2003] EWHC 1319 (Ch), [2003] PNLR 34 (Evans-Lombe J) (accountant) at [578], [579]: ‘BFS’ contention on this issue would require Mr Mah to be a prophet rather than ordinarily competent’; Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9 at [37] (Sir Peter Gibson): ‘It is important to bear in mind the limits of what would be expected of a solicitor. A solicitor is not bound to know all the law. His duty is merely to exercise that reasonable degree of care and skill to be expected of competent and reasonably experienced solicitors’; and Williams v Leatherdale [2008] EWHC 2574 (QB) where Field J  held that an experienced ancillary relief solicitor was not expected to give advice on the effect of a pending appeal to the House of Lords. In that case, however, the solicitors had instructed counsel and counsel was held to have discharged his duty to the client. 2 (1986) 31 DLR (4th) 481 at 524. This dictum was cited with approval by Warren J in Youlton v Charles Russell [2010] EWHC 1032 (Ch), [2010] Lloyds Rep PN 227 at [308] where he stated: ‘I  dare say that there are highly competent commercial solicitors who although they have awareness of the existence of the Law Reform (Miscellaneous Provisions) Act 1989 really have no idea what it says. But if such a solicitor chooses to involve himself in a property transaction, he must improve his state of knowledge and understanding.’ He also stated (at [295]): ‘Any competent corporate lawyer would have been aware of the terms of s 317 and art 85, would have ascertained whether art  85 (or some other similar Article adopted in its place) applied, and would have known that, absent a declaration and disclosure in accordance with those provisions, the protection afforded by art 85 would not be available in relation to any particular transaction.’ 3 See Melbourne Mortgages Ltd v Turtle [2004]  NIQB  82 (where Deeny J  held that a firm of solicitors advising a lender in relation to the form of a consumer credit agreement were negligent for failing to appreciate that a recent Court of Appeal decision had rendered it unenforceable). 4 See Ridehalgh v Horsefield [1994] Ch  205 at 244B–F, CA and Herrmann v Withers LLP [2012] EWHC 1492 (Ch), [2012] PNLR 28 (Newey J) at [68].

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2.10  Breach of duty

(d)  Reliance on counsel’s advice 2.10 In general, it is a good answer to a claim for negligence that D relied upon the advice of counsel. In Locke v Camberwell Health Authority1 the Court of Appeal laid down the following principles: ‘(1) In general, a solicitor is entitled to rely upon the advice of counsel properly instructed. (2)  For a solicitor without specialist experience in a particular field to rely on counsel’s advice is to make normal and proper use of the Bar. (3)  However, he must not do so blindly, but must exercise his own independent judgment. If he reasonably thinks counsel’s advice is obviously or glaringly wrong, it is his duty to reject it.’ In Ridehalgh v Horsefield2 the Court of Appeal qualified the guidance which it had set out in Locke by adding a fourth proposition: ‘A solicitor does not abdicate his professional responsibility when he seeks the advice of counsel. He must apply his mind to the advice received. But the more specialist the nature of the advice, the more reasonable it is likely to be for a solicitor to accept it and act on it.’ There are a number of reported decisions in which these propositions have been applied. In a number of cases solicitors have been found liable where the issue was within their competence and the advice of counsel was obviously wrong3 or the solicitor failed to give adequate instructions to counsel4 or failed to clarify counsel’s advice in cases of doubt.5 Nevertheless, there are a substantial number of cases in which the defence has succeeded.6 In MatrixSecurities Ltd v Theodore Goddard,7 for example, C brought an action against both solicitors and counsel for failure to obtain a tax clearance which was itself the subject of proceedings. Lloyd J held that it is only a solicitor’s duty to differ from counsel’s advice and either give separate advice or to record reservations separately to the client if there was an important point on which the solicitor regarded that advice as being seriously wrong.8 In Bamrah v Gempride Ltd9 the Court of Appeal applied the same principles to reliance upon a costs draftsman. 1 [1991] 2 Med LR 249 at 254. For a recent statement of the principle see Dunhill v Brooke & Co [2018] EWCA Civ 505 at [49] (Sir Brian Leveson P): ‘Further, a solicitor is not liable in negligence if he acts reasonably on the advice of appropriate counsel who has been properly instructed. But a solicitor must not be passive, and must exercise his own independent judgment of the case before him. If he considers that counsel’s advice is ‘obviously and glaringly wrong’ it is his duty to speak up.’ 2 [1994] Ch 205 at 237G. For a further summary of the principles based on Locke and Ridehalgh (which Sir Peter Gibson described as ‘impeccable’): see Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9 at [26] and [34]. Locke was applied by the Court of Appeal in Langsam v Beachcroft LLP [2012] EWCA Civ 1230 at [85] (Arden LJ). 3 See Davy-Chiesman v Davy-Chiesman [1984] Fam 48, CA (solicitor held negligent for failure to advise that litigation was doomed to fail despite counsel’s advice); Green v Collyer Bristow [1999] Lloyds Rep PN 798 (Douglas Brown J) (failure by solicitor and counsel to realise that

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The standard of care  2.11 contract for the sale of land was void under s 2 of the Law of Property (Miscellaneous Provisions) Act 1989); Green v Hancocks [2000] Lloyd’s Rep PN  813 (Ferris J) (failure by solicitor to appreciate that the cause of action had vested in the claimant’s trustee in bankruptcy was held to be ‘something which should be within the competence of an ordinary high street solicitor’ where counsel had failed to address the point); Bond v Livingstone & Co [2001] PNLR 30 (counsel’s advice on limitation in a personal injury claim was obviously wrong); Isaac Partnership v Umm Al-Jawaby Oil Service Co Ltd [2003]  EWHC  2539 (QB), [2004]  PNLR  9 at [44] (solicitors liable for wasted costs for bringing proceedings when they should have known that there was no contract between the parties). 4 See Estill v Cowling, Swift & Kitchen [2000] Lloyd’s Rep PN  378 (Arden J) (solicitor held liable for failure to give counsel adequate instructions or to appreciate that he had failed to advise on IHT, counsel also liable) and Hickman v Blake Lapthorn [2005] EWHC 2714 (QB), [2006] PNLR 20 (Jack J) at [51] (solicitor failing to raise the possibility that rehabilitation might not work in a personal injury claim). 5 See D Morgan plc v Mace & Jones [2010] EWHC 3375 (TCC) (Coulson J) at [348] to [355] (solicitor failing to clarify counsel’s written advice which was inconsistent with written advice provided six years earlier). 6 See Reaveley v Safeway Stores plc [1998]  PNLR  526, CA (solicitor held not liable for rejecting Calderbank offer on the advice of counsel); FirstCity Insurance Group Ltd v Orchard [2003] PNLR 9 (solicitor held not liable for relying on leading counsel in relation to presentation of a case and counsel not liable either); Luke v Wansbroughs [2003]  EWHC  3151 (QB), [2005] PNLR 2 (Davis J) (advice of solicitors and counsel to settle was reasonable); Foster v Alfred Truman [2003] EWHC 95 (QB) (solicitor held not liable for failure to check additional documents to verify counsel’s opinion); Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9 (solicitors held not liable for relying on counsel’s advice in relation to the rule against reflective loss and for failing to instruct counsel to advise on whether to join a company to a counterclaim before the limitation period for the claim expired); McFadden v Platford [2009]  EWHC  121 (TCC) (HHJ  Toulmin QC) (solicitor instructed counsel with reasonable care and entitled to rely on counsel’s advice in relation to an application for an adjournment of a trial on the grounds that the client lacked mental capacity); West Wallasey Car Hire Ltd v Berksons [2009] EWHC 3454 (QB), [2010] PNLR 14 (HHJ Simon Brown QC) (solicitor not liable for relying on counsel’s advice to reject settlement at the court door); and Langsam v Beachcroft LLP [2012] EWCA Civ 1230 (specialist litigation solicitor not liable for deferring to leading counsel on settlement in a complex piece of litigation where the advice was not obviously or glaringly wrong). In D Morgan plc v Mace & Jones [2010] EWHC 3375 (TCC) (above) at [324] Coulson J stated: ‘Save to note that, in very general terms, the more specialised the area of practice under review, the greater the prospect of such a defence being successful, it is impossible to discern any real pattern in those cases: they turned on their own facts.’ 7 [1998] PNLR 290. 8 At 323A–B. 9 [2018] EWCA Civ 1367, [2019] 1 WLR 1545 at [25] (Hickinbottom LJ): ‘Finally, Ridehalgh confirmed that a solicitor does not abdicate his professional responsibility when he delegates or subcontracts work that he is retained to do, even when he seeks advice from another legal representative such as counsel (at p 237G, endorsing guidance in Locke v Camberwell District Health Authority [1991] 2 Med LR  249).’ For detailed discussion of the case in relation to wasted costs: see Chapter 13, paras 13.11 and 13.92, below.

(e)  Failure to obtain counsel’s advice 2.11 In Ridehalgh v Horsefield1 the appellant solicitors acted in both the preparation and advocacy of a case which took two days in the county court but proceeded on the wrong basis. The resulting confusion generated a number of further hearings and appeals. Sir Thomas Bingham MR stated: 57

2.12  Breach of duty ‘The solicitors do not appear to have approached the case in a careless way. There is nothing to contradict their statements that the textbooks they consulted did not give a clear answer to their problem. They could not be expected to bring the expertise of specialist counsel to the case. Nor could they reasonably be expected to be remunerated for prolonged research. We do not think their error was one which no reasonably competent solicitor in general practice could have made.’ This dictum offers some support for the converse proposition that a solicitor is not always obliged to consult counsel on points of law, even where the answer to the question is not straightforward. But the case in question was a possession action in the county court which a solicitor in general practice would usually be able to conduct without any specialist advocacy training or a wide experience. It will not take much, however, for a solicitor to come under a duty to offer his client the opportunity of instructing counsel. In Balamoan v Holden & Co,2 for example, the claimant was advised that his claim was worth only £3,000 and when he refused to accept this advice his legal aid certificate was discharged. However, acting in person he accepted an offer of £25,000 plus costs in settlement of his claim. His former solicitors were held liable for failing to seek counsel’s advice or taking the necessary steps themselves.3 Further examples of cases concerned with counsel’s advice are considered in Chapters 12 and 13. 1 [1994] Ch 205 at 244C, CA. 2 [1999] All ER (D) 566. 3 The claim was remitted to the county court for re-hearing. Brooke LJ stated: ‘I am nevertheless of the clear opinion that between January 1989 and May 1991 the defendants failed in the duty of care they owed to Mr Balamoan to take such steps as were reasonable to ensure either that they took him to see counsel promptly (so that counsel could advise on what evidence should be gathered before the trail went cold) or that they gathered such evidence competently of their own initiative, and that he suffered as a consequence of this breach of duty.’

3  The relevance of professional standards and practice (a)  Professional standards 2.12 For cases which involve conduct prior to 1 July 2007 the benchmark of the solicitors’ profession is the Solicitors Practice Rules 1990 which were amended and updated from time to time and published in the Guide to the Professional Conduct of Solicitors (the last full edition of which was published in 1999). For cases which involve conduct between 1 July 2007 and 5 October 2011 the benchmark was the Solicitors’ Code of Conduct 2007. Since 6 October 2011 the profession has been regulated by the SRA Code of Conduct 2011 and the SRA Handbook 2011 and since 25 November 2019 the SRA Standards and Regulations 2019 now regulate the profession.1 Although a failure to comply with these regulations may in extreme cases render the contract of retainer between the client and solicitor void for illegality on public policy grounds2 not every breach automatically renders the retainer unenforceable and not every breach of the rules or guidance promulgated by the Law Society amounts to a breach 58

The standard of care  2.13 of either the Practice Rules or the Code of Conduct.4 The test for professional misconduct applied by the Solicitors Disciplinary Tribunal in deciding on the appropriate sanction against a solicitor who has committed breaches of the relevant rules of professional conduct is not the standard of reasonable care.5 1 See Chapter 15, paras 15.10 to 15.13, below. 2 See Awwad v Geraghty [2001] QB 570 (confidential fee agreement in contravention of r 8 of the Solicitors Practice Rules 1990) and Westlaw Services Ltd v Boddy [2010] EWCA Civ 929 (fee sharing agreement in breach of rr 3 and 7 of the Solicitors Practice Rules 1990). In Baranowski v Rice [2014] NIQB 122 D’s solicitors and his insurer had entered into an unenforceable CFA and the court followed Awwad v Geraghty & Co and held that no order for costs should have been made (except for counsel’s fees). In PH Law v Brown (t/a Integrum Law) [2018] EWCA Civ 1629, [2018] 4 Costs LR  823 the Court of Appeal declined to investigate whether the old common law rule as to the unlawfulness of CFAs (derived from Awwad v Geraghty & Co) survived or whether it is now more appropriate to categorise non-compliant CFAs as simply unenforceable: see [48]. For further discussion see Chapter 15, para 15.30, below. 4 See Garbutt v Edwards [2005] EWCA Civ 1206, [2006] 1 WLR 2907 at [37] where Arden LJ held that a failure to comply with the Introductions and Referrals Code did not automatically amount to a breach of r 15 of the Solicitors Practice Rules 1990 or render the retainer unenforceable unless it was sufficiently serious. In Westlaw (above) Etherton LJ drew a distinction between ‘incidental breaches’ of the practice rules and a contract which was contrary to ‘the very matters expressly prohibited by r 7(1)’: see [37]. There was no equivalent to the code in the SRA Code of Conduct 2011. In Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch), [2009] 1 WLR 881 Morgan J considered Garbutt v Edwards and followed the same approach to cost estimates under the CPR: see [90]–[92] and para 15.27, below. The SRA Transparency Rules 2019 now require individuals and firms to publish costs information on their websites which ought to prevent the kind of issue in these cases arising. 5 For legal issues arising out of professional misconduct proceedings see Chapter 16, section C, below.

2.13 In Chapter 15 we consider the extent to which conduct rules are relevant to claims for negligence.1 Although those rules provide an obvious starting point for establishing what conduct would be regarded as acceptable by a responsible body of the profession, not every breach of the SRA Standards and Regulations (or before them any failure to comply with the Code of Conduct or the guidance notes or Indicative Behaviours) should be treated as a breach of contract or negligence or give rise to a claim for damages. It is also necessary to approach the way in which this issue has been addressed in some of the cases with a little caution. For example, in Hilton v Barker Booth & Eastwood2 the House of Lords held that the claimant was entitled to recover substantial damages on the basis that Practice Rule 6 was a contractual term of the retainer between solicitor and client. However, Hilton should not be treated as authority for the proposition that it is an implied term of the retainer that a solicitor should comply with the Practice Rules or the relevant Code of Conduct in force. The point was effectively conceded and conflict rules probably fall into a special category.3 The Solicitors’ Disciplinary Tribunal exercises a disciplinary function and professional misconduct does not have the same boundaries as a private action for negligence.4 1 See section C, paras 15.22 to 15.32, below. 2 [2005] UKHL 8, [2005] 1 WLR 567

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2.14  Breach of duty 3 See [30] (Lord Walker): ‘On this issue of liability both sides have been content for the case to be dealt with as a claim for breach of contract. However, the content of BBE’s contractual duty, so far as relevant to this case, has roots in the parties’ relationship of trust and confidence.’ See also Ratiu v Conway [2005] EWCA Civ 1302, [2006] 1 All ER 570 at [73] (Auld LJ): ‘Where there is a contractual retainer and where it provides expressly or by implication obligations of a fiduciary nature, such obligations must clearly prevail, or “mould” or “inform” the fiduciary nature of the contractual relationship.’ 4 For an analogy with the financial services regulatory regimes see Winnetka Trading Corporation v Julius Baer International Ltd, Bank Julius Baer & Co Ltd [2011]  EWHC  2030 (Ch) [2012] 1 BCLC 588 at [91] and [92] where Roth J cited Seymour v Caroline Ockwell [2005] EWHC 1137, [2005] PNLR 39 (HHJ Havelock-Allan QC) and continued: ‘However, it is clear from these and other authorities that the starting point is the contract. Here, there was no duty to warn in either the Banking Mandate or in the Investment Mandate as regards investments selected by the client.’

2.14 Even if it is not a term of the retainer that a solicitor must comply with current professional standards, however, a serious failure to do so will carry substantial evidential weight in determining whether a solicitor has been negligent. Three authorities illustrate this point. In Omega Trust Co Ltd v Wright Son & Pepper (No 2)1 the judge stated that the Guide was the ‘starting point’ in considering whether the defendants had been negligent. In Mortgage Express Ltd v Bowerman2 Sir Thomas Bingham MR relied upon Annex 24L of the Guide to the Professional Conduct of Solicitors (which was then in force) in rejecting the submission that a solicitor owed no duty to pass on certain information3 and in Patel v Daybells4 (which is considered in more detail immediately below) the Court of Appeal placed some weight on Annex 24N of the Guide in reaching the conclusion that the practice of the profession in accepting undertakings was logically defensible. In some cases, the court has had regard to views published the Law Society.5 But in Nationwide Building Society v Davisons Solicitors6 Sir Andrew Morritt C refused the application of the Law Society to intervene on the construction of the CML Handbook. He gave a number of reasons but, in particular, that the effect of the Code of Completion by Post was a matter for the court and the Law Society’s subjective intention was not admissible. 1 [1998] PNLR 337 at 347D–E (Douglas Brown J). The decision of the Court of Appeal striking out the valuer’s claim shortly before trial is considered in para 1.30, above. See also Johnson v Bingley, Dyson & Furey [1997] PNLR 392 (Benet Hytner QC) at 407E–G considered in more detail in para 2.29 (where a failure to comply was held to give rise to a prima facie case which could be rebutted by demonstrating that the guidance did not apply in the instant case) and Kenyon-Brown v Banks & Co (5 June 1998, unreported) (Peter Leaver QC). 2 [1996] 2 All ER 836 at 842a–d. 3 For a further example see also Nash v Phillips (1974) 232 Estates Gazette 1219 (Foster J) at 1222 col 2. 4 [2001] EWCA Civ 1229, [2002] PNLR 6, at [55] and [67] (Robert Walker LJ). 5 See the quotation from Millett LJ’s judgment in Bown v Gould & Swayne set out in para 2.15 (below). In Edward Wong (below) the Privy Council was heavily influenced by a report of a subcommittee of the Hong Kong Law Society which was critical of Hong Kong style completions: see 306F–307G. In G & K Ladenbau v Crawley & De Reya [1978] 1 WLR 266 Mocatta J relied upon a warning in the Law Society’s Gazette: see 278H–279D. In Sharratt v London Central Bus Co Ltd [2003] EWCA Civ 718, [2003] 4 All ER 590 (a case on costs) at [185] the Court of Appeal relied on the written opinion of the Law Society. 6 [2012] EWCA Civ 1626, [2013] PNLR 12 at [60] and [61]. Note, however, that in P&P Property Ltd v Owen White & Caitlin LLP  [2018]  EWCA  Civ 1082, [2019] Ch  273 the Law Society provided written submissions: see 279C.

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The standard of care  2.15

(b)  Professional practice 2.15 By contrast, however, there are virtually no reported examples of cases in which the court’s decision has turned on the practice adopted by a body of the profession, as expressed by an expert solicitor.1 Many cases involve specific transactions where the point is usually whether the drafting was adequate or whether specific advice should have been given.2 In other cases the standard practitioner’s textbooks will provide the court with the same assistance that any expert would have done. In Bown v Gould & Swayne3 (where one party sought to adduce evidence of conveyancing practice) Millett LJ gave the following explanation: ‘Two hundred and fifty years later the practice of investigating title has settled down sufficiently to be well established and recorded in the textbooks. If it is necessary to assist the judge to understand the proper machinery for the deduction and investigation of title, the proper way to do it is to cite the textbooks such as Emmett, Farrand, Williams and Dart, if necessary supplemented by Law Society opinions. In fact, this is a straightforward case in which I doubt that even such references would be necessary.’4 Where there is no textbook guidance it may be appropriate to adduce expert evidence if the issue is genuinely one of standard practice.5 Although a solicitor is unlikely to be found negligent where he or she has followed the standard textbook guidance, the court is not bound to accept that the guidance is reasonable.6 1 For the question whether evidence of this kind is admissible see section 4 (below).The only reported modern example of the question of liability turning on a professional practice is Esterhuizen v Allied Dunbar Assurance plc [1998] 2 FLR 668 (where Longmore J held that a lay will-writer was negligent in relying on a practice adopted by solicitors). In Patel v Daybells [2001]  EWCA  Civ 1229, [2002]  PNLR  6 the court heard evidence from one expert on the relevant practice but the principal issue for the court was whether it was logically defensible. In Societe Internationale de Telecommunications Aeronautiques SC  v Wyatt Co (UK) Ltd [2002] All ER (D) 122 (Park J) at [61] the judge recorded that he had heard expert evidence and found it helpful but that his conclusions represented an overall assessment of the case. In Burmeister v O’Brien [2009] NZHC 2154 the court admitted evidence of professional practice in relation to completing the details of a transfer which had been signed by third parties (and whether the solicitor should check the signature). However, the existence of such a practice did not give rise to a duty of care: see [223] to [226]. 2 See Tain Investments Ltd v Loxleys [2004] EWHC 2708 (Ch) Blackburne J refused to admit expert evidence on whether it was usual conveyancing practice to agree to a chain of positive covenants. The issue as to whether the inclusion of a particular clause was something which D ought to have brought to C’s attention: see [10]. 3 [1996] PNLR 130, CA at 137A. 4 For an example see Prestige Properties Ltd v Scottish Provident Institution [2002] EWHC 330 (Ch), [2003] Ch 1 at [46] and [51] where Lightman J relied on relevant editions of Silverman The Law Society’s Conveyancing Handbook and Ruoff & Roper’s Law and Practice of Registered Conveyancing. The decision was followed by Jeremy Cousins QC in Walker v Burton [2012] EWHC 978 (Ch) at [68], [78], and [96] (affirmed on appeal at [2013] EWCA Civ 1228, [2013] 2  EGLR  129). For a further example see Kandola v Mirza Solicitors LLP [2015] EWHC 460 (Ch), [2015] PNLR 19 at [45] where HHJ Cooke also relied on the Conveyancing Handbook.

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2.16  Breach of duty 5 See May v Woollcombe Beer & Watts [1999] PNLR 283 (HHJ Jack QC) at pp 284–285. 6 See Cottingham v Attey, Bower & Jones [2000] PNLR 557 in which Rimer J was not prepared to accept the standard form enquiry which the Conveyancing Handbook recommended.

2.16 In those rare cases where it is argued that the routine practice or procedure adopted by an individual solicitor is negligent, it ought to be relevant to that issue whether that same practice is also adopted by a substantial body of the profession. Despite the absence of concrete examples from the authorities, we consider that where solicitors adopt a practice that is also adopted by a substantial body of their profession, there should be no finding of negligence unless the practice cannot be defended on a logical basis.1 In Edward Wong Ltd v Johnson, Stokes & Master2 the Privy Council held that a purchaser’s solicitor in Hong Kong who paid the purchase price directly to the vendor’s solicitor against an undertaking to provide documents of title was negligent when the vendor’s solicitor absconded with the money even though this practice was commonly followed in Hong Kong. Lord Brightman stated in delivering the judgment of the Board:3 ‘As already indicated, the prevalence of the Hong Kong style of completion is established beyond a peradventure. It is particularly well adapted to the conditions in Hong Kong. It has obvious advantages to both solicitors and their clients. Their Lordships intend to say nothing to discourage its continuance. However, in assessing whether the respondents fell short of the standard of care which they owed towards the appellants, three questions must be considered: first, does the practice, as operated by the respondents involve a foreseeable risk? If so, could that risk have been avoided? If so, were the respondents negligent in failing to take avoiding action?’ Having answered the first two questions affirmatively, Lord Brightman then said this:4 ‘The risk inherent in the Hong Kong style of completion as operated in the instant case being foreseeable, and readily avoidable, there can only be an affirmative answer to the third question, whether the respondents were negligent in not foreseeing and avoiding that risk. Their Lordships wish to add that they do not themselves attach blame to Miss Leung for the calamity which occurred. In entrusting the vendor’s solicitor Mr Danny Liu with the whole of the money she was merely following the normal practice of her firm, and she had never been instructed to act otherwise in such a case or to take any special precautions.’ If therefore a practice is inherently negligent because it involves a risk to the client which is both reasonably foreseeable and easily avoidable, it is no defence for the defendant to rely upon the fact that it has been adopted either by a substantial body of his profession or, indeed, by the whole profession. 1 This is sometimes described as the irrationality exception or the rejection of universal practices. For this term see King v Western Sydney Health Network [2011] NSWSC 1025 at [109]. For an

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The standard of care  2.17 early example see the T J Hooper 60 F 2d 737 (2nd cir 1932) at 740 where Learned Hand J held that it was unreasonable for tugs not carrying radio sets. 2 [1984] AC 296. For the position in other jurisdictions see: Fong Maun Yee v Yoong Weng Ho Robert [1997] LRC 138 (Singapore Court of Appeal), ACC Bank plc v Johnston [2010] IEHC 236 (Irish High Court) and Weller v Phipps [2010] NSWCA 323 (where the Australian authorities are set out at [68]–[74]). 3 [1984] AC 296 at 306E–F. 4 [1984] AC 296 at 308G–309A.

2.17 In Patel v Daybells1 the Court of Appeal had to decide the same question in relation to the practice of accepting undertakings on completion in England some 20 years later. In that case the vendor’s solicitor gave an undertaking to discharge the existing charge over the property and to provide a Form 53 (which is no longer in use) evidencing the discharge of the charge. Under normal conveyancing practice at the time the purchaser’s solicitors would then have submitted it to the Land Registry with their application to be registered and it would have been discharged and the purchaser registered as the proprietor of the property. However, the vendor was unable to discharge the existing charge, the new lender repossessed the property and it was sold at a loss. The purchaser commenced proceedings against his solicitors. The claimant invited the Court of Appeal to follow Wong and argued that the Law Society’s Code for Completion by Post2 and the practice of completing on undertakings was not a reasonable one. The Court of Appeal accepted the general principle that to provide a defence the practice of accepting undertakings had to be logically defensible3 but unlike the Privy Council in Wong concluded that it was. Their reasons for doing so were that the alternative (initially put forward in Wong) would have significant disadvantages. It would involve additional costs and, possibly, delay and would involve a new risk.4 The extent to which Patel v Daybells provides general guidance and the question whether a solicitor may always complete in reliance on undertakings are examined in Chapter 9. What is of note in the general context is that the Court of Appeal accepted that there was a risk of loss to the purchaser and that it was foreseeable but nevertheless concluded that a solicitor was entitled to adopt it. 1 [2001] EWCA Civ 1229, [2002] PNLR 6. 2 The judge did not accept that the code had been adopted although this made no difference to the central issue (because the parties had completed on the basis of undertakings as the code provided): see [20]–[23] and [48]. 3 See [41] (Robert Walker LJ): ‘We would unhesitatingly accept the general principle in Wong, as restated in the context of clinical negligence in Bolitho, that conformity to a common (or even universal) professional practice is not an automatic defence against liability; the practice must be demonstrably reasonable and responsible if it is to give protection.’ 4 See [64] (Robert Walker LJ): ‘If a purchaser’s solicitor felt himself obliged to address direct inquiries to the mortgagee, and to insist on answers to them, it might be argued that the purchaser had been relying on those rather than on the vendor’s solicitor’s undertaking. If doubt were cast on the purchaser’s reliance on an unconditional undertaking then the cure might be worse than the disease.’

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2.18  Breach of duty

4  The admissibility of expert evidence 2.18 Since the first edition of this book it has become conventional not to adduce expert evidence about the standard of care in solicitors’ negligence cases.1 Moreover, a number of the evidential issues discussed in earlier editions of this book are no longer relevant because changes in practice and active case management have simplified the court’s approach to expert evidence.2 1 For a comment to this effect in a case where the judge might have been assisted by expert evidence see Agouman v Leigh Day [2016]  EWHC  1324 (QB), [2016]  PNLR  32 (Andrew Smith J) at [45]. Contrast the position in other professions where it is usual for a court to require expert evidence as to the standards ordinarily observed within a profession before it will find that a professional’s conduct amounts to negligence. For an example (citing a number of earlier authorities) see Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB) (HHJ Keyser QC) (insurance brokers). 2 For detailed discussion of the earlier cases see the third edition at paras 2.21–2.27. For a short and useful summary of the current position see De Sena v Notaro [2020] EWHC 1031 (Ch) (HHJ Paul Matthews) at [150] and [151]. For their application (which resulted in the court disallowing the expert accountancy evidence of both sides on the demerger of companies) see [152]–[163]. For a longer discussion see Devon Commercial Property Ltd v Barnett [2019] EWHC 700 (Ch) where HHJ Paul Matthews again disallowed expert evidence, this time on the duties of an LPA receiver: see [111]–[140]. In both cases the parties had been permitted to adduce the expert evidence and so the evidence was not excluded as a matter of case management.

(a)  CPR Part 35 2.19 CPR r 35.11 provides that expert evidence shall be restricted to that which is reasonably required to resolve the proceedings and CPR r 35.4 sets out the specific powers of the Court to restrict expert evidence: ‘(1) No party may call an expert or put in evidence an expert’s report without the court’s permission. (2) When a party applies for permission under this rule he must identify— (a) the field in which he wishes to rely on expert evidence; and (b) where practicable the expert in that field on whose evidence he wishes to rely. (3) If permission is granted under this rule it shall be in relation only to the expert named or the field identified under paragraph  (2) … (4) The court may limit the amount of the expert’s fees and expenses that the party who wishes to rely on the expert may recover from any other party.’ In deciding whether to permit a party to call an expert witness the court must determine (i) whether the evidence is admissible and (ii) whether it is reasonably required to resolve the proceedings. Expert evidence is only admissible if it forms part of a body of expertise governed by recognised standards and rules of conduct which are relevant to the question which the court must decide.2 Evidence is reasonably required if the subject matter is such that a person would not be able to form a sound judgment on the matter without the specialist knowledge and experience.3 The burden of proving both limbs of the test is on the party seeking to admit the evidence.4 1 For a useful single source for the test together with a summary of the principal authorities see Re RBS (Rights Issue Litigation) [2015] EWHC 3433 (Ch) (Hildyard J) at [10]–[20] (applied by

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The standard of care  2.20 Asplin J in Dudding v Royal Bank of Scotland Plc [2017] EWHC 2207 (Ch)). For the function of CPR r 35.1 see also JP Morgan Chase Bank v Springwell Navigation Corpn [2006] EWHC 2755 (Comm), [2007] 1 All ER (Comm) 549 (Aikens J) at [23] ‘There is a tendency to think that a judge will be assisted by expert evidence in any area of fact that appears to be outside the “normal” experience of a Commercial Court judge. The result is that, all too often, the judge is submerged in expert reports which are long, complicated and which stray far outside the particular issue that may be relevant to the case. Production of such expert reports is expensive, time-consuming and may ultimately be counter-productive. That is precisely why CPR Pt 35.1 exists. In my view it is the duty of parties, particularly those involved in large scale commercial litigation, to ensure that they adhere to both the letter and spirit of that rule. And it is the duty of the court, even if only for its own protection, to reject firmly all expert evidence that is not reasonably required to resolve the proceedings.’ 2 See Barings Plc (In Liquidation) v Coopers & Lybrand (No.2) [2001] PNLR 22 (Evans-Lombe J) at [45]. 3 R v Bonython [1984] SASR 45 at 46 (cited by Evans-Lombe J (above) in Barings at [35] and applied by Aikens J in JP Morgan Chase Bank v Springwell Navigation Corp (above) and by Patten J in Clarke v Marlborough Fine Art (London) Ltd (No 3) [2002] 2 All ER (D) 105). 4 See Springwell (above) at [19] and Clarke (above) at [5].

2.20 In deciding whether expert evidence is reasonably required to resolve the proceedings there is a sliding scale between essential evidence and useful evidence. In British Airways Plc v Spencer1 Warren J proposed the following three stage test: ‘(a)  The first question is whether, looking at each issue, it is necessary for there to be expert evidence before that issue can be resolved. If it is necessary, rather than merely helpful, it seems to me that it must be admitted. (b)  If the evidence is not necessary, the second question is whether it would be of assistance to the court in resolving that issue. If it would be of assistance, but not necessary, then the court would be able to determine the issue without it … (c) Since, under the scenario in (b) above, the court will be able to resolve the issue without the evidence, the third question is whether, in the context of the proceedings as a whole, expert evidence on that issue is reasonably required to resolve the proceedings. In that case, the sort of questions I have identified in paragraph 63 above will fall to be taken into account. In addition, in the present case, there is the complication that a particular piece of expert evidence may go to more than one pleaded issue, or evidence necessary for one issue may need only slight expansion to cover another issue where it would be of assistance but not necessary.’ The sort of factors which he had identified earlier2 included the value of the claim, the effect of a judgment either way on the parties, who would pay for the commissioning of the evidence on each side and the delay (if any) which the production of such evidence would entail (particularly delay which might result in the vacating of a trial date). 1 [2015] EWHC 2477 (Ch), [2015] Pens LR 519 at [68]. 2 At [63].

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2.21  Breach of duty

(b)  Solicitor experts 2.21 Although expert opinion evidence is generally admissible as a matter of law on the standard of care,1 English courts have been very reluctant to allow one solicitor to give evidence criticising or defending the conduct of another solicitor. The reasons for this were explained by Oliver J in Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp:2 ‘The extent of the legal duty in any given situation must, I think, be a question of law for the court. Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence which really amounts to no more than an expression of opinion by a particular practitioner had he been placed hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the court; whilst evidence of the witnesses’ view of what, as a matter of law, the solicitor’s duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the court’s function to decide.’ This approach was approved by the Court of Appeal in Bown v Gould & Swayne3 and still reflects the general practice in English Courts.4 In Moy v Pettman Smith5 two members of the House of Lords expressed concern that courts should be careful before applying their own standards where no expert evidence had been called on the standard to be expected of solicitors and counsel. But neither suggested that expert evidence should be admitted more widely and since Bown the court has permitted a party to call a solicitor expert to give evidence on the standard of care in barely a handful of cases.6 The expert evidence of a solicitor might be admitted exceptionally in a highly specialised sector where the court will be assisted by evidence of ‘market practice’. But it is more likely that evidence of this nature will come from a banking or financial services expert.7 1 See Sansom v Metcalfe Hambleton [1998]  PNLR  542 at 549 (Butler-Sloss LJ) cited by Alexander Nissen QC in Wattret v Thomas Sands Consulting Ltd [2015] EWHC 3455 (TCC) [2016] PNLR 15 where the court admitted expert evidence on the question whether a firm of quantity surveyors were negligent in giving advice on the merits of a claim as part of their dispute resolution services. 2 [1979] Ch 384 at 402B–E. 3 See [1996]  PNLR  130 at 135B–D  (Simon Brown LJ). See also Football League Ltd v Edge & Ellison [2006] EWHC 1462 (Ch), [2007] PNLR 2 at [278] where Rimer J heard evidence from a solicitor in relation to the negotiation of sports rights agreement without prejudice to its admissibility. In his final judgment he concluded that the evidence was inadmissible on the basis that there was no special practice or standard of conduct: see [279]–[280]. 4 For a recent citation of the passage set out in the text see London Executive Aviation Ltd v Royal Bank of Scotland plc [2017] EWHC 1037 (Ch) at [4]. In that case Newey J refused to permit expert evidence on the risks and meaning associated with certain financial products. He distinguished the decisions of HHJ  Havelock-Allan QC in Battrick v Royal Bank of Scotland plc [2013]  EWHC  4848 (QB) and St Dominic’s Ltd v Royal Bank of Scotland plc

66

The standard of care  2.22 [2015] EWHC 3822 (QB) permitting expert evidence on the practice of banks and other lending institutions who sell financial instruments such as interest rate hedging products. 5 [2005] UKHL 7, [2005] 1 WLR 581 at [19] (Lord Hope) and [26] (Baroness Hale). 6 See Archer v Hickmotts [1997] PNLR 318 (a county court decision reversed on appeal) and May v Woollcombe Beer & Watts [1998] 3 EGLR 94 where HHJ Jack QC admitted expert evidence on answering pre-contract enquiries on public rights because there was a lack of guidance in the textbooks. Expert evidence was admitted in two first instance decisions in Northern Ireland and Ireland: see Baird v Hastings & Co [2013] NIQB 143, [2014] PNLR 17 at [16]–[24] (citing the last edition of this book) and Flynn v King [2017] IEHC 735, [2018] PNLR 15. However, the NICA has also adopted a similar approach to the English courts: see Young v Hamilton [2014] NICA 48, [2014] PNLR 30 at [38] and [39]. 7 See Crema v Cenkos Securities plc [2010]  EWCA  Civ 1444, [2011] 1  WLR  2066 at [44] where Aikens LJ stated that ‘it has been common practice for the Commercial Court to hear evidence of “market practice”, which does not amount to evidence of an alleged “trade usage or custom”, in order to assist the court with a full understanding of the factual background to the proper construction of a written contract’. However, compare JP  Morgan Chase Bank v Springwell Navigation Corpn [2006] EWHC 2755 (Comm), [2007] 1 All ER (Comm) 549 at [24]–[33] where Aikens J (as he then was) excluded the evidence of a solicitor directed at the question whether certain financial instruments fell within a specific definition distinguishing this line of authority. See also Clarke v Marlborough Fine Art (London) Ltd (No  3) [2002] 2 All ER (D) 105 at [9]–[13] where Patten J  refused to admit the evidence of a solicitor on the usual terms available in the Art market in support of an argument that the terms given to the painter Francis Bacon by the Marlborough Gallery were manifestly disadvantageous to him.

5  Errors of judgment and slips 2.22 In many cases a solicitor or barrister is called on to exercise his or her judgment in deciding what advice to give to a client or what action to take. The court will not automatically hold a solicitor liable even if, with the benefit of hindsight, the advice which was given or the action which was taken (or not taken) turns out to be wrong. The court draws a distinction between ‘an error that is so blatant as to amount to negligence and an exercise of judgment that, though in the event it turned out to be mistaken, was not outside the range of possible courses of action that in the circumstances reasonably competent members of the profession might take.’1 This standard was defended by Bingham LJ in Eckersley v Binnie2 on the following basis: ‘[I]t is easy and tempting to impose too high a standard in order to see that the innocent victims of the disaster are compensated by the defendants’ insurers. Many would wish that the right to recovery in such cases did not depend on proof of negligence. But so long as it does, defendants are not to be held negligent unless they are in truth held to have fallen short of the standards I have mentioned.’ In Moy v Pettman Smith3 Lord Carswell drew attention to the following statement by Anderson J in the High Court of Ontario in Karpenko v Paroian, Courey, Cohen & Houston,4 which emphasises the difference between an error of judgment and negligent behaviour (and why it is important) and has been applied in a number of decisions subsequently:5 67

2.23  Breach of duty ‘What is relevant and material to the public interest is that an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him that he should have done otherwise. To the decision to settle a lawyer brings all his talents and experience both recollected and existing somewhere below the level of the conscious mind, all his knowledge of the law and its processes. Not least he brings to it his hard-earned knowledge that the trial of a lawsuit is costly, timeconsuming and taxing for everyone involved and attended by a host of contingencies, foreseen and unforeseen. Upon all of this he must decide whether he should take what is available by way of settlement, or press on. I can think of few areas where the difficult question of what constitutes negligence, which gives rise to liability, and what at worst constitutes an error of judgment, which does not, is harder to answer. In my view it would be only in the case of some egregious error that negligence would be found.’ 1 Saif Ali v Sydney Mitchell & Co [1980]  AC  198 at 220H–221A (Lord Diplock). See also 214F–G (Lord Wilberforce), 218D (Lord Diplock) quoted in para 2.2 (above) and 231C–D (Lord Salmon); Martin Boston & Co v Roberts [1996] PNLR 45, CA at 50E; McFarlane v Wilkinson [1997] 2 Lloyds Rep 259, CA at 274–5 (Brooke LJ); Arthur JS Hall & Co v Simons [2002] 1 AC 615 at 737H (Lord Hobhouse); Griffin v Kingsmill [2001] EWCA Civ 934, [2001] Lloyd’s Rep PN 716 at [61] and [62] (Stuart-Smith LJ); Williams v Leatherdale [2008] EWHC 2574 (QB), [2008] 3 FCR 613 (Field J) at [67]; Fraser v Bolt Burdon Claims [2009] EWHC 2906 (QB) (HHJ  Seymour QC) at [56]–[61]; McFaddens v Platford [2009]  EWHC  126 (TCC) (HHJ Toulmin CMG QC) at [41]; Langsam v Beachcroft LLP [2011] EWHC 1451 (Ch) (Roth J) at [129]; and Boyle v Thompsons Solicitors [2012] EWHC 36 (QB), [2012] PNLR 370 (Coulson J) at [54]. 2 (1988) 18 Con LR 1 at 79, CA, applied in Barings plc v Coopers & Lybrand [2003] EWHC 1319 (Ch), [2003] PNLR 34 and Day v High Performance Sports Ltd [2003] EWHC 197 (QB) (Hunt J). 3 [2005] 1 WLR 581 at [60] followed in Dunhill v Brooke & Co [2018] EWCA Civ 505 at [47] (Sir Brian Leveson P). 4 (1980) 117 DLR (3d) 383 at 397–398. 5 Hickman v Blake Lapthorn [2005] EWHC 2714 (QB), [2006] PNLR 20 (Jack J) at [44]; Walker v Chruszcz [2006]  EWHC  64 (QB) (Davis J) at [83]; West Wallasey Car Hire v Berkson & Berkson [2009] EWHC 3454 (Admin) (HHJ Simon Brown QC) at [26]; Langsam v Beachcroft LLP [2012] EWCA Civ 1230 at [84]; and Webb v Macdonald [2010] EWHC 93 (Ch) (Vos J) at [68].

2.23 Moreover, the fact that a decision taken by a solicitor may turn out to be wrong is not by itself either evidence or proof of negligence.1 However difficult the process is, the court must apply the appropriate standard of care at the date on which the relevant actions took place and without the benefit of hindsight. According to Megarry J in Duchess of Argyll v Beuselinck:2 ‘In this world there are few things that could not have been better done if done with hindsight. The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors 68

The standard of care  2.24 are important and which are unimportant. But hindsight is not a touchstone of negligence.’ 1 See Wilsher v Essex Area Health Authority [1987] QB 730, CA at 747A–C (Mustill LJ): ‘What the courts can do, however, is to bear constantly in mind that, in those situations which call for the exercise of judgment, the fact that in retrospect the choice actually made can be shown to have turned out badly is not itself a proof of negligence; and to remember that the duty of care is not a warranty of a perfect result.’ 2 [1972] 2 Lloyd’s Rep 172 at 185 col 1 (Megarry J) applied in Prestige Properties Ltd v Scottish Provident Institution [2002] EWHC 330 (Ch), [2003] Ch 1 (Lightman J) (reliance on a Land Registry search held not to be negligent): see [45]; Brinn v Russell Jones & Walker [2002]  EWHC  2727 (QB), [2003] Lloyd’s Rep PN  70 (Gray J) (failure to join editor and journalist to a libel action personally held not to be negligent): see [20]; Gosfield School Ltd v Birkett Long [2005] EWHC 2905 (QB) (Tugendhat J) (failure to take steps to join minors to claim and settlement held not negligent despite subsequent litigation): see [95]; Withers LLP v Harrison [2010] EWHC 2769 (QB) (Sharp J) (advice to wife to bring claim against husband to set aside judgment in ancillary relief proceedings for fraud and non-disclosure held not negligent despite lack of success): see [129]; D  Morgan PLC  v Mace & Jones [2010]  EWHC  3375 (TCC) (Coulson J) (advice about scope of existing planning permission and whether to apply for future planning permission held not negligent despite subsequent planning difficulties – only breach of duty was failure to clarify counsel’s advice): see [321]; Agouman v Leigh Day [2016]  EWHC  1324 (QB), [2016]  PNLR  32 (Andrew Smith J) (solicitors held negligent for failing to protect settlement funds paid into a bank account in the Ivory Coast): see [84]; and Patel v Freddy’s Ltd [2017] EWHC 73 (Ch) (HHJ Elizabeth Cooke) (solicitor not negligent for failure to detect identity fraud): see [30]–[32].

2.24 What will the court characterise, without hindsight, as an error of judgment that does not amount to negligence? As Lord Fraser stated in Whitehouse v Jordan:1 ‘Merely to describe something as an error of judgment tells us nothing about whether it is negligent or not. The true position is that an error of judgment may, or may not be, negligent; it depends on the nature of the error.’ This issue often arises in the context of advice given by solicitors and counsel in the context of litigation and especially in the context of advice whether to accept or reject settlement offers. In Griffin v Kingsmill2 StuartSmith identified the sort of factors which would influence the court’s decision: ‘The circumstances in which barristers and solicitors have to exercise their judgment vary enormously. On the one hand decisions have frequently to be made in court with little time for mature consideration or discussion. That is a situation familiar to any advocate. It is one in which it may be very difficult to categorise the advocate’s decision as negligent even if later events proved it to have been wrong. Or in a complex case it may be that in advising settlement too much weight is given to some factors and not enough to others. Here again a difficult judgment has to be made; and unless the advice was blatantly wrong, ie such as no competent and experienced practitioner would give it, it cannot be impugned and the prospects of successfully doing so would seem very slight.’ On the facts both solicitors and counsel were held liable for advising the claimant to accept a poor offer. In relation to the solicitors the court 69

2.24  Breach of duty found that the advice to accept flowed from ‘an unjustified rejection or assessment’ of one witness’s evidence and ‘the failure to appreciate the weakness’ in the evidence of another and ‘to appreciate the alternative line of argument’ which it provided.3 If the court is able to identify some feature of the solicitor’s conduct or risk taken in the course of litigation which no reasonable solicitor could defend then the conduct in question may justify a finding of negligence.4 But, if the complaint is that the solicitor arrived at the decision after balancing up all of the relevant factors, the court is unlikely to make a finding of negligence even if the overall decision is one on which the court would have taken a different view.5 Moreover, where solicitors and counsel are instructed to make allegations of fraud the court is likely to give them greater latitude.6 The issue arises less frequently in the context of transactional advice. But the principle remains the same. If the court considers that the defendant was justified in advising or permitting the client to take or ignore a risk, he or she will not be found negligent. But if the risk was unjustifiably high the defendant will nevertheless be found negligent even though it may have been consciously considered and discounted. 1 [1981] 1 WLR 246, HL at 263E–F. 2 [2001] EWCA Civ 934, [2001] Lloyd’s Rep PN 716 at [63] (Stuart-Smith LJ) applied in Dunhill v Brooke & Co [2018] EWCA Civ 505 at [46] (Sir Brian Leveson P). 3 At [63]. 4 See David Truex Solicitor v Kitchin [2007]  EWCA  Civ 618, [2007]  PNLR  33 (failure to advise promptly to apply for legal aid held negligent); Woodfine Leeds Smith v Russell [2007] EWHC 603 (QB) (HHJ Seymour QC) (failure to advise an interim payment not negligent but failure to advise an application under CPR r 31.16 held negligent). For further discussion of the duties of a solicitor in relation to advice on the merits, strategy, settlement and mediation see Chapter 15, paras 12.27 to 12.31, below. 5 Compare Wilkinson v McFarlane [1997] 2 Lloyd’s Rep 259, CA (failure to plead alternative claim for breach of statutory duty not negligent); Firstcity Insurance Group Ltd v Orchard [2002] EWHC 1433 (QB), [2003] PNLR 9 at [81] (failure to take an alternative argument not negligent); Walker v Chruszcz [2006] EWHC 64 (QB) 64 at [101] (advice to settle not negligent because the view taken that the reliability of the claimant and his performance in the witness box were central to success on liability was a justified and reasonable one); Williams v Leatherdale [2008] EWHC 2574 (QB), [2008] 3 FCR 613, [2009] PNLR 15 (Field J) (counsel’s failure to advise on pending House of Lords decision held to be negligent but solicitors’ failure to do so held not to be negligent); and McFaddens v Platford [2009] EWHC 126 (TCC) (HHJ Toulmin CMG QC) (application to adjourn trial on grounds of client’s lack of capacity held to be nonnegligent even though client later found to be competent). 6 See Neighbour v Barker [1992] 2  EGLR  149, CA (failure to advise purchaser to delay completion until after receipt of structural survey held not to be negligent despite structural defects in the property); Martin Boston & Co v Roberts [1996]  PNLR  45, CA (failure to require claimant to provide security for a costs guarantee held to be negligent because commercial risks obvious and foreseeable); SITA  v Wyatt Co (UK) Ltd [2002]  EWHC  2025 (Ch) at [91]–[105] (failure to include specific provisions in an employee share scheme held not to be negligent); Jassi v Gallagher [2006]  EWCA  Civ 1065, [2007]  PNLR  4 (counsel’s failure to advise tenant to serve second protective notice under LRA  1967 held not to be negligent).

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The extent of the duty to advise  2.26

B  THE EXTENT OF THE DUTY TO ADVISE 1 Introduction 2.25 In every case where an allegation of negligence is made against a solicitor the court may need to have recourse to the materials explored in the previous parts of this chapter in deciding whether he or she fell below the accepted standard. However, whether a finding of negligence is made, particularly in those cases where it is said that the advice given on a particular occasion was inadequate, will ultimately depend on the circumstances of the particular case. In Duncan v Cuelenaere, Beaubier, Walters, Kendall & Fisher1 the court provided this helpful guidance: ‘The test to be applied where a solicitor’s negligence is alleged will depend on various circumstances: the sophistication of the client; the experience and training of the solicitor; the form and nature of the client’s instructions; the specificity of those instructions; the nature of the action or the legal assignment; the precautions one would expect a solicitor, acting prudently and competently, to take; the course of the proceeding or assignment; and the influence of other factors beyond the control of the client and the adviser.’ In Part 2 of this book we attempt to organise and classify the particular duties of a solicitor in specific situations. In this section we address a number of issues of general application which often determine the scope of the advice which a solicitor ought to give to the client. 1 [1987] 2 WWR 379 at 382.

2  The nature of the client 2.26 A solicitor’s duty is to advise the client in terms that are appropriate to his or her own understanding and experience.1 According to Lord Scott in Pickersgill v Riley:2 ‘It is plain that when a solicitor is instructed by a client to act in a transaction, a duty of care arises. But it is also plain that the scope of that duty of care is variable. It will depend, first and foremost, upon the content of the instructions given to the solicitor by the client. It will also depend on the particular circumstances of the case. It is a duty that it is not helpful to try and describe in the abstract. The scope of the duty may vary depending on the characteristics of the client, in so far as they are apparent to the solicitor. A youthful client, unversed in business affairs, might need explanation and advice from his solicitor before entering into a commercial transaction that 71

2.26  Breach of duty it would be pointless, or even sometimes an impertinence, for the solicitor to offer to an obviously experienced businessman.’3 For example, if the client is foreign or unable to speak English the solicitor may have to ensure that any document that he or she is required to sign is translated for him or her and that wider and more basic explanations are given. In Siasati v Bottoms & Webb4 it was held that a solicitor owed a duty to explain the nature and scope of all of the obligations which they were undertaking to clients whose knowledge of English was so limited that they needed to communicate with the solicitor through an interpreter. Where the client is a company or corporation acting through a number of individuals, the position may be more nuanced. In Nationwide BS v Balmer Radmore5 Blackburne J considered that the appropriate standard to apply to a branch of a building society was ‘an intelligent layman’. However, the solicitor is not required to express any advice in language suitable for a particular level of executive and is entitled to assume that the client’s staff will comply with its own internal procedures.6 1 Para 3.4 of the SRA Code of Conduct for Individuals 2019 imposes the following duty: ‘You consider and take account of your client’s attributes, needs and circumstances.’ 2 [2004] UKPC 14, [2004] PNLR 31 at [7]. The passage was cited in Chweidan v Mischcon De Reya Solicitors [2014] EWHC 2685 (QB) (Simler J) at [87], Fryatt v Preston Mellor Harrison [2015]  EWHC  1683 (Ch) (Mark Cawson QC) at [96] and Balogun v Boyes Sutton & Perry [2015] EWHC 275 (QB), [2017] PNLR 30 (Michael Boyes QC) at [14]. 3 See also Yager v Fishman & Co [1944] 1 All ER 552, CA at 556F–H (Goddard LJ); County Personnel (Employment Agency) Ltd v Pulver [1987] 1 WLR 916, CA at 922D (Bingham LJ): ‘It seems obvious that legal advice, like other communication, should be in terms appropriate to the comprehension and experience of the particular recipient’; Carradine Properties Ltd v D  J  Freeman & Co [1999] Lloyd’s Rep PN  483, CA at 486–7 (Lord Denning MR) and 487 (Donaldson LJ); Phelps v Stewarts [2007]  EWHC  1561 (Ch), [2007]  PNLR  32 (Bernard Livesey QC) considered in para 2.28 fn 2 (below); and Kandola v Mirza Solicitors LLP  [2015]  EWHC  460 (Ch) (HHJ  Cooke) at [46] and [47] which contains the following helpful passage: ‘An inexperienced client, or one dealing in matters he is not familiar with, may require more explanation before he can sufficiently understand the risk he is about to take. An experienced client may need less explanation, or even none at all. When an explanation is given, the solicitor may appropriately tailor it to fit his knowledge of the client’s understanding. Of course, if the client asks for more explanation or appears not to understand, the solicitor may have to go into more detail. But the solicitor is not a guarantor of his client’s subjective understanding, and will have fulfilled his duty if he gives an explanation in terms the client reasonably appears to him to be able to understand, and to have understood, even if the client later alleges that he did not in fact understand what was said.’ 4 Mr Geoffrey Brice QC [1997] EGCS 22. For clients in similar circumstances see also Donmez v Barnes [1996] EGCS 129 and Peyman v Lanjani [1985] Ch 457 at 480B, CA. 5 [1999] Lloyd’s Rep PN 241 at 270. See further para 2.30, below. 6 See Redstone Mortgages Ltd v B  Legal Ltd [2014]  EWHC  3398 (Ch) where C  was also a mortgage lender and Norris J held that a report made to a ‘completions specialist’ rather than an underwriter (who had the mandate to make the relevant decision) satisfied D’s reporting obligation. He also held that D  was entitled to assume that C’s internal processes would be operated correctly and it would be passed to an underwriter and that it did not have to be expressed in a form understood by the unqualified completions specialist: see [19] and [20] (for the procedure) and [93] and [94] (for the reasoning). The judge concluded as follows: ‘The obligation of a solicitor does not fluctuate with the client’s recruitment policy, the clarity of its protocols or the performance of its management. B Legal knew its client (Beacon): it did not have to know the abilities and aptitudes of each of Beacon’s employees.’

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The extent of the duty to advise  2.28

3  The nature of the task (a)  Duty to clarify instructions 2.27 The solicitor has a duty to clarify the precise scope and extent of his or her retainer and may be found liable for any loss suffered by the client as a consequence of any misunderstanding. In Gray v Buss Murton1 a testator drew up a new will with the intention of leaving his home and chattels to his partner absolutely. He prepared it without the assistance of his solicitors (but based on an earlier one which they had prepared). He then gave it to his partner and one of the executors to take to his solicitor to check. They asked him to confirm that it had been validly executed and about the tax implications but fatally they did not ask him to check that the principal dispositions of the will gave effect to the testator’s revised intentions. It was held that the solicitor was negligent because he failed to clarify his instructions. Rougier J stated:2 ‘It must, surely, be up to the solicitor to take the appropriate steps to clarify precisely the extent of his retainer, and this, sadly, Mr Lightfoot failed to do when, in my judgment, the circumstances demanded that he should. This view is, if not analogous, at least consonant, so it seems to me, with that line of cases such as Crossley v Crowther (1851) 9 Hare 384, and Re Payne (1912) 28 TLR 201, to the effect that, where there is a dispute between solicitor and client as to the terms of any retainer, prima facie it is the client’s version which should prevail. It seems to me that the underlying basis for this principle must be that it is the client who actually knows what he wants the solicitor to do, and so it is the solicitor’s business to ascertain the client’s wishes accurately, bearing in mind the possibility that the client, through ignorance of the correct terminology, may not have correctly expressed it.’ 1 [1999] PNLR 882 (Rougier J). 2 At 892D–893A. This passage was cited by Arnold J in Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177 at [151] (upheld at [2012] EWCA Civ 498). See also Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch) at [118] where Nugee J found that C’s instructions were either clear but mistranscribed or unclear and D owed a duty to clarify them (a point on which there was no appeal: see [2016] EWCA Civ 1146, [2016] Ch 529). For a similar example see Commodities Research Unit International (Holdings) Ltd v King & Wood Mallesons LLP  [2016]  EWHC  727 (QB), [2016]  PNLR  29 at [81]–[92] where Dingemans J  held that solicitors instructed to give urgent advice owed no duty to locate four historic emails. However, he held that they were negligent because they failed to ask for conditions of service which contained a vital clause. He stated (at [87]) that it was clear that: ‘a solicitor may be put on inquiry that there are further relevant documents to be discovered or information to be obtained by the documents that have been provided, or by what has been said by a client.’

(b)  Duty to confirm instructions in writing 2.28 In Siasati v Bottoms & Webb it was held that the solicitor owed a duty to put his advice in writing because of the particular language difficulties of the 73

2.28  Breach of duty client. In Hurlingham Estates Ltd v Wilde & Partners1 Lightman J also held that a solicitor who wished to obtain his client’s agreement to limit the scope of his retainer by excluding tax advice owed a duty to confirm these instructions in writing. Because of the fundamental nature of the limitation and the conflict of interest to which it gave rise there was a particular need for writing in that case.2 Apart from exceptional cases of this kind, however, there is no duty either to confirm the client’s instructions or to put the solicitor’s advice in writing.3 The court has also rejected the proposition that where there is no record the client’s evidence or understanding of the scope of the retainer should always be preferred to the solicitor.4 Whilst it is undoubtedly correct as a matter of principle that there is no special rule of evidence or legal presumption that the client’s evidence should be preferred, it is obviously in the solicitor’s interests to keep a written record of instructions taken and advice given. The presence or absence of an attendance note or letter confirming the solicitor’s advice may be critical where the issue between the parties is whether the client ignored the solicitor’s advice or gave instructions to pursue a different or contrary course of action.5 Moreover, where the parties have agreed to vary the terms of the retainer orally, the engagement letter will not be conclusive either.6 1 [1997] 1 Lloyd’s Rep 525 at 526: ‘Common sense requires that all these matters should also be recorded in an attendance note of the meeting where they are discussed and agreed, and should subsequently be recorded in a letter to the client. The letter is required, not merely to evidence what has been agreed, but to ensure that, after receipt of the letter, the client can consider (and discuss with others) the position and its implications away from, and free from any constraints imposed by, the presence of the solicitor. These are elementary precautions to ensure that the client gives a fully informed consent to a potentially disadvantageous arrangement where there is an obvious potential conflict between the interest of the solicitor (in retaining his client’s work) and the client (in obtaining the best, or at least competent, service and advice).’ 2 See also Phelps v Stewarts [2007] EWHC 1561 (Ch), [2007] PNLR 32 (Bernard Livesey QC) at [38]: ‘Having regard to the fact that Mr Keating was an unsophisticated client and the complexity and significance of a limitation of retainer, I would not be inclined to regard any limitation, such as that for which Ms Phelps has argued, as effective unless it were in writing and … underlined in red; and, as I would add, properly explained.’ The decision was cited with approval by Birss J in Baillie v Bromhead & Co [2014] EWHC 2149 (Ch), [2015] FSR 16 at [25] and [26]. 3 See Harwood v Taylor Vinters [2003]  EWHC  471 (Ch), [2007] Lloyd’s Rep PN  32 (where HHJ  Seymour QC accepted the evidence of the solicitor that she had given full advice to the client); Middleton v Steeds Hudson [1998]  FLR  738 (where Johnson J  also accepted the solicitor’s evidence in preference to that of the client despite the absence of a confirmatory attendance note or letter); Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch) at [99] (where Nugee J rejected the proposition that ‘the absence of an attendance note in some way counts against the solicitor in forming a view as to where the truth lies’) (a point on which there was no appeal: see [2016] EWCA Civ 1146, [2016] Ch 529); and Minkin v Landsberg [2016] EWCA Civ 1152, [2016] 1 WLR 1489 at [41] (where Jackson LJ stated that it would have been good practice for D to make an attendance note but that the court could not go behind the judge’s findings on the oral evidence). 4 See Farnon v Devonshires [2011]  EWHC  3167 (QB) at [34– [54] (where Owen J  rejected the argument that Crossley v Crowther (above) was authority for this proposition and found in favour of the solicitor on the basis that her evidence was supported by the conduct of the parties and her attendance notes). See also Fladgate LLP v Harrison [2012] EWHC 67 (QB) at [51] (where Laing J rejected the same argument and accepted the evidence of the solicitor despite the absence of a written record of the instructions). See also Mathiesen v Clintons [2013] EWHC 3056 (Ch), at [133]–[146] (where Asplin J considered all of the authorities and

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The extent of the duty to advise  2.29 then held that D was negligent for failing to give advice on the particular clause but although prudent it was not essential to put the advice in writing: see [146]). 5 See Middleton v Steeds Hudson (above) at 741: ‘One might have expected that in circumstances where the lay client was determined to disregard the advice of the solicitor, the attendance note would, as a matter of protection for the solicitor if nothing more, contain a specific reference to the firm instructions that had been given in disregard of the advice. Furthermore, one might have expected there to have been a letter to the client, recording the advice and the instructions given.’ 6 See Manches LLP v Green [2008] EWHC 917 (QB), [2008] 6 Costs LR 881 (Underhill J) at [83].

(c)  Duty to confirm instructions in person 2.29 There is no duty either to see and interview the client personally and there is no reported decision in which a solicitor has been held liable for taking instructions from the client in writing or by telephone.1 But where instructions are communicated by a third party (such as a family member, friend or business partner) there is an obvious risk that there may be an error in transmission or that the third party may be acting without the authority of the principal or that the principal may be acting under the influence of the third party. Both the Guide to the Professional Conduct of Solicitors2 and the Solicitors Code of Conduct 20073 imposed an obligation upon the solicitor to verify those instructions. However, in Johnson v Bingley, Dyson & Furey4 it was held that a failure to observe the principles set out in the Guide did not automatically give rise to a liability in damages and it was a question of fact in every case whether the failure to comply with them was negligent. The SRA  Code of Conduct 2011 removed the mandatory obligation to verify instructions (although the Indicative Behaviours drew attention to the obvious risks if the solicitor failed to do so).5 The SRA Standards and Regulations have reinstated a duty to verify the third party’s authority where there is reason for suspicion.6 It is suggested that a solicitor should as a matter of course offer to see the client face to face and confirm instructions given by a third party unless there is a good reason not to do so or the client has confirmed the third party’s authority in writing.7 If the solicitor acts on instructions which have not been given by the client and the client suffers loss as a consequence, a finding of negligence is likely to be made. Moreover, the solicitor may be exposed to a claim for breach of warranty of authority.8 1 See Hallmark Finance Insurance Brokers Ltd v Fraser & Beatty (1990) 1  OR  (3d) 641 at 647 f–g, (where the client was an experienced businessman and it was held that there was no obligation to meet the client face to face) and Dayman v Lawrence Graham [2008] EWHC 2036 (Ch) at [74] (where HHJ Hodge QC held that the solicitors would have discharged their duty by providing her with written advice rather than insisting on seeing her in person). 2 Principle 12.04 of the Guide to the Professional Conduct of Solicitors (1999) (which applied before 1 July 2007) provided as follows: ‘Where instructions are received from a third party a solicitor should obtain written instructions from the client that he or she wishes the solicitor to act. In any case of doubt the solicitor should see the client or take other appropriate steps to confirm instructions.’ 3 The Solicitors Code of Conduct 2007, r 2.01(1) (which applied between 1 July 2007 and 6 October 2011) provided as follows: ‘You are generally free to decide whether or not to take on a particular

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2.30  Breach of duty client. However, you must refuse to act or cease acting for a client in the following circumstances: … (c) where instructions are given by someone other than the client, or by only one client on behalf of others in a joint matter, you must not proceed without checking that all clients agree with the instructions given; or (d) here you know or have reasonable grounds for believing that the instructions are affected by duress or undue influence, you must not act on those instructions until you have satisfied yourself that they represent the client’s wishes.’ 4 [1997] PNLR 392 (Benet Hytner QC). See also Linaker v Keith Turner & Ashton (Garland J, 5 November 1998, unreported) (where it appears to have been common ground that a failure to comply with Principle 7.05 (the predecessor to Principle 12.04) was negligent); Penn v Bristol & West BS [1997] 3 FCR 789 (where HHJ Kolbert QC held that it was negligent for a solicitor to take instructions from a husband alone in relation to a mortgage of joint property); and Al-Sabah v Ali [1999] EGCS 11 (unreported, 29 June 2000) (where Ferris J followed Penn (above) and held that it was negligent for a solicitor to act on the authority of an agent without confirmation from the principal). The decision was overturned on other grounds by the Court of Appeal. For further discussion, see para 15.24, below. 5 IB(1.25) and IB(1.28) provided that the following behaviours were indicative of a solicitor’s failure to achieve the mandatory Outcomes (original emphasis): ‘acting for a client when instructions are given by someone else, or by only one client when you act jointly for others unless you are satisfied that the person providing the instructions has the authority to do so on behalf of all of the clients‘ and ‘acting for a client when there are reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client’s wishes.’ 6 Para 3.3 of the SRA Code of Conduct for Individuals 2019 imposes the following duty: ‘You only act for clients on instructions from the client, or from someone properly authorised to provide instructions on their behalf. If you have reason to suspect that the instructions do not represent your client’s wishes, you do not act unless you have satisfied yourself that they do.’ 7 Note Marplace (Number 512) Ltd v Chaffe Street [2006] EWHC 1919 (Ch) where Lawrence Collins J  stated at [409] that it was an implied term of the retainer that a firm of corporate lawyers would have adequate resources to deal with the client’s reasonable requirements but that whether a solicitor owed a duty to attend a particular meeting depended on the client’s instructions and requirements. The facts of Dayman v Lawrence Graham (fn 1 above) were unusual since the claimant’s husband was a partner in the firm and he was acting as both his wife’s agent and solicitor: see, in particular, the caveats at [75]. 8 See Chapter 5, paras 5.26 to 5.38, below. For examples of the kind of case identified in the text see P&P Property Ltd v Owen White & Caitlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 at [45]–[53] (including Penn above).

(d)  The nature of the advice 2.30 A solicitor is obliged to give advice not simply to pass on information.1 He or she is also obliged to give advice suitable for the client and to explain the reasons for it.2 But where a solicitor is instructed to draw up or give advice on a legal document this does not mean that he or she is bound to read out every clause in the contract or lease to ensure that the client understands it. There must be an exercise of professional judgment in deciding which provisions to draw to the client’s attention3 and it seems obvious that the more unusual the provision the more important it is to point it out.4 Further it may not be enough simply to point out unusual or unexpected provisions. It may also be necessary to spell out their legal consequences.5 There may also be circumstances in which it is not enough for a solicitor simply to express an opinion about the merits. If there is real scope for dispute the solicitor may be negligent if he or she fails to point out the risk that the court might form a different view. In Queen Elizabeth’s 76

The extent of the duty to advise  2.30 Grammar School Blackburn Ltd v Banks Wilson6 Ds advised on the effect of a restrictive covenant and whilst their construction of the provision was not wrong, the covenant was ambiguous and the advice was given in the knowledge that there was a threat of an objection. In those circumstances, the solicitor was held to be negligent for failing to be more cautious and to point out that there was a risk that the court might adopt an alternative construction. In Barker v Baxendale Walker Solicitors7 D advised on the effect of a particular provision in the Inheritance Act 1984 and it was accepted that he was not negligent in forming the view which he did. However, the Court of Appeal held that he was negligent because his advice was given in the context of a highly aggressive tax scheme and there was always a likelihood of a dispute with HMRC. Asplin LJ stated as follows (citing QEGS v Banks Wilson):8 ‘In this case, legal advice was the very service which was being provided and which was being relied upon. There can be no separation between the advice and any appropriate caveats as to risk. They are one and the same. The lawyer as part of the legal advice he is providing, must evaluate the legal position and determine whether in all of the circumstances, he should advise his client that there is a significant risk that the view he has taken about the substantive matter in question may be wrong …’ The position should be the same for litigation advice. A  solicitor will be negligent even if he or she gives accurate advice about the merits of the claim but identifies the wrong remedy or fails to address the likely recovery.9 1 See Mortgage Express Ltd v Newman [1996]  PNLR  603 (Carnwath J) at 611B–C: ‘If the solicitors’ duty is to draw attention to matters which might affect the value of the security, it must be their duty to do so in terms which draw attention to the reason for taking that view. It cannot be sufficient simply to pass the information across, perhaps by telephone.’ 2 See Nationwide Building Society v Balmer Radmore [1999] Lloyd’s Rep PN 231 (Blackburne J) at 270. 3 See County Personnel (Employment Agency) Ltd v Pulver [1987] 1 WLR  916, CA at 922D (Bingham LJ): ‘It is also, I think, clear that in a situation such as this the professional man does not necessarily discharge his duty by spelling out what is obvious. The client is entitled to expect the exercise of a reasonable professional judgment. That is why the client seeks advice from the professional man in the first place. If in the exercise of a reasonable professional judgment a solicitor is or should be alerted to risks which might elude even an intelligent layman, then plainly it is his duty to advise the client of these risks or explore the matter further.’ See also Reeves v Thrings & Long [1996]  PNLR  265, CA at 275E–F  (Sir Thomas Bingham MR) to similar effect. 4 See Sykes v Midland Bank [1971] 1 QB 113, CA at 124B and 130F. 5 For the need to spell out the practical consequences see Summit Financial Group Ltd v Slaughter & May (unreported, 12 March 1999) where Rimer J said of one witness: ‘Whilst I have been a little surprised that someone of his ability did not spot the inadequacy of the drafts, I must not forget that he is not a lawyer. Part 2 of the Cambridge Law Tripos confers on its consumers undoubted benefits which no doubt continue to serve them well. But it does not turn them into practical lawyers who will thereby, and without more, acquire the skills sufficient to act as their own lawyer in the negotiation and interpretation of complicated commercial documentation.’ For another example: see Accident Assistance Ltd v Hammonds Suddards Edge [2005] EWHC 202 (Ch), [2005] PNLR 29. The principal allegation was that the defendants had failed to explain the implications of the advice of leading counsel (which it was accepted was correct).

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2.31  Breach of duty 6 [2001] EWCA Civ 1360, [2001] Lloyd’s Rep PN 840. The decision was criticised by Gee, ‘The solicitor’s duty to warn that a court might take a different view’ (2003) 19 PN 362. But the same approach was followed in Simmons v Overbury Steward & Eaton (HHJ Bradbury QC, 31 July 2001, unreported) and Herrmann v Withers LLP [2012] EWHC 1492, [2012] PNLR 28 (Newey J) at [74]. In Balogan v Boyes, Sutton & Perry [2015]  EWHC  275 (QB), [2017]  PNLR  30 (Michael Boyes QC) both cases were distinguished because there was no real risk of litigation or action by a third party. 7 [2017] EWCA Civ 2056, [2018] 1 WLR 1905 8 At [64]. See also Patten LJ at [91]: ‘The degree of risk (looked at through the eyes of the reasonably competent solicitor) will dictate the nature of the warning that the client should be given, although other relevant factors for the solicitor to consider and bring to the client’s attention in relation to a tax avoidance scheme of this kind will be the likelihood of a challenge to the scheme by the revenue and the degree of judicial and other scrutiny which the scheme will receive.’ 9 See Levicom International Holdings BV v Linklaters [2010] EWCA Civ 494, [2010] PNLR 29 at [247]–[253] (advice to seek declaratory relief and failure to advise that damages would or might be nominal for breach of a negative covenant held to be negligent).

(e)  The extent of the advice 2.31 The general principle is that a solicitor owes no duty to go beyond the scope of his or her express instructions and give advice in relation to other matters.1 This principle extends to both commercial advice and legal advice about matters which fall outside the retainer. For example, in Pickersgill v Riley2 C sold shares in a company but took an indemnity from the purchaser against his personal liabilities under a guarantee. The Privy Council held that Ds owed no duty to advise him to investigate the purchaser’s financial position. C  was aware of the risks and D  had advised him of the potential danger of contracting with a limited company. Lord Scott stated as follows:3 ‘It was, in their Lordships’ view, a matter for the commercial judgment of Mr Riley whether to he was prepared to accept the protection of the contractual undertaking on offer from WEN. He decided to do so, but not in reliance on any advice to do so given by Mr Pickersgill. It was his, Mr Riley’s, commercial decision. His decision may, with hindsight, be regarded as imprudent and to have been based on a mistake as to WEN’s financial substance at the time of the transaction. But Mr Riley cannot, in their Lordships’ opinion, extend Mr Pickersgill’s role from that of his solicitor acting on his instructions to that of his commercial adviser, or to that of his insurer against his commercial misjudgement. Mr Pickersgill did not, in their Lordships’ judgment, owe the extended duty of care as pleaded or as expressed by the courts below as the basis of their respective findings of liability …’ This principle has been consistently applied.4 Moreover, in a number of cases the court has held that a solicitor owes no duty to go beyond the scope of his or her express instructions and to give advice on other matters even if they raise legal issues rather than issues of commercial judgment.5 Indeed, where the 78

The extent of the duty to advise  2.32 client expressly instructs a solicitor not to pursue a head of claim in a modest personal injury action, the solicitor is entitled to respect the client’s autonomy.6 1 See Clarke Boyce v Mouat [1994] 1 AC 428 at 437D–E (Lord Jauncey), Reeves v Thrings & Long [1996] PNLR 265, CA at 275E (Sir Thomas Bingham MR), 279C (Simon Brown LJ) and 285A (Hobhouse LJ) and Chweidan v Mischcon De Reya Solicitors [2014] EWHC 2685 (QB) (Simler J) at [87] (citing Pickersgill v Riley (below)). See also Jackson LJ’s first proposition in Minkin v Landsberg [2016] EWCA Civ 1152, [2016] 1 WLR 1489 at [38] set out in para 1.17, above. 2 [2004] UKPC 14, [2004] PNLR 31 3 At [17] and [18]. For earlier examples see Bowdage v Harold Michelmore & Co (1962) 106 Sol Jo 512 (where Melford Stevenson J held that a solicitor owed no duty to advise the claimant to consider obtaining valuation advice); Nixon v Stephensons (3 April 1996, unreported) (where John Martin QC held that solicitors did not undertake a general duty to advise the claimant in relation to the wisdom of transferring certain properties into a company in return for shares); and Mean v Thomas [1998] EGCS 2 (where Stephen Tomlinson QC held that the failure to advise the client to examine title before auction was not negligent). 4 See Haigh v Wright Hassall & Co [1994] EGCS 54, CA (where a solicitor was held not liable for exchanging contracts on the assurance of his clients that they had the funds for the deposit), John Mowlem Construction plc v Neil F Jones & Co [2004] EWCA Civ 768, [2004] PNLR 45 (where a solicitor acting in a construction arbitration owed no duty to advise the client to disclose a potential counterclaim when renewing its professional indemnity insurance) and Football League Ltd v Edge & Ellison [2006] EWHC 1462 (Ch), [2007] PNLR 2 at [266]–[270] (where Rimer J  held that solicitors owed no duty to advise the client to consider requesting parent company guarantees for the liabilities of the successful bidder for a broadcasting licence). 5 See Virgin Management Ltd v De Morgan Group plc (1994) 45 ConLR 28, 68 BLR 26, CA (where solicitors acting on a commercial transaction owed no duty to give VAT advice and the client was relying on third party tax advisers), Marplace (Number 512) Ltd v Chaffe Street [2006]  EWHC  1919 (Ch) at [402]–[409] (where Lawrence Collins J  held that a solicitor negotiating an SPA was under no obligation to advise the client about existing breaches of contract), Stone Heritage Developments Ltd v Davis Blank Furniss [2007]  EWCA  Civ 765, [2007] 31  EG  80 at [39]–[44] (where solicitors owed no duty to give advice about the difficulties of title to a piece of land adjoining a development site) and Farnon v Devonshires [2011] EWHC 3167 (QB) (where Owen J held that solicitors acting for a partner on retirement owed no duty to give advice on a potential sex discrimination claim). 6 See Thomas v Hugh James Ford Simey [2017] EWCA Civ 1303, [2018] PNLR 5 where C settled a vibration white finger claim for significantly less than he might have done and decided not to pursue a claim for special damage. Jackson LJ stated (at [42]) that: ‘if a client instructs his solicitor that he does not wish to pursue a particular head of claim and that he does not have evidence to support it, the solicitor is not necessarily under a duty to challenge that decision or to try to change the client’s mind’. He did, however, stress that the claim was a modest one: see [43]. For further discussion see Chapter 12, para 12.29, below.

2.32 Nevertheless, there are issues which arise during the course of the retainer which are so closely connected to the subject matter of the retainer that the solicitor ought to investigate them and, if necessary, advise on them (even though these issues are not the subject of the client’s express instructions). In Minkin v Landsberg1 Jackson LJ described this duty as a duty to give advice on those matters which are ‘reasonably incidental’ to the work that the solicitor has been instructed to carry out. Perhaps, the best known example is Credit Lyonnais SA v Russell Jones & Walker2 where D was acting for C in negotiations with its landlord to vary a break clause. C changed its mind and instructed D to serve a break notice which turned out to be ineffective because C had failed 79

2.32  Breach of duty to make a payment which was a strict condition of the exercise of the option. D  was held liable for failing to point out the conditions for compliance and checking that C understood them. In a well-known passage Laddie J stated:3 ‘[T]he solicitor only has to expend time and effort in what he has been engaged to do and for which the client has agreed to pay. He is under no general obligation to expend time and effort on issues outside the retainer. However if, in the course of doing that for which he is retained, he becomes aware of a risk or a potential risk to the client, it is his duty to inform the client. In doing that he is neither going beyond the scope of his instructions nor is he doing “extra” work for which he is not to be paid. He is simply reporting back to the client on issues of concern which he learns as a result of and in the course of carrying out his express instructions. In relation to this I was struck by the analogy drawn by [counsel for the claimant]. If a dentist is asked to treat a patient’s tooth and on looking into the latter’s mouth he notices that an adjacent tooth is in need of treatment, it is his duty to warn the patient accordingly. So too, if in the course of carrying out instructions within his area of competence a lawyer notices or ought to notice a problem or risk for the client of which it is reasonable to assume that the client may not be aware, the lawyer must warn him.’ This statement and the ‘rotten tooth’ analogy have been applied in a number of cases both at first instance and in the Court of Appeal.4 In Pickersgill v Riley5 Lord Scott described this duty as one to point out any ‘hidden pitfalls’. A similar approach can also be detected in claims against other professionals.6 Whether or not such a duty will arise will depend on the circumstances and it is not possible say to with any precision what those circumstances will be. In some of the more recent cases the court has held on the facts that solicitors are liable for the failure to give incidental advice7 but in other cases this argument has failed.8 Finally, in Lyons v Fox Williams LLP9 the Court of Appeal gave a clear indication that there is a strict limit to any incidental advice which a solicitor may be required to give. 1 [2016] EWCA Civ 1152, [2016] 1 WLR 1489 at [38] set out in para 1.17, above. 2 [2002] EWHC 1310 (Ch), [2003] PNLR 17. 3 At [28]. 4 See John Mowlem Construction plc v Neil F Jones & Co [2004] EWCA Civ 768, [2004] PNLR 45 at [15]; Stone Heritage Developments Ltd v Davis Blank Furniss [2007] EWCA Civ 765, [2007] 31  EG  80 at [34]; Tom Hoskins plc v EMW  Law [2010]  EWHC  479 (Ch) (Floyd J) at [92]; Farnon v Devonshires [2011]  EWHC  3167 (QB) (Owen J) at [34]; Mason v Mills & Reeve [2011] EWHC 410 (Ch), [2011] STC 1177 (Arnold J) at [155] and [2012] EWCA Civ 498 at [40]; and AW Group Ltd v Taylor Walton [2013] EWHC 2610 (Ch) ((HHJ Hodge QC). 5 [2004]  UKPC  14, [2004]  PNLR  31 at [11]. In Marplace (Number 512) Ltd v Chaffe Street [2006] EWHC 1919 (Ch) at [407] Lawrence Collins J also described it as: ‘the duty of pointing out to the client any legal obscurities of which the client might have been unaware, or of drawing the attention of the client to any hidden pitfalls.’ 6 See, eg, Mehjoo v Harben Barker [2014] EWCA Civ 358, [2014] 4 All ER 806, [2014] PNLR 24 (the retainer of accountants who had provided routine tax advice from time to time did not extend complex and sophisticated tax avoidance advice), Denning v Greenhalgh Financial

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The extent of the duty to advise  2.32 Services Ltd [2017]  EWHC  143 (QB), 2  BCLC  526, [2017]  PNLR  19 (Green J) (financial adviser’s retainer was limited to advice on C’s present and future financial requirements and did not extend to advice on the suitability of advice given by C’s former financial advisers) and McMahon v Grant Thornton UK LLP [2020] CSOH 50 (Lord Doherty) (retainer of accountants did extend to raising the idea that a shareholder should transfer shares to his wife to use tax relief but they had discharged that duty) 7 See Luffeorm Ltd v Kitsons LLP [2015] PNLR 30 (Jonathan Acton QC) (conveyancing solicitor acting on the purchase of a pub owed a duty to point out the absence of covenant restricting competition); Mansion Estates Ltd v Hayre & Co [2016]  EWHC  96 (Ch) (HHJ  Saffman) (conveyancing solicitor’s retainer extends to advising a client of matters regarding the title that may blight or limit the reasonably foreseeable use or enjoyment of the property and to ensuring that the correct amount of STLD is paid); and Hickland v McKeone [2018] NIQB 81 (Colton J) (NI conveyancing solicitor’s retainer extended to pointing out difficulties inherent in the purchase of a freehold flat). 8 See BPC  Hotels Ltd v Wright Hassall LLP  2016]  EWHC  1286 (TCC) (Soole J) (retainer of solicitors and counsel defending guarantee proceedings did not extend to considering alternative ‘exit-route arrangement’) and Lyons v Fox Williams LLP [2018] EWCA Civ 2347, [2019] PNLR 9 (personal injury solicitor instructed to claim under accidental death and dismemberment policies owed no duty to investigate claims under long-term disability policies). 9 [2018] EWCA Civ 2347, [2019] PNLR 9 at [41] and [42] (Patten LJ). Note in particular the following passage: ‘The risks in question are all matters which come to his attention when performing the tasks the client has instructed him to carry out and which therefore as part of his duty of care he must make the client aware of. Neither Credit Lyonnais nor Minkin are authority for the proposition that the solicitor is required to carry out investigative tasks in areas he has not been asked to deal with however beneficial to the client that might in fact have turned out to be.’

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Chapter 3

Causation and quantum of damages in contract and tort

A INTRODUCTION 3.01 As Lord Briggs recently observed in a solicitors’ negligence claim in the Supreme Court, ‘the assessment of causation and loss in cases of professional negligence has given rise to difficult conceptual and practical issues which have troubled the courts on many occasions’1. In this chapter we consider those problems in relation to claims in contract or tort.2 Claims against solicitors are usually contractual since generally the claimant retained the defendant as a solicitor. But the standard of the solicitor’s duty in contract is normally the same as in tort, namely to take reasonable skill and care. As a result, with the exception of the rules as to remoteness,3 the principles applied to causation in this area derive principally from cases in tort.4 As to causation in tort, in Kuwait Airways Corpn v Iraqi Airways Corpn (No 6)5 Lord Nicholls said: ‘How, then, does one identify a plaintiff’s “true loss” in cases of tort? … I take as my starting point the commonly accepted approach that the extent of a defendant’s liability for the plaintiff’s loss calls for a two-stage inquiry: whether the wrongful conduct causally contributed to the loss and, if it did, what is the extent of the loss for which the defendant ought to be held liable. The first of these inquiries, widely undertaken as a simple “but for” test, is predominantly a factual inquiry … The second inquiry, although this is not always openly acknowledged by the courts, involves a value judgment (“ought to be held liable”.) Written large, the second inquiry concerns the extent of the loss for which the defendant ought fairly or reasonably or justly to be held liable (the epithets are interchangeable). To adapt the language of Jane Stapleton … the inquiry is whether the plaintiff’s harm or loss should be within the scope of the defendant’s liability, given the reasons why the law has recognised the cause of action in question.’ Although the first inquiry is ‘predominantly’ factual, it would be wrong to say that, in every case, the court simply applies the ‘but for’ test in a way which involves no value judgments and no other legal principles. In Lord Hoffmann’s speech in Kuwait, he said that legal rules derived from the nature of the tort 82

Factual causation  3.03 on which the claim is based will prescribe what the law’s requirements as to causation are.6 1 Perry v Raleys Solicitors [2019] UKSC 5, [2019] 2 WLR 636 at [15]. 2 See Chapter 4 for claims in equity. 3 See para 3.49ff, below. 4 In solicitors’ cases the obligation is normally identical or similar in either contract or tort, namely a duty to take reasonable care, and the function of damages is to place the claimant in the position in which he or she would have been had the defendant exercised such care. This ‘performance’ based approach has been criticised by some commentators: see Stapleton, ‘The Normal Expectancies Measure in Tort Damages’ 113 LQR 257 at 260. Further, Isaacs argues that ‘the duty of care in the tort of negligence can and must always be justified independently from the contract’: ‘Understanding the relationship between duties in contract and the tort of negligence’, (2019) 35(3) PN 155. Taylor suggests that the extent of liability may principally be determined by contractual considerations: ‘Concurrent Duties’ (2019) 82(1) MLR 17. 5 [2002] UKHL 19, [2002] 2 AC 883 at [69]–[70]. 6 Kuwait at [127]–[128]. Lord Hoffmann returned to this theme writing extra-judicially in ‘Causation’ (2005) 121  LQR  592. See further para  3.26ff, below. Further, at [72] in Kuwait Lord Nicholls said that even in considering the ‘but for’ test it was necessary to have in mind the purpose of the relevant cause of action.

3.02 In this chapter we consider the issues in accordance with Lord Nicholls’s two-stage inquiry: first, factual causation and the ‘but for’ test, together with the related of issue of how third parties would have acted. The latter concerns principles of damages for the loss of a chance. Secondly, we look at control techniques which the courts use in order to limit the extent of defendants’ liability. These include the SAAMCo principle (‘extent of liability’), the significance of alternative causes, remoteness and mitigation. Thirdly, we consider the date at which damage will be assessed, and fourthly the availability of damages for psychological damage or injured feelings. Finally, we look at the principles governing the recovery of interest. Except where otherwise stated, so far as tort is concerned in this chapter we deal only with negligence rather than other torts.

B  FACTUAL CAUSATION 1  The ‘but for’ test (a)  The normal rule 3.03 The function of damages in negligence is to put the claimant in the position which he or she would have been in if there had been no breach of duty.1 The ‘but for’ test follows from this. Lord Nicholls commented on this test in Kuwait as follows:2 ‘This guideline principle is concerned to identify and exclude losses lacking a causal connection with the wrongful conduct. Expressed in its simplest form, the principle poses the question whether the plaintiff would have suffered the loss without (“but for”) the defendant’s 83

3.04  Causation and quantum of damages in contract and tort wrongdoing. If he would not, the wrongful conduct was a cause of the loss. If the loss would have arisen even without the defendant’s wrongdoing, normally it does not give rise to legal liability … Of course, even if the plaintiff’s losses pass this exclusionary threshold test, it by no means follows that the defendant should be legally responsible for the loss.’ So in almost all cases in negligence or breach of the contractual duty to take reasonable skill and care the claimant must show3 that, but for the defendant’s conduct, the claimant would not have suffered the loss which is claimed. If the claimant passes this test in relation to any particular item of loss then the court moves on to consider the further control factors on the recovery of damages which we consider below. 1 In tort the standard answer was given by Lord Blackburn in Livingstone v Rawyards Coal (1880) 5 App Cas 25, 39: ‘I do not think that there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages, you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.’ 2 Above, at [72]. 3 As to what must be shown on the balance of probabilities and what must be shown on the loss of a chance basis see para 3.12ff, below.

(b)  Concurrent or competing causes 3.04 Some cases involve concurrent causes, that is, without the separate negligent acts of both A and B, C would not have suffered any loss. In that case the following principle applies: ‘When separate and independent acts of negligence on the part of 2 or more persons together result in a loss each tortfeasor will be liable for the full damage suffered …’1 In other cases, it is impossible to prove, as between two parties both acting in breach of duty, which one caused the loss which the claimant has suffered. In Fairchild v Glenhaven Funeral Services Ltd2 it was scientifically impossible to prove which wrongful period of exposure to asbestos dust had caused the claimants’ mesothelioma, even though one such period had to have caused their illness. It followed that no claimant could satisfy the ‘but for’ test against any specific employer. The House of Lords held that each employer who had, in breach of duty, exposed a claimant to asbestos dust was liable to that claimant, even though the ‘but for’ test could not be satisfied. But this was an exceptional rule, designed to meet the exceptional problem that it was truly impossible to prove that the ‘but for’ test was satisfied. This principle has, however, not been extended to claims against solicitors, and it appears 84

Factual causation  3.05 that, even within the realm of personal injury claims, it will be of very limited application.3 1 Rochpion Properties (4) LLP v Hill Dickinson LLP [2019] EWHC 2354 (TCC), [2020] PNLR 11, per HHJ Bird, sitting as a High Court Judge, at [50], citing Charlesworth & Percy on Negligence (14th edn), at 5–07. 2 [2002]  UKHL  22, [2003] 1  AC  32. A  similar problem might arise if each of two hunters carelessly fires a bullet and a bullet from one of them kills a person but it cannot be proved whose bullet it was. See McGregor on Damages (18th edn, 2009) at 6–017. 3 See McGregor on Damages (20th edn, 2017), at 8-022.

(c)  Chester v Afshar 3.05 A  similar conclusion applies in relation to a different attempt to import authorities dealing with clinical negligence into the area of non-medical professional negligence. In Chester v Afshar,1 a surgeon negligently failed to warn the claimant patient of risks associated with an operation she was about to undergo. The surgeon performed the operation non-negligently but one of the unmentioned risks eventuated and the claimant developed cauda equine syndrome as a result. The trial judge held that, if the surgeon had explained the risks to the claimant, she would still have undergone the operation, but later. It followed, at least on an orthodox view,2 that the claimant could not satisfy the ‘but for’ test. The House of Lords, by a majority of 3 to 2, nevertheless held the surgeon liable. As Lord Hoffmann has written: ‘… the case is another illustration of how the causal requirements which the law prescribes for liability may vary from the standard criteria when the courts think the basis upon which liability is imposed requires such a difference.’3 The courts may think that the ‘but for’ test should be abandoned on the facts of Chester, but in White v Paul Davidson & Taylor,4 a solicitors’ negligence case alleging failure to advise a tenant that a landlord could not rely on a notice to quit, the Court of Appeal rejected a submission that Chester applied so that the claimant need not satisfy the ‘but for’ test. Arden LJ restricted Chester to cases of failure to obtain consent to medical treatment. It seems unlikely that Chester would apply in solicitors’ negligence cases, except conceivably in the case where a solicitor fails to warn a client of the risks of a course of action, such as applying for a freezing order, before the client gives instructions to undertake it.5 1 [2004] UKHL 41, [2005] 1 AC 134. 2 It is submitted that Stapleton’s suggestion that the case may be explained on orthodox grounds is unlikely to be accepted in court. See ‘Occam’s Razor Reveals an Orthodox Basis for Chester v Afshar’ (2006) 122 LQR 426. 3 (2005) 121 LQR 592 at 602. 4 [2004]  EWCA  Civ 1511, [2005]  PNLR  15, at [33] and [40]. See also Beary v Pall Mall Investments [2005] EWCA Civ 415, [2005] PNLR 35 (financial advisor), where the Court of Appeal was considerably more robust in rejecting a similar argument on behalf of the claimant. 5 Levey (2004) 101 Law Society’s Gazette 44.

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3.06  Causation and quantum of damages in contract and tort

(d)  Misrepresentation cases 3.06 Doubt has been cast on how the ‘but for’ test should be applied in misrepresentation cases. In a claim for negligent or fraudulent misrepresentation, it is necessary to distinguish between two questions as to inducement or causation: (a) What would the claimant have done if no misrepresentation had been made at all? (b) What would the claimant have done if, instead of hearing or reading the misrepresentation, s/he had been told the true position? Suppose that I am thinking of buying a house. Nearby is an empty shop. The estate agent falsely tells me that it will soon open as a branch of Waitrose. In fact it will soon be turned into a nuclear reprocessing centre. Question (i) asks whether I would have bought the house if I had been told nothing about the plans for the shop. Question (ii) asks whether I would have bought the house if I  had been told the true plans for the shop, in other words that it would soon be turned into a nuclear reprocessing centre. In misrepresentation cases outside the field of professional negligence it is generally sufficient for the claimant to answer question (i), rather than question (ii), and to show that, if no misrepresentation had been made at all, s/he would not have entered into the transaction. See per Christopher Clarke J  in Raiffeisen Zentralbank Osterreich AG  v the Royal Bank of Scotland Plc1 and authorities cited there, including Downs v Chappell.2 In the third edition of this book,3 we considered a suggestion, based on this, that a distinction was to be drawn, in assessing causation, between acts and omissions: between cases in which a solicitor was sued for having negligently failed to give proper advice, and those in which a solicitor was sued for having negligently given incorrect information. It had been suggested that, in cases in the second category, it was not necessary for claimants to show that they would not have acted as they did if they had been given the correct information. The suggestion was, however, rejected in Hagen v ICI Chemicals and Polymers Ltd,4 and has now been further rejected in Thomas v Albutt.5 It appears from those cases that, in all cases, (a) it is necessary to ask what the claimant would have done if the defendant had given him/her non-negligent advice or information,6 and that (b), at least in the professional negligence context, it is not correct simply to ask what the claimant would have done if there had been no misrepresentation by the defendant but everything else had remained the same. In other words, it is not correct to ignore question (a). A  further elaboration on the correct question relating to the defendant’s conduct, if there had been no negligence, is considered below at para 3.09. 1 [2010]  EWHC  1392 (Comm), [2011] 1 Lloyd’s Rep 123, at [174]–[191]. See also Marme Inversiones 2007 SL v Natwest Markets Plc [2019] EWHC 366 (Comm), per Picken J at [298]. 2 [1997] 1 WLR 426 (CA) per Hobhouse LJ at 433E and 441B–C. 3 At paras 3.09 to 3.11. 4 [2002] Lloyd’s Rep PN 288, per Elias J at [109]–[127].

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Factual causation  3.08 5 [2015] EWHC 2187, [2015] PNLR 29, per Morgan J at [427]–[435]. 6 See also Barker v Baxendale-Walker Solicitors [2017] EWCA Civ 2056, [2018] 1 WLR 1905, which proceeds on the same basis.

3.07 Similarly, it is thought that a dictum of Stephenson LJ in JEB Fasteners v Marks & Bloom,1 to the effect that in misrepresentation cases it is sufficient to show that a misrepresentation need only play ‘a real and substantial part’ in the claimant’s decision in order to count as a cause of the claimant’s loss, should not be taken as the test of causation in solicitors’ negligence cases. The other two members of the court did not apply this test, and the test normally applied in non-medical professional negligence cases is the ‘but for’ test. 1 [1983] 1 All ER 583, CA.

2  How would the defendant have acted? 3.08 In order to apply the ‘but for’ test, it is necessary, first, to consider what the defendant would have done if there had been no negligence, and secondly how the claimant would have responded to the defendant’s different and hypothetical conduct. It is suggested that, in solicitors’ negligence cases as in medical negligence cases, the question of what the defendant would have done must be considered in two ways. The test can best be explained by reference to Hirtenstein v Hill Dickinson LLP,1 a decision of Leggatt J. Mr Hirtenstein wished to buy a yacht. He engaged Hill Dickinson to act for him on the purchase. The seller was a special purchase vehicle company with no assets. Mr Lawson of Hill Dickinson negligently advised Mr Hirtenstein that he had obtained a personal guarantee from Mr Candy, the owner of the special purpose vehicle seller, which covered the condition of the yacht. Mr Hirtenstein bought the yacht. A  few hours later, the engines failed. Mr Hirtenstein discovered that Mr Candy’s guarantee did not cover the condition of the yacht, including the condition of the engines, contrary to what Mr Lawson had told him. Mr Hirtenstein sued Hill Dickinson. As to causation, the question was what would have happened if Mr Lawson had not given the negligent advice to Mr Hirtenstein. The normal approach for claimants in these circumstances is to assert that the solicitor should have acted non-negligently, and that if the solicitor had acted non-negligently then the claimant’s loss would not have occurred. Mr Hirtenstein therefore alleged that, if Mr Lawson had behaved non-negligently, he would have asked Mr Candy for a guarantee covering the condition of the yacht, and that, if that had been done, Mr Hirtenstein’s loss would have been avoided. But the judge rejected that allegation of negligence: he held that Mr Lawson could, without negligence, have decided not to request a guarantee from Mr Candy which covered the condition of the yacht. The judge went on to hold, however, that that finding was not fatal to Mr Hirtenstein’s claim. This was because the judge also found that, if Mr Lawson had not been negligent, he would have realised that he had not requested a guarantee from Mr Candy which covered the condition of the yacht; and that, in that case, 87

3.08  Causation and quantum of damages in contract and tort he, Mr Lawson, would have sought such a guarantee from Mr Candy, even though the law of negligence did not require him to do so. Mr Hirtenstein was therefore entitled to be put in the position he would have been in if Mr Lawson had sought the relevant guarantee from Mr Candy, even though Mr Lawson would not have been negligent if, having realised that the guarantee sought from Mr Candy did not cover the condition of the yacht, he had decided not to ask Mr Candy for such a guarantee. Leggatt J said:2 ‘The correct legal approach in a situation of this kind was clearly analysed by Hobhouse LJ in Joyce v Merton, Sutton and Wandsworth Health Authority [1996] 7 Med LR 1, 20, in a passage approved by the House of Lords in Bolitho v City & Hackney Health Authority [1998] AC 231 at 240: “Thus a plaintiff can discharge the burden of proof on causation by satisfying the court either that the relevant person would in fact have taken the requisite action (although she would not have been at fault if she had not) or that the proper discharge of the relevant person’s duty towards the plaintiff required that she take that action. The former alternative calls for no explanation since it is simply the factual proof of the causative effect of the original fault. The latter is slightly more sophisticated: it involves the factual situation that the original fault did not itself cause the injury but that this was because there would have been some further fault on the part of the defendants; the plaintiff proves his case by proving that his injuries would have been avoided if proper care had continued to be taken.”

In this case I am satisfied that Hill Dickinson would in fact have taken the requisite action (requesting a personal guarantee covering the Yacht’s condition from Mr Candy) even though they would not have been negligent if they had not. I must therefore proceed to assess what would have happened in that event.’ It follows from this that a claimant may prove their case, as to what the defendant would have done if it had not been negligent, in either of two ways: (a) by proving that, had this particular defendant not made the negligent error, then this particular defendant would, regardless of what the law of negligence required of him/her, have acted in a way which would have avoided the loss claimed by the claimant; or, if (a) fails, (b) by proving that, had this particular defendant not made the negligent error, then, in order to act non-negligently, it would have been necessary for this defendant to act in a way which would have avoided the loss claimed. (a) depends on what this particular defendant would have done; (b) depends upon what a non-negligent defendant would have done if s/he had discovered the negligence which has been proved. In cases where a range of advice would have been non-negligent, in assessing (b) the court should work on the basis that the defendant would have given advice that was ‘broadly in the middle rather than at the edges of advice which might have been given without negligence’.3 The final point in relation to the defendant’s 88

Factual causation  3.10 conduct is that it must be assessed on the balance of probabilities rather than the loss of a chance basis,4 which we discuss in the next section. 1 [2014] EWHC 2711 (Comm). 2 At [90]. See also Levicom International Holdings BV v Linklaters [2009] EWHC 812 (Comm) (Andrew Smith J), at [328]–[332]. The Court of Appeal did not find it necessary to decide or comment on this issue: see [2010] EWCA Civ 494, [2010] PNLR 29, per Stanley Burnton LJ at [255]. 3 Magical Marking Ltd v Ware & Kay LLP [2013] EWHC (59) (Ch), per Briggs J at [157]. 4 Hirtenstein v Hill Dickinson LLP, above, per Leggatt J at [85].

3  How would the claimant have acted? (a)  General test 3.09 In most cases, having proved negligence, a claimant must prove what s/he would have done if there had been no negligence. The claimant’s case may either be that the defendant failed to give some piece of advice or failed to take some particular step (negligent omissions), or that the defendant gave some advice or took some step which should not have been taken (negligent acts). In either case, the question is what the claimant would have done if there had been no negligence, and the claimant must prove this on the balance of probabilities. This was reaffirmed in Perry v Raleys Solicitors,1 which we discuss below at para 3.12 in relation to the loss of a chance doctrine. Thus, in assessing what the claimant, or indeed the defendant, would have done if there had been no negligence, the court applies the traditional balance of probabilities, or ‘all or nothing’, approach. If the court is persuaded that there is a 51%, or greater, chance that the claimant would have acted in a particular way, then it proceeds on the basis that s/he definitely would have acted in that way. If the court’s assessment is that there was only a 49%, or lower, chance that the claimant would have acted in that way, then it proceeds on the basis that s/he definitely would not have acted in that way.2 So far as this first stage is concerned, in Perry Lord Briggs emphasised that the parties must have ‘the full benefit of an adversarial trial’.3 This presumably means that, unlike the position in relation to the second stage of the loss of a chance doctrine (see para 3.24, below), at this first stage of determining what the claimant would have done if there had been no negligence the claimant should not receive the benefit of any doubt, and must prove his/her case in the normal way. 1 [2019] UKSC 5, [2019] 2 WLR 636, per Lord Briggs at [20]. See also Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113, CA. 2 Perry, at [23]. 3 Perry, at [24].

3.10 Depending on the facts, the court’s analysis of causation may be complex. In BBL  v Eagle Star,1 the reason why Phillips J  found that the claimant had not relied upon the defendant’s valuation in deciding whether to make a loan was that the main purpose of obtaining the valuation was to satisfy 89

3.11  Causation and quantum of damages in contract and tort Eagle Star, the claimant’s indemnity insurers. The judge indicated, however, that he would have found the defendants liable if Eagle Star had relied upon the valuation (which they had not) because the claimant would not have entered the transaction without Eagle Star’s agreement. In N M Rothschild & Sons v Berensons,2 a lenders’ claim,3 the defendants were held liable to the claimant even though the claimant had not seen the certificate of title, contained in the Funds Request, which the defendants had negligently completed, because ‘all those lending would be doing so on the basis that the solicitors had provided to Barclays Bank a true and accurate Funds Request’.4 1 [1995] 2 All ER 769 at 793h–796d. 2 [1997] NPC I5, CA. 3 See further Chapter 10. 4 Transcript, p 8 per Saville LJ.

(b)  Burden of proof 3.11 Despite the occasional suggestion to the contrary,1 it is settled by Wilsher v Essex Area Health Authority2 and Allied Maples Group Ltd v Simmons & Simmons3 that the burden of proving the causal link between the defendant’s act and the claimant’s loss is squarely on the claimant. But this does not necessarily mean that the claimant must call direct oral evidence to show what would have occurred. In Cavendish Funding Ltd v Henry Spencer & Sons Ltd4 it was held that the claimant had relied upon the defendants despite the absence of direct evidence from the claimant as to what it would have done. The judge was able to reach this conclusion by inference from the agreed or unchallenged documents in the claimant’s loan file; the Court of Appeal upheld his finding. 1 See Heywood v Wellers [1976] QB 446 at 459, CA. 2 [1988] AC 1074. 3 [1995] 1 WLR 1602 (CA). See Boateng v Hughmans [2002] Lloyd’s Rep PN 449, CA, for a claim in which the claimant failed to satisfy the burden of proof. 4 [1998]  PNLR  122, CA. In so doing the Court of Appeal followed O’Donnell v Reichard [1975] VR 916.

4  How would third parties have acted? Damages for the loss of a chance (a)  The loss of a chance doctrine 3.12 In Perry v Raleys Solicitors,1 the Supreme Court approved the use of the loss of a chance doctrine in claims against solicitors for negligence leading to the loss of either (i) litigation, or (ii) the opportunity to achieve a more favourable outcome in a negotiated transaction. Lord Briggs, with whom the other judges agreed, said at [20] that: ‘For present purposes the courts have developed a clear and commonsense dividing line between those matters which the client must 90

Factual causation  3.14 prove, and those which may better be assessed upon the basis of the evaluation of a lost chance. To the extent (if at all) that the question whether the client would have been better off depends upon what the client would have done upon receipt of competent advice, this must be proved by the claimant upon the balance of probabilities. To the extent that the supposed beneficial outcome depends upon what others would have done, this depends upon a loss of chance evaluation.’2 We have already considered the first stage of this test, which concerns proving, on the balance of probabilities, what the claimant would have done if there had been no negligence, at para 3.09, above. 1 [2019] UKSC 5, [2019] 2 WLR 636. 2 At [24].

3.13 As to the second stage, of assessing what a third party other than the claimant or defendant would have done, however, the court applies the loss of a chance evaluation. As to what that evaluation is, Lord Briggs approved the Court of Appeal’s decision in Allied Maples v Simmons & Simmons,1 which was also a solicitors’ negligence case. In Allied Maples, Stuart-Smith LJ, with whom Hobhouse LJ agreed, said that where the claimant’s loss depends on showing what a third party would have done if the defendant had given the appropriate advice, the claimant will succeed if there is a substantial chance that the third party would have acted so as to avoid the loss which the claimant claims. If the claimant succeeds in proving there was such a substantial chance, then the court will quantify damages by discounting the total sum claimed to reflect the percentage chance that the loss would have been avoided. So if due to my solicitor’s negligence I  lost a 30% chance of winning £100,000 then I  would be entitled to £30,000 in damages. In relation to this second stage, there is a ‘general rule that, for the purpose of evaluating the loss of a chance, the court does not undertake a trial within a trial’.2 1 [1995] 1 WLR 1602 at 1611B and 1618H. 2 Perry v Raleys Solicitors [2019] UKSC 5, [2019] 2 WLR 636, per Lord Briggs at [24], and see 12.33ff below.

(b)  In which type of case must the doctrine be applied? 3.14 The choice between assessing a contingency according to either the loss of a chance doctrine, or on the balance of probabilities, may benefit either the claimant or the defendant, depending upon what the chances are. Suppose that, in relation to a given issue, the claimant has a 51% chance of success. On that assumption, it will be in the interests of the claimant that that issue be decided on a balance of probabilities basis, since in that case a 51% chance of success will lead to the court treating the claimant as if there were a 100% chance of success. For the same reason, in such a case it will be in the interests of the defendant for that issue to be determined on a loss of a chance basis, since 91

3.15  Causation and quantum of damages in contract and tort in that case the defendant will only have to compensate the claimant for 51% of whatever damage was caused by that issue. The cases establish, however, that, in relation to issues which are the subject of the loss of a chance doctrine, the use of the doctrine is mandatory: a claimant cannot choose whether or not to rely on the loss of a chance approach, depending on whether it suits his or her interests on the facts of that particular case.1 The result of this is that it may be of considerable importance to determine in which sort of case the court must use the loss of a chance doctrine, and in which sort of case it must not use it. 1 See Parker v SJ Berwin & Co [2008] EWHC 3017 (QB), [2009] PNLR 17 (Hamblen J), and Assetco plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291, per Bryan J at [406]–[408].

3.15 The loss of a chance doctrine does not apply in personal injury or clinical negligence cases.1 Further, even in the realm of non-medical professional negligence cases, it is clear that it is not simply a question of asking whether part of the claimant’s case on loss involves asserting that, absent negligence, a third party would have acted differently, and concluding that, if such a question does arise, then the loss of a chance doctrine must be used. In Wellesley Partners LLP v Withers LLP,2 the Court of Appeal had to consider a number of cases in which it had been held that the assessment of loss of profits following torts or breaches of contract should be done without reference to the loss of a chance doctrine. For example, in Vasiliou v Hajigeorgiou,3 Patten LJ said at [22] that: ‘… caution needs to be exercised in identifying the contingency which is said to represent the lost chance. The loss of a chance doctrine is primarily directed to issues of causation and needs to be distinguished from the evaluation of factors which go only to quantum.’ But how does one tell whether an issue which concerns the actions of third parties relates to causation, so that the loss of a chance doctrine must be used, or to quantum, so that it must not be used? The cases in which the loss of a chance doctrine had not been used were distinguished in Wellesley, though Tettenborn has suggested that the court’s explanation of the basis on which that was done is not entirely convincing.4 It is thought that the reason for this is that the division between cases in which the loss of a chance doctrine must be used and those in which it must not be used is a difficult one.5 Nevertheless, given that large sums may turn on it, it is necessary to form a view as to how to tell whether, in any given case, the loss of a chance doctrine must be applied. 1 Gregg v Scott [2005] UKHL 2, [2005] 2 AC 176. 2 [2015] EWCA Civ 1146, [2016] Ch 529 at [101]–[108]. 3 [2010]  EWCA  Civ 1475, CA. See also Parabola Investments Ltd v Browallia Cal Ltd [2010] EWCA Civ 486, [2011] QB 477, and Front Act, Owners of the Ship v Owners of the Ship Vicky 1 [2008] EWCA Civ 101, [2008] 2 All ER (Comm) 42. 4 ‘Professional liability and remoteness: contract v tort’, (2016) 32(1) PN 68. 5 See for example the discussion of Nugee J in Wellesley at first instance: [2014] EWHC 556 (Ch), [2016] PNLR 22 at [188]. As Lord Briggs said in Perry v Raleys Solicitors [2019] UKSC 5, [2019] 2  WLR  636 at [15]: ‘The assessment of causation and loss in cases of professional

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Factual causation  3.17 negligence has given rise to difficult conceptual and practical issues which have troubled the courts on many occasions’.

3.16 It is thought that it is against this background that the Supreme Court’s recent decision in Perry v Raleys Solicitors,1 which was decided after Wellesley, must be read, albeit Wellesley and the cases referred to in note 3 of the previous paragraph were not cited in Perry. Lord Briggs’s speech in Perry contains a review of the loss of a chance doctrine in the context of claims against solicitors. It appears from this speech that the paradigm type of claim in which damages for the loss of a chance will be awarded is where, due to the negligence of a professional, almost always a solicitor, the claimant has lost the opportunity to make a claim by litigation. Lord Briggs said that, if what the professional had caused the client to lose was a claim with substantial but uncertain prospects of success, then it would be ‘absurd’ to decide the professional negligence claim on an all or nothing basis, since in that case a claimant would receive nothing if the prospects of success were 49% but full damages if they were 51%.2 Another reason for using the loss of a chance doctrine in this sort of case was that most claims with substantial but uncertain prospects of success are settled, on a discounted basis, so that, in cases where there is no negligence of a solicitor and the claimant therefore does not lose their original litigation, the claimant will not usually receive either all or nothing. It may be said that, in this type of case, bearing in mind the intrinsic uncertainty of litigation, what the claimant has lost is best characterised as being a right to take a chance: ‘the loss is by definition no more than the loss of a chance’.3 Hence awarding damages for the loss of a chance appears entirely right. Claims that solicitors’ negligence has led to the loss of a right to bring litigation, or similar claims, are considered in more detail in chapter 12. 1 [2019] UKSC 5, [2019] 2 WLR 636 2 At [17]. See also per Patten LJ at [21] in Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475, CA. 3 Vasiliou, per Patten LJ at [21]. Further, ‘Sometimes the law treats the loss of a chance of a favourable outcome as compensatable damage in itself. The likelihood that the favourable outcome would have happened must then be quantified …’ Barker v Corus UK  Ltd [2006] UKHL 20, [2006] 2 AC 572, per Lord Hoffmann at [36].

3.17 Having stated that the loss of a chance doctrine applies to claims for negligence causing the loss of a right to litigate, Lord Briggs went on to consider the facts of Allied Maples,1 which for over 20 years has been the leading authority on the loss of a chance doctrine. It too was a claim against solicitors. He pointed out that Allied Maples: ‘was about the loss, due to negligence, of the opportunity to achieve a more favourable outcome in a negotiated transaction, rather than about the loss of an opportunity to institute a legal claim’.2 But he went on to say that there was no sensible basis for distinguishing between the two classes of case. It follows from this that the loss of a chance doctrine must be applied both in claims based on negligence leading to the loss 93

3.18  Causation and quantum of damages in contract and tort of a right to litigate, and in those based on the loss of an opportunity to achieve a more favourable outcome in a negotiation with a third party.3 We shall refer to the latter as commercial transaction cases. Further, as to such commercial transaction cases, in Assetco plc v Grant Thornton UK LLP,4 Bryan J referred to a category of case in which: ‘the claimant does not seek to establish as a matter of causation that he has lost the opportunity of acquiring a specific benefit which is dependent on the actions of a third party [in which case the loss of a chance doctrine would apply] rather he claims he has lost the opportunity to trade generally, and claims the loss of profits he would have made’. Further case law on this topic would be helpful, but it may be that this passage provides the distinction between the cases referred to in note 3 to para 3.15, above, in which the loss of a chance doctrine should not be used in assessing a claim for lost profits, and those in which it must be used. If the claimant’s case is based on the hypothetical actions of one or more specific third parties then the loss of a chance doctrine should be applied; if, on the other hand, the claim is one for the loss of trading profits in general, then the court takes a different approach, usually based on expert accountancy evidence which considers many contingencies, and does not apply the loss of a chance doctrine. 1 Above. 2 At [22]. 3 The latter category of case includes the facts of Wellesley v Withers (above). 4 [2019] EWHC 150 (Comm), [2019] Bus LR 2291, per Bryan J at [441].

3.18 Finally on this topic, it has also been suggested, obiter, that the loss of a chance doctrine applies in a case where a potential beneficiary under a will sues a solicitor for failing to ensure that a testator’s wishes to include the potential beneficiary in his/her will were implemented: it is applied in deciding what the testator would have done if there had been no negligence.1 1 Feltham v Freer Bouskell [2013] EWHC 1952, [2014] PNLR 2, per Charles Hollander QC at [96]–[112]. But see para 11.22, below.

(c)  Does the doctrine apply where the third party has given evidence? 3.19 In Gregg v Scott,1 Lord Hoffmann said that the reason why the claimant’s conduct was assessed on the balance of probabilities and a third party’s on a loss of a chance basis was a matter of policy. But he did not say what the policy was. In Stone Heritage Developments Ltd v Davis Blank Furniss,2  HHJ  Hodge QC sitting as a deputy High Court judge suggested, obiter, that the policy might be that it was likely to be difficult for a claimant to prove what third parties would have done. In the instant case, however, the third parties had given evidence so that this difficulty did not arise. The judge 94

Factual causation  3.21 suggested that, in cases where all potentially relevant material was before the court, the rationale for applying the loss of a chance approach was no longer present and he should apply the standard balance of probabilities test to determining what the third parties would have done. In Moda International Brands Ltd v Gateley LLP,3 however, Freedman J considered the issue in detail and concluded that, even where a third party had given evidence, the court should continue to apply the loss of a chance doctrine when considering what a third party would have done if there had been no negligence. One of his reasons was that the role of a third party in litigation is normally less than that of a party to the action, the third party may not have to give disclosure and may be less committed to giving evidence. Thus, even if a third party has given evidence, the court may not have all the material before it which would be available if the third party had been either claimant or defendant. Further, there might be practical difficulties if the question of whether to apply the loss of a chance doctrine depended on which witnesses had given evidence. 1 Above, at [83]. 2 Ch D, 1 June 2006 at [330]–[334]. Although the case went to the Court of Appeal, the latter did not deal with the loss of a chance issue: see [2007] EWCA Civ 765 at [47]. In 4 Eng Ltd v Harper [2008] EWHC 915 (Ch), [2009] Ch 91, David Richards J preferred to express no view on the correctness of Judge Hodge’s approach. 3 [2019] EWHC 1326 (QB), [2019] PNLR 27 at [176]–[177].

(d)  Claimants must show that their hypothetical behaviour would have been honest 3.20 A claimant who sues for negligence which led to him or her losing a claim in litigation must, in order to obtain damages for the loss of the chance of having the case tried in court, show that the potential claim was not simply a claim with a ‘nuisance value’, in other words, an unmeritorious claim which a defendant would nevertheless have paid something to settle in order to avoid the ‘nuisance’ of having to spend time and money fighting it.1 In Perry v Raleys Solicitors,2 Lord Briggs said that, by the same token, such a claimant had to show that their notional claim would have been an honest claim. This is presumably because dishonest claimants do not deserve compensation. Although Perry concerned claims for the loss of a claim in a compensation scheme similar to litigation, it is thought that this rule must apply to all cases in which the loss of a chance doctrine is applied. 1 Kitchen v Royal Air Force Association [1958] 1 WLR 563, per Lord Evershed MR at 575. 2 [2019] UKSC 5, [2019] 2 WLR 636 at [26].

(e)  Parties closely aligned to the claimant 3.21 In Veitch v Avery,1 the Court of Appeal considered a claim that due to solicitors’ negligence the claimant had lost the opportunity to make profits from a hotel. A  question arose as to what the claimant’s father would have 95

3.22  Causation and quantum of damages in contract and tort done if there had been no negligence. Auld LJ said that, in applying the loss of a chance doctrine, the father of the claimant should be treated as if he were the claimant, because father and son ‘were for practical purposes a unity’. As a result, the question of what the father would have done was to be decided on the balance of probabilities, rather than on the loss of a chance basis. In Assetco,2 Bryan J summed up the authorities on the issue of when other parties should count as the claimant, for the purposes of the loss of a chance doctrine, as follows ‘… there will be cases where an entity is, together with the claimant, for practical purposes a unity or is so closely connected or associated with the claimant as to justify the third party’s hypothetical conduct being judged on balance of probabilities rather than on a loss of a chance basis. The reality is that it is likely to be relatively rare that there is such unity, or such a close connection or association …’ 1 [2007] EWCA Civ 711, [2008] PNLR 7, per Auld LJ at [26]. 2 [2019] EWHC 150 (Comm), [2019] Bus LR 2291 at [455].

(f)  Burden of proof – loss of speculative or negligible chances 3.22 As to commercial transaction claims, in Allied Maples,1 Stuart-Smith LJ said, in the context of the loss of a chance doctrine, that the claimants had the burden of proving that they had ‘a real or substantial chance [of avoiding the loss claimed, if there had been no negligence] as opposed to a speculative one’. This is consistent with the point that, in a loss of litigation case, the claimant must prove that the lost claim had more than ‘nuisance value’,2 and more than a ‘negligible’ chance of success.3 Once the claimant has jumped that hurdle, however, the evidential burden switches to the defendant to show that the lost chance had low or minimal value.4 As to what counts as either a ‘speculative’ claim or a claim with ‘negligible’ prospects of success, if the chance which the claimant has lost is below 10% then that is likely to amount, in the lost litigation context, to a claim with negligible prospects of success, and, in the commercial transaction context, to a claim with speculative chances. In either case, no damages will be awarded for the lost chance.5 1 [1995] 1 WLR 1602, per Stuart-Smith LJ at 1614D and F. 2 See para 3.20, above. 3 In relation to lost litigation claims, see Mount v Barker Austin [1998]  PNLR  493, CA, and 12.42ff below, and Waraich v Ansari Solicitors [2019] EWHC 1038 (Comm), [2019] PNLR 24 (HHJ  Pearce). Proudman J  applied this principle to commercial transaction claims, too, in Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329 (Ch) at [34]–[38]. 4 In relation to lost litigation cases, see Mount (above); in relation to commercial transaction cases, see per Proudman J in Harding Homes (above), loc cit. 5 In relation to lost litigation claims, see the barrister’s negligence case of Thomas v Albutt [2015]  EWHC  2187, [2015]  PNLR  29, per Morgan J  at [461]. In relation to commercial transaction cases, see Harding Homes (above), per Proudman J at [167]–[168].

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Factual causation  3.24

(g)  Linked risks and independent risks 3.23 A problem may arise where the claimant’s chance of obtaining what it has lost, say a payment of £100,000, depends on the chance of the claimant overcoming not one but two hurdles, in the circumstances where each hurdle depends on the actions of a third party. A claimant might have a 20% chance of overcoming the first hurdle and a 50% chance of overcoming the second. Should the court multiply the two percentages, to arrive at a chance of 10% (50% × 20%), which would be worth £10,000, or should it take some other course? It is suggested that, if the chances of overcoming each risk are truly independent of each other, so that the chance of the claimant succeeding on risk A  has nothing to do with his/her chances of succeeding on risk B, then a multiplication in this way is the correct approach. If, on the other hand, the claimant’s chances of success on both issues depend on connected factors, for example if they both depend on the claimant’s credibility, then, in the example given, it is not appropriate simply to multiply the percentage chances, and the claimant’s chances of success should be assessed as being more than 10%.1 There may also be cases in which the court will assess the chances of each of three or more possible outcomes occurring, and assign values to each of those, and then add the values of each lost chance together in order to reach a final damages figure.2 Alternatively, the court may select one figure as representing the most likely result of negotiations, and assess the chance of that occurring.3 1 In the loss of litigation context, see Hanif v Middleweeks [2000] Lloyd’s Rep PN  920, CA, discussed at 12.48 below. In the commercial transaction context, see Assetco plc v Grant Thornton UK plc [2019] EWHC 150 (Comm), [2019] Bus LR 2291, per Bryan J at [447]–[449], disagreeing in this respect with Proudman J  in Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329 (Ch) at [41]–[42]. 2 Moda Brands Ltd v Gateley LLP [2019] EWHC 1326 (QB), [2019] PNLR 27, per Freedman J at [199]. 3 Malmesbury v Strutt & Parker [2007] EWHC 999 (QB), [2007] PNLR 29, per Jack J at [149].

(h)  When should the court give the claimant the benefit of the doubt? 3.24 In the context of claims for the loss of litigation, there is a wellestablished principle that if, due to the defendant’s negligence, it has become harder for the claimant to prove his/her case as to what a third party would have done, then, in applying the loss of a chance doctrine, the court will give the claimant the benefit of any doubt.1 Bearing in mind that Lord Briggs approved this principle in Perry v Raleys Solicitors,2 and his general approach of assimilating the two classes of claim for damages for the loss of a chance, it is suggested that the court may take a similar approach in relation to commercial transaction cases, if it can be shown that the defendant’s negligence has made it harder for the claimant to prove his/her case as to what third parties would have done. This could be either due to delay caused by the negligence, or because it 97

3.25  Causation and quantum of damages in contract and tort is hard for the claimant to obtain documents or witness evidence from the third party.3 1 See 12.42ff below. 2 [2019] UKSC 5, [2019] 2 WLR 636 at [18]. 3 Ibid. See also Football League v Edge Ellison [2006] EWHC 1462 (Ch), [2007] PNLR 2, per Rimer J at [286]; this was a commercial transaction case.

(i)  Examples of commercial transaction cases 3.25 It has been suggested above that the claims against solicitors in which the loss of a chance doctrine has been applied fall into two categories: claims for the negligent conduct of litigation, or of proceedings similar to litigation; and claims for negligence in relation to the negotiation of commercial transactions. Examples of the first category are considered below in chapter 12. As to the second category, the doctrine has been applied in a wide range of factual situations, including acting for a seller of land,1 advising on the terms of a business licence granted by a local authority,2 advising on the form of legal structure whereby an entrepreneur could jointly create a tourist attraction,3 advising on the purchase of shares in a business,4 advising on the terms of a guarantee to be given to a bank,5 advising on the terms whereby an investor might invest in a business,6 and, in the context of auditors, failing to spot that a company was being run fraudulently.7 1 Stovold v Barlows [1996] PNLR 91, Hartle v Laceys [1999] Lloyd’s Rep PN 315. 2 Finley v Connell Associates [2002] Lloyd’s Rep PN 62 (Ouseley J). 3 Ball v Druces & Atlee [2004] EWHC 1402 (QB), [2004] PNLR 39 (Nelson J). 4 Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 (CA). 5 Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329 (Ch). 6 Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146, [2016] Ch 529. 7 Assetco Plc v Grant Thornton UK LLP  [2019]  EWHC  150 (Comm), [2019] Bus LR  2291, Bryan J.

C THE SAAMCo PRINCIPLE: EXTENT OF THE DEFENDANT’S LIABILITY 1  General approach 3.26 In para  3.01, above we suggested, following the passage quoted there from Lord Nicholls, that there should be a two-stage approach to the question of causation and damages.1 The first stage was the predominantly factual enquiry which in solicitors’ negligence cases will generally amount to asking whether, but for the claimant’s breach of duty, the defendant would have suffered the loss claimed. If the claimant fails at that stage the claim fails. Assuming, however, that the claimant passes the ‘but for’ test, the law imposes further tests to determine the extent of the defendant’s liability. The tests applied at this second stage depend on value judgments as to (i) the kind and 98

The SAAMCo principle: extent of the defendant’s liability  3.26 (ii) the extent of damage for which it is fair to hold the claimant liable. Lord Nicholls said that those questions are answered by reference to ‘the reasons why the law has recognised the cause of action in question’. In many cases it was easy to determine which of the causal factors leading to the claimant’s loss should be treated as the factor which the law regarded as bearing responsibility for it. But, in the cases where this was difficult: ‘it is of crucial importance to identify the purpose of the relevant cause of action and the nature and scope of the defendant’s obligation in the particular circumstances. What was the ambit of the defendant’s duty? In respect of what risks or damage does the law seek to afford protection by means of the particular tort?’2 From 1997 until his retirement from the bench, the principal author of this approach was Lord Hoffmann. He originally described it as asking what the scope of the legal duty imposed was, but in a later article stated that the question was more accurately described as concerning the extent of the liability.3 We therefore use the latter term here.4 In the case commonly known as SAAMCo,5 he said that in tort the extent of the duty depended on the purpose of the rule imposing the duty, and in contract it depended on construing the agreement as a whole in its commercial setting; the extent of the liability, in the sense of the consequences for which a contracting party would be responsible if in breach of contract, depended on what the law regarded as giving best effect to the express obligations assumed by that party. In a subsequent lecture given in 1999, Lord Hoffmann said that the argument in difficult cases over causation was:6 ‘… almost always an argument over the law. It is an argument over the true scope of the rule which imposes liability. In particular, there are two kinds of questions about the rule which have to be answered before you can properly formulate the question of fact about causation. The first is to identify the grounds upon which the rule imposes liability. The second is to identify the kind of loss for which it provides compensation. Once those questions have been answered, the question of causation does indeed become a question of fact and usually a pretty obvious one at that.’ This approach is derived from Hart & Honoré. They give a simple example, in relation to statutes:7 ‘A bus company admits passengers in excess of the maximum imposed for the safety of the vehicle, and a pickpocket, taking advantage of the crush, steals a passenger’s property. The reason why in such cases there is no liability [sc: of the bus company] is to be found by asking what the purpose or scope of the statute is.’ The purpose of the statute is not to protect passengers from thieves, so the bus company is not liable for the theft, even though it passes the ‘but for’ test 99

3.27  Causation and quantum of damages in contract and tort because it would not have occurred if the bus company had not breached the statute. Lord Hoffmann’s approach has given rise to what may be called the SAAMCo principle. In Hughes-Holland v BPE Solicitors,8 the Supreme Court recently considered and reaffirmed that principle in the context of a claim against solicitors, and that decision, in turn, was re-considered by the Court of Appeal in the accountants’ negligence case of Manchester Building Society v Grant Thornton UK LLP.9 We consider the effect of those decisions below. The application of the SAAMCo principle to claims by lenders is discussed in detail in chapter 10.10  1 Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883 at [70].   2 [2002] UKHL 19, [2002] 2 AC 883 at [71].   3 (2005) 121 LQR 592 at 596.  4 Though in Hughes-Holland v BPE Solicitors [2017] UKSC 21, [2018] AC 599 at [38], Lord Sumption appeared to prefer the term ‘scope of duty’, while nevertheless pointing out that Lord Hoffmann regarded the issue as ‘a mere question of terminology’. It does not seem worth spending much time discussing which label is better.   5 But reported sub nom Banque Bruxelles SA v Eagle Star [1997] AC 191, HL, 212D–F.   6 ‘Common Sense and Causing Loss’, lecture to the Chancery Bar Association given on 15 June 1999. See also the discussion of remoteness below at para 3.51.  7 Causation in the Law (2nd edn, 1995) 103.   8 Note 4, above.   9 [2019] EWCA Civ 40, [2019] 1 WLR 4610. 10 See para 10.108ff, below.

2  In which type of case must the SAAMCo principle be applied? 3.27 It is clear from the decision in the Manchester Building Society case that, in cases to which the SAAMCo principle applies, the use of the principle is mandatory. In that case, accountants had negligently advised a building society that it could use hedge accounting. In reliance on the advice, the society entered into a series of fixed term mortgages which were hedged against long term swaps. It was therefore a case in which the claimant entered into transactions in reliance upon negligent advice. The trial judge nevertheless declined to apply the distinction, set out in SAAMCo, between ‘advice’ and ‘information’ cases.1 The Court of Appeal overturned his decision on that basis: ‘This was clearly a case in which the SAAMCo principle applied. MBS’s claim is for the foreseeable consequences of entering into the swaps in reliance GT’s negligent accounting advice. In my judgment the judge’s approach should accordingly have been to consider whether this was an “advice” or “information” case, as both parties submitted.’2 1 The distinction is discussed below. 2 See [2019] 1 WLR 4610 at [55].

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The SAAMCo principle: extent of the defendant’s liability  3.29 3.28 As in the case of the loss of a chance doctrine, as the use of the SAAMCo principle is mandatory in cases to which it applies, it is important to know in what type of case it does apply. Also in the Manchester Building Society case, Hamblen LJ said that the principle was a legal filter which was used to eliminate certain losses from the scope of a wrongdoing defendant’s liability. Other such filters were effective causation, remoteness, and failure to mitigate. The SAAMCo principle applied ‘in cases where foreseeable losses are suffered as a result of entering into a transaction in reliance on negligent advice and/or information’.1 Hence it appears that the principle applies in all cases in which the claimant enters into a transaction in reliance on negligent advice. But what about cases where there is a negligent omission to provide advice, and, had the correct advice been given, the claimant would not have entered into the transaction? Further, what about cases in which the claimant’s reliance results in the claimant doing something other than entering into a transaction, for example, commencing litigation? In BPE, Lord Sumption couched the question as to the application of the SAAMCo principle as being one of what damages were recoverable in a case where ‘but for the negligence of a professional adviser his client would not have embarked on some course of action’.2 It is thought that this question sets out the scope of the SAAMCo principle, at least so far as claims against solicitors are concerned: it must be applied in all cases in which, but for the negligence of a solicitor, the solicitor’s client would not have embarked on a particular course of action. It therefore applies to cases in which the negligence consists of a mere omission to act rather than a positive act, and to cases in which the claimant’s reliance involves doing something other than entering into a transaction. Further, in principle it is hard to see why it should not apply even in cases where the claimant was not a client of the solicitor, but in which, exceptionally, the solicitor nevertheless owed the claimant a duty of care. It would therefore appear that the principle applies to all cases in which solicitors are liable to claimants for negligence.3 The principle does not, however, apply to cases of fraudulent misrepresentation, breach of warranty, or possibly misrepresentation inducing a party to enter a contract contrary to Misrepresentation Act 1967, s 2(1).4 1 See [2019] 1 WLR 4610 at [49], [50]. 2 See [2018] AC 599 at [1]. 3 The SAAMCo principle also applies to claims for equitable compensation: Various Claimants v Giambrone & Law [2017] EWCA Civ 1193, [2018] PNLR 2, discussed below at para 4.56. 4 See [1997] AC at 215F–216D.

3 The SAAMCo principle in summary 3.29 The test which the court must apply in cases to which the SAAMCo principle applies has helpfully been summarised by Hamblen LJ in the Manchester Building Society1 case, as follows: ‘… the application of the SAAMCO principle may generally be addressed by considering the following: 101

3.30  Causation and quantum of damages in contract and tort (1) It is first necessary to consider whether it is an “advice” case or an “information” case. This is a necessary first step because the scope of the duty, and therefore the measure of liability, is different in the two cases. (2) It will be an “advice” case if it can be shown that it has been “left to the adviser to consider what matters should be taken into account in deciding whether to enter into the transaction”, that “his duty is to consider all relevant matters and not only specific matters in the decision” and that he is “responsible for guiding the whole decisionmaking process”.2 (3) If it is an “advice” case, then the negligent adviser will have assumed responsibility for the decision to enter the transaction and will be responsible for all the foreseeable financial consequences of entering into the transaction. (4) If it is not an “advice” case, then it is an “information” case and responsibility will not have been assumed for the decision to enter the transaction. (5) If it is an “information” case, the negligent adviser/information provider will only be responsible for the foreseeable financial consequences of the advice and/or information being wrong. (6) This involves a consideration of what losses would have been suffered if the advice and/or information had been correct. It is only losses which would not have been suffered in such circumstances that are recoverable.’ 1 [2019] EWCA Civ 40, [2019] 1 WLR 4610, at [54]. 2 The quotations in this paragraph are from Hughes-Holland v BPE Solicitors [2017] UKSC 21, [2018] AC 599, per Lord Sumption at [40].

3.30 It will be suggested below that the summary gives rise to two types of question: first, is the case an ‘advice’ case or an ‘information’ case? Secondly, in relation to cases which are ‘information’ cases, would the claimant’s loss have been suffered even if the advice or information which the defendant negligently gave had in fact been correct? In addition, the second question may give rise to a further issue: are there cases in which the claimant cannot recover loss because it is not the kind of loss from which a negligent solicitor has undertaken to protect the claimant, even though recovery of the loss is not screened out by asking whether the loss would have been suffered even if information which the solicitor gave had been correct? These issues are considered below.

4  ‘Advice’ cases and ‘information’ cases 3.31 In BPE, Lord Sumption said that the terminology ‘advice’ cases and ‘information’ cases 102

The SAAMCo principle: extent of the defendant’s liability  3.33 ‘has given rise to confusion largely because of the descriptive inadequacy of these labels … Information given by a professional man to his client is usually a specific form of advice, and most advice will involve conveying information. Neither label really corresponds to the contents of the bottle.’1 Nevertheless, it appears from both BPE and Manchester Building Society that these labels are still to be used.2 They must be viewed as terms of art whose definitions are as set out in the summary quoted above. 1 BPE at [39]. 2 In Various Claimants v Giambrone & Law [2017] EWCA Civ 1193, [2018] PNLR 2, the Court of Appeal criticised the use of these labels, and preferred ‘category 1’ and ‘category 2’, but that suggestion was not followed in the subsequent Manchester Building Society case, also in the Court of Appeal.

3.32 The summary set out above states that, in any case where the SAAMCo principle applies, it is necessary to ask whether the claim is an ‘advice’ case or an ‘information’ case. It appears from principle (4) of the summary that the default position is that cases are ‘information’ cases, in the sense that, if it cannot be shown that the case is an ‘advice’ case then it is an ‘information’ case. Note, though, that in BPE  Lord Sumption cautioned against regarding either category as either ‘normal’ or ‘special’.1 The definition of ‘advice’ case appears from principle (2) of the summary, and para [40] of BPE. It depends on showing that the advisor was responsible for all aspects of the decision as to whether the claimant should take the course of action which s/he is considering. An ‘information’ case, on the other hand, is a case in which: ‘… a professional adviser contributes a limited part of the material on which his client will rely in deciding whether to enter into a prospective transaction, but the process of identifying the other relevant considerations and the overall assessment of the commercial merits of the transaction are exclusively matters for the client (or possibly his other advisers).’2 1 BPE, above, at [44]. 2 BPE at [41].

3.33 The rationale for the distinction between the two types of case appears to be as follows. In cases where a claimant makes a decision to take a course of action based on both (a) an assessment of some risks which the claimant has itself made, and (b) an assessment of other and different risks which an advisor has made and in relation to which the advisor has advised the claimant, then, if loss follows, it may have been caused either by the risks which the claimant itself assessed or by the risks which the defendant advisor assessed. If, and to the extent that, the loss was due to the risks which the claimant assessed, the claimant cannot seek compensation from the defendant advisor. But if, and to the extent that, the loss was due to the risks on which the defendant advisor negligently advised then, if the advisor’s advice about the risks was negligent, 103

3.34  Causation and quantum of damages in contract and tort the claimant is entitled to recover compensation from the advisor for that loss. In SAAMCo, Lord Hoffmann illustrated the point by reference to his wellknown mountaineer example:1 ‘A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee … On what I have suggested is the more usual principle, the doctor is not liable. The injury has not been caused by the doctor’s bad advice because it would have occurred even if the advice had been correct.’ In the example, if the mountaineer had suffered the injury due to the weakness of his knee, the doctor would have been liable, but because the injury arises from risks of mountaineering which had nothing to do with the knee, the doctor is not liable. That explains ‘information’ cases. If, on the other hand, the defendant has negligently advised the claimant on all the risks relating to the transaction, then the defendant must bear the loss whatever the risk which caused it. 1 [1997] AC 191 at 213D–F.

3.34 It is thought that, at the level of principle, the distinction is clear.1 The difficulty, in some cases, comes in deciding which are ‘advice’ cases and which are ‘information’ cases. In BPE, Lord Sumption gave examples of cases at either end of the spectrum2: ‘A valuer or a conveyancer, for example, will rarely supply more than a specific part of the material on which his client’s decision is based. He is generally no more than a provider of what Lord Hoffmann called “information”. At the opposite end of the spectrum, an investment adviser advising a client whether to buy a particular stock, or a financial adviser advising whether to invest self-invested pension fund in an annuity are likely, in Lord Hoffmann’s terminology, to be regarded as giving “advice”. Between these extremes, every case is likely to depend on the range of matters for which the defendant assumed responsibility and no more exact rule can be stated.’ These descriptions have, however, been criticised for being ‘somewhat extreme caricatures’.3 In relation to Lord Sumption’s ‘advice’ example, Evans suggests that the clients of an independent financial advisor generally do not simply hand over the money and tell the advisor to make all the investment decisions. On the other hand, in relation to the ‘information’ example concerning conveyancers, after BPE the Court of Appeal held that Italian conveyancers who had advised UK and Irish clients buying properties off plan in Italy fell into the ‘advice’ 104

The SAAMCo principle: extent of the defendant’s liability  3.35 category because they were ‘guiding the whole decision-making process’.4 This case has been criticised, however,5 and it remains to be seen whether it will be followed other than in cases whose facts are identical. What it does show, though, is that applying the distinction between ‘advice’ and ‘information’ cases may be difficult. In most claims against solicitors, there will of course be a contractual retainer. It may therefore be said, following SAAMCo, that the question of whether a case is an ‘information’ or an ‘advice’ case is a matter of construing the retainer by objective contractual interpretation.6 But interpreting a contract, which may have few express terms, in order to determine whether the parties intended that the defendant would assume responsibility for a particular kind of loss may not be an easy, or policy-free, matter. It seems likely that it may give rise to further litigation in the future.7 1 As Hamblen LJ said in the Manchester Building Society case (above) at [57]. 2 See BPE at [44]. 3 Evans, ‘Solicitors and the scope of duty in the Supreme Court’ (2017) 33(3) PN 193. 4 Various Claimants v Giambrone & Law [2017] EWCA Civ 1193, [2018] PNLR 2. 5 See Davies, ‘Equitable compensation and the SAAMCO principle’ [2018] LQR 165, 168–171, in whose view the defendant ‘was offering legal advice on legal aspects of the transaction, and no more than that,’ so that the case should have been viewed as an ‘information’ case rather than an ‘advice’ case. Ryan finds this criticism ‘persuasive’: ‘SAAMCO re-explored: BPE and the law of professional negligence’ [2018] PN 71, footnote 41. 6 See [1997] AC 191, 212D–F. See Balen, ‘Duty of professional adviser to protect client from losses’, (2017) 33(4) PN 279. 7 At the time of writing, for example, permission to appeal to the Supreme Court has been given in the Manchester Building Society case.

5  The counter-factual: would the loss have been suffered if the information which the solicitor negligently provided had been true? 3.35 The effect of principles (5) and (6) in Hamblen LJ’s summary, above at para 3.29, is that in ‘information’ cases it is necessary to determine whether, if the information which the solicitor negligently provided had been true, the loss would still have been suffered. If it would, then no damages are recoverable, as a result of the application of the SAAMCo principle. Thus, in the mountaineer example set out above, the mountaineer would have suffered the same injury even if the information which the doctor provided, that the knee was healthy, had been true. As suggested above, this test is intended to screen out compensation for causes for which the negligent professional is not responsible. As Lord Sumption put it in BPE, ‘the question which it poses is whether the loss flowed from the right thing, ie from the particular feature of the defendant’s conduct which made it wrongful’.1 The effect of this principle is that, in cases where the defendant has breached a duty to take reasonable care to provide information on the basis of which the claimant will decide what to do, even if the claimant passes the ‘but for’ test, in assessing damages the court should compare (i) the position the claimant is in fact in with (ii) the position the claimant would have been in if the information had been correct. If this test 105

3.36  Causation and quantum of damages in contract and tort shows no loss then, unless there is some reason why the SAAMCo principle should not apply,2 the claimant should be awarded only nominal damages. Step (ii) has been described as the ‘counter-factual’.3 1 BPE at [38]. 2 Cases of fraudulent misrepresentation, breach of warranty, or possibly misrepresentation inducing a party to enter a contract contrary to Misrepresentation Act 1967, s  2(1). See [1997] AC 191 at 215F–216D. 3 Per Hamblen LJ in the Manchester Building Society case (above) at [84].

3.36 Two examples of the application of the counter-factual in ‘information’ cases are as follows. First, if the defendant is a valuer whose duty is limited to estimating the current value of a property, and does not extend to predicting later falls in the residential property market, then the defendant’s liability will be limited to the amount of any negligent over-valuation, assessed as at the date of the valuation. It will not include losses caused by later falls in the property market which it was not part of the defendant’s duty to predict.1 Secondly, if an actuary negligently advises a client that pensions with company A will attract statutory protection if A becomes insolvent, when they will not, and the client takes a pension with A only because s/he thought the pension would attract statutory protection, the client will recover nothing if his/her pension with A performs badly but A does not become insolvent: even if the information had been correct, the client would have been no better off, because the statutory protection for insolvency would not have been triggered.2 The counter-factual test has probably most often been applied in the context of lenders’ claims. Its detailed application is considered at para 10.115ff below. Note, for example, that in some cases the application of the principle means that no loss is recoverable, while in other cases the loss which passes the ‘but for’ test is the subject of a limit. 1 See the facts of SAAMCo itself. 2 Andrews v Barnett Waddingham LLP [2006] EWCA Civ 93, [2006] PNLR 24.

6  Is there a further SAAMCo filter? 3.37 In SAAMCo, Lord Hoffmann said that, in the context of a valuer whom the claimant had retained by contract, the contract included a duty of care and ‘The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking.’1 Lord Hoffmann also quoted a dictum of Lord Bridge of Harwich in Caparo Industries plc v Dickman:2 106

The SAAMCo principle: extent of the defendant’s liability  3.38 ‘It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless.’ These passages suggest that, in asking for which consequences a professional is liable, it is necessary to ask whether the loss claimed was a kind of loss or damage in respect of which the professional undertook a duty to the claimant. This issue may be dealt with under the heading of remoteness of damage, which is discussed below.3 Alternatively, it may, in effect, be dealt with in ‘information’ cases by asking whether the loss claimed would have been suffered if the solicitor’s negligent misrepresentation had been true. It is, however, possible that there may be cases in which the solicitor’s negligence is not most naturally characterised as being giving, or failing to give, negligent advice, yet it can still be said that the loss claimed is not the kind of loss in relation to which the solicitor agreed to hold the claimant harmless, so that recovery of the loss is prevented by the SAAMCo principle. Teare J took that view at first instance in Manchester Building Society,4 but as we have seen the Court of Appeal rejected his reasoning on the basis that he should have reached the same result by holding that the case was an ‘information’ case. Further, it has been suggested5 that the counter-factual could not be applied in Pearson v Sanders Witherspoon,6 because there was no giving of information or advice. Solicitors had negligently failed to conduct litigation with reasonable speed. As a result, the claimant was delayed in obtaining judgment against the defendant to the litigation, Ferranti. By the time judgment had been obtained, Ferranti had entered into receivership, so the claimant could not enforce his judgment against Ferranti and recovered no compensation. He claimed from the solicitors the compensation which Ferranti should have paid him. The Court of Appeal held that, unless a solicitor has notice of facts suggesting a risk of insolvency on the part of the defendant to litigation, the solicitor is not under a duty to protect the client from loss due to such insolvency: such loss is not the kind of loss against which it is the duty of the solicitor to protect the client. It is thought that this case suggests that there may be cases which are not aptly described as being cases in which solicitors negligently failed to give advice or information, but in relation to which a SAAMCo-type filter may be applied to damages, on the basis that the loss claimed is not loss of a kind against which the solicitors undertook to protect the claimant. 1 See [1997] AC 191 at 212E–F. 2 [1990] 2 AC 605, at 627. 3 At 3.49ff. 4 [2018] EWHC 963 (Comm), [2018] PNLR 27. 5 Evans, ‘Solicitors and the scope of duty in the Supreme Court’ (2017) 33(3) PN 193. 6 [2000] Lloyd’s Rep PN 151, CA. See 160 col 1 to 161 col 2.

3.38 Another case which should be considered in this context is Haugesund Kommune v Depfa ACS Bank.1 Depfa Bank was thinking of making a loan to Norwegian local authorities called Kommunes. Depfa instructed Norwegian solicitors called Wikborg Rein to advise it on whether the Kommunes had legal 107

3.39  Causation and quantum of damages in contract and tort capacity to enter into the proposed transactions. Wikborg Rein negligently advised that they did have legal capacity when in fact they did not. Depfa entered into the transactions and the Kommunes largely defaulted. The reason why the Kommunes did not repay Depfa, however, was not that they had lacked capacity to enter into the loans, instead it was that they could not afford to repay. Rix and Gross LJJ reached the same conclusion, namely that Depfa could not recover damages from Wikborg Rein, but by different routes. Peter Smith J agreed with both, so it cannot be said that the reasoning of either is fully authoritative. In Rix LJ’s view the case was an ‘information’ case rather than an ‘advice’ case. This was because the relevant advice of Wikborg Rein related to only one aspect of the transaction, namely the legal capacity of the Kommunes to enter into the loans. He continued that the question was therefore whether Depfa’s loss fell within the scope of Wikborg Rein’s duty. In Rix LJ’s view it did not, because the loss had been suffered due either to the lack of creditworthiness of the Kommunes, or to Depfa’s inability to enforce the loans against the Kommunes, but each of those were matters as to which Depfa had knowingly taken the risk. They were not the responsibility of Wikborg Rein.2 The case could be read as an example of applying the ‘counter-factual’ test referred to above at para 3.35, and indeed the defendant argued it in that way,3 but Rix LJ’s conclusion was couched in terms of asking whether the loss suffered was within the scope of the defendant’s duty, rather than simply whether the loss would have been suffered if Wikborg Rein’s advice had been correct. Hence the case could be read as being one in which the court did not apply the counter-factual, but rather asked whether the loss fell within the scope of the defendant’s duty. Turning to Gross LJ’s reasoning, he also considered that the loss did not fall within the scope of Wikborg Rein’s duty,4 and was therefore not recoverable. Thus it can be argued that both the reasoned judgments applied the test of asking whether the loss claimed was within the scope of the defendant’s duty, without asking whether the same loss would still have been suffered if the negligent advice had been correct. Further authority on whether Saamco may be applied in this way, without using the counterfactual referred to above, would be helpful. 1 [2011] EWCA Civ 33, [2011] 3 All ER 655, [2011] PNLR 14. See also, in the auditors’ context, Assetco plc v Grant Thornton UK LLP  [2019]  EWHC  150 (Comm), [2019] Bus LR  2291 (Bryan J). 2 Ibid, at [77]. 3 Ibid, at [42]. 4 Ibid, at [101]. It is thought that Gross LJ’s suggestion there that it did not matter whether the case was an ‘information’ or an ‘advice’ case is inconsistent with the Court of Appeal’s later decision in the Manchester Building Society case (above).

7  The burden of proof 3.39 In BPE, Lord Sumption dealt briefly with the question of the burden of proof. He said, in the context of the SAAMCo principle, that ‘it is an essential part of the claimant’s case that he was owed a relevant duty’.1 108

The SAAMCo principle: extent of the defendant’s liability  3.41 He held that the claimant had the burden of proving ‘facts which engaged the SAAMCo principle’. The effect of this is that, in principle, a claimant in a case to which the SAAMCo principle applies must both plead and prove facts which show that the damages which are claimed are recoverable after application of the SAAMCo principle. In practice, it is doubtful how often such cases are pleaded in particulars of claim: normally a defendant pleads a case in the defence to the effect that the SAAMCo principle limits damages, and the claimant responds in the reply. It remains to be seen whether, as to pleading, this practice will change following Lord Sumption’s remarks. Nevertheless, Lord Sumption’s conclusion on this point favours defendants. It may be that there will be cases in the future which turn on the burden of proof. 1 Above, [2018] AC 599, at [53].

8  Failure to report a fact which was fundamental to the claimant’s decision to proceed 3.40 A final element of the BPE decision is that Lord Sumption overruled cases in which it was said that there was no SAAMCo limit on damages because the information which the solicitor had failed to report was fundamental to the claimant’s decision to proceed with the transaction.1 This aspect of the decision is considered below at para 10.125ff. 1 See [2018] AC 599 at [51].

9  New intervening causes and alternative causes 3.41 Once it has been shown that the defendant’s conduct was a ‘but for’ cause of the loss, the question may arise whether other causes, such as the conduct of the third party or the claimants themselves, should be treated as the cause of the loss. In Kuwait Airways,1 Lord Nicholls said that: ‘In most cases, how far the responsibility of the defendant ought fairly to extend evokes an immediate intuitive response. This is informed common sense by another name. Usually, there is no difficulty in selecting, from the sequence of events leading to the plaintiff’s loss, the happening which should be regarded as the cause of the loss for the purpose of allocating responsibility.’ Stapleton makes a similar point:2 ‘Of course, the law is never overburdened by a huge range of historical factors leading to an outcome because the elements of a cause of action that precede this issue in the analysis, such as duty and breach, focus the cause-in-fact inquiry only on the few factors of legal concern.’ 109

3.42  Causation and quantum of damages in contract and tort Lord Nicholls continued: ‘In other cases, when the outcome of the second inquiry is not obvious, it is of crucial importance to identify the purpose of the relevant cause of action and the nature and scope of the defendant’s obligation in the particular circumstances. What was the ambit of the defendant’s duty? In respect of what risks or damage does the law seek to afford protection by means of the particular tort? Recent decisions of this House have highlighted the point. When evaluating the extent of the losses for which a negligent valuer should be responsible the scope of the valuer’s duty must first be identified: see [SAAMCo]. In Reeves v Metropolitan Police Comr [2000] 1 AC 360 the free, deliberate and informed act of a human being, there committing suicide, did not negative responsibility to his dependants when the defendant’s duty was to guard against that very act.’ To paraphrase, it is suggested that, in such difficult cases where there are two or more plausible candidates as to the cause of the claimant’s loss to which the court should ascribe legal responsibility, the SAAMCo approach, as suggested at paras 3.37–3.38 above, of asking what is the kind, and extent, of loss from which it is the purpose of the relevant tort to protect the claimant, may help to answer the question of whether it is the defendant’s conduct, or the other possible cause, to which liability should be ascribed. 1 Above, [2002] 2 WLR 1353 at [71]. 2 [2003] LQR 388 at 392.

3.42 As Lord Nicholls also said in Kuwait,1 principles which are used to limit loss ‘assist in promoting some consistency of general approach’ but ‘these are guidelines, some more helpful than others, but they are never more than this’. So there are no hard and fast rules. One may, however, suggest that, in the context of negligence, where the defendant’s negligence is a ‘but for’ cause of the claimant’s loss but there is an alternative candidate for the cause to which legal liability might be attached, there are some general guideline principles which may apply. 1 [2002] 2 WLR 1353 at [70].

(a)  Claimant’s conduct 3.43 Where the claimant’s conduct is at fault, there may be a deduction from damages on account of contributory negligence, discussed below in chapter 8. Alternatively, the defendant may be able to argue that the claimant’s conduct invokes the doctrine of volenti non fit injuria or novus actus interveniens (new intervening cause) so as to excuse the defendant of liability. In order to constitute a new intervening cause, the conduct of the claimant must ‘obliterate’ the causative effect of the defendant’s conduct; if the defendant’s conduct 110

The SAAMCo principle: extent of the defendant’s liability  3.43 remains ‘an effective cause’ of the loss then there is no break in the chain of causation.1 An example of a professional negligence case in which the Court of Appeal held that the defendant’s conduct was the ‘occasion but not the cause’ of the claimant’s loss is Young v Purdy.2 The claimant retained the defendant solicitor to act for her in relation to claims against her former husband for ancillary relief. The law was that, if the claimant remarried before commencing a claim for financial provision for herself from her former husband, she was barred absolutely from making such a claim. The defendant knew that the claimant was living with another man. She instructed the defendant that she had no intention of remarrying. The defendant advised the claimant not to remarry pending the hearing of her proposed application for ancillary relief. The defendant wrongfully terminated her retainer by the claimant. Two days later, the claimant, acting in person, drew up a form seeking ancillary relief and lodged it at court. The claimant knew that she had to lodge the application for financial relief before remarrying, although she did not realise that her application was defective in that it failed to claim financial provision for herself. Three weeks later she remarried. The effect of remarrying, when taken with the defective application, was to bar absolutely any claim she might have had for financial provision for herself from her husband. Leggatt LJ said:3 ‘… the loss of the claimant’s right to claim was entirely due to the claimant acting on her own, failing to complete the Form 11 correctly and remarrying before her error had been rectified. These matters the solicitor could not, in my judgment, reasonably have been expected to foresee whether separately or in combination.’ It is submitted that the court ascribed principal responsibility for the loss to the fault of the claimant, and for that reason held that the defendant’s breach of duty was not the cause of the loss in law. Similarly, in Gorham v British Telecommunications plc,4 the claimant received negligent pensions advice from the defendant. Later, he learnt the true position. The court held that losses that the claimant suffered after he had learnt the true position were not caused by the defendant’s negligence. On the other hand, the ‘extrication’ cases, where a claimant reasonably attempts to mitigate the effect of the defendant’s negligence, are examples of cases where the claimant’s conduct is not at fault and so does not negative the causal effect of the defendant’s negligence.5 Further, the former rule that a claimant could not recover loss caused by the claimant’s pre-existing ‘impecuniosity’, or, in non-legal language, lack of money, has been abandoned and is no longer the law.6 So if it costs a particular claimant more to take remedial action to reduce the effect of the defendant’s negligence because the claimant is poor, and has to borrow the money, the defendant must pay the extra cost: the defendant takes his victim as he finds him. 1 Borealis AG v Geogas Trading SA [2010] EWHC 2789 (Comm), [2011] 1 Lloyd’s Rep 482, per Gross LJ at 488 col 1 to col 2. See also Finecard International Ltd v Urquart Dyke Lord [2005] EWHC 2481 (Ch), [2006] PNLR 16 (patent agents) at [34] (Peter Smith J), and Assetco plc v Grant Thornton UK LLP  [2019]  EWHC  150 (Comm), [2019] Bus LR  2291, at [985] (Bryan J).

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3.44  Causation and quantum of damages in contract and tort 2 [1997] PNLR 130. 3 At 138G. 4 [2000] 1 WLR 2129, CA. See 2143H–2144C. 5 See per Lord Hoffmann in SAAMCo [1997] AC 191 at 219A–B, and para 9.68, below. See also per Hobhouse LJ in County Ltd v Girozentrale Securities [1996] 3 All ER 834, CA, at 857A–E: claimant not at fault so claimant’s conduct did not negative causation by defendant’s breach of duty. 6 Lagden v O’Connor [2003] UKHL 64, [2004] 1 AC 1067.

3.44 Although it was decided before SAAMCo, it is submitted that the result in the solicitors’ case of British Racing Drivers’ Racing Club v Hextall Erskine & Co1 may be interpreted in this way. The solicitors were found liable for failure to advise the board of the claimant company that a joint venture agreement for the acquisition of shares had to be approved by the company in meeting because one of the directors was interested in the contract. When the transaction was eventually put to the company at an extraordinary general meeting, the members refused to approve the contract and the company took steps to rescind it. After proceedings were commenced the company settled the litigation by reselling the shares to the interested director for £2.1m less than it had paid for them. It was argued that the loss suffered by the company was caused not by the negligence of the defendants but by the poor commercial judgment of the board. But Carnwath J  found that the loss ‘was within the reasonable scope of the dangers against which it was the solicitor’s duty to provide protection’.2 This seems right. The defendant should have protected the claimant against the danger that the board would make a contract with a director of substantial personal benefit to the director without the agreement of the company in meeting. 1 [1996] 3 All ER 667 (Carnwath J). Cf Tom Hoskins plc v EMW [2010] EWHC 479 (Ch) (Floyd J). 2 [1996] 3 All ER 667 at 681f.

(b)  Intervening acts of third parties 3.45 A similar principle applies in relation to third parties. If a third party’s wrongful conduct was conduct of a kind against which it was the defendant’s duty to guard the claimant, then the claimant should be able to contend that the defendant is liable to the claimant even though it might be argued that the loss was caused by the deliberate conduct of the third party. For an application of this principle in the context of auditors’ liability, see Man Nutzfahrzeuge AG v Freightliner Ltd.1 On the other hand, if the third party’s conduct passes the ‘but for’ test, but is not a risk against which the defendant had a duty to guard the claimant, and the third party’s conduct was not at fault, then the court may hold that the third party’s conduct does not prevent the defendant’s conduct from being counted as the cause of the loss in law. In Cook v S,2 the defendant solicitors acted for the claimant in divorce proceedings and negligently allowed her husband’s petition to be heard as an undefended suit. A  month 112

The SAAMCo principle: extent of the defendant’s liability  3.46 after pronouncement of the decree nisi, the defendant approached counsel, who wrongly advised that there was no point in the claimant defending the suit, even if it were possible. The judge considered that counsel’s advice, although mistaken, was not negligent. He held that counsel’s advice was not a new cause of the claimant’s difficulties, so it did not break the chain of causation. Further, the question often has to be addressed where the claimant is faced with litigation brought by a hostile third party as a consequence of, or after, the defendant’s negligence. The claimant may have no choice and be faced with an implacable third party. In both Barnes v Hay3 and Connor & Labrum v Regoczi-Ritzman4 the conduct of third parties in pursuing court proceedings, even to an unsuccessful conclusion, did not break the chain of causation because it was the solicitor’s duty to protect the client against litigation and within his or her contemplation that a failure to give appropriate advice before a transaction might expose the client to the risk of litigation. Further, in Agouman v Leigh Day,5 the claimants instructed solicitors who claimed to be experienced in international claims against large companies to pursue a multinational which had caused a large quantity of toxic waste to be dumped in landfill in the Ivory Coast. The claim was settled on the basis that the multinational would pay £30 million into a bank account with a branch of a French bank in the Ivory Coast. On application by a third party, the Ivorian courts froze the money. The defendant solicitors were advised that the Ivorian court system was of doubtful impartiality, and likely to favour the third party. As a result they settled with the third party for less than £30 million. The claimants sued the solicitors for the shortfall. Andrew Smith J  held that, although the corrupt nature of the Ivorian court system was arguably an effective cause of the loss, the defendant’s negligence was also an effective cause of it, so that there was no new intervening cause which broke the chain of causation: the defendant was still liable for the loss. 1 [2007] EWCA Civ 910, [2008] PNLR 6. This is a popular theme in claims against auditors: see Barings plc v Coopers & Lybrand [2003] PNLR 24 and Sasea Finance Ltd v KPMG [2000] 1 All ER  676, CA. In Sasea, the difficult case of Galoo v Bright Grahame Murray [1994] 1 WLR 1360, CA, was explained on the basis that the defendant auditors had no duty to warn against losses of the types incurred by the claimant, namely losses due to the fraud of employees of the company. This also appears to be Lord Hoffmann’s view of Galoo: see ‘Common Sense and Causing Loss’, lecture to the Chancery Bar Association, 15 June 1999 at pp 13–14. 2 [1967] 1 WLR 635, Lawton J. 3 (1988) 12 NSWLR 337, CA. 4 (1995) 70 P & CR D41–3, Robert Walker J. 5 [2016] EWHC 1324 (QB), [2016] PNLR 32, per Andrew Smith J at [119]–[120].

3.46 What if the third party’s conduct was not conduct against which the defendant had a duty to guard the claimant, but was a ‘but for’ cause of the loss, and the third party was also at fault? In Rahman v Arearose Ltd1 Laws LJ, with whom the other judges agreed, considered the submission that B’s later negligence always extinguishes the continuing causative effect of the negligence of A, an earlier tortfeasor. He said: ‘… it does not seem to me to be established as a rule of law that later negligence always extinguishes the causative potency of an earlier 113

3.47  Causation and quantum of damages in contract and tort tort. The law is that every tortfeasor should compensate the injured claimant in respect of that loss and damage for which he should justly be held responsible. To make that principle good, it is important that the elusive concept of causation should not be frozen into constricting rules.’ This suggests that there may be no clear rule as to this situation.2 In Webb v Barclays Bank plc & Portsmouth Hospital Trust,3 the first defendant’s negligence caused injury to the claimant, its employee. The claimant’s condition was then worsened by negligent treatment by the second defendant hospital. The Court of Appeal did not consider that the second defendant’s negligence meant that the first defendant was not liable for all the claimant’s injuries. In Luke v Kingsley Smith,4 it had to be assumed that solicitors A had negligently delayed the claimant’s claim so as to render it susceptible to be struck out for want of prosecution, but that solicitors B, who had been instructed in place of A, had then negligently under-settled the claim. Davis J considered that it was arguable that, if those assumptions were proved, A and B were both liable for all the damage which the claimant suffered. Further, in Vision Golf Ltd v Weightmans,5 solicitors A  had failed to apply for relief from forfeiture of a lease for their client the claimant. The claimant then instructed solicitors B. If B had acted swiftly, they could have applied in time for relief from forfeiture, but they failed to do so. Lewison J rejected the argument that B’s errors meant that A was not liable to the claimant for the whole loss.6 Of course, in such circumstances, A could then seek contribution from B.7 1 [2001] QB 351, CA, at [29]. See also Wright v Cambridge Medical Group [2011] EWCA Civ 669, [2011] Med LR 496. 2 In Horton v Evans [2006] EWHC 2808 (QB), [2007] PNLR 17, Keith J said at [53] that ‘the guiding principle is that there is no guiding principle in this area of the law’. He added, quoting Clerk & Lindsell, that four issues needed to be addressed: ‘Was the intervening conduct of the third party such as to render the original wrongdoing merely a part of the history of events? Was the third party’s conduct either deliberate or wholly unreasonable? Was the intervention foreseeable? Is the conduct of the third party wholly independent of the defendant, ie does the defendant owe the claimant any responsibility for the conduct of the intervening third party?’ 3 [2001] EWCA Civ 1141, [2001] Lloyd’s Rep Med 500. 4 [2003] EWHC 1559 (QB), [2004] PNLR 12. 5 [2005]  EWHC  1675, [2005] All ER (D) 675, Lewison J. See also Estill v Cowling, Swift & Kitchin [2000] Lloyd’s Rep PN 378, per Arden J at 395–6, where a solicitor’s attempt to argue that counsel’s negligence broke the chain of causation also failed. 6 A further attempt by negligent defendant solicitors to assert that the true cause of the loss was the acts of others failed in Redbus LMDS Ltd v Jeffrey Green Russell [2006] EWHC 2938 (Ch), [2007] PNLR 12, HHJ Behrens QC. 7 See Chapter 8.

(c)  Defendant’s conduct 3.47 Generally speaking, it will not help a defendant to argue that the true cause of the claimant’s loss was not the negligent act of the defendant on which the claimant relies, but rather a different negligent act of the defendant which 114

The SAAMCo principle: extent of the defendant’s liability  3.48 is not pleaded in the claimant’s particulars of claim. This is because, if correct, the answer to this contention would simply be for the claimant to amend the particulars of claim to rely on this further negligent act of the defendant. What, however, if the claimant’s limitation period for suing in respect of the further negligent act has expired so that it is no longer open to the claimant to sue the defendant in respect of the second negligent act? This was the position in Normans Bay Ltd v Coudert Brothers.1 Laws LJ, with whom Carnwath LJ agreed on this point, said: ‘… I have reached the clear conclusion that in principle a defendant should not be allowed to rely on wrong perpetrated by himself in order (in whole or in part) to break the chain of causation put forward by the claimant to establish and quantify the damage sustained by him by reason of the defendant’s breach of contract or tort. This may be seen (as Waller LJ expresses it: para 46) as an application of the general rule of the common law that a party may not rely on his own wrong to secure a benefit, and I agree that some support is to be found for that approach in the speech of Lord Browne-Wilkinson in Bolitho. But I think it is also consonant with modern ideas of causation now being developed in the cases. Authority supports the proposition that the resolution of causation issues, certainly in the law of tort, is by no means a merely fact-finding exercise; in many instances it is an evaluative judgment, concerned to establish the extent to which a defendant should justly be held responsible for what has befallen the claimant.’ It will be seen that the view expressed in the last sentence of this passage is consistent with the passages quoted above at paras 3.01 and 3.41 from Lord Nicholls as to the nature of causation in tort. As indicated in the quotation from Laws LJ, Waller LJ agreed with the principle which Laws LJ stated, though he supported it by slightly different reasoning. It therefore appears that, once the claimant has proved some negligence that caused him or her some loss, a defendant cannot argue that its own negligence, in relation to which the claimant is barred by limitation from suing, is an independent cause of the loss which the claimant has suffered, at least in loss of a chance cases such as Normans Bay. 1 [2003] EWCA Civ 215, The Times 24 March 2004. See per Laws LJ at [64]–[65] and Carnwath LJ at [69].

(d) Events 3.48 As to supervening causes which are not related to human agency, it is likely that the rules which apply generally in tort and contract would apply equally in professional negligence cases. If the event was foreseeable then the court is unlikely to hold that it negatived causation by the defendant if it was an event that occurred in the ordinary course of events and could reasonably 115

3.49  Causation and quantum of damages in contract and tort be anticipated.1 It if was a wholly unforeseeable event which could not be expected then the court might hold that its consequences fell outside the extent of the defendant’s liability to the claimant. 1 Monarch SS v Karlshamns Oljefabriker [1949] AC 196, HL.

D  REMOTENESS OF DAMAGE 1  The test in contract rather than in tort is generally applied 3.49 In deciding whether damage which a claimant claims is too remote to be recoverable, different tests are applied in contract and in tort. The test in contract is discussed further below, but, in summary, in most cases: ‘It remains the basic rule that a contract-breaker is liable for damage resulting from his breach if, at the time of making the contract, a reasonable person in his shoes would have had damage of that kind in mind as not unlikely to result from a breach.’1 In the tort of negligence, on the other hand, the test is whether, at the time of the negligence, it was reasonably foreseeable that, if the defendant were to be negligent, loss of the kind which is claimed might occur. It is generally thought that the test in contract will restrict a claimant’s damages more than the test in tort. The different between the two tests is that: ‘Damage may be of a kind which is reasonably foreseeable (and therefore recoverable in tort) yet highly unusual or unlikely (and therefore irrecoverable in contract).’2 In most claims against solicitors, the claimant will be able to assert that the solicitor owed them concurrent duties in contract and tort.3 In Wellesley Partners LLP v Withers LLP,4 the Court of Appeal held that, where there are concurrent duties in a claim against solicitors, the court will apply the contractual test of remoteness and not the test which is applied in negligence claims. The rationale for this is that, in such a case, the basis for the duty of care in tort is that there has been a voluntary assumption of responsibility by the defendant to the claimant, that the claimant will have had the opportunity to mention to the defendant any particular type of loss which might arise in the event of a breach of contract, and that the defendant will have had the opportunity to limit the extent of its liability.5 This distinguishes this type of case from the standard case in tort, where the parties are strangers, and the claimant has not instructed the defendant to act for him/her. 1 Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146, [2016] Ch 529, per Floyd LJ at [69]. 2 Ibid., at [74]. 3 See para 1.17, above. 4 Note 1, above. 5 See per Floyd LJ at [75]-[76], and [80], Roth J at [146], [151], and Longmore LJ at [186], [187].

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Remoteness of damage  3.52 3.50 What is the position in a case where the solicitor defendant owes the claimant no duty in contract, but only a duty of care, for example if advice is given for no fee so that there is no consideration and thus no contract between solicitor and claimant? The rationale just set out suggests that the court should also apply the contractual test of remoteness in such a case, even though the duty is owed only in tort. In Wellesley, Roth J suggested, obiter, that that would be the position.1 1 See [2016] Ch 529 per Roth J at [163].

2  What is the test of remoteness in contract? 3.51 In this section we consider the extent to which the traditional test of remoteness in contract, derived from Hadley v Baxendale,1 has been modified by the speeches of Lords Hoffmann and Hope in The Achilleas.2 In The Achilleas, Lord Rodger, with whom Baroness Hale agreed, applied what might be described as the orthodox view of remoteness in contract. Lords Hoffmann and Hope, on the other hand, set out a new test which turns on interpretation of the parties’ obligations; we call this the ‘contractual interpretation’ approach. At [87], Lord Walker agreed not only with Lord Rodger but also with Lords Hoffmann and Hope. There is therefore doubt as to whether the speeches of Lords Hoffmann and Hope form part of the ratio of The Achilleas. Subsequently, in The Sylvia,3 Hamblen J held that the effect of The Achilleas is that the court must apply an amalgam of the orthodox and the ‘contractual interpretation’ approaches. On the other hand, in Wellesley,4 Floyd LJ, while adverting to the debate as to the ratio of The Achilleas, did not feel it necessary to reach a conclusion as to what the ratio was. It appears to have been his view that the same result would be reached by applying either the orthodox or the contractual interpretation approaches.5 Subsequently, in Wright v Lewis Silkin LLP,6 the Court of Appeal applied only the orthodox test. It will be suggested below that, in relation to claims against solicitors, the circumstances in which the contractual interpretation approach will be applied will be limited. 1 (1864) 9 Exch 341. 2 Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008]  UKHL  48, [2009] 1 AC 61. 3 Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] EWHC 542 (Comm), [2010] 2 Lloyd’s Rep 81 (Hamblen J) at [40]. 4 Above, per Floyd LJ at [69]–[71]. 5 See [81]–[83]. It can, therefore, be said that Floyd LJ did proceed on the basis that the test advocated by Lord Hoffmann in The Achilleas had to be taken into account, and he did not suggest that it was to be ignored. 6 [2016] EWCA Civ 1308, [2017] PNLR 16, per Jackson LJ at [62].

(a)  The orthodox approach 3.52 The classic formulation of the test of remoteness in contract is that stated by Alderson B in Hadley v Baxendale:1 117

3.53  Causation and quantum of damages in contract and tort ‘We think the proper rule in such a case as the present is this: where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such a breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.’ This is generally seen as comprising two limbs. Each limb is tested by reference to circumstances pertaining at the date when the contract was entered into. The claimant may succeed on remoteness in contract by showing that the loss claimed is either [limb (i)] of a type which may fairly and reasonably have been considered as arising in the normal course of events from such a breach of contract as occurred, or [limb (ii)] such as may reasonably be supposed to have been in the contemplation of both parties, at the time when they made the contract, as the probable result of such a breach. Limb (i) depends on what, at the moment when the contract was entered into, every reasonable person knows about what will occur, or is not unlikely to occur, in the normal course of future events; limb (ii) depends on what, at the time the contract was entered into, reasonable persons in the shoes of the parties would know about what would, or was not unlikely to, occur in the course of future events, bearing in mind special knowledge which those particular parties had at the time of entering into the contract. 1 (1854) 9 Exch 341 at 354–5.

3.53 Writing extra-judicially, Lord Hoffmann has suggested that the orthodox view employs only two concepts: degree of probability, and kind of loss.1 As to the first, what degree of probability of some future kind of loss being caused must a claimant show in order to prove, on the orthodox view of remoteness, that that kind of loss is recoverable and not too remote? In the Heron II2 the House of Lords gave various formulations, of which Lord Reid’s ‘not unlikely’ tends to be that most often quoted in the subsequent cases: see, for example, the formulation of Floyd LJ in Wellesley:3 ‘in my judgment the damage was of a kind which was in the reasonable contemplation of the parties as not unlikely to result from a breach’. 1 Hoffmann, ‘The Achilleas: custom and practice or foreseeability?’ [2010] Edin LR 47, at 52. Although note that ‘degree of probability’ must mean ‘degree of probability to reasonable persons in the positions of the contracting parties at the time when they entered into the contract.’ 2 Koufos v C Czarnikow Ltd [1969] 1 AC 350, HL, esp per Lord Reid at 388F. 3 Above, at [83].

3.54 As to the second ingredient, ‘kind of loss’, Lord Hoffmann has suggested that this, like the first ingredient, is ‘open to very considerable manipulation to achieve what the court considers to be a fair result’.1 The question is whether a particular kind of loss was, or was not, within the reasonable contemplation of 118

Remoteness of damage  3.55 the parties, at the time when the contract was made, as not unlikely to arise from a breach of contract. It is suggested that, from the legal advisor’s point of view, it may not be easy to be sure as to how a court will answer this question. This point is discussed further below at para 3.60ff. 1 Hoffmann, ‘The Achilleas: custom and practice or foreseeability?’, [2010] Edin LR 47, at 52.

(b)  The contractual interpretation approach 3.55 Dissatisfaction with the orthodox test may have led Lords Hoffmann and Hope to suggest what we have termed the ‘contractual interpretation’ test. The effect of Lord Hoffmann’s speech, read in the context of the rest of the speech, is that the rule that a party may recover losses which were foreseeable (‘not unlikely’), in other words, the orthodox view, is: ‘a prima facie assumption about what the parties may be taken to have intended, no doubt applicable in the great majority of cases but capable of rebuttal in cases in which the context, surrounding circumstances or general understanding in the relevant market shows that a party would not reasonably have been regarded as assuming responsibility for such losses …’1 Note that, even on this formulation, the orthodox view applies ‘in the great majority of cases’. But it is possible to show that it does not apply. Lord Hoffmann said2 that liability for damages must be founded on ‘the intention of the parties (objectively ascertained)’, since that was the basis of all contractual liability. In other words objective interpretation of the contract determines not only what counts as a breach of contract but also the extent of damages which a party may recover if there is a breach. Referring to SAAMCo,3 which had concerned surveyors’ implied duty to take reasonable care in a valuation, Lord Hoffmann continued4 that: ‘What is true of an implied contractual duty (to take reasonable care in the valuation) is equally true of an express contractual duty (to redeliver the ship on the appointed day). In both cases, the consequences for which the contracting party will be liable are those which “the law regards as best giving effect to the express obligations assumed” and “[not] extending them so as to impose [on the contracting party] a liability greater than he could reasonably have thought he was undertaking.”’ Lord Hoffmann’s quotations are from SAAMCo. He continued5 that in SAAMCo liability for damages attributable to a fall in the value of the property market had been excluded ‘on the ground that it was outside the scope of the liability which the parties would reasonably have considered that the valuer was undertaking’. The test which, in The Achilleas, he applied in considering whether the loss claimed was recoverable was ‘what these parties, contracting against the background of market expectations found by the arbitrators, would 119

3.55  Causation and quantum of damages in contract and tort reasonably have considered the extent of the liability they were undertaking’.6 He added that:7 ‘the question of whether a given type of loss is one for which a party assumed contractual responsibility involves the interpretation of the contract as a whole against its commercial background, and this, like all questions of interpretation, is a question of law.’ Note that the effect of a question being one of law rather than fact is that it becomes easier for appeal courts to overturn the decisions of first instance judges. Further, this question will have to be answered in accordance with the general principles of contractual interpretation, which have themselves been the subject of a considerable volume of recent authority. Turning to Lord Hope’s speech, this was to similar effect.8 Further, extra-judicially Lord Hoffmann has written that:9 ‘The question is: what obligation to make compensation for breach of contract would a reasonable observer understand the contracting party to have undertaken? In the ordinary way, that will be compensation for any loss which the parties would reasonably have regarded as likely to flow from the breach. But there may be cases in which a reasonable man would consider that a greater or lesser obligation was being accepted.’ Baroness Hale encapsulated the difference between the orthodox and the contractual interpretation approaches by saying that, on the contractual interpretation approach:10 ‘… one must ask, not only whether the parties must be taken to have had this type of loss within their contemplation when the contract was made, but also whether they must be taken to have had liability for this type of loss within their contemplation then. In other words, is the charterer to be taken to have undertaken legal responsibility for this type of loss? What should the unspoken terms of the contract be taken to be?’ Baroness Hale was not keen to embrace the contractual interpretation approach as part of the test of remoteness in general contract law, partly on the ground that11 this ‘would be to introduce into ordinary contractual liability the principle adopted in the context of liability for professional negligence in’ SAAMCo. Whilst that may be an objection to the use of the contractual interpretation approach in most cases, it is thought that it is unlikely to be an objection in most solicitors’ negligence claims, since, as we have seen above, in most solicitors’ negligence cases the SAAMCo principle applies whatever test of remoteness is used.  1 The Achilleas, at [9].  2 At [12].   3 Above at para 3.28ff.  4 At [16].

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Remoteness of damage  3.56  5 At [17].  6 At [23].  7 At [25].   8 At [31]–[32] and [36].   9 Above, at [55]. 10 At [92]. 11 At [93].

(c)  Amalgam of the two approaches 3.56 Bearing in mind that Lord Walker agreed with Lords Hoffmann and Hope, it can be argued that the ‘contractual interpretation’ approach commanded majority support. The position therefore appears to be that in the great majority of cases the orthodox approach will be applied without reference to the ‘contractual interpretation’ approach. Pausing there, however, note that it can be argued that the rationale for even the orthodox approach is the objectively construed intention of the parties: the reason why, in the Hadley v Baxendale test, the court looks to what reasonable people would think would follow from a breach of contract is that this is what, objectively interpreted, the parties are taken to have thought.1 In some cases, however, it will be possible for a party to show that the orthodox approach should not apply. When will that be? How can it be shown that, objectively speaking, at the time of contracting the parties would not have intended or expected a particular kind of loss to be recoverable if there were a breach of contract? It has to be assumed that the contract itself is silent on the question, otherwise the issue would be governed by an exclusion clause or other express term. If there was some special knowledge, known to both parties at the time of contracting, which bore on the question then the case is likely to fall within limb (ii) of Hadley v Baxendale so that the orthodox approach will deal with it. It follows that, in order for the contractual interpretation approach to make a difference, there must be some further factor which takes the claim out of the ordinary run of cases. What might such factors be? In The Achilleas the relevant factors were that, at the time of contracting, the risk of loss from the following charter would have been completely unquantifiable, was contrary to the market’s understanding that there should be no liability of charterers for such losses, and was outside the charterers’ control.2 In The Sylvia,3 Hamblen J said that the orthodox approach remained the ‘standard rule’ and that it was only in relatively unusual cases that the contractual interpretation approach needed to be considered. The contractual interpretation approach was most likely to be applicable in cases where use of the orthodox approach might lead to ‘an unquantifiable, unpredictable, uncontrollable or disproportionate liability or where there is clear evidence that such a liability would be contrary to market understanding and expectations’. 1 See Supershield Ltd v Siemens Building Technologies Ltd [2010] EWCA Civ 7, [2010] 1 Lloyd’s Rep 349, per Toulson LJ at [40], [43]. 2 At [23], [24], per Lord Hoffmann, and [34]–[35] per Lord Hope. 3 Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] EWHC 542 (Comm), [2010] 2 Lloyd’s Rep 81 (Hamblen J) at [48], [40]. See also Rubenstein v HSBC  Bank plc

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3.57  Causation and quantum of damages in contract and tort [2012] EWCA Civ 1184, a financial advisor’s case, principally as to breach of statutory duty. The question as to remoteness was answered by identifying the correct cause of the loss: per Rix LJ at [117]–[118].

3.57 In Wellesley,1 Floyd LJ rejected the suggestion that the contractual interpretation approach was the same as the SAAMCo principle, ‘not least because [the contractual interpretation approach] depends on the individual circumstances surrounding the making of a contract and the [SAAMCo principle] on the purpose of the rule imposing the tortious duty’. Nevertheless, there is plainly a similarity between the two techniques. From a practical point of view, as the SAAMCo principle already applies to most solicitors’ negligence claims, and there is generally no clear market expectation about the extent of a solicitor’s liability, it may turn out that there will be few solicitors’ cases in which the contractual interpretation approach makes a difference to the amount of damages recoverable. 1 Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146, [2016] Ch 529, per Floyd LJ at [74].

3.58 So far we have been considering the contractual interpretation approach as a rule which excludes liability for types of loss. But it may also extend the scope of liability: ‘… [SAAMCo] and [The Achilleas] are authority that there may be cases where the court, on examining the contract and the commercial background, decides that the standard approach would not reflect the expectation or intention reasonably to be imputed to the parties. In those two instances the effect was exclusionary; the contract breaker was held not to be liable for loss which resulted from its breach although some loss of the kind was not unlikely. But logically the same principle may have an inclusionary effect. If, on the proper analysis of the contract against its commercial background, the loss was within the scope of the duty, it cannot be regarded as too remote, even if it would not have occurred in ordinary circumstances.’1 1 Supershield Ltd v Siemens Building Technologies Ltd, above, per Toulson LJ at [43].

(d)  Time at which the remoteness test should be applied 3.59 A final general consideration as to the test in law relates to the time at which the test of remoteness should be applied. The retainer of a solicitor may be seen as different from, for example, a contract to purchase a shipment of peas or beans, since the retainer tends to lead to a continuing relationship over time between solicitor and client. After the initial setting up of the retainer, but while the solicitor is working for the client, the client may later alter the 122

Remoteness of damage  3.60 solicitor’s instructions, or give new instructions on points as they arise. It may therefore be too narrow an approach, in considering the parties’ knowledge, to focus only on knowledge which they both had at the time when the initial retainer was entered into; in some cases later knowledge, shared during the course of the retainer, may be relevant. This appears to have been the ratio of Malyon v Lawrence, Messer & Co,1 where the defendant solicitor had to pay contractual damages to the claimant for extending the period for which the client suffered neurosis. The solicitor, however, did not discover the client’s condition until after the start of the retainer. Similarly, in Wellesley Partners LLP v Withers LLP,2 the facts of which are discussed in the next paragraph, the claimant first retained the defendant in January 2008. During the course of the retainer the defendant learned of the claimant’s plan to expand into the United States. The Court of Appeal held that that knowledge, of the intention to expand into the United States, was sufficient to satisfy the contractual test of remoteness. It does not appear to have mattered that the defendant did not have that knowledge at the start of the retainer. 1 [1968] 2 Lloyd’s Rep 539 (QB) (Brabin J), at 550–1. See further Kramer, The Law of Contract Damages (2nd edn, 2017), at 14-28. 2 [2015] EWCA Civ 1146, [2016] Ch 529.

3  Application of the contractual test of remoteness 3.60 As indicated at para 3.54 above, it may be difficult to predict, on the facts of any given case, whether a particular kind or type of damage will be considered to have been within the reasonable contemplation of the parties so as to be recoverable, or not. A Scottish judge has suggested that disputes as to whether a class of loss is too remote to be recoverable is best determined after full investigation of the facts.1 Two cases, with opposite results, are considered here. In Wellesley v Withers at first instance, the trial judge, Nugee J, said that, if he had had to apply the contractual test, then the damages claimed would have been too remote to be recoverable.2 Each member of the Court of Appeal, however, concluded that the damages claimed were recoverable when applying the contractual test of remoteness.3 The defendant solicitors had drafted a contract for the claimant head-hunters. The contract provided for a third party, Addax, to invest a large sum in the claimant’s business. The defendant should have drafted the contract so as to ensure that Addax could not withdraw any of its investment for 41 months. Negligently, the defendant drafted the contract so as to allow Addax to withdraw half of its investment during that 41 month period. Addax withdrew half of the investment after a year. That prevented the claimant from opening an office in the United States and benefitting from a particularly lucrative contract. The Court of Appeal held that it had been within the reasonable contemplation of the parties that, if the defendant were in breach of contract, that might prevent the claimant from expanding into the US. The loss of US profits was therefore a kind of loss which was within the reasonable contemplation of the parties; it did not matter that the extent of the loss of that kind was much greater than the 123

3.61  Causation and quantum of damages in contract and tort parties could reasonably have anticipated.4 On the other hand, in Wright v Lewis Silkin LLP,5 solicitors had drafted an employment contract for a businessman working for an Indian company, but had negligently failed to include a clause providing that the English courts would have exclusive jurisdiction in relation to any disputes under the contract. The businessman was constructively dismissed. He brought proceedings in England. The employer disputed the jurisdiction of the English courts. In the professional negligence action against the solicitors, the Court of Appeal held that the businessman’s costs of the dispute as to jurisdiction were not too remote to be recoverable, but, overturning the trial judge, that his losses due to the employer becoming insolvent, during the delay caused by the jurisdictional dispute, were too remote to be recoverable. 1 Henderson v Wotherspoon [2013] CSOH 113, [2013] PNLR 28, per Lady Wise at [23]. 2 Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch), [2014] PNLR 22, at [216]. 3 [2016] EWCA Civ 1146, [2016] Ch 529. 4 See per Floyd LJ at [85], and Brown v KMR Services Ltd [1995] 4 All ER 598. 5 [2016] EWCA Civ 1308, [2017] PNLR 391.

3.61 An example of a pragmatic approach to different ‘types’ of financial loss, applying the orthodox approach, is provided by Matlock Green Garages Ltd v Potter Brooke-Taylor & Wildgoose.1 Although the case pre-dated Wellesley, the court applied the contractual test of remoteness. The claimant claimed damages against the defendant for failure to renew a tenancy of a garage and filling station under the Landlord and Tenant Act 1954, Pt II. The claimant recovered damages for losing the garage. But, as a consequence of the claimant’s loss of this one site, it also had to close two related businesses, a body shop and a vehicle recovery service, both of which were undertaken from different premises. Wright J stated: ‘While the Defendant firm of solicitors carried on practice in Matlock, and may perhaps be taken to have known that the business of the Plaintiff company was not restricted to the service station and garage located on the Matlock Green sites, there is no evidence before me and I do not consider that I would be justified in assuming that the Defendants had any knowledge, whether at the time of the contract or at the time of its breach, of the detailed inter-relationship between the various elements of the Plaintiffs’ business, still less the extent to which, as it is claimed, the continued commercial viability of any of the elements of the Plaintiffs’ business depended upon the continuing existence of other parts thereof.’ As a result, damages were not recoverable in respect of the parts of the business other than the service station and the Matlock Green site. 1 [2000] Lloyd’s Rep PN 935, per Wright J at 943, col 2, to 944 col 1.

3.62 Further, in Al-Kandari v J  R  Brown & Co,1 the claimant sued the defendant solicitors for damages arising out of her husband’s abduction of her 124

Remoteness of damage  3.64 two children to Kuwait. The Court of Appeal held that damage of this type was not too remote, because the solicitors had known sufficient facts to put them on notice that there was a risk that, if they acted negligently, the husband would abscond with the children. Additionally, in Agouman v Leigh Day,2 the defendant solicitors acted in litigation for a claimant living in the Ivory Coast. She sued an international oil trading company which had caused toxic waste to be dumped in landfill. The oil company agreed to pay damages in settlement. The settlement money was paid into a bank account in the Ivory Coast. It was then lost due to a claim made in the Ivorian courts, and a dubious decision of an Ivorian court. The claimant, who had recovered nothing, sued the solicitors. The judge found them negligent. Holding that the loss was not too remote to be recoverable, he stated that the kind of loss in question was loss due to the defendant not taking proper steps to protect the settlement sum from being dishonestly acquired by third parties making claims to it, and that that was within the reasonable contemplation of the parties as the likely result of breach of duty. On the other hand, in Pilkington v Wood,3 the Court of Appeal awarded the claimant damages for the defendant solicitor’s failure to ensure that he obtained good title to a house which he had bought in Hampshire. The principal award of damages was the difference between the value of the property with good title and its actual value, with the defective title. By the time he came to sell the property, the claimant had moved employment from Surrey to Lancashire. Harman J considered that his claims for hotel accommodation in Lancashire, travel by car to Lancashire, and telephone calls to his wife while away were not within the reasonable contemplation of the parties at the time when the contract of retainer was entered. Neither party had known at the time that the claimant would find work in Lancashire, so these costs were too remote to be recoverable. 1 [1987] QB 514. 2 [2016] EWHC 1324 (QB), [2016] PNLR 32, per Andrew Smith J at [124]. 3 [1953] Ch 770.

3.63 The impact of changes in market prices has been considered in a number of solicitors’ cases1 pre-dating The Achilleas. But alterations in market prices were the subject matter of The Achilleas, and of SAAMCo which, as indicated above, The Achilleas appears to have reinterpreted and applied in the context of remoteness. It is suggested that, today, cases in which the issue is whether the claimant may recover damages representing the effect of a fall in the property market are more likely to be decided by reference to the SAAMCo principle. 1 Inder Lynch Devoy & Co v Subritzky [1979] 1 NZLR 87, CA; King v Hawkins & Co (1982) The Times, 28 January (Mars Jones J); Snipper v Enever Freeman & Co [1991] 2 EGLR 270 at 271J (Sheen J); Rumsey v Owen, White and Caitlin (1977) 245 Estates Gazette 225, CA; McElroy Milne v Commercial Electronics Ltd [1993] NZLR 39. See also the discussion of the date on which damages are assessed in Chapter 9 below.

3.64 As to particularly lucrative contracts, the traditional position is that, in the standard case, defendant solicitors will not be liable to a claimant who 125

3.65  Causation and quantum of damages in contract and tort loses the benefit of a particular contract as a consequence of the solicitors’ negligence unless the solicitors either had, or ought to have had, the contract in contemplation: see Pilkington v Wood.1 Thus defendants will not usually be liable to the client for the loss of a profit on resale of property unless they knew that the property had been acquired for resale. But in G & K Ladenbau (UK) v de Reya2 where there was an express finding that the solicitor should have foreseen that a loss on resale was likely, damages for the delay and increased costs on resale were awarded. Further, in Wellesley Partners LLP  v Withers LLP,3 the defendant solicitors ought to have had in mind that, if they acted in breach of contract, the claimant head-hunters were not unlikely to lose the chance to open an office in the United States. That was enough to permit the claimant to recover for the loss of a particularly lucrative contract in the US, even though it could not be shown that the parties should have had that particular contract in their reasonable contemplation during the retainer. 1 [1953] Ch 770 (Harman J). This appears to mirror the development of contracts for the sale of land rather than the sale of goods or commercial contracts: see Diamond v Campbell-Jones [1961] Ch 22 (Buckley J). 2 [1978] 1 WLR 266, esp at 289C–F (Mocatta J). See further para 9.71 below. 3 [2015] EWCA Civ 1146, [2016] Ch 529, discussed above at para 3.49.

E  MITIGATION OF DAMAGE 1  General principles 3.65 A defendant may seek to reduce the amount of damages which he or she must pay by alleging that claimants have failed to act reasonably to reduce, or mitigate, the amount of loss which they have suffered. The classic statement of the mitigation rule is in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Rlys Co of London Ltd.1 Speaking of the assessment of damages at common law, Viscount Haldane LC said: ‘The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps. In the words of James LJ in Dunkirk Colliery Co v Lever (1878) 9 Ch D  20, at p  25, “The person who has broken the contract is not to be exposed to additional cost by reason of the plaintiffs not doing what they ought to have done as reasonable men, and the plaintiffs not being under an obligation to do anything otherwise than in the ordinary course of business.” As James LJ indicates, this second principle does not impose on the plaintiff an obligation to take any steps which a reasonable and prudent man would not ordinarily take in the course of his business. But when 126

Mitigation of damage  3.66 in the course of his business he has taken action arising out of the transaction which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.’ It will be seen that this passage may be read as containing two principles as to mitigation: first, the defendant need not compensate the claimant for loss which the claimant has in fact suffered, but would not have suffered if he or she had acted reasonably; secondly, the defendant need not compensate the claimant for loss which the claimant has in fact avoided, whether the claimant avoided suffering the loss by acting reasonably or unreasonably. Both principles may be seen as aspects of causation: if the claimant does not act reasonably, the claimant’s unreasonable conduct may be said to have caused the loss, so the defendant need not compensate the claimant for such loss; if the claimant has in fact avoided loss, the defendant has not caused it. Although it is sometimes said that the claimant has a duty to mitigate loss, in Bunge SA v Nidera BV it was said that:2 ‘It is well recognised that the so-called duty to mitigate is not a duty in the sense that the innocent party owes an obligation to the guilty party to do so: Darbishire v Warran [1963] 1 WLR 1067, 1075, per Pearson LJ. Rather, it is an aspect of the principle of causation that the contract breaker will not be held to have caused loss which the claimant could reasonably have avoided.’ 1 [1912] AC 673 at 689. 2 [2015]  UKSC  43, [2015] Bus LR  987 at [81]. See also Hirtenstein v Hill Dickinson LLP [2014] EWHC 2711 (Comm) per Leggatt J at [117], and Kramer, The Law of Contract Damages (2nd edn, 2017) at 15-15ff.

3.66 As to the first principle, the court tends to take a relatively lenient attitude toward the claimant’s behaviour, once it has been shown that the defendant acted in breach of duty. The standard statement of this latter approach is the following:1 ‘Where the sufferer from a breach of contract finds himself in consequence of that breach placed in position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult position by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.’ 127

3.67  Causation and quantum of damages in contract and tort It follows that the defendant alleging a failure to mitigate loss tends to face an uphill battle. For a solicitors’ case in which the defendant solicitors succeeded on mitigation, however, see Hermann v Withers LLP.2 The claimants were thinking of buying a house near a garden square in Kensington, London, for £6.8m. The defendant solicitors were negligent in that they advised the claimants that, on purchase, they would definitely have the right to use the garden square, when in fact the legal position was in doubt. The claimants bought the house. It became clear that there was real doubt as to whether they had a right to use the garden square. They could have bought a licence to use the garden square for £25,000. This would have increased the value of the house by about £300,000. They declined to buy the licence; Newey J held that, by declining to take the licence, they had failed to act reasonably to mitigate their loss. It is thought that this case does not invalidate the general principle that defendants seeking to show a failure to mitigate face a hard task: spending £25,000 to gain £300,000 is, if one can afford it, plainly a reasonable step to take. 1 Banco de Portugal v. Waterlow [1932] AC 452, per Lord Macmillan at 506; cited, for example, by Jonathan Parker LJ in Williams v Glyn Owen & Co [2003] EWCA Civ 750, [2004] PNLR 20, at [68]. 2 [2012] EWHC 1492 (Ch), [2012] PNLR 28 (Newey J).

3.67 The cornerstone of the first mitigation principle is to ask whether the claimant has acted reasonably after the defendant’s breach of duty. The courts sometimes consider that question as going only to either causation or to remoteness, rather than simply to mitigation. Further, the same issue can also be a critical factor in determining the date on which damages fall to be assessed,1 an issue which is considered below. 1 See, eg  Radford v de Froberville [1977] 1 WLR  1262 at 1258, in which Oliver J  stated that the rationale of the rule as to the date for the assessment of damages in sale of goods cases lay ‘in the inquiry – at what date could the plaintiff reasonably have been expected to mitigate the damages by seeking an alternative performance of the contractual obligation’.

2  Reasonableness of bringing further litigation 3.68 In professional liability claims, mitigation often arises where the question is whether the claimant ought to have commenced or continued proceedings against another party to reduce or recover his or her loss before turning to pursue the defendant. In London and South of England Building Society v Stone,1 for example, a valuer’s case, Stephenson LJ summarised the relevant principles: ‘[The defendant] must prove it was unreasonable and when the court has to decide that question of fact, the [claimant’s] conduct in not taking steps to reduce the loss will not be weighed in nice scales at the instance of the party who has occasioned the loss: … (1) a plaintiff need not take the risk of starting an uncertain litigation against a third party, for which Pilkington v Wood [1953] Ch  770 is authority and 128

Mitigation of damage  3.69 that includes litigation which may be reasonably certain to result in judgment for the plaintiff but there is no certainty that the judgment will be satisfied; (2) a plaintiff need not take steps to recover compensation for his loss from parties who, in addition to the defendant, are liable to him, for which The Liverpool (No 2) [1963] P 642 is authority. There the other party was a tortfeasor, unlike the borrowers in this case; but (3) a plaintiff need not act so as to injure innocent persons, and (4) need not prejudice its commercial reputation.’ The defendant must satisfy the court that the claimant should have commenced and proceeded with litigation against another party, that those proceedings would have succeeded and a judgment could have been enforced. If the claimant has the benefit of advice from counsel, particularly leading counsel, that he or she should not pursue a claim, it is highly unlikely that the court would take a different view. Further, even if the claimant could reasonably have proceeded against another professional, such as a valuer or an accountant, The Liverpool (No 2) referred to by Stephenson LJ above remains good authority for the proposition that this is no defence to recovery in full by the claimant, who is entitled to choose which potential defendant to sue. 1 [1983] 1 WLR 1242, CA. Lord Sumption approved the reasoning in this case in Swynson Ltd v Lowick Rose LLP [2017] UKSC 32, [2018] AC 313 at [50]. 2 The Liverpool principle was discussed in Haugesund Kommune v Depfa ACS  Bank [2011] EWCA Civ 33, [2011] 3 All ER 655.

3.69 In Pilkington v Wood1 a purchaser of land brought proceedings against his solicitor when the title turned out to be defective and the defendants contended that the purchaser should have mitigated his loss by suing the vendor on an implied covenant of title. Harman J held2 that: ‘[T]he so-called duty to mitigate does not get so far as to oblige the injured party, even under an indemnity, to embark on a complicated and difficult piece of litigation against a third party.’ London and South of England Building Society v Stone and Pilkington v Wood were both followed in Segenhoe Ltd v Atkins, which illustrates the principle.3 1 [1953] Ch 770. 2 [1953] Ch 770 at 777. It is questionable whether the defect in title would now be found to give rise to a ‘complicated and difficult piece of litigation,’ even if the issue were to arise again. On the facts, it seems clear that the plaintiff would have been entitled to a declaration and an indemnity against the vendor. 3 [1990] ACSR  691, (1992) 29  NSWLR  569. Claim by company to recover dividends paid to shareholders as a consequence of accountants’ negligence held to be too uncertain. C relied on a statement in HaIsbury (adopted in both Pennington and Palmer) which Ds contended was wrong. The judge found that support for the position in HaIsbury was ‘far from overwhelming’. Nevertheless, he held that C  was not obliged to pursue either individual shareholders or the single largest shareholders, whose dividend was A$484,476. It is thought, however, that it is hardly unreasonable to require a claimant to test a proposition in HaIsbury with a large sum at stake. There was a further application of Pilkington v Wood in Moda International Brands Ltd v Gateley LLP [2019] EWHC 1326 (QB), [2019] PNLR 27, per Freedman J at [113].

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3.70  Causation and quantum of damages in contract and tort 3.70 On the other hand, these cases were distinguished in Western Trust & Savings Ltd v Travers & Co Ltd, where the claimant lender had taken no steps to seek possession of a mortgaged property before turning its attention to the defendants. The litigation in question was ‘no more than a possession action with which the plaintiffs in this case were well familiar and which would have been a necessary step whether or not there were defects in the security’.1 The submission that the court should ‘attach significance’ to the fact that the defendants would not offer an indemnity or take an assignment of the claimants’ rights was also rejected. Phillips LJ stated:2 ‘In my judgment these matters have very little relevance. It is for the court to decide what should or should not reasonably have been done by the plaintiffs in the circumstances of the case not for the defendants or their solicitors.’ In that case it was so clear that the claimants should have taken possession proceedings that the offer of indemnity was unnecessary. It is suggested, however, that there will be cases, especially where the claimant is unable to fund the litigation, where the offer of an indemnity will be highly material. Further, in Walker v Geo H Medlicott & Son3 it was held that a claimant beneficiary had failed to mitigate his loss in that he had failed to commence proceedings for rectification of a will before commencing proceedings against the solicitor who had drafted it. Although the general principle quoted at para 3.69 above was accepted, it was held4 that, where a claimant claims that a solicitor has failed to record a testator’s instructions adequately, a claim for rectification should usually be brought before, or instead of, a claim for negligence. This is because the evidence in both actions will be virtually identical. It therefore cannot be said that it is unduly onerous to require the claimant to seek rectification first: in the rectification action, the claimant must prove no more than what he or she would have to prove in the negligence action against the solicitor. 1 [1997] PNLR 295 at 303G, CA. Applied: Capital Home Loans Ltd v Hewit & Gilpin Solicitors Ltd [2016] NIQB 13, [2016] PNLR 24. Cited with approval: Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2017] UKSC 34, [2017] 1 WLR 1373, per Lord Mance JSC at [48]. 2 [1997] PNLR 295 at 304D. 3 [1999] 1 WLR 727, CA. The case is discussed in detail at paras 11.14 and 11.25, below. Compare Horsfall v Haywards [1999] Lloyd’s Rep PN  332, CA (considered at para  11.26), where it would not have been worth bringing rectification proceedings. Walker was also distinguished in Williams v Glyn Owen & Co [2003] EWCA Civ 750, [2004] PNLR 20, at [70], on the ground that in Walker the claimants’ activities in suing the negligent solicitors led to ‘adventitious benefits’ whereas in Williams they did not. 4 [1999] 1 WLR 727 at 738H–739H, 741E–742H and 743H–744G.

3  Recovery of costs if alternative litigation brought in mitigation 3.71 A claimant who, in reasonable mitigation of loss, brings alternative legal proceedings and thereby incurs costs, may recover as damages the costs 130

Mitigation of damage  3.73 of that litigation. There has been a debate as to whether the costs recoverable as damages should be costs assessed on the standard or the indemnity basis. In light of recent changes to the CPR, it appears that the better view is that the claimant may recover costs incurred on the indemnity basis.1 1 See Hermann v Withers LLP [2012] EWHC 1492 (Ch), [2012] PNLR 28 (Newey J), at [115], followed in Hawksford Trustees Jersey Ltd v Halliwells LLP  [2015]  EWHC  2996 (Ch). The Hermann judgment contains a helpful discussion of the previous authorities. On the recovery of costs in lost litigation claims, see also para 12.75ff below.

4  Consequential benefits and ‘legal causation’ (a)  Two types of case: legal causation, and collateral benefits 3.72 A different problem arises when the claimant does receive a benefit or payment as a consequence of the defendant’s breach of duty, so that it can be shown that, but for the breach of duty, the claimant would not have received that benefit or payment. Must the claimant give credit for the benefit/payment in the assessment of damages? This issue usually arises where claimants establish that, absent breach of duty, they would have entered into transaction B instead of transaction A which they in fact entered. Suppose, however, that transaction A has given the claimant a benefit which transaction B would not have given them. Must they give credit, in the assessment of damages, for the benefit, since damages put them in the position they would have been in but for the breach, and if there had been no breach they would have entered into transaction B and thus would not have had the benefit? Two situations must be distinguished:1 (a) cases in which the focus is on whether the defendant’s breach of duty was the ‘legal cause’ of the claimant receiving the benefit. Those are considered in this section. (b) Cases in which the focus is on the character of the benefit, and the question of whether the benefit is of a kind which the law ignores in the assessment of damages (‘collateral benefits’). These cases are considered in the next section. 1 See Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291, per Bryan J at [1061]–[1062].

(b)  The position in principle – legal causation 3.73 So far as the first category of cases is concerned, the leading case is now Fulton Shipping Inc of Panama v Globalia Business Travel SAU (formerly Travelplan SAU) of Spain.1 The charterers of a vessel re-delivered the vessel to the owners two years early. That was a repudiatory breach of the charterparty under which the charterers had chartered the vessel. The owners claimed from the charterers damages for two years’ lost profits during the remainder of the 131

3.74  Causation and quantum of damages in contract and tort charterparty. At the time when the owners received the vessel back, there was no available charter market and so the owners sold the vessel for $23.7m. The question was whether, in the assessment of damages, the owners had to give credit for the $23.7m. The Supreme Court held that they did not. Lord Clarke JSC said:2 ‘Viewed as a question of principle, most damages issues arise from the default rules which the law devises to give effect to the principle of compensation, while recognising that there may be special facts which show that the default rules will not have that effect in particular cases. On the facts here the fall in value of the vessel was in my opinion irrelevant because the owners’ interest in the capital value of the vessel had nothing to do with the interest injured by the charterers’ repudiation of the charterparty. This was not because the benefit must be of the same kind as the loss caused by the wrongdoer. In this regard I agree in particular with the eighth proposition identified by the judge … As I  see it, difference in kind is too vague and potentially too arbitrary a test. The essential question is whether there is a sufficiently close link between the two and not whether they are similar in nature. The relevant link is causation. The benefit to be brought into account must have been caused either by the breach of the charterparty or by a successful act of mitigation. The eighth proposition identified by the trial judge had been that ‘There is no requirement that the benefit must be of the same kind as the loss being claimed or mitigated … but such a difference in kind may be indicative that the benefit is not legally caused by the breach …’3 Further, at [33] Lord Clarke distinguished between situations in which the breach of duty was ‘the occasion’ for selling the vessel, and those in which it was ‘the legal cause of it’. It therefore appears that, in relation to this category of case, the key question is whether either (i) the benefit in question was ‘legally caused by’ the breach of duty, in which case credit must be given for it in the assessment of damages, or (ii) the breach of duty was merely the ‘occasion’ of the claimant receiving the benefit, in which case no credit need be given for the benefit.4 1 Also known as The New Flamenco, [2017] UKSC 43, [2017] 1 WLR 2581. 2 At [29]–[30]. 3 See Fulton at [16]. 4 Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291 per Bryan J at [1057].

3.74 In principle, the rationale for this ‘causation’ approach to mitigation issues may be as follows. If the benefit in question was gained due, for example, 132

Mitigation of damage  3.76 to a lot of hard work by the claimant, it may be said that it was caused by the claimant’s work rather than the defendant’s negligence, so that the defendant should not have the benefit of it, and it should be ignored in the assessment of damages. If, on the other hand, the claimant was able to obtain the benefit relatively easily then it might be said that the cause of the claimant obtaining the benefit was the defendant’s negligence, so that the benefit should be taken into account in assessing damages. In practice, however, it is not always easy to determine whether, on the facts of any given case, the defendant’s breach was either (a) the legal cause of the claimant receiving a particular benefit, so that the benefit should be taken into account in assessing damages, or (b) merely the occasion of the claimant receiving the benefit, so that it should be ignored. In that context, it may still be helpful to consider the professional negligence cases which preceded Fulton. Some of them were referred to in Fulton, but none of them were overruled by it. They pre-date Fulton and so must now be read bearing in mind the principles which were set out in that case. It is thought, however, that the cases may easily be read in terms of asking whether a given benefit was sufficiently closely linked to the defendant’s breach of duty to count as having been legally caused by it.

(c)  The pre-Fulton professional negligence cases 3.75 In Hussey v Eels,1 which was applied in Gardner v Marsh and Parsons,2 Needler v Taber3 and Primavera v Allied Dunbar Assurance plc,4 it was held that the claimant, who had purchased a defective property in reliance on the defendant’s misrepresentation, was not obliged to give credit for the profit which he had made by obtaining planning permission and selling to a developer. It was said that the negligence which caused the loss did not cause the profit. In Gardner, as a consequence of the claimants’ negotiations, the landlord repaired their flat some years after purchase and cured the defect which the defendant surveyor had failed to notice. In each case, the claimant recovered the difference between (i) the price paid for the property, and (ii) its market value if its true condition had been known at the date of acquisition. In other words, the claimants did not have to give credit for the benefits which they had in fact received. Why was this? 1 [1990] 2 QB 227. 2 [1997] 1 WLR 489, CA (though Peter Gibson LJ dissented). 3 [2001] EWHC Ch 5, [2002] 3 All ER 501, Sir Andrew Morritt V-C. 4 [2002] EWCA Civ 1327, [2003] PNLR 12.

3.76 In each case, statements of principle were avoided. In Hussey v Eels1 Mustill LJ determined the question in this way: ‘To my mind the reality of the situation is that the plaintiffs bought the house to live in, and did live in it for a substantial period. It was only after two years that the possibility of selling the land and moving elsewhere was explored, and six months later still that this possibility 133

3.77  Causation and quantum of damages in contract and tort came to fruition. It seems to me that when the plaintiffs unlocked the development value of their land they did so for their own benefit, and not as part of a continuous transaction of which the purchase of land and bungalow was the inception.’ [Emphasis added.] In Gardner, Hirst LJ followed this approach, stating that:2 ‘In my judgment, having regard to the intervening events and to the long interval of time, the repairs executed in 1990 were not part of a continuous transaction of which the purchase of the lease as a result of Mr Dyson’s negligence was the inception.’ Pill LJ noted that the defendants would not have been entitled to take the benefit of any market increase in the value of the property after acquisition and that, if the claimants had wished to sell it at any time before the repairs were done, they would have suffered a loss. He stated:3 ‘In my judgment the present case, on its facts, is on the Hussey v Eels side of the line … Years after the defendant’s negligence, the freeholders performed their obligation to the plaintiffs under a contract which the plaintiffs had negotiated with them. That had the effect of rectifying the damage resulting from the defendants’ negligence. The benefit came by reason of the performance of a contractual obligation by a third party. The plaintiff had to undertake protracted negotiations with that third party and other third parties, the other tenants in the building. Before that obligation was performed by the freeholder, there was considerable lapse of time in the course of which the plaintiffs, because of the structural defect, were unable to sell the property which they wished to do in 1988. In my judgment, the facts relied upon as affecting the measure of damages are too remote to be taken into consideration and, on the facts, the judge was entitled to find for the plaintiffs as he did.’ Put another way, the claimants were entitled to the fruits of their considerable labours. 1 [1990] 2 QB 227 at 2410, cited by both Hirst and Pill LJJ in Gardner at 500B and 514A. The decision was also followed in Blue Circle Industries plc v Ministry of Defence [1999] Ch 289, CA where the defendant was not entitled to take the benefit of the claimant’s decision to wait and sell in a more favourable market. 2 [1997] 1 WLR 489 at 503H. 3 [1997] 1 WLR 489 at 514C–F.

3.77 In Needler, due to the defendant’s negligence the claimant had changed his pension arrangements. As a result, he had taken a personal pension scheme with Norwich Union. When Norwich Union later demutualised, the claimant received shares in Norwich Union which he sold for £7,815.77. The question was whether, in the assessment of damages, he should give credit for the £7,815.77. Sir Andrew Morritt said that the authorities established two relevant propositions:1 134

Mitigation of damage  3.77 ‘First, the relevant question is whether the negligence which caused the loss also caused the profit in the sense that the latter was part of a continuous transaction of which the former was the inception. Second, that question is primarily one of fact.’ He held that the gain from the demutualisation was not part of a continuous transaction of which the negligence was inception, so that the claimant did not have to give credit for its benefits. Couching the question in the language of causation, and thus consistently with the later decision in Fulton, ‘the breach of duty gave rise to the opportunity to receive the profit, but did not cause it’.2 It is suggested, on the basis of the analysis set out earlier in this chapter, that the question of whether a cause which, as here, passes the ‘but for’ test, should be treated by the law as the cause of a loss is part of the second of the two-stage assessment which Lord Nicholls set out in the Kuwait case, and, following Lord Nicholls,3 should therefore be seen primarily as depending on a value judgment rather than on an assessment of the facts of the case. The question with which we are currently concerned may therefore be formulated as being: does the court consider that the claimant ought fairly to give credit for the benefit which, but for the defendant’s negligence, he or she would not have enjoyed? In assessing that question, the court may ask whether the gain of the benefit can fairly be said to be part of a continuous chain of events which began with the defendant’s negligence, and should ask whether the negligence was the legal cause of the claimant receiving the benefit. But in answering this second question the court is, it is submitted, asking whether it considers that the claimant has gained the benefit by his or her own hard work, or that of professional advisors whom the claimant has engaged, or some other factor which renders it unfair that the defendant take advantage of the benefit. In short, this is not simply a question of fact: it is a question of making findings of fact as to what caused the benefit to be gained and then making a value judgment as to whether, in light of the facts, it is fair that the claimant give credit for the benefit. It is submitted that this analysis explains the Court of Appeal’s subsequent decision in Primavera,4 which again concerned a claimant who, due to the defendant’s negligence, had changed his pension arrangements. By the time of trial the claimant’s pension fund had increased in value, but the court held that this was due to the advice of his subsequent professional advisors, and he therefore did not have to give credit for it.5 1 [2001] EWHC Ch 5, [2002] 3 All ER 501 at [24]. 2 At [26]. 3 See the passages cited at paras 3.01 and 3.41, above. 4 [2002] EWCA Civ 1327, [2003] PNLR 12. 5 The same explanation may not apply to the decision in Needler, but that decision is controversial. For a further application of the Hussey principle, see Devine v Jeffreys [2001] Lloyd’s Rep PN 301, HHJ Raymond Jack QC. Surveyors’ negligence caused the claimants’ loss when they bought a property in 1988, though they did not discover the problem until 1996. In 1999 they managed to persuade their mortgage lender to enter into a deal the effect of which was that ultimately they suffered no loss. The judge, however, assessed their loss as at 1988, plus interest, so that they received substantial damages, because he held that the events of 1999 were too remote from those of 1988, and came about due to a combination of factors and not simply the

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3.78  Causation and quantum of damages in contract and tort defendant’s negligence. It is submitted that the result in this case may be analysed in the terms suggested above: the judge considered that the 1999 agreement came about as a result of the claimants’ hard work so they did not have to give credit for it.

3.78 One way of giving effect to the conclusion that the claimant should not give credit for benefits acquired later is to assess damages as at the date of the breach of duty and ignore what happens later. None of the cases discussed so far involved solicitors. The courts have shown a greater willingness to depart from assessment of damages as at the date of breach of duty in cases of solicitors’ negligence, although in four similar cases it has been applied. In Westlake v J P Cave & Co1 a claim against a solicitor for failure to give adequate advice to a client joining a partnership to develop land, Ebsworth J followed the approach in Hussey v Eels and assessed damage at the date on which the claimant advanced money to his partner to purchase the land and, therefore, first suffered loss. The claimant had later acquired part of the land and obtained planning permission to develop it, but Ebsworth J ignored this. Steel J took the same approach in Owen v Fielding.2 The defendants had failed to advise the claimants about rights of common. The claimants were awarded the difference between the price paid and the actual value of the land at the date of purchase. Steel J ignored the profit made by the claimants when they later divided the land, obtained planning permission for another house and eventually sold both properties. In Shaw v Fraser Southwell3 the same principle, of ignoring benefits which had been acquired later, was applied. More recently, Bacciottini v Gotelee and Goldsmith4 is a case in which the court did take account of later benefits. The claimants purchased a granary in Suffolk which, due to the defendant solicitors’ negligence, was subject to a planning restriction which prevented development. The judge found that, once the claimants had learned of the restriction, making an application to have it removed was ‘simple, obvious and cheap’. The application cost £250. Davis LJ said that the claimants had had a duty to take that step to mitigate their loss. Damages were limited to £250. It is thought that is because it was easy for the claimants to have the restriction removed. On the other hand, in Quilter v Hodson Developments,5 which was not a professional negligence claim, in 2012 the claimant bought a flat in reliance upon misrepresentations by the sellers/ developers to the effect that there were no disputes relating to the flat. In fact there was a dispute about the boiler. In 2014 the claimant sold the flat, taking advantage of a rise in the property market between 2012 and 2014. The Court of Appeal held that she did not have to give credit for the sale. The result of this case is similar to that in Fulton. It will be seen that these cases all involved transactions concerning land. The authorities on the assessment of damages in this area are discussed in greater detail in chapter 9, to which reference should be made.6 1 [1998] NPC 3. 2 [1998] EGCS 110. 3 [1999] Lloyd’s Rep PN 633, CA. 4 [2016] EWCA Civ 170, [2016] 4 WLR 98. See per Davis LJ at [49], [59] and [66]. 5 [2016] EWCA Civ 1125, [2017] PNLR 7. 6 See para 9.58ff below.

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Mitigation of damage  3.81 3.79 Even if the court is satisfied that a benefit formed part of a continuous transaction beginning with the defendant’s negligence, the claimant must also show that the benefit is sufficiently closely causally related to the loss claimed.1 In Nadreph Ltd v Willmett & Co2 the defendant’s negligent advice to the claimant landlord caused the tenant to vacate the holding and claim compensation for disturbance under the Landlord and Tenant Act 1954, Pt II. The claimant did, however, recover possession and was able to make use of the premises. The court held that the defendant was entitled to set off against the compensation the value of having vacant possession of the premises.3 1 See now Fulton (above). 2 [1978] 1 All ER 746 (Whitford J). 3 The reasons why Whitford J reached this conclusion are not easy to discern. Two factors were: first, the subsequent occupation arose in the ordinary course of the claimants’ business: see [1978] 1 All ER 746 at 751g: and, secondly, the defendant’s negligence was the direct cause of the tenant vacating: see 752g.

3.80 A final consideration in this area is that there is no requirement that, in order to be taken into account, a benefit should have been directly caused by the defendant’s act: ‘Equally loss may be avoided by natural causes (the resolution of a problem of physical movement in a property: McKinnon v E. Surv Ltd) or by changes brought about by statute (Kennedy v Van Emden), or by negotiation with a contractual counterparty (Gregory v Shepherds), or by application to a public authority (Bacciottini v Gotelee and Goldsmith). The key point, however, is that in relation to benefits allegedly obtained there must, in every case, be legal causation between the breach and the loss.’1 1 Assetco, above, per Bryan J at [1063]. Strictly speaking the judge was recording one party’s submission, but the submission appears to be correct, and the judge appears to have agreed with it.

5  Collateral benefits 3.81 A  similar type of problem can arise in different circumstances. As we have seen, the general rule is that, to the extent that a claimant succeeds in avoiding loss as a result of the defendant’s negligence, the claimant is not to be compensated by the defendant. But there is a further exception to that rule in that some types of benefit which a claimant would not have received if there had been no breach of duty are nevertheless ignored in quantifying damages. In relation to these ‘collateral benefits,’ which are also known as res inter alios acta,1 the question of whether the benefit should be taken into account depends on the nature or character of the benefit in question.2 The Supreme Court considered the nature of such collateral benefits in the accountants’ negligence case of Swynson Ltd v Lowick Rose LLP. Lord Neuberger of Abbotsbury PSC said that:3 137

3.82  Causation and quantum of damages in contract and tort ‘… the types of payment to a claimant which are not to be taken into account when assessing damages are either those which are effectively paid out of his own pocket (such as insurance which he has taken out, whether through his employer, an insurance company or the government), or which are the result of benevolence (whether from the government, a charity, or family and friends), all of which can be characterised as essentially collateral in nature’. In Swynson, the Supreme Court was not keen to extend the existing categories of collateral benefit.4 The claimant was a lender which had lent money to a borrower in reliance upon a negligent report from the defendant accountants. The borrower defaulted. The claimant claimed the amount of the default from the defendant. By the time the judge came to assess damages, the borrower had repaid some of the loan due to a re-financing arranged by a party linked to the claimant. The Supreme Court declined to hold that the money received from the re-financing was a collateral benefit. It had discharged the borrower’s liability to the claimant lender. It was therefore treated as having reduced the loss which the claimant could recover from the defendant, and the claimant could not claim damages in respect of it. On the other side of the line, in Quilter v Hodson Developments Ltd5 the claimant bought a flat, relying on the seller’s representation that there were no disputes relating to it. In fact there was a dispute as to the working of a biomass boiler. It appeared that the NHBC would solve the problem pursuant to a guarantee which it had given. The Court of Appeal held that, to the extent that the guarantee benefitted the claimant, the benefit derived from an insurance policy and was therefore to be ignored in the assessment of damages. 1 A  literal translation from the Latin might be ‘matters dealt with or transacted between other parties’. 2 Swynson Ltd v Lowick Rose LLP  [2017]  UKSC  32, [2018] AC  313, per Lord Sumption at [11]. See also Tiuta International Ltd v De Villiers Surveyors Ltd [2017]  UKSC  77, [2017] 1 WLR 4627, per Lord Sumption at [12]–[13]. 3 Ibid, at [98]. See also per Lord Mance at [47]. Lord Sumption pointed out, at [11], that if insurance was taken out for the benefit of the wrongdoer then it might be that payments made pursuant to the insurance would be taken into account in assessing damages. 4 The Court of Appeal showed similar reluctance in LSREF III  Wight Ltd v Gateley LLP [2016] EWCA Civ 359, [2016] PNLR 21, per Briggs LJ at [43], as did the Supreme Court in Tiuta (above). 5 [2016] EWCA Civ 1125, [2017] PNLR 7, per Floyd LJ at [39].

F  DATE OF ASSESSMENT 1  Is there a breach date rule? (a)  The date of breach 3.82 The traditional date for assessing damages in contract and tort is said to be the date of the breach of duty in question. This date is particularly 138

Date of assessment  3.83 suited to claims involving the sale of goods in which there is a ready market. In such a case, non-delivery or delivery of defective goods will coincide with the claimant’s opportunity to accept or reject them and replace them by buying alternatives in the market: ‘The availability of a substitute market enables a market valuation to be made of what the innocent party has lost, and a line thereby to be drawn under the transaction.’1 Solicitors’ cases sometimes involve the loss of, or damage to, an asset such as real property, but sometimes not. It will be suggested below that, in solicitors’ cases, measuring the loss at the date of either the breach of duty or the transaction entered into after a breach of duty is no more than one way of assessing loss, to be considered according to the justice of the case; it is not the default position even in cases where the negligence causes an asset to be lost or damaged.2 In particular, the date of assessment of loss is likely to turn on the date at which the claimant should have mitigated its loss by taking alternative steps, as to which, see section E above. If there is no such date, because there never came a time when the claimant should have acted differently to mitigate its loss, then the court may decide to assess loss as at the date of trial.3 1 Bunge SA v Nidera BV [2015] UKSC 43, [2015] Bus LR 987, per Lord Toulson JSC at [79]. 2 See, for example, Veitch v Avery [2007] EWCA Civ 711, [2008] PNLR 7, per Auld LJ at [38]: ‘there is no hard and fast rule in negligence cases that the measure of loss is always to be identified by reference to, and quantified as at, the date of breach of duty. It depends; it turns on the facts and the application to them of common sense, an essentially evaluative role for the judge of first instance …’. 3 Kramer, The Law of Contract Damages (2nd edn, 2017) at 17-12, 17-17 argues that there is no ‘rule’ in contract that damages must be assessed at the date of the breach of duty.

(b)  The date of the transaction 3.83 In a claim for the sale of defective goods the date of breach is usually the date of sale, that is when the seller contracts to deliver the goods and transfer property in them to the buyer, the buyer contracts to pay the price and the transfer of risk takes place. In a claim against a professional for defective advice, however, the date of breach does not necessarily coincide with the date on which the claimant acts in reliance on it, suffers damage or has an opportunity either to mitigate the loss or obtain an alternative performance. But the time lapse between the date of a surveyor’s report or a solicitor’s letter and the date on which the claimant acts on it will in most cases be a matter of days and of little or no significance. Hence, in professional negligence cases in the 1980s and early 1990s the breach date rule was generally applied. But the court cannot assess damages at the date of breach if the claimant has not, on that date, entered into the transaction: see Shaw v Halifax (SW) Ltd.1 The defendant valuer valued the property at £37,000 in June 1988 when it was worth only £32,000. In August 1988 the claimants exchanged contracts to buy it for £42,000. By this time the true value had appreciated by £5,000 and the property’s true value was £37,000. It was argued that the claimants had suffered no loss because, by the time they bought the property, it was worth 139

3.84  Causation and quantum of damages in contract and tort what the defendants had said it was worth. This was rejected on the ground that the claimants had been entitled to rely on the report two months later when they paid what they believed to be the market price of the property given the rise in the market between the date of report and the date of purchase. The correct measure of loss was held to be £5,000. If damages had been assessed at the date of the breach of duty, it would have been impossible to assess loss because the claimants had not committed themselves to the purchase at the date of breach, or nominal damages would have been awarded because when they later purchased the property it had the higher value. 1 [1996] PNLR 451.

3.84 In SAAMCo Lord Hoffmann stated1 that there was no general principle that damages were to be assessed at the date of breach, although it represented a prima facie rule in relation to sale of goods. Then in Smith New Court Securities Ltd v Scrimegour Vickers (Asset Management) Ltd,2 a deceit case, Lord Browne-Wilkinson said that the old 19th century cases that had established that damages should be assessed at the date of breach of duty could no longer be treated as laying down ‘a strict and inflexible rule’. He continued: ‘In many cases, even in deceit, it will be appropriate to value the asset acquired as at the transaction date if that truly reflects the value of what the plaintiff has acquired. Thus, if the asset acquired is a readily marketable asset and there is no special feature (such as a continuing representation or the purchaser being locked into a business that he has acquired) the transaction date rule may well produce a fair result. The plaintiff has acquired the asset and what he does with it thereafter is entirely up to him, freed from any continuing adverse impact of the defendant’s wrongful act. The transaction date has one manifest advantage, namely that it avoids any question of causation. One of the difficulties of either valuing the asset at a later date or treating the actual receipt on realisation as being the value obtained is that difficult questions of causation are bound to arise. In the period between the transaction date and the date of valuation or resale other factors will have influenced the value or resale price of the asset. It was the desire to avoid these difficulties of causation which led to the adoption of the transaction date rule.’ Lord Steyn agreed that in general the date of transaction ‘would be a practical and just date to adopt’ in cases of deceit.3 Note, first, that Lord BrowneWilkinson’s analysis treats the question of when to assess loss as being an aspect of causation: in cases where loss is assessed at the date of the transaction, the rationale of doing this is to screen out irrelevant causative factors. Secondly, however, even in the context of deceit it may be appropriate to assess damages at the date of trial rather than earlier dates such as the discovery of the fraud: Parabola Investments Ltd v Browallia Cal Ltd.4 1 [1997] AC 191 at 220H.

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Date of assessment  3.86 2 [1997] AC 254 at 266C. 3 [1997] AC 254 at 284B. 4 [2010] EWCA Civ 486, [2011] QB 477.

(c)  The flexible approach 3.85 Subsequently, in The Golden Victory,1 the majority in the House of Lords was prepared to depart from the date of the transaction as the date for assessing damages in a case of the breach of a commercial contract, namely a charterparty for the charter of a ship. The charterparty was entered into on 10 July 1998 for a term of seven years. Either party could terminate it in the event of war breaking out between certain countries. On 14 December 2001 the charterers repudiated the contract and on 17 December 2001 the shipowners accepted the repudiation. The shipowners were entitled to damages from the charterers for the charterers’ breach of contract. But on 20  March 2003 the second Gulf War broke out. This would have entitled the charterers lawfully to terminate the charterparty if they had not already repudiated it. The arbitration took place after 20 March 2003, so the arbitrator knew that the charterers could have terminated the contract on 20 March 2003. The question was whether the shipowners should be awarded damages in relation to the balance of the sevenyear period which remained after 20  March 2003, in other words after the period when the charterers would have been entitled to terminate the contract if they had not already wrongfully repudiated it. The majority decided that no damages were payable in respect of this period: the court knew that the charterers would have been entitled to terminate on 20 March 2003, and they were required to compensate the owners on the basis of what the court knew had happened after termination of the contract. The result was that damages were assessed as at the date of the arbitration, not the date of the breach of duty. 1 Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 21, [2007] 2 AC 353, per Lords Scott of Foscote, Carswell and Brown of Eaton-under-Heywood. The Supreme Court affirmed the decision in The Golden Victory in Bunge SA  v Nidera BV [2015] UKSC 43, [2015] Bus LR 987.

3.86 The Golden Victory was a contractual case and the basic measure of damages was damages to put the shipowners in the position they would have been in if the contract had been performed, in other words if the charterers had continued to abide by the terms of the charterparty until they were entitled to terminate it. The highly commercial context was different to that of many claims against solicitors. It is notable, however, that even the dissenting minority considered that it might often be acceptable to depart from the date of the breach of duty as the date for assessing damages in cases which did not concern contracts between two commercial parties which stipulated precise performance, such as charterparties. Lord Bingham, with whom Lord Walker agreed, accepted at [13] that the court in contractual or tortious cases would be prepared to depart from the breach of duty as the date for assessing loss ‘where it judges it necessary or just to do so in order to give effect to the compensatory 141

3.87  Causation and quantum of damages in contract and tort principle’. For the purposes of this book, it is thought that The Golden Victory tends to support the proposition that the court should adopt a flexible approach in assessing damages for breach of contract.1 1 Cf para 3.01, above.

2  The valuation method 3.87 What Lord Steyn labelled the valuation method in Smith New Court originally became known as the diminution in value rule following the decision of the Court of Appeal in County Personnel v Alan R Pulver & Co,1 although it had been steadily applied before that case. It was explained in these terms by Browne-Wilkinson LJ: ‘The diminution in value rule is concerned with a case where the client has purchased for a capital sum a property having a capital value. Such client thinks it has certain features which render it more valuable. Due to the shortcomings of his professional adviser he is not aware of the fact that it lacked these features.’ 1 [1987] 1 WLR 916 at 927F–G.

3  Conclusion as to date of assessment of damages 3.88 From the above description it is clear that the valuation method of assessing damages is particularly suited to cases where the claimant has acquired a capital asset such as land or property, and it is in the context of negligence in relation to conveyancing and real property that the valuation method has been applied most frequently in solicitors’ negligence cases. If applied at the date of transaction the method often provides a just and convenient way of assessing damages which avoids the difficulties which Lord Browne-Wilkinson had identified in Smith New Court. This type of case is considered in detail in Chapter 9. It will be seen from para 9.59, however, that, in relation to cases where purchasers sue their former solicitors, our conclusion is that, at least in practice, there is no general rule that damages will be assessed using the valuation method as at the date of the breach of duty. Rather, the date at which damages are assessed in such cases is usually the date at which the defendant’s negligence ceased to have any causative effect, and the claimant either could have acted, or did act, to mitigate the loss. In lenders’ claims for example, it is unlikely that damage will be assessed before the date on which the lender repossessed the security.1 This is consistent with the view, set out in section E above, that mitigation is an aspect of causation. On this view, therefore, even in cases where the sales of goods analogy is most compelling, there is no general rule that damages will be assessed using the valuation method at the date of the breach of duty. 1 See LSREF III Wight Ltd v Gateley LLP [2016] EWCA Civ 359, [2016] PNLR 21, per Briggs LJ at [29], [30] and [33], and, for further discussion, chapter 10 below.

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Damages for mental distress and psychiatric illness  3.91 3.89 It is suggested that, once one moves away from claims where the damage claimed is loss or damage to assets such as property, there is likely to be even less reason for a rule that damages must be assessed as at the date of breach of duty. It is thought that, in cases which do not concern negligence leading to damage to property, there is no general rule to that effect. The basic comparison in lenders’ claims, discussed in chapter 10, is an example of loss being assessed as at the date of trial. As in relation to claims relating to lost or damaged assets, however, the date at which the negligence ceased to have any causative effect, when the claimant should have mitigated its loss, may be the appropriate date at which to assess loss. In relation to claims for lost litigation, which are discussed in chapter 12, a more detailed approach is taken. In this type of case, the court is generally asking what a hypothetical court would have awarded at a notional trial which would have occurred if there had been no breach of duty. 3.90 As a footnote to this discussion, the decision of Phillips J in Deeny v Gooda Walker Ltd1 shows that the court has, and may, in special cases where future losses are claimed, exercise a discretion not to assess damages at the date of trial but to postpone further assessment until the future losses have been suffered and can be quantified. 1 [1995] 1 WLR 1206. See now CPR Pt 3.1(2)(e) and (f).

G  DAMAGES FOR MENTAL DISTRESS AND PSYCHIATRIC ILLNESS 3.91 Damages for these types of loss are not generally recoverable against solicitors. The areas in which claimants have had some element of success in claiming are in claims relating to conveyancing, and the negligent conduct of litigation. The authorities are therefore considered in chapters 9 and 12.1 1 See paras 9.74 and 12.83–12.85, below. See also Seymour v Ockwell [2005]  EWHC  113, [2005]  PNLR  39 (HHJ  Havelock-Allen QC), at [185]: it was not an important object of the defendant financial advisor’s contract to give pleasure, relaxation or peace of mind, so damages for stress, anxiety and inconvenience were not recoverable.

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Chapter 4

Claims in equity

A  THE RELEVANCE OF EQUITY 4.01 The relationship between solicitor and client is a fiduciary one. For this reason claims against solicitors often involve equitable considerations which go beyond contract and tort. Moreover, in the last 25 years cases involving solicitors have supplied a number of leading authorities in relation to the duties of trustees and fiduciaries both in the House of Lords and Supreme Court1 and in the Court of Appeal2 despite expressions of caution about the expansion of the law of trusts into commercial areas.3 1 The principal decisions at House of Lords and Supreme Court level are Target Holdings Ltd v Redferns [1996] AC 421; Twinsectra Ltd v Yardley, [2002] UKHL 12, [2002] 2 AC 164; Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567; and AIB Group (UK) plc v Redler & Co [2014] UKSC 58, [2015] AC 1503. 2 See the leading authority on fiduciary duties Bristol and West Building Society v Mothew [1998] Ch  1. More recently, solicitors claims have produced a series of cases exploring the proper scope of s  61 of the Trustee Act 1925 culminating in P&P  Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 and important decisions on the application of SAAMCo principle to equitable compensation for breach of trust (Various Claimants v Giambrone and Law [2017] EWCA Civ 1193, [2018] PNLR 2 and accessory liability (Group Seven Ltd v Notable Services Ltd [2019] EWCA Civ 614, [2020] Ch 129). 3 See most notably Millett, ‘Equity’s Place in the Law of Commerce’ (1998) 114 LQR 214.

B  BREACH OF TRUST 1  Express, implied and resulting trusts (a)  Client funds 4.02 Solicitors often agree to act as trustees or as the directors of trust companies. In this section we are not concerned with express trusts of this nature which are usually regulated by complex trust instruments but with those trusts which are incidental to the normal course of a solicitor’s practice and created by the deposit of assets or money either by a client or a third party.1 It is rare for deposits of this nature to be the subject of an express trust although the UK Finance Mortgage Lenders’ Handbook2 imposes an express trust on a mortgage advance between the transmission of funds and completion of the 144

Breach of trust  4.03 transaction.3 The notable feature about these trusts is that they are unlikely to spell out the legal consequences of the assumption of such a trust arrangement and in the event of dispute those consequences will be determined by the rules and principles of equity.4 1 It is not part of the ordinary course of business of a solicitor to accept appointment as a trustee: see Dubai Aluminium Co Ltd v Salaam [2002]  UKHL  48, [2003] 2 AC  366 at [134] (Lord Millett). 2 It was formerly called the CML Lenders’ Handbook and changed its name on 1 July 2017. 3 See Part 1, clause 10.7: ‘You must hold the loan on trust for us until completion. If completion is delayed, you must return it to us when and how we tell you …’. 4 See, eg  Re Lehman Brothers International (Europe) (No  2) Ltd [2011]  EWCA  Civ 917, [2011] 1  BCLC  184 at [65]–[67] where Arden LJ stated that the rules of trust law provided ‘the analytical framework and the principal diagnostic tool’ for resolving issues relating to institutions holding funds under CASS7 and described them as ‘a series of default rules and principles which apply irrespective of the intention of the parties’. It is suggested that a similar analogy applies to solicitors holding funds under the SRA Accounts Rules 2019.

4.03 A solicitor holds client funds on trust for the client even where there is no express declaration of trust or trust instrument.1 As a matter of professional conduct the terms on which a solicitor holds a client’s money were governed by the SRA Accounts Rules 20112 until 25 November 2019 and are now governed by the SRA Accounts Rules 2019.3 Rule 20.1 of the SRA Accounts Rules 2011 provided that funds could only be withdrawn when they were properly required for a payment to or on behalf of the client and either withdrawn on the client’s written instructions or confirmed by the solicitor in writing.4 Rule 5.1 of the SRA Accounts Rules 2019 contains a similar provision although there is no longer any requirement that the client’s instructions must be obtained in writing.5 Both the old rules and the new rules contain an obligation to restore client funds which have been improperly withheld or withdrawn and breaches of the rules are enforceable by the SRA in disciplinary proceedings.6 The position adopted in this book more generally is that rules of professional conduct are not implied terms of the contractual relationship between solicitor and client.7 But there is authority at first instance for the proposition that the Accounts Rules from time to time in force are terms of the implied trust on which the client’s funds are held.8 In practice it probably does not matter much whether the Accounts Rules are terms implied into the retainer because the entitlement of a solicitor to part with a client’s funds is governed by the instructions which he or she receives from the client.9 In most cases a solicitor will have no authority to release the funds to a third party without express instructions from the client and if the solicitor releases those funds without obtaining those instructions, he or she commits a breach of trust.10   1 For the highest authority see Burdick v Garrick (1870) 5 Ch App 233 at 240 and 243, CA, Brown v IRC [1965] AC 244 for client monies; and Target Holdings Ltd v Redferns [1996] AC 421 at 436 and Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [12] (Lord Hoffmann).   2 The rules came into force on 6 October 2011 and replaced the Solicitors’ Accounts Rules 1998. Rule 22 was the equivalent provision in the 1998 rules (which were last amended on 16 October 2007). Rule 1 of the SRA Accounts Rules 2011 also contained an ‘overarching objective’ and ‘underlying principles’ which must be borne in mind in considering the application of the 2011

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4.04  Claims in equity rules. In particular, r 1.1 provided: ‘The purpose of these rules is to keep client money safe. This aim must always be borne in mind in the application of these rules.’ For the position before the SRA Accounts Rules came into force (and which are likely to be of historic interest only now) see Re Ahmed & Co [2006] EWHC 480 (Ch) (Lawrence Collins J).   3 The Accounts Rules 2019 simplify the 2011 rules considerably and introduce the new concept of ‘Third Party Managed Accounts’ which enable firms of solicitors to practise without a client account: see para 11.1.   4 ‘Client money may only be withdrawn from a client account when it is: (a) properly required for a payment to or on behalf of the client (or other person on whose behalf the money is being held); … (f) withdrawn on the client’s instructions, provided the instructions are for the client’s convenience and are given in writing, or are given by other means and confirmed by you to the client in writing; …’.   5 ‘You only withdraw client money from a client account: (a) for the purpose for which it is being held, (b) following receipt of instructions from the client, or the third party for whom the money is held; or (c) on the SRA’s prior written authorisation or in prescribed circumstances.’ This change was no doubt prompted by the vexed question whether email instructions amount to ‘instructions … given in writing’. But a solicitor would be well advised to obtain email or written instructions and keep a clear record of them.   6 Rule 7 of the Solicitors Accounts Rules 2011 imposes a duty to restore client funds: ‘7.1 Any breach of the rules must be remedied promptly upon discovery. This includes the replacement of any money improperly withheld or withdrawn from a client account. In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the firm. 7.2 This duty extends to replacing missing client money from the principals’ own resources, even if the money has been misappropriated by an employee or another principal, and whether or not a claim is subsequently made on the firm’s insurance or the Compensation Fund.’ Rule 6.1 of the Solicitors Accounts Rules 2019 imposes a similar obligation: ‘You correct any breaches of these rules promptly upon discovery. Any money improperly withheld or withdrawn from a client account must be immediately paid into the account or replaced as appropriate.’ Breaches of the rules are subject to the wider disciplinary regime set out in the new SRA Standards and Regulations. For further discussion see Chapter 15, paras 15.31 to 15.32.   7 See Chapter 15, paras 15.22 to 15.32.  8 See Bristol & West BS v May, May & Merrimans [1996] 2 All ER 801 at 819b (Chadwick J). This passage was approved by Jackson LJ in Various Claimants v Giambrone [2017] EWCA Civ 1193, [2018] PNLR 2 at [66]. By contrast, Lord Toulson did not consider the SRA Accounts Rules 2011 to be relevant to the assessment of equitable compensation in AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 at [75].  9 See Target Holdings Ltd v Redferns [1996] AC  421 at 436B–D  (Lord Browne-Wilkinson): ‘Thus, the circumstances under which the solicitor can part with money from client account are regulated by the instructions given by the client: they are not part of the trusts on which the property is held.’ See also P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] 3 WLR 1244 at [87] (Patten LJ): ‘The entitlement of the solicitor to part with the money is governed by the instructions he receives from his client.’ 10 See, eg Cherney v Neuman [2011] EWHC 2156 (Ch) (Henderson J) at [273].

4.04 Most of the disputes involving claims for breach of trust have arisen in the context of standard form instructions or undertakings which confer authority to release client funds in certain specified circumstances. A common question is whether the failure to satisfy a particular condition or obligation in the solicitor’s standard form instructions vitiates the solicitor’s authority to release the funds. This is a question of construction of the relevant instructions or undertaking. In Target Holdings Ltd v Redferns1 Lord Browne-Wilkinson emphasised that although a solicitor holds client funds on trust, the nature of that trust is different from a traditional trust and not every duty owed by the solicitor to the client is 146

Breach of trust  4.05 a trust obligation. In Bristol & West BS v Mothew2 the lender argued that the solicitor’s authority to complete the transaction was conditional upon his having complied with all of the terms in their standard form instructions. Millett LJ rejected this argument. He stated that ‘it would in my judgment require very clear wording to produce so inconvenient and impractical a result’ because ‘no solicitor could safely accept such instructions, for he could never be certain that he was entitled to complete’. The solicitor’s authority to release the funds was not ‘vitiated by the misrepresentations for which he was responsible but of which he was unaware’.3 In general, therefore, the failure to complete a certificate of title accurately or the failure to exercise reasonable care in carrying out the other terms of the retainer will not vitiate a solicitor’s authority to release client funds unless there is a clear express term to that effect.4 1 See Target Holdings Ltd v Redferns [1996] AC 421 at 428 (Lord Browne-Wilkinson). 2 [1998] Ch 1. 3 [1998] Ch 1 at 24B–D. 4 See also Nationwide Building Society v Balmer Radmore [1999] Lloyd’s Rep PN  235, [1999]  PNLR  606 and Nationwide BS  v Vanderpump & Sykes [1999] Lloyd’s Rep PN  422 (where Blackburne J construed the lender’s instructions in the same way). See also DB UK Bank Ltd v Edmunds & Co [2014]  PNLR  12 (where HHJ  Seys-Llewellyn QC also construed the instructions in the same way and held that a failure to obtain a first legal charge was a breach of retainer and negligent but was not in itself a breach of trust).

4.05 The application of trust principles to the standard form obligations of the solicitor handling funds advanced by a lender for the purchase of a property have created a particular challenge. In Lloyds TSB Bank plc v Markandan & Uddin1 the CML Lenders’ Handbook (now the UK Finance Mortgage Lenders’ Handbook) provided that the mortgagee’s solicitor was required to hold the loan advance on trust until completion. The Court of Appeal held that ‘completion’ in this context meant completion in accordance with the Law Society’s Code for Completion by Post. On the facts completion had not taken place in accordance with the Code because D, the mortgagee’s solicitors, had been dealing with a firm of impostors who could not give solicitors’ undertakings. They had also failed to comply with the Code and released the mortgage advance before they had received the transfer. They were held to have committed a breach of trust. But Rimer LJ also went on to consider the position if D had not released the mortgage advance until they had received a transfer of the subject property but it had turned out to be forged:2 ‘The purported contract was a nullity, since the Greens had not agreed to sell their property to Mr Davies, nor had they authorised anyone to sell it to him in their name; and the purported completion of that nullity by way of the exchange of purchase money for forged documents could not in my view have amounted to completion. Nothing, said Lear, will come of nothing, and so it was here. Completion in the present context must mean the completion of a genuine contract by way of an exchange of real money in payment of the balance of the purchase price for real documents that will give the purchaser the 147

4.06  Claims in equity means of registering the transfer of title to the property that he has agreed to buy and to charge. An exchange of real money for worthless forgeries in purported performance of a purported contract that was a nullity is not completion at all. Had that happened in this case, the parting with the loan money would have been a breach of trust.’ The decision was followed in both Nationwide Building Society v Davisons Solicitors3 and Santander UK v RA Legal Solicitors.4 In each case the purchaser’s solicitors were held to have committed a breach of trust when they released the mortgage advance against a forged transfer presented (in one case) by an impostor posing as a genuine firm of solicitors and (in the other) by a fraudulent firm of solicitors. In the first case the solicitor was held to have complied with the terms of his retainer (although he had accepted requisitions on title on a different form) and in the second the solicitors had committed other breaches of their retainer (although it was unnecessary for the court to determine whether they amounted to breaches of trust). These decisions are authority for the proposition, therefore, that a solicitor who releases funds in the absence of a genuine completion commits a breach of trust.5 A solicitor will also be in breach of trust where he or she releases the relevant funds without obtaining the relevant documents required to complete the transaction or a valid undertaking in a suitable form.6 Because a solicitor may be held to have committed a breach of trust without a finding of negligence or breach of contract, the real issue in many of these cases is whether the solicitor is entitled to relief under s 61 of the Trustee Act 1925.7 1 [2011] EWCA Civ 65, [2012] 2 All ER 884. 2 See [50]. 3 [2012] EWCA Civ 1626, [2013] PNLR 12. 4 [2014] EWCA Civ 183, [2014] PNLR 20. In that case the purchaser’s solicitors also committed other breaches of the code but it was unnecessary for the court to decide whether they amounted to a breach of trust. 5 For the expression ‘in the absence of a genuine completion’ see P&P  Property Ltd v Owen White and Catlin LLP  [2018]  EWCA  Civ 1082, [2019] Ch  273 at [90] (Patten LJ). Lloyds TSB Bank plc v Markandan & Uddin was also followed in Mortgage Express v Iqbal Hafeez [2011] EWHC 3037 (Ch) (John Randall QC). For earlier cases which reached a similar outcome but with different fact patterns which may be worth considering see First Property Finance Ltd v Martin & Haigh [2006] PNLR 29 (HHJ Pelling QC) and UCB Loans v Grace & Co (unreported) 14 December 2010 (HHJ Dight). 6 This was the position in Lloyds TSB Bank plc v Markandan & Uddin (where the transaction was fraudulent but the solicitor failed to comply with the code). It was also the position in AIB Group (UK) plc v Redler & Co [2014] UKSC, [2015] AC 1503 (a re-mortgage case where the solicitor released the advance without obtaining an accurate redemption figure or an undertaking from the previous lender to release its legal charge). The issue of principle for the Supreme Court was how to approach the question of compensation and it is considered in that context in paras 4.46–4.51, below). 7 See paras 4.66 to 4.70, below).

(b)  Third party funds 4.06 The general rule is that where a third party pays money into a solicitor’s client account, that money is held on trust for the client in the absence of any 148

Breach of trust  4.07 agreement or arrangement to the contrary. This is because payment to the solicitor is equivalent to payment to the client.1 Most payments received by a firm of solicitors into its client account will fall into this category. But in some cases the terms on which the solicitor accepts the funds will impose a trust not for the benefit of the client but for the benefit of the third party. Such a trust may arise because the funds have been transferred to the solicitor for a specific purpose and the solicitor’s client was not intended to take them beneficially. This situation may give rise to a ‘Quistclose-type’ trust2 and modern cases have tended to focus on whether such a trust has arisen either expressly or by implication. We return to this issue below. But the transfer of funds by a third party subject to conditions or for a particular purpose may involve other kinds of trust because a solicitor who receives funds into a client account must be acting in a fiduciary capacity.3 1 See Challinor v Juliet Bellis & Co [2015] EWCA Civ 59, [2016] WTLR 43 at [78] (Briggs LJ) citing Ellis v Goulton [1893] 1 QB 350. 2 See P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 at [85] (where Patten LJ pointed out that a Quistclose type trust will only arise where the funds in the hands of the solicitor would not otherwise be impressed with a trust). The term itself is taken from Briggs LJ’s judgment in Challinor v Juliet Bellis & Co (above) at [52]. 3 See Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [76] (Lord Millett): ‘The duty is fiduciary in character because a person who makes money available on terms that it is to be used for a particular purpose only and not for any other purpose thereby places his trust and confidence in the recipient to ensure that it is properly applied. This is a classic situation in which a fiduciary relationship arises, and since it arises in respect of a specific fund it gives rise to a trust.’

4.07 P&P Property Ltd v Owen White and Catlin LLP1 and the conjoined appeal Dreamvar (UK) Ltd v Mishcon de Reya provide examples of a trust of third-party funds where it was unnecessary to have resort to a Quistclosetype trust. The facts of each case were very similar to Lloyds TSB Bank plc v Markandan & Uddin and the cases following it considered above. Both involved identity fraud and an impostor posing as the owner of a property purporting to sell it to an unsuspecting and innocent purchaser. However, in P&P Property Ltd and Dreamvar the claim was brought by the purchaser not against its own solicitors but against the vendor’s solicitors who had given the standard form undertakings in the Law Society’s Code for Completion by Post.2 The Code provided that on completion the vendor’s solicitors were to act as the agents for the purchaser’s solicitors. The vendor’s solicitors also gave certain undertakings both on and after completion, eg to redeem any charges over the subject property. In a detailed passage Patten LJ analysed the effect of those provisions and reached the conclusion that in acting as agents for the purchasers’ solicitors, the vendor’s solicitors received and held the purchase monies on a bare trust for the purchaser. Their authority to release the funds to the vendor depended upon completion having taken place and compliance with their own undertakings. But because no completion of the sale of the property had taken place, they had no authority to release the funds and committed a breach of trust. Patten LJ rejected the argument that completion had taken 149

4.08  Claims in equity place when they gave a receipt for the funds to the purchaser’s solicitors. He also rejected an argument that a provision in the Code which provided that the vendor’s solicitor was not required ‘to investigate or take responsibility for any breach of the seller’s contractual obligations’ excluded liability for breach of trust or gave the vendor’s solicitor authority to release the funds.3 1 [2018] EWCA Civ 1082, [2019] Ch 273. 2 We assume that the claims brought against the vendor’s solicitors were driven by the absence of insurance cover or insufficient cover for the claims against the purchaser’s own solicitors. 3 See [85]–[88] for the trust analysis and [91]–[102] for the analysis of the completion arrangements. For further discussion of the code and the solicitor’s duty on completion see Chapter 9, paras 9.53 to 9.57.

4.08 P&P Property Ltd v Owen White and Catlin LLP ultimately turned on the same point as Lloyds TSB  Bank plc v Markandan & Uddin, namely, whether completion had taken place. For present purposes, however, the point for discussion is the trust analysis which the Court of Appeal adopted to arrive at that conclusion. The general rule that the solicitor held the balance of the purchase price on trust for the vendor was displaced by the agreement or arrangement contained in the Law Society’s Code for Completion by Post. Patten LJ did not consider that a Quistclose-type trust had arisen because at all times prior to completion the purchaser’s solicitors held the funds on trust for the purchaser and when acting as their agents under the Code the vendor’s solicitors were bound by the same trust.1 But more frequently it will be necessary for the third party to establish that a Quistclose-type purpose trust arose in order to recover against the solicitor. A full analysis of this species of trust is outside the scope of this book but since two of the leading cases involve funds held by solicitors in their client accounts, a brief treatment of the topic is justified.2 The question whether a Quistclose-type trust usually (although not exclusively) arises where one party (A) provides funding to another party (B) for a specified purpose and requires the funds to be paid into the client account of a solicitor (S) to give comfort that the funds will be applied for that purpose. 1 He found support for this proposition in the passage from Lord Millett’s speech in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [76] (quoted above in 4.06, fn 3). 2 For the most influential Court of Appeal decisions involving commercial and banking relationships see Bieber v Teathers Ltd [2012] EWCA Civ 1466, [2013] 1 BCLC 248 and First City Monument Bank Plc v Zumax Nigeria Ltd [2019] EWCA Civ 294, [2019] WTLR 511. See also Smolyansky ‘Reining in the Quistclose Trust: A Response to Twinsectra v Yardley’ (2010) 17 T&T 558-68 and Millett ‘The Quistclose Trust – a reply’ (2011) 17 T&T 7-16. For more recent criticism see Hedlund and Rhodes ‘Loan or commercial trust? The continuing mischief of the Quistclose trust’ [2017] Conv 254-268.

4.09 In Twinsectra Ltd v Yardley1 A made a loan to B to purchase a property against S1’s undertaking that: ‘The loan monies will be utilised solely for the acquisition of property on behalf of our client and for no other purpose.’ In breach of the undertaking S1 transferred the money to S2 who misapplied it. A claimed against S2 for dishonest assistance and the first issue was whether S1 held the funds in his client account on trust. The House of Lords held that he 150

Breach of trust  4.10 did and that he had committed a breach of trust.2 Twinsectra can be contrasted with Challinor v Juliet Bellis & Co3 where no such trust arose. B raised funds from investors in order to repay bank borrowing on a development scheme at Fairoaks Airport in Surrey. He sent a circular to investors inviting them to transfer funds to S’s client account on the basis that an SPV would issue loan notes to them and would acquire the development. It was also the common understanding of B  and the investors that they would ultimately acquire an interest in the development through a unit trust scheme. 21 investors accepted the invitation and paid funds into S’s client account which were then used to repay the bank. But the SPV did not acquire an interest in the development, no loan notes were ever issued and no unit trust was set up. Hildyard J held at first instance that the investors had no intention to part with the beneficial interest in their money until certain conditions were satisfied (which were intended to protect them until the scheme was set up). But the Court of Appeal reversed his decision and held that investors had paid money to S as immediate loans to the SPV. The decision turns on a detailed analysis of the arrangements in question. But one important issue was the significance to be attached to the fact that investors paid their money into a solicitor’s client account. Briggs LJ drew attention to the general rule and then had this to say:4 ‘I am, with respect, wholly unpersuaded by the notion that the only sensible explanation for the identification of the Firm’s client account as the receptacle for investments was that the money should be held to the investors’ order pending further events. AFL was a recently formed Guernsey company which a reader of the emails and their attachments would understand had just made a major property acquisition in England and which might perfectly sensibly be understood to be using English solicitors for the handling of incoming payments designed to assist in the funding of the transaction. For Mr Egan to direct that investors’ payments should be made to those English solicitors called for no explanation at all.’ 1 [2002] UKHL 12, [2002] 2 AC 164 2 See Lord Hoffmann (with whom Lords Slynn and Steyn agreed) at [3] and [9] and Lord Hutton at [25]. Lord Millett delivered a concurring speech on this issue but dissented on the question whether S2 was dishonest. The terms of the undertaking are set out in Lord Hoffmann’s speech at [9]. 3 [2015] EWCA Civ 59, [2016] WTLR 43. 4 At [81].

4.10 In the course of his judgment in Challinor v Juliet Bellis & Co Briggs LJ set out the basic principles applicable to Quistclose-type trusts drawing on Lord Millett’s analysis in Twinsectra Ltd v Yardley.1 In future cases these principles are likely to provide the starting point for any factual analysis in solicitors’ cases and we set out no more than the headline points here: (1) Quistclose-type trusts are a species of resulting trust which arise where property (usually money) is transferred on terms which do not leave it at 151

4.10  Claims in equity the free disposal of the transferee. The restriction is usually created by an arrangement that money should be used for a stated purpose or purposes. (2) There must be an intention to create a trust on the part of the transferor. This is an objective question and the transferor must have intended to enter into arrangements, which viewed objectively have the effect in law of creating a trust. (3)

There is no presumption of such a trust arising unless a contrary intention is proved (unlike the traditional resulting trust where a person makes a gratuitous transfer of property to an apparent stranger).

(4)

The question whether essential restrictions have been imposed on the use of the property turns on the true construction of the words used by the transferor on the transfer of funds or the invitation to transfer funds by transferee.2

(5) Where property is transferred on terms which do not leave it at the free disposal of the transferee, the trust established is one under which the beneficial interest in the property remains in the transferor unless and until the purpose is fulfilled. (6) The application of the property by the transferee is a power vested in the transferee and the trust is not a primary purpose trust. If the power cannot be exercised and the property cannot be applied for the stated purpose, then the transferor’s beneficial interest continues in existence.3 (7) Where it is not demonstrated that the property is not to be at the free disposal of the transferee, the ordinary consequence is that the money becomes the property of the transferee who is free to apply it as he or she chooses. The key difference between Twinsectra and Challinor v Bellis & Co was that in the one case S1 gave a solicitor’s undertaking to A to apply the funds for a stated purpose but in the other there was virtually no communication between S  and the investors. In most cases a trust will only arise where S  gives a solicitor’s undertaking to A which prevents B from having free access to the funds.4 But the presence of a solicitor’s undertaking will not invariably give rise to a Quistclose-type trust and the context in which it is given will be highly significant.5 Likewise, it is possible for such a trust to arise where no undertaking is given by S to A and there is no contractual relationship between them at all.6 1 [2015] EWCA Civ 59, [2016] WTLR 43 at [51]–[65]. 2 Twinsectra was a case where the relevant words were those of the transferee. Briggs LJ also accepted that the relevant restriction could exceptionally be contained in an invitation from a third party: ‘If you transfer money to C, it will be used solely for a specified purpose’. But whether C is liable for breach of trust will then depend on whether C knew the terms of the transfer before disposing of the property. In Goyal v Florence Care Ltd [2020]  EWHC  659 (Ch) Morgan J held that it was necessary to show that S had knowledge of the restriction: see [104]–[112] He then examined in detail whether the firm could be treated as having knowledge of the contents of an email which was sent to a general inbox: see [113]–[140].

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Breach of trust  4.11 3 This principle was directed to the situation where the property could not be applied for the stated purpose because the purpose was not stated with sufficient clarity. But it appears to be of general application. 4 See Barclays Bank plc v Weeks, Legg & Dean [1999] QB 309, CA (standard form undertaking given by the solicitor of a customer to a bank); Freeman v HM  Commissioners and Excise [2005]  EWHC  582 (Ch), [2006]  WTLR  1271 (Michael Crystal QC) (undertaking to discharge liability for VAT where the contest was between the original payor and the intended recipient); Templeton Insurance Ltd v Penningtons Solicitors LLP  [2006]  EWHC  685 (Ch), [2007]  WTLR  1103 (Lewison J) (undertaking to apply funds towards the purchase of a property), and Global Marine Drillships Ltd v Landmark Solicitors LLP [2011] EWHC 2685 (Ch) (Henderson J) (undertaking to apply funds for the purchase of an insurance policy). Compare Gore v Mishcon de Reya [2015] EWHC 164 (Ch) (HHJ Hodge QC). 5 See Tradegro (UK) Ltd v Wigmore Street Investments Ltd (in administration) [2011] EWCA Civ 268, [2011] 2  BCLC  616 where S  gave an undertaking not to release funds paid under tax indemnity under threat of a freezing injunction. The beneficial interest in the money passed to the indemnified subject to the undertaking not to release it until the determination of the dispute. The fact that the undertaking was given in the context of an application for a freezing order (where A could not expect to get priority over other creditors) was very important. For a recognition of the importance of context more generally see Bieber v Teathers Ltd [2012] EWCA Civ 1466, [2013] 1 BCLC 248 at [15] (Patten LJ) cited by Newey LJ in First City Monument Bank Plc v Zumax Nigeria Ltd [2019] EWCA Civ 294 at [23]. 6 For recent examples see Levack v Philip Ross & Co [2019] EWHC 762 (Comm) at [9] and [21]– [42] (where Lionel Persey QC held that a trust arose in the course of email correspondence) and Goyal v Florence Care Ltd [2020] EWHC 659 (Ch) at [73] and [99]–[103] (where Morgan J held that an email in the following form was sufficient to give rise to a trust although the claim failed on the facts: ‘I have transferred £160,000 into your account which as agreed should be held till you receive further instructions and should only be used as proof of funds for exchange until advised further’).

(c)  Conscious or deliberate breach of trust 4.11 In Mothew there was no allegation of dishonesty or bad faith and it was unnecessary for the court to consider what the position would have been if a fraudulent, dishonest or deliberate breach of trust had been alleged.1 If D  had known that the report on title was misleading when he completed it, then C  could have recovered damages for deceit at common law. But this would also have been a fraudulent breach of trust.2 It is hard to think of a stronger example of a trustee intentionally or recklessly disregarding the beneficiary’s interests than a fraudulent misrepresentation. But a claim for conscious or deliberate breach of trust is not the same as a claim for common law deceit and to establish liability it may be sufficient for the claimant to show that the solicitor was guilty of conscious or deliberate nondisclosure. In Alliance & Leicester Building Society v Edgestop3 Hoffmann J held that a solicitor who knew that his borrower client had made fraudulent misrepresentations to his lender client but concealed this fact was held to be liable for breach of trust. This knowledge made it apparent to the solicitor that the transaction was wholly different from the transaction which the lender client had intended to authorise and vitiated the solicitor’s authority to release the money. The Court of Appeal reached a similar conclusion in Various Claimants v Giambrone and Law,4 where S  deliberately suppressed 153

4.12  Claims in equity the fact that funds C  had paid to them as deposits were being used to fund substantial commissions.5 1 [1998] Ch 1 at 15G. See para 4.04, above. 2 See Armitage v Nurse [1998] Ch 241 at 251D–G (Millett LJ) who defined ‘actual fraud’ for the purpose of a trustee exemption clause as an ‘intention to pursue a particular course of action, either knowing that it is contrary to the interests of the beneficiary or being recklessly indifferent whether it is contrary to their interests or not’. See also First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [64] (Patten LJ): ‘For a breach of trust to be fraudulent it is not enough to show that it was deliberate. There must also be an absence of honesty or good faith. This can include being reckless as to the consequences of the action complained of.’ See also [68]: ‘I am satisfied from what I have read that it was fairly put to Mr Emmett that he was aware that he was acting contrary to the interests of BSW and that he knew that what he was doing was wrong. The judge in my view had evidence from which he could properly decide whether the breaches of duty alleged against Mr Emmett were dishonest and therefore fraudulent.’ 3 [1999] Lloyd’s Rep (PN) 868. The decision was approved but distinguished by the House of Lords in Target [1996] AC  421 at 439B–D. For a recent example where the court found that the solicitor paid away mortgage funds ‘in the knowledge that this was contrary to his instructions and the conditions on which they were held so as to give rise to a breach of trust’: see LIV Bridging Finance Ltd v EAD Solicitors LLP [2020] EWHC 1590 (Ch) (HHJ Halliwell) at [34]. 4 [2017] EWCA Civ 1193, [2018] PNLR 2 at [65]–[71]. 5 Jackson LJ set out the precise state of mind which gave rise to liability at [71]: ‘It was obvious that Giambrone ought to have disclosed the payment of such large and over-generous commissions. Giambrone appreciated this as soon as it gave serious consideration to the matter. Giambrone felt so embarrassed about its conduct that it sought to suppress the truth. In my view that package of circumstances is sufficient to “affect the conscience” of Giambrone in the manner described by Millett LJ in Mothew at 23.’

2  Constructive trusts 4.12 The liability of a solicitor as constructive trustee was considered by the Court of Appeal in Paragon Finance plc v DB Thakerar & Co1 where the facts were similar to both Target and Edgestop and the solicitors had failed to report a series of sub-sales to a lender. The lender applied for permission to amend to allege that the solicitors were liable as constructive trustees outside the normal six-year limitation period and the question for the court was whether this claim was barred by limitation under s 21 of the Limitation Act 1980. Millett LJ drew a distinction of general application between two categories of constructive trust which we refer to as category (1) constructive trusts and category (2) constructive trusts and the Supreme Court accepted and applied this distinction in Williams v Central Bank of Nigeria.2 Category (1) consists of those cases in which the defendant ‘though not expressly appointed as trustee, has assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust’.3 The second category consists of those cases in which the defendant is implicated in a breach of trust or breach of fiduciary duty and is liable to account to C not as a trustee but as if he or she were a trustee. The defendant is not a trustee at all but the term ‘constructive trust’ is used as a formula for equitable relief.4 Examples of category (1) constructive trusts are Stack v Dowden5 trusts of the family home 154

Breach of trust  4.13 and secret trusts. This type of constructive trust has also been described as an ‘institutional’ constructive trust.6 But the risk in using this term is that category (2) constructive trusts will be labelled a ‘remedial’ constructive trust and unlike Canada or the USA  English courts have never embraced the constructive trust as a remedial device.7 We therefore continue to refer to the two kinds of trust as category (1) constructive trusts and category (2) constructive trusts. Finally, although the distinction between the two categories is one of general importance its principal practical application arises in relation to limitation.8 1 [1999] 1 All ER 400, CA at 408–409. 2 [2014] UKSC 10, [2014] AC 1189. For a useful digest of the key passages in both cases see First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [41]–[45] (Patten LJ). 3 See the passage from Paragon, above. See also First Subsea Ltd v Balltec Ltd (above) at [45] (Patten LJ): ‘A defining characteristic of constructive or de facto trustees within the first class in the Paragon case is that (as with all trustees) they should be in lawful possession of trust property.’ 4 See Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366 at [142] where Lord Millett stated that ‘the expressions “constructive trust” and “constructive trustee” create a trap’ and that they are ‘nothing more than a formula for equitable relief’. See also Williams (above) at [64] (Lord Sumption): ‘It is unreal to refer to a person who receives property dishonestly as a “trustee”, ie a person in whom trust is reposed, given that the trust is said to arise simply as a result of dishonest receipt. Nobody involved, whether the dishonest receiver, the person who passed the property to him, or the claimant, has ever placed any relevant trust and confidence in the recipient.’ 5 [2007] UKHL 17, [2007] 2 AC 432. 6 See Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 714–715 (Lord Browne-Wilkinson). 7 See FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250 at [47] (Lord Neuberger) and Angove’s Pty Ltd v Bailey [2016] UKSC 47, [2016] 1 WLR 3179 at [27] (Lord Sumption): ‘English law is generally averse to the discretionary adjustment of property rights, and has not recognised the remedial constructive trust favoured in some other jurisdictions, notably the United States and Canada. It has recognised only the institutional constructive trust.’ 8 See section E, below.

(a)  Dishonest assistance 4.13 Dishonest assistance is ‘a liability in equity to make good resulting loss attaching to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation’.1 This liability depends on proof of four ingredients: (1) There was a trust in existence at the material time. (2) The trustee committed a breach of that trust. (3) The defendant assisted the trustee to commit that breach of trust. (4) The defendant’s assistance was dishonest.2 A claim for dishonest assistance will ordinarily be brought by new trustees or by a beneficiary. But there is no reason in principle why the defaulting trustee may not also bring a claim. In the context of solicitors’ claims this means that a firm of solicitors itself may bring a claim for dishonest assistance against its 155

4.14  Claims in equity former partners or employees for stealing or misappropriating money from the firm’s client account.3 1 Royal Brunei Airlines v Tan [1995] AC 378, PC at 392 (Lord Nicholls). 2 See Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [28] (a solicitor’s case). This passage was cited by Males LJ in Simetra Global Assets Ltd v Ikon Finance Ltd [2019]  EWCA  Civ 1413, [2019] 4 WLR  112 at [31] as a general statement of the test. 3 See Pulvers v Chan [2007] EWHC 2406 (Ch), [2008] PNLR 9 at [380]–[395] (Morgan J) and Group Seven Ltd v Notable Services LLP [2017] EWHC 2466 (Ch), [2018] PNLR 6 at [564] (also Morgan J) (reversed in part by the CA (above)). For a more recent example see Lavarello v Jyske Bank (Gibraltar) Ltd (CA for Gibraltar, unreported, 18 January 2018) where the trustees in bankruptcy of a dissolved solicitors’ firm brought a dishonest assistance claim against the bank at which the firm’s client and office accounts were held in their capacity as trustees of the accounts.

(i)  The trust 4.14 The first ingredient does not require the victim to establish the existence of a formal trust and the most common form of claim involves the directors of a company misappropriating company funds or other company assets.1 Where a company director or other fiduciary misappropriates or steals funds in breach of fiduciary duty and diverts them through a solicitor’s client account, this element usually presents no difficulty and the critical question will be whether the solicitor was aware that the funds had been stolen or turned a blind eye to this fact.2 But the relevant trust can be the trust on which the firm itself holds funds in its client account and the breach of trust can be a breach of trust by the firm.3 The relevant trust may also be the trust of funds in the client account of another firm of solicitors.4 The position is more complicated where the solicitor takes instructions from a third party who is not a director or from a director who does not have formal control of the company.5 The most difficult cases (in conceptual terms) are those where the victims are third parties who have been induced by fraud to transfer funds to a corporate vehicle either by way of loan or for the issue of shares. In cases of this kind, the recipient holds the relevant property or its traceable proceeds on trust for the victim but only once the victim has elected to rescind or avoid the transaction.6 In fraud cases the courts have approached the requirement for rescission very broadly. It is not necessary to give notice of rescission to the fraudster nor to plead it specifically. It is also sufficient that the innocent party clearly indicates that he or she is rescinding the contract by reclaiming the property.7 Moreover, under English law the innocent party may avoid or rescind a fraudulent transaction and assert a constructive trust over the property or its traceable proceeds where the original transaction was genuine but the theft or misappropriation of the assets has taken place subsequently.8 Nevertheless, there are some limits on the power to rescind. Rescission is not possible where it would prejudice the interests of innocent third parties, or substantial restitution by both parties is not possible, or the innocent party has affirmed the transaction. Nor will the proceeds be held on a constructive trust when it has ceased to be possible to 156

Breach of trust  4.15 identify the transferred property or its traceable proceeds in the hands of the wrongdoer.9 1 For the first modern decision see Selangor United Rubber Estates Ltd v Cradock (No  3) [1968] 1 WLR 1555 (Ungoed-Thomas J). For recent decisions see Payroller Ltd v Little Panda Consultants [2020] EWHC 391 (QB) (Freedman J) and Bilta (UK) Ltd v Natwest Markets plc [2020] EWHC 546 (Ch) (where Snowden J held that carousel or MTC fraud could amount to dishonest assistance at [170]–[172]). For more examples see Lewin on Trusts 20th edn (2020) at para 43–26. 2 For examples see Attorney General of Zambia v Meer, Care & Desai [2008] EWCA Civ 1007 (where corrupt employees of the Zambian government diverted funds which were intended to be used for arms contracts through D’s client account) and Lexi Holdings plc v Pannone [2009] EWHC 2590 (Ch) (where a director diverted assets from a company). For an example of a claim for dishonest assistance against a foreign lawyer in relation to misappropriation of the assets of a foreign company see Grupo Torras SA v Al-Sabah [2001] CLC 221, CA. 3 For an example see Mortgage Express Ltd v S Newman & Co (No 2) [2001] PNLR 5, CA (a mortgage fraud case where the trust was the trust of the mortgage advance). See also Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [30]. For a case in which it is difficult to identify a breach of trust at all although the decision ultimately turned on dishonesty see Clydesdale Bank Plc v Workman [2016] EWCA Civ 73, [2016] PNLR 18 (where Ds paid the proceeds of the sale of a number of properties to a private mortgagee who claimed to have priority over the bank’s unregistered charge). 4 See Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 (the facts of which are set out in para 4.09, above). 5 For two famous examples see Agip (Africa) Ltd v Jackson [1991] Ch 547, CA (where the chief accountant who defrauded his employer was held to be a fiduciary) and El-Ajou v Dollar Land Holdings Plc (No.1) [1994] 1 BCLC 464, CA (where a nominee director was held to be the directing mind and will of the company). 6 See National Crime Agency v Robb [2014]  EWHC  4384 (Ch), [2015] Ch  520 (Sir Terence Etherton C) at [40]–[50] where the principal authorities are considered. 7 See NCA  v Robb (above) at [47] citing Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525, CA, Shalson v Russo [2005] Ch 281 (Rimer J) at [12] and O’Sullivan, ‘Rescission as a Selfhelp Remedy: A Critical Analysis’ [2000] 59 CLJ 509. See also Glenn v Watson [2018] EWHC 2016 (Ch) (Nugee J) at [540] and Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [30] (where it was conceded that the solicitors held the relevant funds on bare trust for the victim after it had avoided the transaction under Maltese law). 8 See NCA v Robb (above) at [51]: ‘I consider that there are good policy reasons for enabling a victim of fraud, which supervenes in a transaction, to set aside the transaction so as to pursue a proprietary claim even though that will have priority over other unsecured creditors of the fraudster or of any other person who has received traceable proceeds.’ 9 See also at [51].

(ii)  Breach of trust 4.15 Given that dishonest assistance is a form of accessory liability, it is essential for the victim to establish that a breach of trust took place although it is not necessary to show that the breach of trust was itself dishonest.1 When the last edition of this book was published, there remained some doubt whether the misuse of trust property was a prerequisite to liability. This issue has now been resolved and an accessory may be liable for dishonest assistance even if the breach of fiduciary duty did not involve the misapplication of trust funds or trust property.2 This issue might arise in professional liability cases.3 1 See Royal Brunei Airlines v Tan [1995] AC 378, PC.

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4.16  Claims in equity 2 See Novoship (UK) Ltd v Mikhaylyuk [2014]  EWCA  Civ 908, [2015]  QB  499 at [87]–[93] where Longmore LJ set out the relevant authorities and stated (at [92]): ‘Because dishonesty can take many different forms (as well as having many different consequences) we do not agree that it makes all the difference that the dishonesty consists of receiving as opposed to paying a bribe. As we have said, the only question is whether liability as a dishonest assistant in a breach of fiduciary duty has been established.’ 3 The editors of Lewin (above) give the following example at 43–027: ‘This question might arise, for example, if someone engages a solicitor to give him advice, and the solicitor breaches his fiduciary duty of loyalty by rendering advice which, as the solicitor is aware, is contrary to the interest of the person engaging him, thereby causing loss, and the solicitor is assisted by some third party in rendering the false advice.’

(iii) Assistance 4.16 Liability is not limited to the accessory who assists the fiduciary to commit the original breach of trust or diversion of assets. It extends to everyone who consciously assists the fiduciary to continue that design.1 It is necessary that the assistance provided have some causative impact on the breach. It must be of more than minimal importance and passive receipt of trust property will not be sufficient to give rise to liability.2 There is no mental element involved in assessing whether the ingredient of assistance is made out and the quality of the acts are not coloured by the defendant’s knowledge (which must be considered separately).3 An accessory will be liable if he or she renders assistance after the original transfer which constitutes the breach of trust to disguise the destination of the funds and prevent their recovery.4 Indeed, one of the most likely situations in which a solicitor will be exposed to accessory liability is by accepting instructions to assist a client to launder money through the firm’s client account after a breach of trust has taken place.5 The client will be unable to move the money through the solicitor’s client account without the solicitor completing and signing the relevant forms to accept or release the money and these actions will usually satisfy this ingredient of the cause of action.6 But where the assistance involves the laundering of funds, the accessory may not be liable for the whole loss but only for those funds which pass through the firm’s hands.7 1 See Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [99] (Lord Millett). 2 See Brown v Bennett [1999] BCLC 649, CA at 659 (Morritt LJ) and Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), [2007] WTLR 835 (Lewison J) at [1509] and [1510]. For examples of the application of the test see Madoff Securities International Ltd (In Liquidation) v Raven [2013] EWHC 3147 (Comm) (Popplewell J) at [352]: ‘K assisted the payments to be made by providing the research, submitting invoices, collecting the Erko cheques and providing details for, and receiving, the electronic transfers. That is sufficient to make out this ingredient.’ See also FM  Capital Partners Ltd v Marino [2018]  EWHC  1768 (Comm) (Cockerill J) at [330]: ‘O provided more than minimal assistance in the sense that even if he did not perform a substantive role, he was of manifest use in concealing the involvement of M and B from sight and in arranging payment.’ 3 See Madoff Securities International Ltd (In Liquidation) v Raven (above) at [348]–[351]. 4 See Latchworth v Dryer [2016] EWHC 3424 (Ch) (HHJ Pelling QC) (where the assister made false representations in order to disguise the destination of the funds). 5 See Twinsectra (above) at [107] (Lord Millett): ‘Most of the cases have been concerned not with assisting in the original breach but covering it up afterwards by helping to launder the money.’

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Breach of trust  4.18 6 See Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [30] (where the signatures of two of the three partners were required to authorise the release of the funds). 7 See Grupo Torras SA v Al-Sabah (No 5) [1999] CLC 1469 (Mance LJ) at [1667] (upheld on appeal at [2001] Lloyd’s Rep PN 117 at [119]).

(iv) Dishonesty 4.17 The decision of the Privy Council in Royal Brunei Airlines v Tan1 settled the question whether dishonesty was an essential ingredient of dishonest assistance. It also decided that the test for dishonesty was an objective one. The decision of the House of Lords in Twinsectra v Yardley2 ‘temporarily clouded, although it did not ultimately obscure, the picture painted so clearly by Lord Nicholls in Tan’.3 In Twinsectra the majority interpreted the decision as requiring the court to apply the criminal test for dishonesty in R v Ghosh4 which required not only the application of the objective standard of dishonesty but also subjective knowledge by the accessory that what he or she was doing would be regarded as dishonest by ordinary people.5 In Barlow Clowes International Ltd v Eurotrust International Ltd,6 however, Lord Hoffmann reverted to the purely objective test in Tan:7 ‘Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree.’ 1 [1995] 2 AC 378 at 390–391. See also the analysis of Sir Anthony Clarke MR in ‘Claims against professionals: negligence, dishonesty and fraud’ [2006] 22  PN  70 at 73–75. For the wider context in both civil and criminal law see Ridge and Dietrich, ‘Challenging conceptions of accessory liability in private law’ (2019) 78 CLJ 383–408. 2 [2002] UKHL 12, [2002] 2 AC 164. 3 See Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [38]. 4 [1982] QB 1053. 5 See, in particular, at [27] (Lord Hutton) who regarded Tan as laying down a test ‘which required a finding that the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest’. 6 [2005] UKPC 37, [2006] 1 WLR 1476. The relevant test was critical because the judge found that the unsuccessful defendant had been dishonest because he had an ‘exaggerated notion of dutiful service to clients, which produced a warped moral approach’. 7 At [10].

4.18 For a period it was unclear whether English courts should follow Twinsectra (a decision of the House of Lords) or Tan and Lord Hoffmann’s gloss on Twinsectra in Barlow Clowes (both decisions of the Privy Council). In Abou-Rahmah v Abacha1 the Court of Appeal found it unnecessary to decide this issue but in Starglade Properties Ltd v Nash2 decided as part of the ratio of the decision that Lord Hoffmann’s interpretation in Barlow Clowes contained a correct statement of English law. The position has now been put beyond doubt 159

4.19  Claims in equity by the decision of the Supreme Court in Ivey v Genting Casinos (UK) Ltd3 in which Lord Hughes approved the test for dishonesty in civil cases set out by Lord Hoffmann in Barlow Clowes.4 This test has now been applied by the Court of Appeal to a case involving a dishonest assistance claim against a firm of solicitors in Group Seven Ltd v Notable Services LLP.5 The members of the court expressed the test as a two stage exercise in the following terms:6 ‘… the defendant’s actual state of knowledge and belief as to relevant facts forms a crucial part of the first stage of the test of dishonesty set out in Tan. But once the relevant facts have been ascertained, including the defendant’s state of knowledge or belief as to the facts, the standard of appraisal which must then be applied to those facts is a purely objective one. The court has to ask itself what is essentially a jury question, namely whether the defendant’s conduct was honest or dishonest according to the standards of ordinary decent people.’ The members of the court also affirmed that ‘blind-eye knowledge’ is to be treated as actual knowledge for the purposes of applying that test. To prove the requisite knowledge, it is necessary to satisfy two conditions: first, the existence of a suspicion that certain facts must exist and, secondly, a conscious decision to refrain from taking steps to confirm their existence.7 However, the court also confirmed that the court may take into account suspicions which fall short of constituting blind-eye knowledge in the overall assessment whether a person was dishonest.8 1 [2006] EWCA Civ 1492, [2007] 1 Lloyd’s Rep 115. See Rix LJ at [26] and Arden LJ at [69]. Pill LJ left open the issue: see [94]. 2 [2010] EWCA 1314. See, in particular, [32] (Sir Andrew Morritt C). 3 [2017] UKSC 67, [2018] AC 391. See, in particular, [62] and [63]. For extra judicial comment see Hale, ‘Dishonesty’ (2019) 48 CLWR 5 supporting the simplification of the test but pointing out the difficulties with the objective test for juries. 4 See para 4.17, above. See also Magner v Royal Bank of Scotland plc [2020] UKPC 5 at [10] (Lord Hodge) where the Privy Council also applied Ivey in a Gibraltar appeal. 5 [2019] EWCA Civ 614, [2020] Ch 129. For case comment see Douglas, ‘The role of knowledge in dishonest assistance’ (2020) 79 CLJ 14–17 who points out the difficulties in commercial cases of proving the assister’s state of knowledge in solicitors’ cases. 6 See [57]. 7 See [58]. The court relied on passages from the speeches of Lord Hobhouse (at [25]) and Lord Scott (at [112]) in the well-known decision Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2001] UKHL 1, [2003] 1 AC 469 which was concerned with privity under s 39(5) of the Marine Insurance Act 1905. 8 See [60]: ‘Even though knowledge, in this context, must now be taken to be confined to actual and blind-eye knowledge, we see no reason in principle why a person’s beliefs may not include suspicions which he harbours, but which in and of themselves fall short of constituting blind-eye knowledge. The existence of such suspicions, and the weight (if any) to be attributed to them, are then matters to be taken into account at the objective second stage of the test … The state of a person’s mind is in principle a pure question of fact, and suspicions of all types and degrees of probability may form part of it, and thus form part of the overall picture to which the objective standard of dishonesty is to be applied.’

4.19 In solicitors’ cases the usual question for the court is whether the solicitor knew or had blind eye knowledge that the ‘client had no right to require 160

Breach of trust  4.19 the relevant funds in the firm’s client account to be paid out to the particular person or for the particular purpose’.1 It is not a condition of liability that the accessory is aware of the existence of a trust or that those obligations gave rise to a fiduciary relationship.2 It is enough to show that the accessory knew that the funds were not at the free disposal of the principal.3 In Group Seven Ltd v Notable Services Ltd4 the Court of Appeal rejected the argument that the accessory must know, at least in broad terms, what is the underlying breach of trust or what the design of the principal wrongdoer is. However, it was unnecessary for the members of the court to reach a concluded view on this question because they found that the solicitor was acting dishonestly by accepting a bribe and concealing it from his colleagues. They also found that he must have had blind eye knowledge that the relevant funds were not owned beneficially by the client or at its free disposal.5 Nevertheless, they expressed the view that the simplicity of the two stage process which emerged from the authorities (and set out above) should not be complicated by the introduction as a matter of law of a minimum content of knowledge which must be satisfied.6 The number of cases in which a solicitor has been found to be dishonest is relatively rare7 and claims have usually failed where the victim is unable to show that the solicitor was a party to the fraud or that the client’s instructions were so abnormal or unusual that the solicitor must have known or suspected the truth.8 Indeed, in one case the Court of Appeal refused to accept that two solicitors were dishonest even though their conduct was characterised as reckless.9 1 See Attorney General of Zambia v Meer, Care & Desai [ 2008] EWCA Civ 1007 at [20] (Lloyd LJ). 2 See Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [24] (Lord Hoffmann) and [135] (Lord Millett). 3 For various formulations see Twinsectra (above) at [135]: ‘It is sufficient that he knows that the money is not at the free disposal of the principal. In some circumstances it may not even be necessary that his knowledge should extend this far. It may be sufficient that he knows that he is assisting in a dishonest scheme’. See also Barlow Clowes [2005] UKPC 37, [2006] 1 WLR 1476 at [28]: ‘Someone can know, and can certainly suspect, that he is assisting in a misappropriation of money without knowing that the money is held on trust or what a trust means’. 4 [2019] EWCA Civ 614, [2020] Ch 129. 5 See [96] and [100]. 6 See [103]. This view was expressly recognised to be obiter dictum and remains open for reconsideration by the Court of Appeal or Supreme Court. 7 For findings of dishonesty see Halliwells LLP  v NES  Solicitors [2011]  EWHC  947 (Ch), [2011]  PNLR  30 (HHJ  McCahill QC) (a coverage dispute) and Cherney v Neuman [2011]  EWHC  2156 (Ch) (Henderson J) (a dishonest breach of trust case). For a finding of dishonesty against a foreign lawyer see Grupo Torras SA v Al-Sabah (No 5) [1999] CLC 1469 (Mance LJ) at 1618 (where a Spanish lawyer who implemented ‘instructions which conflicted, on their face and in the most obvious way, with the most fundamental of fiduciary duties, to keep private and corporate affairs and monies separate’ was held to be dishonest). In Walker v Stones [2001] QB 902, CA C was given permission to amend to plead a case that a solicitor trustee consciously used his position as trustee to further or protect the interests of the beneficiaries’ father and his companies by deliberately sacrificing the financial interests of the beneficiaries: see 941–946. 8 For allegations of dishonesty which failed see Mortgage Express v Newman [2001] Lloyd’s Rep PN  605, Attorney General of Zambia v Meer, Care & Desai [ 2008]  EWCA  Civ 1007 and Lexi Holdings plc v Pannone [2009] EWHC 2590 (Ch) (Briggs J) (a summary judgment

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4.20  Claims in equity application where the court found that the instructions came nowhere near the sufficient degree of abnormality or suspicion sufficient for summary determination). 9 See Clydesdale Bank Plc v Workman [2016] EWCA Civ 73, [2016] PNLR 18 at [48] (Longmore LJ): ‘It was reckless to have allowed the entirety of the sale proceeds to be paid to Mr Hayward without making further enquiry about the extent of the monies secured by the Hayward charge. I am not convinced that recklessness is equivalent to dishonesty in this area of the law, although it is undoubtedly evidence of dishonesty.’

4.20 One issue which may have a bearing on whether a solicitor is found liable for dishonest assistance is the extent to which he or she has complied with the SRA Accounts Rules or guidance provided by the SRA or the Law Society or the money laundering regulations. Since 1997 the Law Society has provided guidance on banking instrument fraud and guidance in other practice areas on money laundering.1 The current regulations are the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 20172 and the current guidance was last updated in January 2020.3 Failure to comply with the MLR or the guidance is not direct evidence of dishonesty but it may justify the conclusion that the solicitor suspected fraud but turned a blind eye to it.4 In addition, the SRA has issued a series of warning notices on money laundering.5 These warning notices are relevant to all regulated persons but especially to the COLP and MLRO of a law firm. The current warning notices state that the SRA expects all firms and individuals regulated by it to have regard to them and a failure to do so may well expose a solicitor to the risk of a finding of dishonesty. Again, a solicitor who fails to submit a suspicious activity report to the NCA but complies with the client’s instructions to transfer funds away in suspicious circumstances runs a high risk of both a finding of dishonesty and committing a criminal offence.6 By contrast, if the NCA consents to the transaction proceeding or issues a ‘DAML’7 this will provide the best possible defence to a claim for dishonest assistance.8 1 The Law Society’s Banking Instrument Fraud Warning Card ‘Yellow Card’ warning on banking instrument fraud was first published in September 1997 at Annex 12B of the Guide to the Professional Conduct of Solicitors. Since claims are likely to be historic, it is important to have regard to the MLR and guidance in place at the relevant time. For a more detailed history of both the MLR and the guidance see Chapter 1, para 1.08 and the third edition at para 4.17. In this edition we deal only with changes in the meantime. 2 SI  2017/692. The MLR  2017 originally came into force on 26  June 2017 and replaced the MLR  2007 (SI  2007/1257) which came into force on 15  December 2007 and replaced the MLR  2003. On 10  January 2020 they were amended by the EU’s  5th Money Laundering Directive. 3 The SRA issued general guidance on 2  March 2018 (updated on 25  November 2019). For detailed guidance, however, since the directive came into force see the Law Society’s Antimoney laundering Guidance for the Legal sector, also dated 10 January 2020. 4 Chapter 11, para 11.2 (headed ‘constructive trusteeship’) states: ‘The state of your knowledge is key to this liability. Records of CDD measures undertaken and disclosures of your notes provide evidence of your knowledge and intentions.’ Chapter 12 sets out in detail a series of ‘Money laundering warning signs’ including secretive clients, unusual instructions, changing instructions, use of client accounts, source of funds and disclosing client account details. 5 See ‘Money Laundering and terrorist financing – suspicious activity reports’ first issued on 8 December 2014 and updated on 2 March 2018 and 25 September 2019. See also ‘High-yield investment fraud’ issued on 10 September 2013, ‘Investment schemes and client account’ issued

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Breach of trust  4.21 on 21 September 2016, ‘Investment schemes (including conveyancing)’ issued on 23 June 2017 and ‘Improper use of a client account as a banking facility’ originally issued on 18 December 2014 and updated on 6 August 2018. 6 Section 330 of the Proceeds of Crime Act 2002 makes it an offence to fail to disclose information where the solicitor knows or suspects or has reasonable grounds to know or suspect that another person is involved in money laundering. Section 328 also makes it an offence where a person ‘enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property.’ 7 ‘DAML’ or ‘Defence Against Money Laundering’ is a term used by the NCA when referring to ‘appropriate consent’ to carrying out an activity that may result in a person committing a principal money laundering or terrorist financing offence under Part 7 of the Proceeds of Crime Act 2002 and provides a statutory defence to money laundering offences. Section 338(4A) provides that where an authorised disclosure is made in good faith, no civil liability arises. Chapters 8 and 9 of the 2018 practice note contain detailed guidance on making a disclosure together with the relevant web links. The NCA has also provided online guidance in the form of ‘Defence Against Money Laundering FAQs’ published on 8 May 2018. 8 We should record one note of caution about the impact of a failure to comply with professional conduct rules and findings of dishonesty. In Group Seven Ltd v Notable Services Ltd [2017] EWHC 2466 (Ch), [2018] PNLR 6 at [338] Morgan J found that a solicitor had knowingly and deliberately broken the SRA Accounts Rules but did not find him or the firm liable for dishonest assistance. The Court of Appeal overturned his judgment at [2019] EWCA Civ 614, [2020] Ch 129, but it is not clear what reliance they placed on the breaches of the SRA Accounts Rules. Ds’ submission was that the dishonest breach of the Accounts’ Rules should not give rise to liability for dishonest assistance: see [86]. The court did not directly address this point. But they held that Morgan J’s findings were sufficient to give rise to liability for dishonest assistance as well as knowing receipt: see [103].

(b)  Knowing or ministerial receipt 4.21 A  solicitor who becomes involved in money laundering or the commission of some other breach of trust may also be at risk of the court imposing a constructive trust for knowing receipt. There are three elements of the cause of action:1 ‘For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.’ Further, where a solicitor lawfully receives trust property (as a trustee or agent) but subsequently disposes or deals with the property inconsistently with the terms of the trust, he or she will also be liable as a constructive trustee. In cases of this kind, the solicitor does not become a constructive trustee upon receipt of the trust property but only when he or she deals with it inconsistently. We call this ‘ministerial receipt’ to distinguish it from knowing receipt and many of the cases involve solicitors. In Lee v Sankey2 Sir James Bacon V-C explained the cause of action in the following terms: ‘It is well established by many decisions, that a mere agent of trustees is answerable only to his principal and not to cestuis que trust in 163

4.22  Claims in equity respect of trust moneys coming to his hands merely in his character of agent. But it is also not less clearly established that a person who receives into his hands trust moneys, and who deals with them in a manner inconsistent with the performance of trusts of which he is cognizant, is personally liable for the consequences which may ensue upon his so dealing.’ Knowing receipt is often described as restitutionary in nature although it requires an element of fault.3 Ministerial receipt is fault based. Indeed, in the modern law there is little to distinguish between the modern cause of action for accessory liability and the traditional cause of action for inconsistent dealing or ministerial receipt. We deal first with the elements of knowing receipt and then deal briefly with ministerial receipt and a comparison between the two causes of action. 1 See El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685, CA at 700 (per Hoffmann LJ) followed in Arthur v Attorney General of the Turks and Caicos Islands [2012] UKPC [30] (Etherton LJ), Akita Holdings Ltd v Attorney General of the Turks and Caicos Islands [2017] UKPC 7, [2017] AC  590 at [13] (Lord Carnwath) and Brent LBC  v Davies [2018]  EWHC  2214 (Ch) (Zacaroli J) at [557]. The editors of Lewin on Trusts 20th edn (2020) adopt a test with six requirements: see para  42–023. This test was adopted by Morgan J  in Pulvers v Chan [2007] EWHC 1814 (Ch), [2008] PNLR 8 at [377] and by Peter Smith J in Independent Trustee Services Ltd v GP Noble Trustees Ltd [2010] EWHC 1653 (Ch) at [48] (although the decision itself was reversed on appeal [2012] EWCA Civ 195, [2012] 3 All ER 210). 2 (1872-73) LR 15 Eq 204. See also Uzinterimpex JSC v Standard Bank Plc [2008] EWCA Civ 819, [2008] 2 Lloyd’s Rep. 456 at [39] (Moore-Bick LJ): ‘The ground of distinction, as I  understand it, is that a person who receives property merely as an agent has no interest of any kind in it himself and must simply account to his principal for it. Receipt by him is the equivalent of receipt by the principal.’ 3 See Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [105] (Lord Millett).

(i)  Disposal of assets in breach of fiduciary duty 4.22 For the purposes of knowing receipt, property subject to a trust includes property legally and beneficially owned by a company but subject to the fiduciary duties of the directors or other fiduciaries.1 It also includes the proceeds of fraud which are held on constructive trust by the wrongdoer for the victim2 or transferred by the wrongdoer into the hands of a third party.3 It has also been held to include property subject to a Quistclose-type trust.4 There must also be a transfer of the property to the wrongdoer in breach of trust. Moreover, it must be the transfer itself which is the breach of trust or breach of fiduciary duty. It is not sufficient for the transfer to be made in connection with or following a breach of trust. In Courtwood Holdings SA  v Woodley Properties Ltd5 receivers sold a development site to a number of connected parties who sold it at a profit. Nugee J  found that the corporate vehicle for one of these investors had committed a number of breaches of non-custodial fiduciary duties although he rejected the principal allegation that it had procured the sale. Following the decision of the Court of Appeal in Brown v Bennett6 he held that it 164

Breach of trust  4.23 was not enough to establish that there had been a breach of fiduciary duty which led to Ds receiving the trust property but that the receipt should be the direct result of the breach.7 1 See Agip (Africa) Ltd v Jackson [1991] Ch 547, CA at 567–568 (accountant) and Twinsectra Ltd v Yardley [1999] Lloyd’s Rep Bank 438 at [114] (Potter LJ) (reversed in part at [2002] UKHL 12, [2002] 2 AC 164) (solicitor). For an example where the knowing receipt claim failed because the property was not trust property: see First National Trustco (UK) Ltd v Page [2019] EWHC 1187 (Ch) (Joanna Smith QC). 2 See Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), [2013] Ch 156 (Stephen Morris QC) at [125]–[130]. 3 See Keown v Nahoor [2015] EWHC 3418 (Ch) (David Halpern QC) at [55]. 4 See Twinsectra (above). 5 [2018] EWHC 2163 (Ch) 6 [1989] 1 BCLC 649, CA at 655e (Morritt LJ): ‘It is in my view quite plain … that the receipt must be the direct consequence of the alleged breach of trust or fiduciary duty of which the recipient is said to have notice.’ 7 See [190]: ‘In my judgment therefore the ratio of Brown v Bennett is that it is a prerequisite of a claim in knowing receipt that the disposition to the recipient is “in breach of trust” , that is that the disposition is itself a breach of trust (or breach of fiduciary duty).’

(ii)  Beneficial receipt 4.23 It must be shown that the recipient received the trust property for his benefit or in his own right. For this reason, a solicitor who receives funds from a client in a ministerial capacity for onward transmission is not liable for knowing receipt (although the client may be).1 It follows that most claims against solicitors for knowing receipt relate to their fees.2 It also follows that in order to establish liability for all of the funds passing through the solicitor’s client account the victim will have to establish either dishonest assistance or ministerial receipt.3 1 See Agip (Africa) Ltd v Jackson [1990] Ch 265 (Millett J) at 291–292: ‘The essential feature of [this] class is that the recipient must have received the property for his own use and benefit … This is not a technical or fanciful requirement. It is essential if receipt-based liability is to be properly confined to those cases where the receipt is relevant to the loss.’ D1 and D2 were a firm of accountants and in a similar position to a firm of solicitors. There was no appeal on this point: see [1991] Ch 547, CA. See also Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [106] (Lord Millett) for the difference between legal fees and other funds: ‘Mr Leach received sums totalling £22,000 in payment of his costs for his own use and benefit, and Twinsectra seek their repayment on the ground of knowing receipt. But he did not receive the rest of the money for his own benefit at all. He never regarded himself as beneficially entitled to the money. He held it to Mr Yardley’s order and paid it out to Mr Yardley or his companies. Twinsectra cannot and does not base its claim in respect of these moneys in knowing receipt, not for want of knowledge, but for want of the necessary receipt. It sues in respect of knowing (or dishonest) assistance.’ 2 Claims for fees or to restrain the use of client funds to pay fees apart from Twinsectra (above) include Carl Zeiss Siftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276, CA (where the claim failed on the basis that notice of C’s claim did not make D’s solicitors liable for knowing receipt of their fees and disbursements: see also para  4.24, below) and United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435 (Michael Burton QC) (an application for directions). 3 See Keown v Nahoor [2015] EWHC 3418 (Ch) (David Halpern QC) at [55].

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4.24  Claims in equity (iii) Knowledge 4.24 In BCCI (Overseas) Ltd v Akindele1 the Court of Appeal held that ‘the recipient’s state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt’. Notice is not the test of unconscionability and the fact that the defendant has notice of the breach of trust or breach of fiduciary duty will not suffice unless the knowledge on which that notice is based is such as to make the retention of the receipt unconscionable.2 This is a broad test but one which ought to be adaptable to most commercial settings. However, even now it remains unclear whether the court should continue to use the Baden classification of knowledge into five categories in order to assess whether the recipient should be held liable. Those five categories are as follows:3 (1) actual knowledge; (2) wilfully shutting one’s eyes to the obvious; (3) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (4) knowledge of circumstances which would indicate the facts to an honest and reasonable man; and (5) knowledge of circumstances which would put an honest and reasonable man on inquiry. In Tan4 Lord Nicholls stated that this classification was best forgotten and in Akindele5 the Court of Appeal had grave doubts about its utility. However, in Group Seven Ltd v Notable Services LLP6 Morgan J  held that that the recipient, an accountant, was liable for knowing receipt on the basis that he had knowledge which fell within Baden category (4). The Court of Appeal expressed misgivings about his use of the Baden classification but nevertheless relied on his findings as the basis for their own determination that the recipient had been dishonest.7 Whether it is useful for the adviser or advocate to adopt the Baden classification will probably depend on the facts of the case and the extent to which the recipient could have uncovered the fraud or misappropriation by making sensible inquiries.8 But it may assist the court to adopt the classification in deciding whether it would be unconscionable for a solicitor to retain substantial fees even if he or she did not have sufficient knowledge to give rise to liability for dishonest assistance.9 1 [2001] Ch 437, CA at 455E–G (Nourse LJ). 2 See the discussion in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347, [2012] Ch 451 at [97]–[122]. Lord Neuberger MR applied the following test (at [100]) to a bank: ‘the issue is to be determined by asking what the banks actually knew, and what further inquiries, if any, a reasonable person, with the knowledge and experience of the banks, would have made, and, in the light of that, whether it was, or should have been, obvious to the banks that the transaction was probably improper’. See also Bank of Tokyo-Mitsubishi UFJ Ltd v Baskan Gida Sanayi Ve Parzarlama AS [2009] EWHC 1276 (Ch) at [990] (where Briggs J stated that liability for knowing receipt required a ‘clear suspicion’).

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Breach of trust  4.25 3 See Baden v Societe Generale pour Favoriser le Developpement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 (Peter Gibson J). 4 See Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, PC at 392. 5 See 455B. 6 [2017]  EWHC  2466 (Ch), [2018]  PNLR  6 at [483]. For other cases in which the court has applied the Baden classification see Re Montagu’s ST at 285B-286A (where Sir Robert Megarry V-C accepted that liability would be imposed where D’s knowledge fell within categories (1) to (3) but doubted whether it would be imposed where D’s knowledge fell within categories (4) and (5)). See also Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), [2013] Ch 156 at [130]–[132] (where Stephen Morris QC accepted that knowledge within categories (4) and (5) could give rise to liability). Re Montagu’s ST was cited by Lord Neuberger MR with approval in Sinclair (above) at [106]. The editors of Lewin on Trusts 20th edn (2020) also continue to use the Baden classification: see para 42–063. 7 [2019] EWCA Civ 614 at [87]. For the findings themselves and the use to which the Court of Appeal put them: see [88] to [95]. 8 This was the approach of Zacaroli J in Brent LBC v Davies [2018] EWHC 2214 (Ch) at [563]: ‘While the Baden classification remains useful as guidance, rigid adherence to it is no longer appropriate following Akindele. The essential question is whether, in all the circumstances, the particular Defendant’s state of mind was such as to make it unconscionable for him or her to retain the payments made.’ 9 That was essentially the conclusion reached by Morgan J in Group Seven although the Court of Appeal considered that his findings also justified the imposition of liability for dishonest assistance.

(iv)  Ministerial receipt 4.25 A  solicitor (S) who receives trust assets as agent for trustees does not become a trustee of the funds and is entitled to rely on the instructions of the client trustees.1 But even though S  receives the property lawfully and is not a trustee, he or she may become liable as a constructive trustee, either to the beneficiaries of the trust or to replacement trustees, where he or she deals with the trust assets in a way which is inconsistent with the terms of the trust. This form of liability is described in the textbooks as inconsistent dealing or ministerial receipt.2 To understand the basis for this liability, it is important to appreciate that it includes two categories of case: first, those in which S deals with the trust assets without the authority of the trustees (who must act unanimously) and then fails to obtain a proper discharge; and, secondly, those in which S implements a breach of trust on the instructions of the client trustees or fiduciaries but in the knowledge that those instructions conflict with the terms of the trust. Indeed, it may well be that dishonesty is an ingredient of the second category of case.3 The leading case, Lee v Sankey,4 is an example of the first category. In that case S was held liable to the beneficiaries of a trust for handing over trust funds (which should have been invested) to one of the trustees without the consent of the other. Williams-Ashman v Price & Williams,5 another case which is often cited as an example of ministerial receipt, falls into the second category. There, the firm paid away trust funds in breach of trust but Bennett J dismissed the claim on the basis that neither solicitor had assisted the trustees to commit the breach or was aware of the terms of the trust. He distinguished Lee v Sankey on the basis that the solicitors were acting on the 167

4.26  Claims in equity instructions of both trustees. Cases in the second category are better regarded as early examples of accessory liability decided before the cause of action had been fully developed and explained.6 1 See Adams v Bank of New South Wales [1984] 1 NSWLR 285 at 290 (Moffit P): ‘A solicitor by receiving the money from a client who is the trustee and accordingly puts it in a separate account, namely, an account exclusively for the client trustee, does not himself become a trustee of the money … He is neither required nor entitled to inquire into the rights of beneficiaries to the trust money. He is neither entitled nor bound to take steps to ensure that the money is dealt with for the benefit of such beneficiaries.’ The decision was cited by Dillon LJ in Napier (below). 2 The editors of Lewin on Trusts 19th edn (2015) describe the cause of action as ‘Inconsistent Dealing by Lawful Recipients of Trust Property’: see paras 42–111 to 42–125. The editors of Snell’s Equity 34th edn (2020) describe it as ‘Inconsistent Dealing’’: see paras 30–075 and 30–076. For a general statement of the law see also Portman Building Society v Hamlyn Taylor Neck [1998] 4 All ER 202 at 207–208 (Millett LJ). 3 For the two categories of case and the need for dishonesty in the second see Lewin on Trusts 20th edn (2020) at paras 42–111 and 42–125. See also Lord Napier and Ettrick v RF Kershaw Ltd [1993] 1 Lloyd’s Rep 10 at 18 where Dillon LJ drew the same distinction. The decision was reversed in part by the House of Lords in one of the leading authorities on subrogation: see [1993] AC 716. But the action originally included a claim against the firm of solicitors holding the funds which was not the subject matter of the appeal. Note that the editors of Snell on Equity 33rd edn (2015) do not distinguish between the two categories but simply state that a higher degree of fault is required for ministerial receipt than for knowing receipt. 4 (1872–73)  LR  15 Eq 204. For another example of the first category see Freeman v HM  Commissioners of Customs and Excise [2005]  EWHC  582 (Ch), [2006]  WTLR  1271 (where Michael Crystal QC followed Lee v Sankey and held a firm of accountants were held liable for dealing with VAT payable on the sale of property which they held as agents for the vendor’s solicitors). 5 [1942] Ch 219. For the key findings see at 223 and 225. 6 For other famous examples where a claim in the second category failed see Mara v Browne [1896] 1 Ch 199, CA (which Bennett J followed in Williams-Ashman) and Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch 276 (where the Court of Appeal rejected the argument that a claim that the assets were held on trust should be treated as actual notice of the trust). See, in particular, at 292–293 where Danckwerts LJ distinguished Lee v Sankey and said: ‘But claims are not the same thing as facts. Mr. Harman contended that for the purposes of the present issue all the allegations contained in the statements of claim in both the actions must be taken as true. That will not do.’

C  BREACH OF FIDUCIARY DUTY 1 Introduction 4.26 In addition to common law duties in contract and tort, a solicitor also owes fiduciary duties to his or her client. When the first edition of this book was published, one of the more difficult issues for professional indemnity lawyers was to determine whether conduct which falls below the standards to be expected of a solicitor went beyond a breach of contract or negligence and involved the commission of a breach of fiduciary duty. In Bristol and West Building Society v Mothew1 the Court of Appeal confined claims for breach of fiduciary duty by a solicitor to those duties which are peculiar to fiduciaries 168

Breach of fiduciary duty  4.27 and confirmed that the purely contractual duties of a solicitor or the duty to act with reasonable skill and care are not fiduciary duties.2 This section deals with the specific duties owed by a solicitor as a fiduciary and enforced in equity apart from the duty of confidentiality which is the subject matter of Chapter 6. Fiduciary relationships can be very varied and there is a wide body of case law on this topic. For this reason, this section is limited to cases dealing with solicitors unless there are issues of general application on which the citation of other authorities is considered helpful. 1 [1998] Ch 1 at 16C, CA. See also Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR  567 at [29] (Lord Walker) and Edelman ‘When do Fiduciary Duties Arise?’ (2010) 126 LQR 302. Millett LJ’s analysis in Mothew has also been influential in other Commonwealth jurisdictions: see the Law Commission of New Zealand Issues Paper ‘Review of Trust Law in New Zealand’ (November 2010) at 3.32 to 3.36. 2 For a recent re-statement of these principles see Spencer-White v Harding Evans LLP [2017] EWC Civ 434 at [39] and [40] (Black LJ).

4.27 The distinguishing obligation of a fiduciary is the duty of singleminded loyalty to the client. This core obligation has several facets: (1) A fiduciary must act in good faith. (2) He or she must not make a profit out of their trust. (3) He or she must not place themselves in a position where their duty and interest may conflict. (4)

He or she may not act for their own benefit or the benefit of a third person without the informed consent of their principal.1

A  solicitor’s fiduciary obligations normally arise out of the contract of retainer.2 For example, in Hilton v Barker Booth & Eastwood3 the House of Lords held that in the absence of any express terms a solicitor owed an implied contractual duty not to place himself in a position where his duty to one client conflicted with his duty to another. In some cases, however, a fiduciary relationship may arise outside contract. For instance, a fiduciary relationship was held to arise between a solicitor and a director or shareholder where the client was a company but there was a particular relationship of trust and confidence between the relevant individuals.4 Moreover, although the fiduciary relationship arises out of a contract it does not necessarily come to an end when the retainer is terminated. A solicitor normally owes a continuing duty to keep the client’s affairs confidential after the termination of the retainer and this duty is considered in Chapter 6. But if the relationship of trust and confidence between solicitor and client continues after the termination of the retainer, the other fiduciary obligations may also continue.5 1 Bristol & West BS v Mothew [1998] Ch 1 at 18A. This statement was approved by the Supreme Court in FHR  European Ventures LLP  v Cedar Capital Partners LLC  [2014]  UKSC  45, [2015] AC 250 at [5]. Lord Neuberger also stated that the second proposition (which we call the ‘no profit rule’) is part of the wider rule set out in the third proposition (which we call the ‘no conflict’ rule) citing Boardman v Phipps [1967] 2 AC 46 at 123 (Lord Upjohn). The decision is

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4.28  Claims in equity discussed in Section 2 (below) where we also treat the no profit rule as an example of the wider no conflict rule. 2 See Hospital Products Ltd v United States Surgical Corpn (1984) 156 CLR 41 at 97 (Mason J) cited by Lord Browne-Wilkinson in Kelly v Cooper [1993] AC 205 (estate agents) at 215. 3 [2005] UKHL 8, [2005] 1 WLR 567 at [30] (Lord Walker). 4 See Conway v Ratiu [2005] EWCA Civ 1302, [2006] 1 All ER 571 where the Court of Appeal was prepared to lift the corporate veil and examine the personal relationship. The decision is controversial. It was applied to other professions and to de facto fiduciary relationships: see JD Wetherspoon plc v Van de Berg & Co Ltd [2009] EWHC 639 (Ch), [2007] PNLR 28 (Peter Smith J) at [76]–[77] and Ross River Ltd v Waveley Commercial Ltd [2012] EWHC 81 (Ch) (Morgan J) at [231]–[263]. The rationale was explained by Moore-Bick LJ in Diamantides v JP  Morgan Chase Bank [2005]  EWCA  Civ 1612 at [39]: ‘The importance of this passage lies in the recognition that, in a case where a fiduciary relationship arises out of a contractual relationship, it does not matter whether the person to whom the duty is owed entered into the contract directly or through an agent or through a nominee company. What matters is whether a relationship of trust and confidence has come into being.’ But it is unclear whether it survives the later decision of the Supreme Court in Petrodel Resources Ltd v Prest [2013] UKSC 34, [2013] 2 AC 415: see Al-Dowaisan v Al-Salam [2019] EWHC 301 (Ch) (a de facto fiduciary relationship case) (HHJ Hodge QC) at [75]–[78]. 5 See Longstaff v Birtles [2001] EWCA Civ 1219, [2002] 1 WLR 470 (considered below).

2  Conflict of interest and duty (a)  The general principle 4.28 The leading case on the conflict between a solicitor’s duty to the client and his or her own interests is Nocton v Lord Ashburton.1 C was approached by S to provide a secured loan in relation to a development in which he himself had a personal interest. Later, S  persuaded C  to release part of his security over the property which had the effect of advancing the security which S also had over the property. C  failed to recover the loan from the borrowers and brought a claim against S.2 Neville J treated the claim as an action in deceit and dismissed it. The Court of Appeal dismissed the appeal in relation to the taking of the original mortgage but found that S had been guilty of fraud in relation to the release of the security. The House of Lords affirmed the Court of Appeal’s order but on different grounds. Viscount Haldane LC (who gave the leading speech) held that where a solicitor has a financial relationship with a client the court had jurisdiction to scrutinise his actions irrespective of any claim for damages for breach of contract.3 The speech of Lord Dunedin makes it clear that the jurisdiction to give relief in equity arises because of the potential or actual conflict between the interests of the solicitor and client which imposes a duty to make full disclosure.4 1 [1914] AC 932. For the background to the case and some explanation for what may have been a surprising result see Gummow ‘Compensation for Breach of Fiduciary Duty’ in Youdan (ed) Equity Fiduciaries and Trusts (1989) at 57–91. 2 See the relief claimed at 939. See also Edelman ‘When do fiduciary duties arise?’ (2010) 126 LQR 302 at 307–308. 3 See 952 and 958. 4 See 964–5.

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Breach of fiduciary duty  4.30 4.29 In Swindle v Harrison, Mummery LJ identified the following propositions of law arising from the decision of the House of Lords:1 ‘(1)  A  solicitor stands in a fiduciary relationship with his client. (2) A solicitor who enters into a financial transaction with his client is under a fiduciary duty, when advising his client, to make full disclosure of all relevant facts known to him. (3) Liability for breach of fiduciary duty is not dependent on proof of deceit or negligence. Equity imposes duties in special relationships above and beyond the minimum legal duties to be honest and to be careful. Fiduciary duties rest on the idea of trust and of conduct offensive to conscience. (4) The equitable remedies available for breach of fiduciary duty are “more elastic” than the sanction of damages attached to common law fraud and negligence.’2 The facts illustrate the strictness of the rule. S acted for H who charged her home as security for a loan made to her son to acquire a restaurant business. H and her son were unable to complete the acquisition because a loan by the brewery fell through and S  lent the balance to them himself. The business failed and S sought to enforce the loan. The Court of Appeal upheld the judge’s findings that S was acting in breach of fiduciary duty because he had failed to disclose that his firm was making a profit of 2.5 per cent and £1,000 on the loan (even though H would have accepted the loan if he had made full disclosure). Nevertheless, C was unable to obtain equitable compensation for the breach of duty because she could not prove that the failure to disclose the terms caused loss.2 Nocton v Ashburton and Swindle v Harrison both involved claims for equitable compensation for a non-custodial breach of duty.3 But C  may be entitled to relief where S seeks to enforce the relevant transaction or C seeks to set it aside or requires S to account for any secret commission. Where claims of this nature are made, a number of different equitable principles are engaged.4 1 [1997] PNLR 641 at 672 [1997] 4 All ER 705, CA at 731–732. 2 See Section D (below). 3 C had transferred the property to her son who agreed to assume liability for the charge to S. His appeal was compromised and so the question whether H would have been entitled to rescission for breach of fiduciary duty did not arise. Smith argues that the duty of loyalty is not a duty in the strict sense and that equitable compensation is awarded in cases like Nocton v Ashburton and Swindle v Harrison for breach of the duty of disclosure: see Smith ‘Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another’ (2014) 130 LQR 608 at 622–623 and 632. 4 For limits to the doctrine see Blythe v Northwood [2005] NSWCA 221, (2005) 63 NSWLR 531 where the interest of the solicitor was peripheral, he was unaware of the facts which might have given rise to a conflict and the Court of Appeal of NSW held that his interest did not conflict with his limited duty to the client. See, in particular, Bryson JA at [211].

(b)  The no profit rule 4.30 A solicitor acting in a fiduciary capacity is liable to account for profits made by him or her by taking advantage of an opportunity which came to his 171

4.30  Claims in equity attention when acting in that capacity.1 The no profit rule is one element of the wider rule that fiduciaries must not place themselves in a position where their duties and interests conflict.2 A detailed examination of both the no profit rule and the no conflict rule is well outside the scope of this book. But since two of the leading authorities are concerned with the conduct of solicitors, they merit a brief discussion. In Regal (Hastings) Ltd v Gulliver3 S acquired shares in a subsidiary of his client which he later sold at a profit. Although the directors were found liable to disgorge the profits which they had made, the claim against S was dismissed because the client had authorised him to acquire the shares.4 In Phipps v Boardman5 S had acted for trustees who held a significant minority shareholding in a private company. He and another beneficiary purchased additional shares in the company at their own expense, turned it round and made a profit. By a bare majority, the House of Lords held that they had acquired the shares in breach of the no profit rule and held them on constructive trust for the trust and its beneficiaries. They also ordered an account of profits to establish what allowance should be made to the shareholders for their investment and effort. The factual distinction between the two cases is a fine one. In Regal S had the authority of the board but in Phipps v Boardman S did not obtain the authority of all of the trustees (although he believed that he had done so).6 From the point of view of claims against solicitors, three further points illustrate the strictness of the rule. First, S was liable even though he was not found to be dishonest or acting in bad faith. Secondly, he held the relevant shares on constructive trust even though the trustees had never expressed any interest in buying them and would never have done so even if the shares had been formally offered to them first. Thirdly, the rule was held to apply even though S was no longer acting for the trustees and his contractual retainer had come to an end.7 1 The no profit rule has been expressed in a number of different ways: see, eg Lewin on Trusts 20th edn (2020) at 20–001. Our formulation is adapted from the judgment of Lord Neuberger in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250 at [13]. 2 See para 4.27, fn 1, above. 3 [1967] 2 AC 134, HL (Note). For recent reliance on the decision see Keystone Healthcare Ltd v Parr [2019] EWCA Civ 1246, [2019] 4 WLR 99 at [10] (Lewison LJ). 4 See 152 (Lord Russell): ‘He was requested by the Regal directors to apply for 500 shares. They arranged that they themselves should each be responsible for £500 of the Amalgamated capital, and they appealed, by their chairman, to Garton to subscribe the balance of £500 which was required to make up the £3,000. In law his action, which has resulted in a profit, was taken at the request of Regal, and I know of no principle or authority which would justify a decision that a solicitor must account for profit resulting from a transaction which he has entered into on his own behalf, not merely with the consent, but at the request of his client.’ However, there was no suggestion that the board itself was conflicted. If the board had a conflict of interest and duty, such a resolution would not have amounted to informed consent: see Cook v Deeks [1916] 1 AC 554 at 564 and s 175(6) of the Companies Act 2006. 5 [1967] 2 AC 49. 6 See 98E (Lord Cohen). 7 At first instance, Wilberforce J held that he was acting as a self-appointed agent. There is no concise statement in any of the speeches in the House of Lords explaining why he continued to be a fiduciary. But the broad basis was that he continued to hold himself out as the solicitor for

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Breach of fiduciary duty  4.31 the trust and that information about the company and the opportunity to buy shares would not have been made available to him if he had not been either the current or former solicitor to the trustees. When C (who was a disgruntled beneficiary) first asserted a claim, S also asserted in correspondence that he had been acting for the trustees. Lord Hodson (with whom Lord Cohen and Lord Guest agreed) considered it sufficient that he was continuing to act as solicitor to the trust even though there was no formal retainer: see 106D–F and 109E. In an important passage Lord Upjohn (who dissented) considered that a solicitor could act against the interests of a former client and deal in shares in which a former client was a shareholder: see 125G–126F. For further discussion see Edelman ‘When do fiduciary duties arise?’ (2010) 126 LQR 302 at 310–311 and Millett, ‘Bribes and secret commissions again’ (2012) 71 CLJ 583.

(c)  Abuse of confidence 4.31 The ‘fair dealing’ rule applies where a trustee purchases a beneficial interest in property from a beneficiary. Although the full rigour of the selfdealing rule does not apply, such a transaction is voidable by the beneficiary unless the trustee can show that he or she has not taken advantage of their fiduciary position and has made full disclosure.1 The fair dealing rule applies to other fiduciaries including solicitors and the term ‘abuse of confidence’ is often used in this context in contrast to undue influence.2 In Demerara Bauxite Ltd v Hubbard3 the court refused to enforce an option granted by C  to S  to on the grounds that he had failed to disclose a competing bid. In Johnson v EBS  Pensioner Trustees Ltd4  S  arranged a private loan from clients to C’s company for which C provided a guarantee but failed to disclose that the firm had also charged the lenders a 1.5 % ‘service charge’. The Court of Appeal held that S had committed a breach of fiduciary duty.5 They dismissed a claim for rescission of the property transaction and the personal guarantee but S was ordered to account for the commission.6 Where the relationship of trust and confidence continues beyond the termination of the retainer the fair dealing rule will continue to apply.7 1 See Tito v Waddell (No. 2) [1977] Ch 106 (Sir Robert Megarry V-C) at 241. ‘The fair-dealing rule is … that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.’ 2 See CIBC Mortgages plc v Pitt [1994] 1 AC 200 at 209E–F (Lord Browne-Wilkinson): ‘the long standing principle laid down in the abuse of confidence cases viz. the law requires those in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties to establish affirmatively that the transaction was a fair one … The abuse of confidence principle is founded on considerations of general public policy, viz. that in order to protect those to whom fiduciaries owe duties as a class from exploitation by fiduciaries as a class , the law imposes a heavy duty on fiduciaries to show the righteousness of the transactions they enter into with those to whom they owe such duties.’ 3 [1923] AC 673, PC. 4 [2002] EWCA Civ 164, [2002] Lloyd’s Rep PN 309. See also Moody v Cox & Hatt [1917] 2 Ch 71 where S and his clerk sold property to C without revealing the valuations which they had obtained. S and his clerk were acting as trustees but Mummery LJ considered the decision to be an example of abuse of confidence. He also rejected the argument that they had no duty to disclose the valuations because this would have placed them in breach of their duties to the beneficiaries: see [43]–[48]. This was a key point in Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567 (discussed in para 4.40, below).

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4.32  Claims in equity 5 See [71] (Mummery LJ). They held that the fair dealing rule could potentially apply to a personal guarantee. They also held that the test for disclosure was whether the facts were material and might have had an effect on the principal’s decision (whether or not they might have done so). 6 For an example of a case in which S was able to discharge the burden of establishing that the transaction was fair and that full disclosure had been made see Hanson v Lorenz Jones [1987] 1 FTLR 23. 7 See Allison v Clayhills (1907) LT 709 at 712 (Parker J), Demerara Bauxite Co Ltd v Hubbard [1923] AC 673, PC at 675–676 (Lord Parmoor), Longstaff v Birtles [2001] EWCA Civ 1219, [2002] 1 WLR 470 at [35] (Mummery LJ) and Richards v Law Society [2009] EWHC 2087 (Admin) at [45] and [51] (Sir Anthony May P) (where the solicitor arranged for the client to see a licensed conveyancer but was still held to have committed a breach of duty).

(d)  Undue influence 4.32 The relationship between solicitor and client also gives rise to a presumption of influence or undue influence.1 There is obviously a considerable overlap between the two principles of abuse of confidence and undue influence.2 But the obvious situation in which the presumption of undue influence will arise is where C has made a gift to S or to members of his or her family.3 The presumption will also apply to private trusts where the trust instrument contains charging provisions and the solicitor or an associated company is appointed trustee.4 However, in a number of cases attempts to use undue influence to set aside agreements for professional services (as opposed to personal gifts) have failed.5 As in abuse of confidence cases, the presumption of undue influence will arise where the relationship of influence continues beyond the termination of the retainer.6 The presumption may be rebutted by demonstrating that C entered into the transaction with full, free and informed thought. It is not necessary to demonstrate that C was advised to take independent legal advice or, indeed, that C did so.7 Indeed, in some cases the presumption may not be rebutted even where C has taken advice from another solicitor.8 1 See AKB v Willerton [2016] EWHC 3146 (QB), [2017] 4 WLR 25 at [30] (Norris J): ‘The law irrebuttably presumes that a solicitor has influence over his client’. 2 See the formulation adopted in Westmelton (Vic) Pty Ltd v Archer [1982]  VR  305 (Starke, Kaye and Fullager JJ of the Full Court of the Supreme Court of Victoria) cited by Lewison J in Wollenberg v Casinos Austria International Holding GmbH [2011] EWHC 103 (Ch) at [203] as an ‘illuminating decision’. 3 See Liles v Terry [1895] QB 679, CA (gift of leasehold premises to S’s wife after C’s death), Willis v Baron [1902] AC  271 (voluntary transfer in favour of S’s son) and Wright v Carter [1903] 1 Ch  27 (declaration of trusts for benefit of S  and C’s children). The last case is an example of both undue influence and abuse of confidence. 4 See AKB  v Willerton (above) at [28]–[38] where Norris J  had to consider private trusts established for the benefit of personal injury victims. He held that the presumption could be rebutted by a separate partner in the firm instructing independent counsel to give detailed advice on the specific advantages and disadvantages of the proposed trust arrangements and in high value trusts the appointment of a family member or independent professional as protector. 5 See Birmingham City Council v Forde [2009]  EWHC  12 (QB), [2009] 1  WLR  2732 (Christopher Clarke J) at [111]–[114] and Wollenberg v Casinos Austria International Holding GmbH [2011] EWHC 103 (Ch) (Lewison J) at [198]–[209]. See also Malouf v Constantinou [2017] NSWSC 923 (Supreme Court of NSW) where Parker J held that the doctrine applied where the solicitor took charges over the client’s property to secure fees. 6 See Wollenberg at [199]–[201] (relying on the abuse of confidence cases).

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Breach of fiduciary duty  4.34 7 See Wollenberg at [207] (where Lewison J  cited Lord Hoffmann in Attorney General v R [2003] UKPC 22, [2003] EMLR 24). 8 See Wright v Carter (above).

(e)  Bribes and secret benefits 4.33 Another aspect of the no profit rule is that a fiduciary must account to the principal for any bribe or secret profit or commission. The fiduciary is treated as holding the bribe or secret benefit on trust for the principal and the principal may trace into the proceeds or follow them into the hands of a knowing recipient.1 A bribe is a gift accepted by a fiduciary as an inducement to commit a breach of fiduciary duty. A secret benefit (such as a commission) is a benefit which the fiduciary derives from trust property or from knowledge acquired from acting as a fiduciary.2 Solicitors are liable to account for bribes3 and secret benefits4 in the same way as other fiduciaries. Moreover, where the solicitor accepts a bribe from a client, the firm may have an illegality defence to any claim for negligence or breach of contract and the firm may not be vicariously liable for the acts of the individual solicitor.5 1 See FHR  European Ventures LLP  v Cedar Capital Partners LLC  [2014]  UKSC  45, [2015] AC 250. 2 See Attorney General of Hong Kong v Reid [1994] 1 AC 324, PC at 330G (Lord Templeman). 3 See Islamic Republic of Iran Shipping Lines v Denby [1987] 1 Lloyd’s Rep 367 (where S accepted a bribe from another party in litigation) and Attorney General of Hong Kong v Reid (above) (where S  was a public prosecutor and accepted bribes to obstruct prosecutions). In Denby Leggatt J  followed Lister v Stubbs (1890) 45 Ch D  1, CA (as he was bound to do). In FHR  European Ventures LLP  v Cedar Capital Partners LLC (above) the Supreme Court overruled Lister v Stubbs (and those cases following it) and applied Reid in deciding that proprietary relief was available. 4 See Tyrrell v Bank of London (1862) 10 HL Cas 26 (where S secretly acquired an interest in a property) and Johnson v EBS Pensioner Trustees Ltd [2002] EWCA Civ 164, [2002] Lloyd’s Rep PN 309 (where S received a commission for arranging private finance). 5 See Nayyar v Denton Wilde Sapte [2009] EWHC 3218 (QB), [2010] PNLR 15. The case was decided before Patel v Mirza [2016] UKSC 42, [2017] AC 467 and Hamblen J followed Gray v Thames Trains Ltd [2009] 1 AC 1339, HL. For a recent discussion of both cases in the context of claims against solicitors see Robinson v Ness & Co [2017] EWHC 2305 (Ch).

(f)  Professional conduct 4.34 The SRA Standards and Regulations 20191 reflect the no conflict rule. They provide that a solicitor should not act if there is an own interest conflict or a significant risk of an own interest conflict. The SRA Code of Conduct 2011 was the same.2 An own interest conflict is any situation where the duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with the solicitor’s own interests in relation to that matter or a related matter.3 In Spector v Ageda4 Megarry J stated that in all ordinary circumstances S ought to refuse to act for a person in a transaction to which S is a party with an adverse interest and even if he or she is pressed to 175

4.35  Claims in equity act after refusing to do so, should persist in that refusal. The position in relation to litigation appears to be equally strict.5 1 See para 6.1 of the SRA Code of Conduct for Individuals and 6.1 of the SRA Code of Conduct for Firms (both of which come into force on 25 November 2019): ‘You do not act if there is an own interest conflict or a significant risk of conflict.’ On 25 November 2019 the SRA published guidance ‘Putting matters right when things go wrong, and own interest conflicts’. 2 See O(3.4): ‘you do not act if there is an own interest conflict or a significant risk of an own interest conflict’ (Version 21 of the Solicitors’ Handbook published on 6  December 2018). IB(3.8) and IB(3.9) give the following examples: in a personal capacity, selling to or buying from, lending to or borrowing from a client (unless the client has obtained independent legal advice) advising a client to invest in a business in which S has an interest which affects his or her ability to provide impartial advice. 3 See the SRA Glossary to the Standards and Regulations. The definition in the SRA Code of Conduct is almost identical. 4 [1973] Ch 30 at 47G. In that case the court refused to enforce a loan granted by C to S on the basis that it was illegal and contravened the Moneylenders Acts. S was also held to be negligent in failing to give adequate advice about the transaction. 5 See SRA v Howell Jones LLP (SDT 4 December 2018). However, the SRA’s guidance suggests that the position may be slightly more nuanced. For detailed discussion see Chapter 16, paras 16.74 to 16.78.

3  Conflict of duty and duty (a) Terminology 4.35 Where a fiduciary acts for one or more principals he or she owes a duty of undivided loyalty to each one. In Bristol and West Building Society v Mothew1 Millett LJ identified four rules or components of this duty: (1) A  fiduciary cannot accept instructions to act for two principals whose interests may conflict without the informed consent of each one (the ‘double employment rule’). (2) Once the fiduciary agrees to act for both, he or she owes a ‘duty of good faith’ to each one. (3)

A breach of the duty of good faith must be conscious or intentional rather than negligent because of the ‘no inhibition principle’.

(4) A fiduciary must not place himself or herself in a position where there is an actual conflict between the duties to each principal (the ‘actual conflict rule’). These terms have now become standard and we adopt them below.2 1 [1998] Ch 1 at 18H to 19H, CA. 2 Conaglen, ‘Fiduciary Regulation of Conflicts Between Duties’ (2009) 125 LQR 111 argues that historically speaking conflict of duties cases have always been treated distinctly: see 111-18. However, because the number of cases in which the issue had arisen for consideration before Mothew was very small it must be doubtful whether they were seen as falling into a separate category.

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Breach of fiduciary duty  4.36

(b)  The double employment rule 4.36 The double employment rule applies at the outset of any engagement. Before the fiduciary can accept competing engagements, he or she must obtain the informed consent of both principals. The rule is reflected in both the SRA Code of Conduct1 (which was in force until 25 November 2019) and the SRA Standards and Regulations (which have been in force thereafter).2 Even if both clients consent, a solicitor may not act unless they have a substantially common interest3 and are competing for the same objective.4 Under both sets of rules the rule applies where there is either an actual conflict or a significant risk of conflict. The language which Millett LJ used in Mothew was ‘potentially conflicting interests’ and ‘a position where his duty to one principal may conflict with his duty to the other’.5 It is suggested that there is no real difference between the two tests.6 It is also interesting to note that the definition of ‘conflict of interest’ has changed. The definition in the SRA Code of Conduct included not only same matter conflicts but also related matter conflicts.7 The definition in the new Standards and Regulations no longer refers to related matter conflicts.8 It remains to be seen whether this will have any practical impact. But it is suggested that this is unlikely because the duty of confidentiality to client A  will prevent the solicitor acting for client B  in relation to separate matters where there is a reasonable relationship between them.9 The rule is not engaged and there is no breach of fiduciary duty unless a potential conflict arises. Once a potential conflict has arisen a solicitor who fails to obtain the informed consent of both principals is automatically in breach of the rule and commits a breach of fiduciary duty. This breach of duty does not depend on proof of conscious impropriety unlike a breach of the duty of good faith. 1 O(3.5) required the solicitor to achieve the following outcome: ‘you do not act if there is a client conflict, or a significant risk of a client conflict unless the circumstances set out in Outcomes 3.6 or 3.7 apply’. The exceptions contained in O(3.6) and O(3.7) were as follows: ‘O(3.6) where there is a client conflict and the clients have a substantially common interest in relation to a matter or a particular aspect of it, you only act if: (a) you have explained the relevant issues and risks to the clients and you have a reasonable belief that they understand those issues and risks; (b) all the clients have given informed consent in writing to you acting; (c) you are satisfied that it is reasonable for you to act for all the clients and that it is in their best interests; and (d) you are satisfied that the benefits to the clients of you doing so outweigh the risks; O(3.7) where there is a client conflict and the clients are competing for the same objective, you only act if: (a) you have explained the relevant issues and risks to the clients and you have a reasonable belief that they understand those issues and risks; (b) the clients have confirmed in writing that they want you to act, in the knowledge that you act, or may act, for one or more other clients who are competing for the same objective; (c) there is no other client conflict in relation to that matter; (d) unless the clients specifically agree, no individual acts for, or is responsible for the supervision of work done for, more than one of the clients in that matter; and (e) you are satisfied that it is reasonable for you to act for all the clients and that the benefits to the clients of you doing so outweigh the risks.’ 2 Para 6.2 of the SRA Code of Conduct for Individuals 2019 and para 6.2 of the SRA Code of Conduct for Firms 2019 both provide as follows: ‘You do not act in relation to a matter or particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it, unless: (a) the clients have a substantially common interest

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4.37  Claims in equity in relation to the matter or the aspect of it, as appropriate; or (b) the clients are competing for the same objective, and the conditions below are met, namely that: (i) all the clients have given informed consent, given or evidenced in writing, to you acting; (ii) where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and (iii) you are satisfied it is reasonable for you to act for all the Clients.’ 3 The SRA  Glossary to the new SRA  Standards and Regulations 2019 defines ‘substantially common interest’ as ‘a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved’. 4 The Glossary also defines ‘competing for the same objective’ as ‘any situation in which two or more clients are competing for an “objective” which, if attained by one client, will make that “objective” unattainable to the other client or clients, and “objective” means an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process or a bid or offer, but not a public takeover’. 5 [1998] Ch 1 at 19A. 6 In Boardman v Phipps [1967] 2  AC  46 at 124 Lord Upjohn used the following test for a possible conflict: ‘In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in conflict.’ The test was adopted by Jonathan Parker LJ in Bhullar v Bullar [2003] EWCA Civ 424, [2003] 2 BCLC 241 at [30]. Compare the test used by Canadian courts. In R v Neill [2002] 3  SCR  671 the Supreme Court of Canada adopted the test set out in the Restatement Third, The Law Governing Lawyers (2000), Vol 2, at pp 244–45: ‘a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person’. 7 ‘For the purposes of Chapter 3 of the SRA Code of Conduct, means any situation where you owe separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict.’ 8 ‘”conflict of interest” means a situation where your separate duties to act in the best interests of two or more clients conflict.’ 9 See Marks & Spencer plc v Freshfields Bruckhaus Deringer [2004] EWHC 1337 (Ch), [2004] 1  WLR  2331 (Lawrence Collins J) and [2004]  EWCA  Civ 741, [2005]  PNLR  4 (CA). For further discussion see Chapter 6, paras 6.54 to 6.70.

4.37 There is no absolute rule that a solicitor may not act for two parties.1 However, where a solicitor agrees to act for two parties whose interests may conflict, he or she must make full disclosure of all material facts before being able to act.2 The extent of the disclosure will depend on the facts of each case but the burden is on the solicitor to prove that the client gave fully informed consent3 and what is required is that the client should have sufficient information to decide whether to agree to the solicitor acting with a potential conflict of interest.4 It may also require the solicitor to obtain the clients’ informed consent in writing.5 In Clark Boyce v Mouat6 Lord Jauncey identified the information which the solicitor must disclose: ‘Informed consent means consent given in the knowledge that there is a conflict between the parties and that as a result the solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interest of the other. If the parties are content to proceed upon this basis the solicitor may properly act.’ 178

Breach of fiduciary duty  4.38 The solicitor will also have to advise the client of any limitations on the scope of the retainer which the dual engagement will impose on the firm and that the client could take advice from an independent solicitor who would not have to impose the same limitations. Finally, the solicitor will have to disclose sufficient information about the nature of the conflict for the client to assess the risk of a conflict arising and how the limitations on the retainer will affect his or her interests. 1 See Paton v Rosesilver Group Corp [2017] EWCA Civ 158 at [27] (Henderson LJ): ‘There is no absolute rule that a solicitor may not act for more than one party in the same transaction. Indeed, there are many circumstances in which this is commonplace, for example where there is no conflict of interest between the parties to a family transaction, or where the same solicitor acts for the purchaser of property and the purchaser’s mortgagee. And even if there is an actual or potential conflict of interest, the solicitor may nevertheless act if he has his client’s informed consent.’ 2 See Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567 at [29] and [30] citing Clark Boyce v Mouat (discussed in the text). 3 See Hurstanger Ltd v Wilson [2007]  EWCA  Civ 299, [2007] 1 WLR  2351 at [36] (Tuckey LJ) (also an introducing broker’s case) applied by Floyd J  in Cobbetts LLP  v Hodge [2009] EWHC 786 (Ch) at [106]. 4 See Hurstanger (above) at [35] (cited with approved by Lord Neuberger MR in Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2012] EWCA Civ 1021, [2013] Bus LR 543 at [22]). See also Stevens v Premium Real Estate Ltd [2009] NZSC 15 at [71] and [72] (Blanchard J). The SRA Code of Conduct 2011 required the solicitor to explain the relevant issues and risks to the clients and to have a reasonable belief that they understood those issues and risks: see O(3.6)(a) (above). This is no longer a requirement of the new Codes of Conduct. But it is suggested that the authorities require a very similar test to be met. For recent consideration of the scope of the duty of disclosure: see Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2019] EWCA Civ 83, [2019] 1 WLR 4481 at [34]–[47] (Longmore LJ) (scope of the duty of brokers introducing borrower to lender to disclose commission arrangements). 5 See para 6.2 of each code of conduct quoted in para 4.36, fn 2 which requires consent to be given or evidenced in writing. It is suggested that this is not an absolute rule. But it is unlikely that a solicitor will establish that he or she has obtained informed consent without setting out the position in writing. See also O(3.6)(b) and O(3.7)(b) quoted in para 4.36, fn 1, above for the position under the SRA Code of Conduct 2011. 6 [1994] 1 AC 428 at 43SF–H. The passage was cited and applied in Paton v Rosesilver Group Corp [2017]  EWCA  Civ 158 at [28] (Henderson LJ). See also Spikins v Wickham & Fine (18 November 1998, unreported) (Peter Leaver QC) for an example where the court held that informed consent had been given.

4.38 In Kelly v Cooper1 the Privy Council held that it was an implied term of the contract between an estate agent and a seller that the agent could act for other sellers with competing interests and keep confidential information learnt in the course of those retainers. In earlier editions of this book, we cited the decision as authority for the proposition that consent could be implied2 although we pointed out that it was problematic and had been the subject of criticism.3 More recently, in Rossetti Marketing Ltd v Diamond Sofa Co Ltd4 the Court of Appeal has considered the scope of Kelly v Cooper. They held that an agent can act for two principals with conflicting interests in two cases. The first is where both principals agree (and it is for the agent to show not merely that the principal consented but that it was given on a fully informed basis). The second is where the principal must have appreciated that the nature of the agent’s business was to act for numerous principals.5 It must be doubtful whether the Court of Appeal intended 179

4.39  Claims in equity to cast doubt on the proposition that consent could be implied in appropriate circumstances. In Mothew itself there was no suggestion that either the lender or the borrowers were expressly asked to consent to the dual engagement and the standard form documentation does not appear to have contained an express consent either.6 Lenders’ cases may fall into the second category or provide a true example of implied consent. The modern application form for a mortgage usually requires the borrower to consent to his or her solicitor acting for the lender on the terms of the UK Finance Mortgage Lenders’ Handbook and both solicitor and lender will be fully familiar with its terms. There may be other cases in which consent can be implied. But these will be rare.7 1 [1993] AC 205, PC at 214B–D (Lord Browne-Wilkinson). 2 See the third edition at 4.27. 3 See now Hollander and Salzedo, Conflicts of Interest 5th edn (2016) at 4–019 to 4–23. The Supreme Court of New Zealand left open the question whether they should follow it but distinguished the case on its facts in Stevens v Premium Real Estate Ltd [2009] NZSC 15. See also J D Wetherspoon plc v Van De Berg & Co Ltd [2007] EWHC 1044 (Ch) at [22] (where Lewison J also distinguished the decision) and Harlequin Property (SVG) Ltd v Wilkins Kennedy [2016]  EWHC  3188 (TCC) at [492]–[495] (where Coulson J  considered the position of an accountant to be closer to Kelly v Cooper than that of a solicitor). 4 [2012] EWCA Civ 1021, [2013] Bus LR 543 at [19]–[32] (Lord Neuberger MR). 5 This was the case in Kelly v Cooper. 6 [1998] Ch  1 at 7A–B  and 19B–C. See also Nationwide Building Society v Balmer Radmore [1999] Lloyd’s Rep PN 241 at 260–264. 7 For an example see Paton v Rosesilver Group Corp [2017] EWCA Civ 158 at [33] and [34] (solicitor acting for seller and buyer under limited retainer).

(c)  The actual conflict rule 4.39 The purpose of the double employment rule is to prevent the solicitor placing himself in a position of conflict.1 Traditionally, equity lawyers have organised the principles of liability by reference to the ‘no profit’ rule and the ‘no conflict’ rule drawing no distinction between potential conflicts and actual conflicts.2 Once the rule was engaged the principal could set aside the transaction or require the fiduciary to account for any profit unless the fiduciary had made full disclosure of all material facts. In Mothew, however, Millett LJ drew a distinction between potential and actual conflicts. Even if a solicitor complies with the double employment rule and obtains the informed consent of both clients to act at the outset of the retainer, he or she will be unable to continue to act once an actual conflict of interest has arisen:3 ‘Finally, the fiduciary must take care not to find himself in a position where there is an actual conflict of duty so that he cannot fulfil his obligations to one principal without failing in his obligations to the other … If he does, he may have no alternative but to cease to act for at least one and preferably both. The fact that he cannot fulfil his obligations to one principal without being in breach of his obligations to the other will not absolve him from liability. I shall call this “the actual conflict rule”.’ 180

Breach of fiduciary duty  4.40 It is no answer to a claim for breach of fiduciary duty that the solicitor obtained the informed consent of the client to the dual engagement at the outset of the retainer. The client may have been prepared to take the risk of a potential conflict of interest arising when engaging the solicitor but the client was not consenting to the client continuing to act once an actual conflict had arisen or to the solicitor committing a breach of fiduciary duty. What is an actual conflict? The obvious case is where the clients give conflicting instructions to the solicitor. In those circumstances the solicitor will have no option but to withdraw. But an actual conflict will also arise where there is a direct conflict between the existing duties to both clients. The obvious example is where the solicitor acquires confidential information in the course of acting for one client which he or she must disclose to the other.4 If the solicitor cannot obtain the consent of the first client to disclose the information to the second an actual conflict arises and the solicitor must cease acting for both. If the solicitor has properly complied with the double employment rule he or she will not be in breach of the contract of retainer by ceasing to act. The firm’s terms and conditions ought to regulate the length of notice required to terminate the retainer and the extent to which the solicitor must provide an explanation for the conflict. If the solicitor has not complied with the double employment rule the solicitor may commit a breach of contract by ceasing to act.5 1 It has traditionally been regarded as a prophylactic rule designed to prevent fiduciaries from getting into trouble rather than compensating their principals. For a modern expression of that principle see Imageview Management Ltd v Jack [2009] EWCA Civ 63, [2009] 1 BCLC at [50] (Jacob LJ): ‘The policy reason runs as follows. We are here concerned not with merely damages such as those for a tort or breach of contract but with what the remedy should be when the agent has betrayed the trust reposed in him – notions of equity and conscience are brought into play. Necessarily such a betrayal may not come to light. If all the agent has to pay if and when he is found out are damages the temptation to betray the trust reposed in him is all the greater. So the strict rule is there as a real deterrent to betrayal.’ 2 See the traditional formulations of the no conflict rule in Aberdeen Rly Co v Blaikie Bros (1854) 1 Macq 461 at 471 (adopted by Lord Herschell in Bray v Ford [1896] AC 44 at 51 and cited by the Court of Appeal in Bhullar v Bhullar [2003] EWCA Civ 424, [2003] 2 BCLC 241 at [27]). Compare also s  175 of the Companies Act 2006 which gives statutory effect to the rule for company directors. 3 [1998] Ch  1 at 19G–H. See also Ultraframe (UK) Ltd v Fielding [2005]  EWHC  1638 (Ch) (Lewison J) at [1317]. 4 For a classic example see Moody v Cox and Hatt [1917] 2 Ch 71, CA. In that case the firm acted for both vendor and purchaser and one of the partners was a trustee of the vendor trust. The firm obtained valuations on behalf of the trust which showed that the purchaser was paying an inflated price but failed to disclose them to the purchaser. 5 The solicitor can only terminate the retainer for reasonable grounds and on reasonable notice: see Chapter 1, para 1.11. An actual conflict will constitute reasonable grounds although it may be impossible for the solicitor to disclose the nature of the conflict or give reasonable notice once an actual conflict has arisen.

(d)  The no inhibition principle 4.40 The corollary to the actual conflict rule is the ‘no inhibition principle’.1 Where an actual conflict arises but the solicitor fails to withdraw it is no answer 181

4.40  Claims in equity to a claim for breach of fiduciary duty that the solicitor could not comply with his or her duty to one client without breaking his or her duty to the other. This principle explains the decision of the House of Lords in Hilton v Barker Booth & Eastwood.2 S accepted instructions to act for both V and P in breach of Rule 6 of the Solicitors’ Practice Rules 1990 (which were then in force).3 The trial judge held that S was in breach of his professional duty by doing so and that he should have advised P to take independent advice. However, he also found that this breach of duty caused no loss and dismissed the claim. P’s real complaint was that S  had failed to disclose to him that V  had committed a number of bankruptcy offences but P could not demonstrate that he would have discovered them if he had instructed new solicitors to act. The Court of Appeal upheld the judge’s decision but on the basis that S owed no duty to disclose the bankruptcy offences and that there was no conflict. The House of Lords reversed this decision for two reasons: first, S could not rely on his own breach of Rule 6 as a defence to a claim based on a subsequent breach of contract and, secondly, it was no answer to the claim that S had irreconcilable duties to both clients and that by complying with his duty to P he was in breach of his duty to V:4 ‘Mr Gibson submitted that a solicitor who has conflicting duties to two clients may not prefer one to another. That is, I think, correct as a general rule, and it distinguishes the case of two irreconcilable duties from a conflict of duty and personal interest (where the solicitor is bound to prefer his duty to his own interest). Since he may not prefer one duty to another, he must perform both as best he can. This may involve performing one duty to the letter of the obligation, and paying compensation for his failure to perform the other. But in any case the fact that he has chosen to put himself in an impossible position does not exonerate him from liability.’ Hilton can be viewed as a straightforward application of the no inhibition principle. S conceded that he owed a duty of confidentiality to V and would have been in breach of it to reveal the convictions to P. There was therefore an actual (as opposed to potential) conflict which meant that S should not have accepted instructions. He should not have accepted them because he could not obtain P’s informed consent or comply with Practice Rule 6 without revealing this information.5 But once he had accepted instructions S could not rely on his duty to V to keep the convictions confidential as a defence to a claim by P. But even when viewed in this way Hilton presents a number of difficulties: first, the claim was framed as a claim for breach of contract and not a claim in equity and the House of Lords appears to have approached the claim on the basis that S owed an absolute duty to comply with Practice Rule 6. Secondly, there was no finding of conscious impropriety or disloyalty (see section (e) below). It is suggested that the key to interpreting the decision is to recognise the limited issue which the House of Lords was being asked to decide. The only issue before the House was whether in complying with Practice Rule 6 S owed a duty to disclose information to one client in breach of his duty to the other. It was unnecessary to determine whether this was also a fiduciary obligation and whether it was qualified or 182

Breach of fiduciary duty  4.41 absolute. It was also unnecessary to determine whether it also amounted to a breach of fiduciary duty because there was no suggestion that a finding to that effect would have had a different effect on the issues of causation or damage.6 1 [1998] Ch 1 at 19F-G. In Moody v Cox and Hatt [1917] 2 Ch 71, the Court of Appeal rejected the argument that the solicitors were under no duty to report the valuations to the claimant because this would have involved a breach of their duty to the vendor: see 91 (Scrutton LJ). 2 [2005] UKHL 8, [2005] 1 WLR 567. For a detailed analysis see Harlequin Property (SVG) Ltd v Wilkins Kennedy [2016] EWHC 3188 (TCC) at [492]-–[495] (where Coulson J distinguished it on the basis that the regulatory and ethical context for accountants was very different). See also Getzler, ‘Inconsistent fiduciary duties and implied consent’ (2006) 122 LQR 1–8. 3 At [38]. Practice Rule 6 was the forerunner to the rules considered in 4.36 (above). 4 At [44]. 5 See Lord Walker’s analysis at [30]–[32]. See also Haira v Burbery Mortgage Finance & Savings Ltd [1995] 4 LRC 387. 6 For the concession: see [26]. Lord Walker was also careful to say that it was unnecessary to decide whether to address the points taken by P about the fiduciary relationship. For a case in which the court distinguished Hilton and rejected the argument that a contractual relationship between a solicitor and a funder gave rise to a fiduciary relationship see Hall v Saunders Law Ltd [2020] EWHC 404 (Comm) (Richard Salter QC) at [54]–[57].

(e)  The duty of good faith 4.41 The core facet of the duty of loyalty is the obligation to act at all times in good faith and in the interests of each client and not to prefer the interests of one client over the interests of the other. Once a solicitor accepts instructions from two clients with competing interests, each one is entitled to single-minded loyalty. But it does not follow from this that because a solicitor is retained by two clients, any breach of retainer or negligence is a breach of fiduciary duty. The principal must show that the solicitor acted in bad faith:1 ‘The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent duty is not unfaithful and is not guilty of a breach of fiduciary duty … Conduct which is in breach of this duty need not be dishonest but it must be intentional. An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of the duty of skill and care.’ In this important passage Millett LJ was obviously concerned to explain why a negligent breach of retainer in a lender’s claim should not be elevated into a breach of fiduciary duty purely because the solicitor has accepted a dual engagement, and to limit claims for breach of fiduciary duty to those circumstances in which the existence of the separate engagements has had a direct and conscious effect on the conduct of the fiduciary. 1 See Mothew [1998] Ch 1 at 18F and 19D–G.

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4.42  Claims in equity 4.42 For this reason successful claims for breach of fiduciary duty are rare. In a number of lenders’ claims the principles in Mothew have been applied. In Nationwide Building Society v Richard Grosse & Co and Nationwide Building Society v Goodwin Harte1 (cases in the Nationwide managed litigation) the judge was prepared to conclude that two solicitors consciously put their borrower client’s interests before those of their lender client. In the first case, the critical factor from which the judge was prepared to draw this conclusion was that S had submitted an unqualified report on title at a time when he had taken no steps to investigate title at all. His evidence was also an important factor.2 In the second case S  elected not to give evidence but the judge was prepared to make a finding of breach of fiduciary duty.3 He was able to find on the documents that S must have known that B was defrauding C and that his failure to disclose the relevant information to C was ‘conscious, deliberate and in bad faith’. Both of these were strong cases.4 In Bristol and West Building Society v Fancy and Jackson5 by contrast the judge was not willing to find that any of the solicitors had been guilty of conscious impropriety. Ball v Druces & Attlee6 provides a rare example in a different context. In that case a firm of solicitors which acted both for the founders of the Eden Project and the charitable trust which was formed to administer it was held to be in breach of fiduciary duty by continuing to act for one client after an actual conflict arose.7 1 [1999] Lloyd’s Rep PN 348 and [1999] Lloyd’s Rep PN 338 (Blackburne J). 2 [1999] Lloyd’s Rep PN 348 at 355–356. 3 [1999] Lloyd’s Rep PN 338 at 345. 4 For a similar case see Morkot v Watson & Brown Solicitors [2014]  EWHC  3439 (QB), [2015] PNLR 9 (where HHJ Behrens held that the solicitors had committed a conscious and deliberate breach of fiduciary duty by failing to report deposit arrangements which were the badge of mortgage fraud). See also Goose v Wilson Sandford [2001] Lloyd’s Rep PN 189, CA (where an accountant was held to be in breach of fiduciary duty in failing to make disclosure to his client (although the claim failed because the duty was not causative of loss)). 5 [1997] 4 All ER  582 at 613g and 614d–e (Chadwick J): ‘I  should not draw an inference of dishonesty against a solicitor without cogent evidence; evidence which, in effect, compels me to reach that conclusion.’ For other cases in which the court did not find a breach of fiduciary duty made out see Maes Finance Ltd v Sharp (HHJ Bowsher QC, 27 July 1999, unreported), Birmingham Midshires BS v Infields [1999] Lloyd’s Rep PN 874 (HHJ Bowsher QC) and Leeds & Holbeck BS v Arthur & Cole [2002] PNLR 23 (Morland J) (all lenders’ cases). The Supreme Court has overruled parts of Fancy & Jackson in relation to the assessment of damages: see Chapter 10, para 10.148 for further discussion. 6 [2004] EWHC 1402 (QB), [2004] PNLR 39 (Nelson J) at [315]–[340]. There was no separate award of equitable compensation because the claimant recovered damages for negligence. 7 The breaches of duty consisted of revealing the claimant’s weak bargaining position to their other client whilst he was still a client of the firm ([322]–[326]) and exploiting confidential information when he had ceased to be a client ([330] and [336]–[337]). The judge also rejected the argument that there was transparency of information between the two clients ([333]–[335]). He also pointed out that a different test would apply at trial in relation to a breach of the fiduciary duty of confidentiality than would apply at the interim stage where a client or former client was seeking to restrain a solicitor from acting: see [322].

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Compensation in equity  4.44

D  COMPENSATION IN EQUITY 1 Introduction 4.43 Claims against solicitors for breach of trust or breach of fiduciary duty against a professional often involve a claim for equitable compensation in the alternative to a claim for damages and for this reason the subject is given separate treatment in this book. But in recent years this subject has been controversial. Critics attack the term as misleading arguing that claims against fiduciaries do not require proof of causation and breach. They also rely on the traditional accounting procedure in the Court of Chancery to attack the reasoning in the leading English cases. Moreover, the boundaries of the remedy remain unclear because equitable compensation is not always assessed in the same way. Before the Trustee Act 2000 trustees owed a duty of care which was enforceable in equity.1 Other fiduciaries also owe an equitable rather than a common law duty of care.2 The compensation which a claimant can claim for breach of these duties is assessed in the same way as a claim for damages for negligence or breach of contract against a solicitor.3 1 See Speight v Gaunt (1883) 22 Ch D 727, (1883) 9 App Cas 1. For the history of the equitable duty of care see Australian Securities and Investment Commission (No 2) [2016] FCA 1552, (2016) 20 ITELR 160 at [263]–[276] (where Edelman J considered that a trustee’s equitable duty of care is ultimately founded upon the trustee’s ‘objective assumption or undertaking of responsibility in the trust deed or acceptance of trust duties arising from a declaration of trust’ and placed particular reliance upon a passage from Lord Browne-Wilkinson’s speech in Henderson v Merrett Syndicates [1995] 2 AC 145 at 205). 2 For a recent example see Brewer v Iqbal [2019]  EWHC  182 (Ch), [2019]  PNLR  15 (Chief ICC Judge Briggs) at [52]–[56] (administrators). 3 See Bristol & West BS v Mothew, [1998] Ch 1, CA at 17G–H. See also Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 687 (Tipping J) (cited by Lord Toulson in AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 at [60]), Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003]  HCA  15, (2003) 212  CLR  484 at [36]–[37] Strother v 3464920 Canada Inc [2007] SCC 24, [2007] 281 DLR (4th) 640 at [157].

(a)  The controversy: equitable account 4.44 Target Holdings Ltd v Redferns1 was an early mortgage fraud case involving a sub-sale. S acted for both C, the lender, and B, the borrower, and released the mortgage advance to the intermediate vendor without authority and in breach of trust without obtaining any security over the subject property. S was later successful in obtaining a first legal charge over the property but when B defaulted and C enforced the charge there was a significant shortfall. C brought claims for negligence and breach of trust and applied for summary judgment. The Court of Appeal granted summary judgment on the breach of trust claim but the House of Lords restored the order made by the judge at first instance. The issue of principle was whether C could recover the overall losses from the transaction because S had misapplied the trust property or whether it was an answer to the claim that C would have obtained the same security and suffered the same losses 185

4.45  Claims in equity if S had not committed the breach of trust.2 Lord Browne-Wilkinson (with whom the other members of the House agreed) accepted that the basic rule was that a trustee in breach of trust was required to restore the assets lost as a consequence of the breach or to pay compensation to the trust estate (if unable to do so).3 However, where the trust had come to an end the normal order would be to require the trustee to pay compensation to the beneficiary directly. But the measure of compensation was the actual loss suffered by the beneficiary as a consequence of the breach assessed with the full benefit of hindsight and common sense.4 It followed that C was not entitled to recover equitable compensation because it had suffered no loss. It was in exactly the same position in which it would have been if S had waited until he held a first legal charge over the property before releasing the mortgage advance.5 1 [1996] AC 421, HL. 2 Lord Browne-Wilkinson formulated the issue as follows (at 428B): ‘Is the trustee liable to compensate the beneficiary not only for losses caused by the breach but also for losses which the beneficiary would, in any event, have suffered even if there had been no such breach?’ 3 See 434C–F. For this proposition he relied upon Nocton v Ashburton [1914] AC 932 at 952 and 958 (Viscount Haldane LC). 4 See 438D–439B. 5 Lord Wilkinson described the transaction as ‘redolent of fraud’: see 432B. The House of Lords restored the original order made by Warner J granting conditional leave to defend. The claim settled before trial but if it had gone to trial the lender would have succeeded in full if it had been able to prove that it would not have entered into the transaction if properly advised or that the transaction would not have proceeded if S had declined to release the mortgage advance until he held a transfer and charge: see 440G–441B.

4.45 Commentators1 criticised Target on the basis that a trustee’s liability to account in equity does not depend upon proof of loss and that the term equitable compensation is misleading. They placed particular emphasis on the fact that a trustee owed a primary obligation to account to beneficiaries which could be enforced by an order for an account2 and that an order requiring the trustee to make good the deficit is analogous to a debt rather than damages for breach of duty.3 There is no doubt that historical support can be found for these arguments. An order for an account is not a remedy but a means by which a trustee can be compelled to discharge a primary obligation and it does not necessarily require proof of wrongdoing or loss.4 When the account is taken, the beneficiary can challenge various entries and require the trustee to make good the deficit.5 The beneficiary can also affirm the unauthorised transaction and take the benefit of any investment.6 However, these arguments elevate a flexible procedure developed in the context of institutional trusts into a substantive obligation upon a solicitor to replace or restore the trust fund which seem very foreign to professional negligence lawyers for whom causation and loss are often the key issues.7 But more importantly, to insist that trustees must account to the beneficiaries for a trust asset or pay compensation if they are unable to do so, does not answer the question when in principle the remedy should be available and what the measure of compensation should be.8 1 See, in particular, Millett, ‘Equity’s place in the law of commerce’ (1998) 114 LQR 214, Elliott and Edelman, ‘Target Holdings considered in Australia’ (2003) 119  LQR  545 and Mitchell,

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Compensation in equity  4.46 ‘Stewardship of property and liability to account’ [2014] Conv 215. For a summary of the current standpoint of most commentators see Elliott in Snell’s Equity 34th edn (2020) at 20–025 to 20--035. 2 See Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch) at [1513] (Lewison J): ‘The taking of an account is the means by which a beneficiary requires a trustee to justify his stewardship of trust property.’ 3 Most commentators refer to the dictum in Ex p Adamson; in re Collie (1878) 8 Ch D 807 at 819 (James and Baggallay LJJ) discussed by Lord Toulson in AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 at [61]: ‘This was long before the expression “equitable compensation” entered the vocabulary. Equitable monetary compensation for what in that case was straightforward fraud was clothed by the court in the literary costume of equitable debt, the debt being for the amount of the loss caused by the fraud.’ 4 For an authoritative summary of the historical development which should be sufficient for most purposes see Barnett v Creggy [2016] EWCA Civ 1004, [2017] Ch 273 at [21] and [22] (Patten LJ). For a more detailed history and development of the claim for an account see Edelman, ‘An English misturning with equitable compensation’ (paper delivered to UNSW to be found on the FCA website) and Mitchell, [2014] Conv 215 (above). For a detailed description of the accounting procedure brought up to date: see Snell’s Equity 34th edn (2020) at 20–12 to 20–027. Historically, the court could make two orders: first, for an account in common form (which was for an order that the trustee should produce his accounts and explain the distributions, disbursements and expenses which he had paid) and, secondly, for an account on the basis of wilful default (which was for an order to provide an account of those assets which the trustees would have received if they had not committed a breach or breaches of duty). Confusingly, a breach of the equitable duty of care was also enforceable by an order for an account on the basis of wilful default: see Australian Securities and Investment Commission (No 2) [2016] FCA 1552, (2016) 20 ITELR 160 at [305] (Edelman J). 5 See Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 at [166]–[174] (Lord Millett NPJ). 6 See Tang Ying Loi v Tang Ying Ip [2017] HKCFA 3 (2017) 20 ITELR 318 at [18]–[25] (Lord Millett NPJ). See also Devonshire ‘The recovery of gains from a fiduciary’s misuse of trust funds’ (2017) 76 CLJ 236. 7 It is clear from the authorities that there was (and is) no formal requirement that a beneficiary should bring a claim for breach of trust or equitable compensation by an action for an account: see Libertarian Investments Ltd v Hall (above) at [172] and Barnett v Creggy (above) at [22]. Furthermore, at any stage the beneficiary could elect whether or not to seek further accounts and inquiries. The primary purpose of the exercise was, therefore, to establish precisely what the trustee had done with the trust assets and to enable the beneficiaries to decide what to do next (eg follow or trace the assets, affirm or reject the transactions and either seek an account of profits or equitable compensation). Given that solicitors usually hold funds for the purpose of a single transaction and for short periods and have professional conduct duties under the SRA Accounts Rules 2011 cases in which this battery of remedies will be required are probably rare. Clients or beneficiaries may need to understand what the solicitor has done and to interpret client account entries, but their advisers will want this information (and should be entitled to obtain it) before proceedings are ever issued. Indeed, it might be well be professional misconduct for a solicitor not to comply with the obligation to account. 8 For further development of this point see Worthington, ‘Four questions on fiduciaries’ [2018] TLI 22 at 39–43.

4.46 In AIB  Group (UK) plc v Mark Redler & Co1  C, also a lender, challenged the Supreme Court to overrule Target. S acted for both C and B, the borrower, and released the mortgage advance without obtaining a first legal charge over the property (as in Target). The circumstances were, however, very different. S was given the wrong redemption figure by the existing lender and as a consequence tendered the wrong amount and C obtained a second legal charge over the property rather than the first legal charge which S had been 187

4.47  Claims in equity instructed to obtain. When B defaulted, there was also a significant shortfall (as in Target) and the same issue arose, namely, whether C could recover the entire losses from the transaction or whether S was only liable for the amount required to discharge the first charge.2 The Supreme Court refused to overrule Target3 and held that S was only liable for the lesser amount. The court also made some general observations about equitable compensation. These are explored in more detail below but Lord Reed4 set out three broad propositions derived from the influential judgment of McLachlin J in Canson Enterprises Ltd v Boughton & Co:5 (1) A breach of trust involving the misapplication of trust property can be remedied by means of proceedings designed to secure the performance of the trust. Such proceedings can include the drawing up of an account as a preliminary to the distribution of the trust fund. Alternatively, proceedings may be brought directly for such a monetary remedy. (2)

The loss resulting from a breach of duty has to be measured according to legal rules and different rules apply to the breach of different obligations.

(3)

Compensation for the breach of an obligation generally seeks to place the claimant in the position he would have been in if the obligation had been performed. Equitable compensation for breach of trust is no different in principle: it aims to provide the pecuniary equivalent of performance of the trust. Some of the typical obligations of the trustee of a fund are strict: for example, the duty to distribute the fund in accordance with the purposes of the trust. The trustee’s liability for a breach of trust will depend on its effect on the fund. The measure of compensation will generally be based on the diminution in the value of the fund caused by the trustee’s default.

1 [2014] UKSC 58, [2015] AC 1503. Redler has been followed in Scotland: see Kidd v Paull & Williamsons LLP [2017] CSOH 16 (Lord Tyre) at [37]–[46]. 2 The difference in round figures was between £2.5m and £275,000 (excluding interest): see [8] (Lord Toulson). 3 See [63] (where Lord Toulson described it as a ‘backward step’ to depart from Target) and [114] (where Lord Reed stated that the result was ‘undoubtedly correct’). 4 See [90]–[92]. 5 (1991) 85 DLR (4th) 129. See, in particular, the passages at 157e–h and 163e–h (which were also cited by Lord Browne-Wilkinson in Target). The seven judges concurred in the result. McLachlin J, with whom L’Heureux-Dube J concurred, wrote the minority opinion.

(b)  The nature of the remedy 4.47 Equitable compensation has often been described as a restitutionary remedy.1 However, care is required when using this term. In her judgment in Canson Enterprises Ltd v Broughton & Co2 McLachlin J explained the basis of the remedy in the following way: ‘In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and 188

Compensation in equity  4.47 account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie  the plaintiff’s loss of opportunity. The plaintiff’s actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach. The plaintiff will not be required to mitigate, as the term is used in law, but losses resulting from clearly unreasonable behaviour on the part of the plaintiff will be adjudged to flow from that behaviour, and not from the breach. Where the trustee’s breach permits the wrongful or negligent acts of third parties, thus establishing a direct link between the breach and the loss, the resulting loss will be recoverable. Where there is no such link, the loss must be recovered from the third parties.’ Although they cited and approved this passage in Redler3 Lord Toulson and Lord Reed did not emphasise the restitutionary nature of the remedy.4 Lord Reed echoed the passage from Canson (above) in stating that the measure of compensation should normally be assessed at the date of trial with the benefit of hindsight. But he also stated that the aim of equitable compensation was to compensate and that there are some structural similarities with common law damages.5 He concluded:6 ‘Those structural similarities do not however entail that the relevant rules are identical: as in mathematics, isomorphism is not the same as equality. As courts around the world have accepted, a trust imposes different obligations from a contractual or tortious relationship, in the setting of a different kind of relationship. The law responds to those differences by allowing a measure of compensation for breach of trust causing loss to the trust fund which reflects the nature of the obligation breached and the relationship between the parties … where a trust is part of the machinery for the performance of a contract, that fact will be relevant in considering what loss has been suffered by reason of a breach of the trust.’ 1 See Re Dawson [1966] 2  NSWLR  211 (Street J) at 214–216, Bristol and West Building Society v Mothew [1998] Ch 1, CA at 18B: ‘primarily restitutionary or restorative rather than compensatory’, Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 697–698 (Tipping J), Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 at [168] (Lord Millett NPJ): ‘restitutionary or restorative’, Barnett v Creggy [2016] EWCA Civ 1004, [2017] Ch 273 at [22] (Patten LJ): ‘restitutionary in nature in the sense of being designed to put the claimant beneficiary back into the position in which he would have been but for the breach of trust’ and Re Ahmed [2018] EWCA Civ 519 at [34] (Gloster LJ): ‘The word “restitutionary” as used in the authorities is used in the sense of restoring trust property actually lost as a result of a breach of trust.’ 2 (1991) 85 DLR (4th) 129 at 163e–h. 3 AIB  Group (UK) plc v Mark Redler & Co [2014]  UKSC  58, [2015] AC  1503 at [36] (Lord Toulson) and [89] and [133] (Lord Reed). This passage was also approved by Lord BrowneWilkinson in Target (above) at 428D–439B.

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4.48  Claims in equity 4 Lord Toulson used the term ‘restitutionary’ at [65] and [66]. But he also agreed with Lord Reed’s analysis at [133]–[138]: see [76]. 5 See [135] and [136]. 6 At [137].

4.48 The decision in Redler did not silence the critics1 who continue to maintain that the Supreme Court failed to distinguish between ‘reparative compensation’ and ‘substitutive compensation’.2 These terms are used to distinguish between (1) the consequential losses to a trust incurred as a consequence of a breach of trust by a trustee or the losses suffered by a principal as a consequence of a non-custodial breach of fiduciary duty and (2) the objective value of the asset misappropriated or misapplied by the trustee. The remedy for the first type of loss is described as ‘reparative compensation’ because it is designed to repair the damage and issues of causation and remoteness may be relevant. The remedy for the second type of loss is described as ‘substitutive compensation’ because its function is to substitute money for the asset which the trustee or fiduciary has stolen or misapplied.3 In Redler the Supreme Court did not accept that Lord Browne-Wilkinson had failed to distinguish between these two types of compensation properly in Target.4 Whichever kind of compensation is appropriate, a beneficiary is only entitled to be compensated for any loss which he would not have suffered but for the breach of trust whether the claim is for reparative compensation or substitutive compensation.5 Provided that this important ground rule is understood, the distinction is a useful one.6 It will be particularly useful outside lenders’ claims where the solicitor trustee was not instructed to use the trust fund to obtain or acquire a substitute asset such as a legal charge (which may fluctuate in value). 1 See Edelman, ‘An English misturning with equitable compensation’ (paper delivered to UNSW to be found on the FCA website) and Millett, [2018] TLI 44. Millett accepts that the decisions in Target and Redler were correct but the reasoning wrong. Edelman criticises both the reasoning and the outcome. For the alternative view responding to these criticisms forcefully see Worthington, [2018] TLI 22 at 39–43. 2 See Snell’s Equity 34th edn (2020) at 20–029 to 20–035. Dr Elliott (who now edits this chapter of Snell) was responsible for these terms which Edelman J adopted judicially in Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102: see Redler (above) at [53] (Lord Toulson). 3 Nocton v Ashburton and Canson were also solicitors’ cases and both involved the breach of noncustodial fiduciary duties by non-disclosure. The first involved a conflict of interest and duty where the fiduciary failed to disclose his personal interest and the second involved a conflict of duty and duty where S failed to disclose that a third party was making a secret profit. On Elliott’s analysis, they are examples of reparative compensation whereas Target, which involved the misapplication of trust assets, should have been an example of substitutive compensation. However, for a different analysis see Smith, ‘Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another’ (2014) 130 LQR 608 at 621–623 (who provides an alternative theory for equitable compensation based on the duty of disclosure). 4 See [56]–[61] and [64]–[73] (Lord Toulson) and [114]–[116] (Lord Reed). 5 This was spelt out most clearly by Lord Toulson in [66] and [73]. 6 See the distinction drawn by Lord Millett between the two types of equitable compensation in Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 at [168] and [174] (although he did not use these terms). See also Interactive Technologies v Ferster [2018] EWCA Civ 1594 at [16]– [20] (where David Richards LJ relied on the distinction drawn in Libertarian and did use these

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Compensation in equity  4.49 terms). Further support for the distinction can be found in Barnett v Creggy [2016] EWCA Civ 1004, [2017] Ch 273 (a solicitor’s case) where the issue was whether equitable compensation should be treated as a ‘liquidated pecuniary claim’ for the purposes of s 29(5) of the Limitation Act 1980. All three members of the Court concurred in the result but the majority considered that a claim against a trustee to recover trust funds improperly paid away was capable of falling within the subsection although it did not do so in the instant case: see [44]–[46] (Sales LJ) and [48] (Sir Terence Etherton MR). Neither used the terminology in the text but they provide support for the proposition that substitutive compensation is analogous to a debt rather than a claim for damages.

2 Causation (a)  Scope of the principle 4.49 In Target Holdings Ltd v Redferns1 the House of Lords decided that it was necessary for a beneficiary seeking equitable compensation to establish a causal connection between the breach of trust and the loss suffered: ‘Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.’ In Redler2 Lord Toulson and Lord Reed affirmed this principle. A number of authorities have considered the scope of this principle and whether it applies only where the underlying transaction has been completed3 and in Redler too it was argued that the principle did not apply because S had failed to complete the transaction by discharging the existing charge and obtaining a first legal charge over the subject property. Lord Toulson rejected this argument on the basis that the transaction was executed or completed when the loan moneys were released to the borrowers.4 Lord Reed rejected it on the basis that the breach of trust did not affect the security which C obtained over the property except to the extent of the amount remaining outstanding to the prior lender.5 1 [1996] AC 421 at 439B. 2 See AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 at [62]–[66] (Lord Toulson) and [107] (Lord Reed). Both of these passages and the passage from Target quoted in the text were cited by Gloster LJ in Re Ahmed [2018] EWCA Civ 519 at [34] and [35] (which contains a useful distillation of the ‘causation loss’ point as she described it). 3 See the discussion in Bairstow v Queen’s Moat Houses plc [2001]  EWCA  Civ 712, [2001] 2  BCLC  531 at [49]–[54], Knight v Duffell, Kentish & Co [2003]  EWCA  Civ 223 at [37]– [39], Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15, (2003) 212 CLR 484 at [48] (where the High Court of Australia distinguished Target on this basis), Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 (Ch) (Lewison J) at [22], Harris v Kent [2007]  EWHC  463 (Ch) at [127] and [127]–[131] (Briggs J) and Cherney v Neuman [2011] EWHC 2156 (Ch) (Henderson J) at [267]–[283]. 4 See [71]–[73]. Further justification for this approach can be found in the judgment of Ribeiro PJ in Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 at [91]–[96] dealing with postbreach changes affecting the trust property. See also the case note Turner, ‘Measuring equitable compensation for breach of fiduciary duty’ (2014) 73 CLJ 257 at 259 which puts the point this way: ‘That same principle answers a lingering criticism of Target: that the solicitor-trustees

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4.50  Claims in equity ought to have restored the entirety of the disbursed sum, since their breach was to make the unauthorised disbursement … ..The criticism is misplaced. Once a claimant shows a prima facie loss to the trust fund, the trustees may discharge their evidentiary onus by showing they restored a wrongly disbursed asset or its equivalent in money, thus satisfying their liability pro tanto (Re Massingberd’s Settlement (1890) 63 L.T. 296, 299 (CA).’ 5 At [140]. This also explains why cases like Lloyds TSB  Bank plc v Markandan & Uddin [2012] EWCA Civ 65, [2012] 2 All ER 884 are not relevant on this issue. S did obtain a valid legal charge over the property. The transaction was not therefore a nullity.

4.50 In Various Claimants v Giambrone & Law1 S acted for C, who were purchasers resident in the UK and Ireland buying apartments off plan in Italy. C transferred deposits of between €30,000 and €105,000 to S who held them on trust with authority to release them upon the issue of a bank guarantee from a specified list of financial institutions under Article  107 of the Italian Consolidated Law on Banking and Credit. S released the deposits upon receipt of guarantees from different financial institutions listed under Article  106 (which were not as strong). 62% of the deposits were used to fund undisclosed commission payments. C  never acquired units in the development and ultimately rescinded the purchase contracts. But they were unable to recover their deposits. S did not challenge the judge’s finding that he had released the deposits in breach of trust because he had failed to obtain guarantees from the correct financial institutions. But he argued that the breach of trust had caused no loss because it would have made no difference if he had received the correct guarantees (because C would never have been able to call on them). The Court of Appeal rejected this argument on the basis that S was only permitted to release the deposits upon receipt of compliant guarantees and should have kept them safe until C had rescinded the purchase contracts.2 Jackson LJ distinguished Target and Redler on the basis that S  had no active obligation to obtain a substitute security or to secure the removal of the prior charges but only to hold the deposits indefinitely.3 This does not seem an entirely convincing ground of distinction.4 But the facts of Giambrone were very similar to the facts of Youyang Pty Ltd v Minter Ellison Morris Fletcher5 where the High Court of Australia reached a similar outcome. C subscribed for preference shares in an investment vehicle under a scheme where S was required to obtain a bearer deposit certificate before releasing the funds. S released the funds but did not obtain the correct certificates. As in Giambrone, the court rejected an argument that the collapse of the scheme was unconnected with the breach of trust and it would have made no difference if S had obtained the correct certificate.6 1 [2017] EWCA Civ 1193, [2018] PNLR 2. 2 See [46]–[64].. 3 See [59]–[64]. 4 See Davies, ‘Equitable Compensation and the SAAMCO principle’ (2018) 134 LQR 165. For the terms of the trust: see para  4.03, above. The SAAMCo point is considered in para  4.56, below. Unlike Target and Redler Cs obtained no substitute asset and, indeed, nothing of value at all. 5 [2003] HCA 15, (2003) 212 CLR 484. The Court distinguished Target on the basis that security was never provided: see [48] and [49]. They held, however, that C was not entitled to recover the entire deposit although the reasoning for this decision is not entirely clear. For discussion of the decision more generally see Elliott and Edelman, ‘Target Holdings considered in Australia’

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Compensation in equity  4.52 (2003) 119 LQR 545 who argue that the Court did not accept the reasoning in Target although they point out that the reason for the final order must have been that S  obtained the correct certificate for 50% of the money. 6 See [63]. The decision was followed by the Supreme Court of Queensland in Jessup v Lawyers Private Mortgage Pty Ltd [2006] QCA 432 (where solicitors who were used to hold funds of investors in a contributory mortgage scheme but dispersed it without authority were also held to be in breach of trust). It was distinguished in Mantonella Pty Ltd v Thompson [2009] QCA 80, [2009] 2 Qd R 524 (where the claimant would have suffered the losses in any event).

4.51 The chain of causation will be broken, however, by some independent and unrelated event with which the breach of trust has no causal connection. In Canson Enterprises Ltd v Broughton & Co1 S acted on the purchase of a development site but failed to disclose to C, who were the developers, that their agent had an interest in the ultimate vendor and was making a secret profit. The Supreme Court of Canada held that S was liable to compensate the client for the secret profit but not for the later development losses (even though it was common ground that C would have withdrawn if it had known the truth). S  had ceased to act and C  was responsible itself for choosing the engineers and pile-drivers whose negligence caused the losses.2 Swindle v Harrison3 can be explained on a similar basis. C’s losses were caused by her choice to invest in a restaurant scheme proposed by her son which was unrelated to and independent of S’s breach of fiduciary duty. 1 (1991) 85 DLR (4th) 129. 2 See La Forest J at 146b–f, McLachlin J at 164b–g and Stevenson J at 162e–g: ‘I agree with the trial judge and the British Columbia Court of Appeal that these losses are too remote, not in the sense of failing the “but for” test but in being so unrelated and independent that they should not, in fairness, be attributed to the defendant’s breach of duty.’ 3 [1997] PNLR 641, [1997] 4 All ER 705, CA.

4.52 The principles of causation are not the same for the recovery of equitable compensation for dishonest assistance and breach of fiduciary duty. In Group Seven Ltd v Notable Services LLP1 the Court of Appeal explained that the issue must be approached in two stages: first, it must be shown that S’s conduct in fact assisted the breach of trust: the test at this first stage is whether the assistance given was more than minimal. Secondly, as was made clear in Target and Redler, there is no warrant for introducing common law concepts and what must be shown is that but for the breach of trust the loss would not have occurred. At this second stage, therefore, it is necessary to focus on the actions of the fiduciary and the breach of trust rather than the actions of the accessory. The Court of Appeal also made it clear that the causation test for an account of profits adopted in Novoship (UK) Ltd v Mikhaylyuk2 is not applicable to a claim for compensation.3 Finally, the principles of causation are not the same for the recovery of a bribe or secret commission or bribe and equitable compensation for breach of fiduciary duty either. There must be a sufficient connection between the bribe or secret commission and the breach

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4.53  Claims in equity of duty but it is not necessary to show that the breach of fiduciary duty was the cause of the profit.4 1 [2019] EWCA Civ 614 at [110]. 2 [2014] EWCA Civ 908, [2015] QB 499. 3 The Court of Appeal adopted a test which required the dishonest assistance to be the ‘real or effective cause’ of the profits on the basis that different rules should apply to a fiduciary and an accessory: see [114] (Longmore LJ). The High Court of Australia adopted the ‘but for’ test in Ancient Order of Forresters in Victoria v Lifeplan Australia Friendly Society Ltd [2018]  HCA  43, (2018) 21  ITELR  403. See Douglas, ‘Dishonest Assistance, Causation and Account of Profits’ (2019) 135 LQR 214. 4 See Parr v Keystone Healthcare Holdings Ltd [2019] EWCA Civ 1246 at [15]–[20] (Lewison LJ).

(b)  The conduct of the claimant 4.53 In Brickenden v London Loan & Savings Co1 Lord Thankerton stated that a fiduciary ‘cannot be heard to maintain that disclosure would not have altered the decision to proceed’ and that once the court had determined that the non-disclosure was relevant ‘speculation as to what course the constituent, on disclosure, would have taken is not relevant’. In Swindle v Harrison2 an unsuccessful attempt was made to persuade the court to adopt this approach to equitable compensation for non-disclosure (which did not involve fraud or bad faith). Similar attempts to persuade the court to adopt this approach in relation to a conscious or deliberate breach of duty have also failed3 and in Gwembe Valley Development Co Ltd v Koshy (No  3)4 the Court of Appeal accepted that the Brickenden principle applied to claims for rescission or an account of profits but not to claims for equitable compensation. A similar approach to causation has been adopted in Australia5 but in Canada6 and New Zealand7 a modified version of the Brickenden principle still appears to apply. 1 [1934] 3 DLR 465 at 469, PC. See also Heydon, ‘Causal relationships between a fiduciary’s default and a principal’s loss’ (1994) 110 LQR 328. 2 [1997] PNLR 641, [1997] 4 All ER 705, CA. For the facts see para 4.29, above. The judge’s finding of fact was that C would have accepted the loan even if there had been full disclosure. See [1997] PNLR 641 at 659 (Mummery LJ): ‘I can only imagine that they would have been astounded at the offer being made by the plaintiff in the circumstances and that with full knowledge of the circumstances they would have said “Grab it”. It was, after all, a lifeline for them. There is no evidence for a better offer could have been obtained elsewhere. The alternative was to forfeit the deposit.’ 3 See Bristol and West Building Society v May, May & Merrimans [1996] 2  All ER  801 (Chadwick J), Swindle v Harrison [1997] PNLR 641, [1997] 4 All ER 705, CA, Nationwide Building Society v Balmer Radmore [1999]  PNLR  606 at 660–672 and [1999] Lloyd’s Rep PN 241 at 272–279 (where Blackburne J set out all of the relevant passages in each of the earlier authorities) and Collins v Brebner [2000] Lloyd’s Rep PN 587. In Kidd v Paull & Williamsons LLP  [2017]  CSOH  16 at [47]–[50] Lord Tyre followed Nationwide and held that the same approach should be adopted in Scotland. 4 [2003] EWCA Civ 1048, [2004] 1 BCLC 131. See [142]–[147] and [159] applied by Vos J in Governor and Company of the Bank of Ireland v Jaffery [2012] EWHC 1377 (Ch) at [355]. 5 See Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15, (2003) 212 CLR 484, [2003] WTLR 751 at [42]. The Supreme Court of Queensland adopted the same approach in Mantonella Pty Ltd v Thompson [2009] QCA 80. See, in particular,[145]–[149] (Fryberg J).

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Compensation in equity  4.55 6 See Hodgkinson v Simms (1994) 117 DLR (4th) 161 at 200 where La Forest J described the Brickenden principle as ‘the long-standing equitable principle that where the plaintiff has made out a case of non-disclosure and the loss occasioned thereby is established, the onus is on the defendant to prove that the innocent victim would have suffered the same loss regardless of the breach’. See also Manitoba Métis Federation Inc v Canada (Attorney General) [2010] MBCA 71 at [201]–[217] (Scott CJM). 7 See Rama v Millar [1996] 1 NZLR 257 where the Privy Council had adopted the same approach as in the English authorities. But see now Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 697–698 (Tipping J), Maruha Corp v Amaltal Corp Ltd [2007]  NZSC  40 at [30] and Premium Real Estate Ltd v Stevens [2009]  NZSC at [32]–[41] (Elias CJ) and [85] and [86] (Blanchard J). In Stevens Blanchard J described the approach as affording ‘the fiduciary a limited opportunity of showing that all or some of the loss would have occurred even if disclosure had been made’: see [85]. The majority also applied the same presumption to the measure of loss. Stevens was applied by Mallon J in Lynds v Fitzherbert Rowe [2017] NZHC 1297 at [201]–[208] (a solicitor’s case).

(c)  The conduct of the defendant 4.54 In Chapter 31 we considered the cases in which the court has approached the conduct of the defendant. In a number of cases the court has had to consider what hypothetical circumstances or counterfactual it should adopt in relation to the conduct of the defendant. In Nationwide Building Society v Balmer Radmore2 Blackburne J considered that the sensible approach was to consider what would have happened if there had been no misrepresentation or the appropriate disclosure had been made. In Kidd v Paull & Williamsons LLP3 Lord Tyre adopted the same approach and held that the appropriate enquiry was what would have occurred if the breach had not been committed. Both of these cases were principally concerned with non-custodial breaches of duty. In Levack v Philip Ross & Co4 (which was concerned with the release of funds in breach of a Quistclose-type trust) the judge considered the correct counterfactual to be to ask himself what the position would have been if C had been informed of the true position before the transfer of the relevant funds. He held that there was no arguable case because it would have been a commercially irrational decision for C to continue with the transaction. 1 See para 3.08. 2 [1999] PNLR 606 at 671–672. He considered that if the breach of fiduciary duty consisted of a deliberate representation the same test as in deceit would be appropriate. 3 [2017] CSOH 16 at [48]. 4 [2019] EWHC 762 (Comm) (Lionel Persey QC) at [49]–[51].

(d)  The conduct of third parties 4.55 In Chapter 31 we also considered the cases in which the court has approached the conduct of third parties at common law by valuing the claimant’s chance of achieving a different outcome. In 4 Eng Ltd v Harper2 David Richards J applied the loss of a chance principle to a claim for damages for fraud for the lost opportunity to invest in an alternative vehicle and his decision was approved by the Court of Appeal in Parabola Investments Ltd v 195

4.56  Claims in equity Browallia Cal Ltd.3 The loss of a chance principle has also been applied to a breach of undertaking4 and it is suggested that there is no reason why the same approach should not be applied to equitable compensation for lost investment opportunities in the same way.5 1 See paras 3.12 to 3.25. 2 [2008] EWHC 915 (Ch), [2009] Ch 91 at [56]–[58]. 3 [2010]  EWCA  Civ 486, [2011]  QB  477 at [45]–[47]. In Wellesley Partners LLP  v Withers LLP [2015] EWCA Civ 1146, [2016] Ch 529 the Court considered Parabola to be a loss of a chance case and applied it to a claim for negligence: see, in particular, [108] (Floyd LJ). There was no suggestion that different principles should be applied to intentional or negligent breaches of duty. 4 See SCF Tankers Ltd v Privalov [2016] EWHC 2163 (Comm)) at [55]–[59] (Males J) (upheld at [2017] EWCA Civ 1877, [2018] 1 WLR 5623). 5 Compare, however, the approach of the majority of the Supreme Court of Canada in Simms v Hodgkinson [1994] SCR 377 (a breach of fiduciary duty case) where the claimant recovered his initial investment in a tax shelter scheme and consequential losses.

(e)  Scope of duty 4.56 In Various Claimants v Giambrone & Law1 the Court of Appeal accepted that the SAAMCO principle applied to a claim for breach of trust but held that the losses were within the scope of the duty. They considered it to be a category 2 case2 because: (1) C were buying properties in Italy and had no knowledge of Italian law and conveyancing procedures; (2)  S  decided what information they needed and provided it to them; and (3) S was guiding the whole decisionmaking process by telling the clients what protection they needed, what sums they should pay out and when it was safe to pay those sums out. 1 [2017] EWCA Civ 1193, [2018] PNLR 2 at [85] (Jackson LJ). See also LIV Bridging Finance Ltd v EAD Solicitors LLP [2020] EWHC 1590 (Ch) at [35] (a lender’s case in which where HHJ Halliwell held that equitable compensation was limited to the losses falling with the scope of the solicitor’s duty to obtain a first charge and confirm that it has been obtained). 2 For further discussion see Chapter 3, paras 3.26 to 3.40. The two categories do not neatly correspond to ‘information’ and ‘advice’: see Hughes-Holland v BPE Solicitors [2017] UKSC 21, [2018] AC 599 at [39]–[41] (Lord Sumption).

(f)  Remoteness of damage 4.57 In Chapter 31 we considered remoteness of damage at common law. In Target2 Lord Browne-Wilkinson also approved the statement of McLachlin J in Canson that foreseeability of damage will not restrict recovery in equity in the same way as damages at common law.3 In AIB Group (UK) plc v Mark Redler & Co4 Lord Reed confirmed that the measure of compensation should normally be assessed at the date of trial with the benefit of hindsight and that the foreseeability of loss is generally irrelevant provided that the loss flows directly from the breach. 1 See paras 3.49 to 3.64. 2 [1996] AC 421 at 439G and 440A.

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Compensation in equity  4.59 3 (1991) 85 DLR (4th) 129 at 162e–g. 4 [2014] UKSC 58, [2015] AC 1503 at [135]. Lord Toulson agreed with this passage and the other members of the Court agreed with them both: see [76] and [143].

(g)  Contributory negligence 4.58 In Nationwide Building Society v Balmer Radmore1 Blackburne J held that contributory negligence is not a defence to a claim for equitable compensation based on a deliberate breach of fiduciary duty or breach of trust and his decision was approved by the House of Lords in Standard Chartered Bank v Pakistan Shipping Corpn (No 2).2 Breaches of this nature are analogous to deceit at common law. In Day v Mead3 the Court of Appeal of New Zealand held that it could be a defence to a claim based on an unintentional or innocent breach of fiduciary duty. The majority in Canson4 agreed with this approach although the point did not arise for decision. More recently, in Kidd v Paull & Williamsons LLP5 it was held arguable in Scotland that it could be a defence to a claim for breach of the double employment rule. In theory, therefore, the question whether the statutory defence of contributory negligence is available as a defence to a claim for innocent breach of trust or breach of fiduciary duty remains open.6 1 [1999] Lloyd’s Rep PN  241 at 281–2, [1999]  PNLR  606 at 672–677. See also Corporacion Nacional del Cobr de Chile v Sogemin Metals Ltd [1997] 1 WLR 1396 at 1402–1405 (Carnwath J). 2 [2002] UKHL 43, [2003] 1 AC 959 at [18] (Lord Hoffmann). See also De Beer v Kanaar & Co [2002] EWHC 688 (Ch) (Patten J) at [92]. 3 [1987] 2 NZLR 443. 4 (1991) 85 DLR (4th) 129 at 162e–g. 5 (1991) 85 DLR (4th) 129 at 151–152 (La Forest J). 6 [2017] CSOH 16 at [60]–[70] (Lord Tyre).

(h) Mitigation 4.59 A victim of a breach of fiduciary duty or breach of trust is not in the same position as the victim of a tort or a breach of contract although his or her actions may prevent recovery if they are so unreasonable that they break the chain of causation. This view was expressed by McLachlin J in Canson1 and adopted by Blackburne J in Nationwide Building Society v Balmer Radmore.2 In AIB Group (UK) plc v Mark Redler & Co3 Lord Reed put the following gloss on Canson: ‘When the plaintiff, after due notice and opportunity, failed to take the most obvious steps to alleviate his or her losses, then it could rightly be said that the plaintiff had been the author of his own misfortune. I  would comment that, rather than being a distinct principle, this might be regarded as following from the requirement of a direct causal connection.’ 1 (1991) 85 DLR (4th) 129 at 162e–g.

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4.60  Claims in equity 2 [1999] Lloyd’s Rep PN  241 at 282, [1999]  PNLR  606 at 677. See also Extrasure Travel Insurances Ltd v Scattergood [2002] EWHC 3093 (Ch) (Jonathan Crow QC) at [159] where the judge stated that he was not satisfied that a cestui que trust is necessarily under the same duty to mitigate as a claimant for damages at common law. 3 [2014] UKSC 58, [2015] AC 1503 at [87].

3  Measure of compensation (a)  Date of assessment 4.60 In Target Holdings Ltd v Redferns1 Lord Browne-Wilkinson stated that the basis upon which equitable compensation was to be assessed was as follows: ‘The quantum is fixed at the date of judgment at which date, according to the circumstances then pertaining, the compensation is assessed at the figure then necessary to put the trust estate or the beneficiary back into the position it would have been in had there been no breach.’ The principle is illustrated by Ahmed v Ingram2 where a shareholder in a number of companies transferred a significant number of shares to his brother before entering into an IVA. The brothers later transferred some of them to their sisters. The shareholder was later found guilty of ‘vote-rigging’ the IVA, which was set aside and he was made bankrupt. The trustee brought proceedings for the return of the shares which were ultimately transferred to him. He also claimed equitable compensation for their diminution in value. Following Target the Court of Appeal held that the compensation had to be assessed at the date on which the trustee in bankruptcy would actually have sold them rather than by reference to some notional date on which they might have realised a higher value. 1 [1996] AC 421 at 437D. 2 [2018]  EWCA  Civ 519 at [56]–[61] (Gloster LJ). Lord Browne-Wilkinson cited Re Dawson 1966] 2 NSWR 211 (Street J), which was concerned with changes in currency, as an example: see 437E–H. See also Harris v Kent [2007]  EWHC  463 (Ch) at [130]–[157] where Briggs J applied Target to the assessment of the date and value of shares in a private company. The case turns on its own facts but it involves an orthodox approach to assessment.

(b)  Changes in value 4.61 For a time there appeared to be a difference between the assessment of damages at common law and the assessment of compensation in equity, particularly where the losses related to shares or other investments which fluctuated in value.1 This difference was probably more apparent than real and where claims for negligence, breach of contract and breach of trust arise out of the same facts (as claims against solicitors are likely to do), the level of compensation recoverable in equity and at common law ought to be the same.2  C  must establish on the evidence what loss he or she would have 198

Compensation in equity  4.63 avoided if there had been no breach of trust or fiduciary duty. Where the loss arises because of the failure to buy or sell an asset, C must prove when and at what price the asset would have been bought or sold in order to recover compensation.3 1 See Robinson v Robinson (1851) 1 De GM & G 247, CA at 257 (damages), Michael v Hart [1901] 2 KB 867 (Willes J) (damages), Guerin v R (1984) 13 DLR (4th) 321, Supreme Court of Canada at 367 (equitable compensation), Jaffray v Marshall [1993] 1 WLR 1285 (Nicholas Stewart QC) at 1290E–1293C (equitable compensation) (overruled in Target [1996] AC 421 at 440E–F) and Nestle v National Westminster Bank plc [1993] 1 WLR 1260, CA at 1268C–1267A (equitable compensation) (where Dillon LJ considered that Robinson was ‘flawed’ and declined to follow it). For a more detailed discussion of this issue see the third edition at para 4.50. 2 See Daniels v Tee [2016] EWHC 1538 (Ch), [2016] 4 WLR 115 at [45]–[56] (Richard Spearman QC citing Lord Reed in Redler (above) at [136]–[137]). 3 See Ata v American Express Bank Ltd (1998) 14  LDAB  221, CA. In Ahmed v Ingram [2018] EWCA Civ 519, the Court of Appeal held that the trustee in bankruptcy was entitled to recover compensation assessed by reference to the insider value on the basis that the trustee would have sold to family members: see [62]–[65] (Gloster LJ).

4  Set off 4.62 A defaulting trustee or fiduciary is not entitled to set off gains made by the beneficiary from one breach of trust or breach of fiduciary duty against losses suffered by the beneficiaries arising out of another breach of trust or duty.1 Accessories are only liable for the losses arising out of those transactions in which they assisted the relevant fiduciaries to commit a breach of trust. But they will not be entitled to set off unrelated gains against those liabilities either.2 1 See Bartlett v Barclays Bank Trust Co Ltd [1980] Ch  515, Van Wagner UK  Ltd v Brown [2005] EWHC 1505 (Ch) (David Kitchin QC) at [79] and Villeneuve v Gaillard [2011] UKPC 1 at [93] (Lord Walker). 2 See A-G of Zambia v Meer Care & Desai [2007] 1540 (Ch) (Peter Smith J) at [26]–[31] and FM Capital Partners Ltd v Marino [2019] EWHC 725 (Comm) at [18]–[26]. The former was a solicitor’s case but in the latter Cockerill J found it of limited assistance.

5 Interest (a)  The equitable jurisdiction 4.63 Until relatively recently there was no power to award interest as damages at common law and the jurisdiction to award interest on damages was statutory only.1 In contrast, courts of equity have always awarded interest under their inherent jurisdiction. In the nineteenth century when rates of interest were very stable the court usually awarded interest at a rate of 4 per cent2 but where special circumstances existed, the court would either award interest at the higher rate of 5 per cent or award compound interest.3 The special circumstances usually involved the trustee making a profit from the trust and the purpose of the award was to strip the trustee of the profit.4 The 199

4.64  Claims in equity court also had a power to award interest on the return of money or investments when making an order for rescission and where the contract was induced by a fraud a higher rate would be applied. In the 1970s the practice of awarding fixed rates of interest disappeared. In Bartlett v Barclays Trust Co Ltd (No 2)5 Brightman LJ awarded interest at the court’s short term investment rate and in O’Sullivan v Management Agency and Music Ltd6 the court awarded interest at a rate of 1 per cent above the bank minimum lending rate.7 For this reason the approach taken by the court under the statutory jurisdiction (at least in commercial cases) and the approach taken in equity became very similar.8 Moreover, after Sempra Metals Ltd v Inland Revenue9 the distinction between the jurisdictions became even less important. Nevertheless, the power to award interest in equity continues to deserve separate but brief treatment. 1 For the history of the jurisdiction to award interest see the Law Commission Report ‘PreJudgment Interest on Debts and Damages’ (Law Com No  287) which states (at 2.3): ‘The English courts have long been reluctant to award interest at common law … interest is largely a matter for either contract or statute. The court’s inherent power to award interest is largely confined to a few limited circumstances, such as where interest is claimed as special damages or under the equitable or Admiralty jurisdictions.’ 2 See Burdick v Garrick (1870) 5 Ch App 233. 3 See Re Dawson [1966] 2 NSWR 211 (Street J) at 218–9 (see para 4.60, fn 2, above). 4 See Wallersteiner v Moir (No 2) [1975] QB 373, CA at 388B–H, 398E–399A and 406E–G. See also Guardian Ocean Cargoes Ltd v Banco do Brasil (No 3) [1992] 2 Lloyd’s Rep 193 (Hirst J) at 198 col 2: ‘Thus, as shown in Burdick’s case, compound interest would be inappropriate in the case of a solicitor trustee who was not engaged in an investment business.’ 5 [1980] Ch 515 at 546G–547B. 6 [1985] QB 428, CA. For the jurisdiction to award interest on rescission see the analysis of Dunn LJ at 449E–458B. 7 See Alenco (Holdings) Ltd v Bates [2005] EWHC 1540 (Ch) (Alan Steinfeld QC) at [50] where the court awarded 1 per cent above base rate with annual rests. Compare El Ajou v Dollar Land Holdings plc (No 2) [1995] 2 All ER 213 at 224e–j where Robert Walker J awarded interest at the base rate from time to time of one of the London clearing banks. He stated that ‘the rate of interest should mirror, so far as possible, the income which the plaintiff might have earned had the principal sum been paid to him in March 1988’. He also declined to award rests any more frequently than yearly. 8 In Guardian Ocean Cargoes Ltd v Banco do Brasil (No 3) [1992] 2 Lloyd’s Rep 193 at 199 col 1 Hirst J accepted expert evidence of available rates in New York and ordered 1 per cent above the New York prime rate. He declined, however, to follow the prevailing commercial practice in New York where three-monthly rests were usual and preferred ‘to adhere strictly to the Wallersteiner formula’ and award yearly rests. In Benedetti v Sawiris [2009] EWHC 1806 (Ch) Patten LJ awarded 1 per cent above Euribor without rests. The significance of the decision is that he rejected the argument that the court should follow Sempra in relation to a statutory award. An appeal was allowed against his decision on the period for which interest should run but not the rate: see [2010] EWCA Civ 1427. 9 [2007]  UKHL  34, [2008] 1 AC  561. The power to award compound interest in equity may remain of some significance if C is unable to prove a specific loss at common law: see [94] and [95] (Lord Nicholls) and [215] and [216] (Lord Mance). Compound interest is now recoverable as damages provided that the normal rules of remoteness of damage in tort or contract (as applicable) are satisfied.

4.64 In Glenn v Watson1 Nugee J  carried out a detailed review of the authorities dealing with an award of interest against a defaulting trustee. He reached the following conclusion:2 200

Compensation in equity  4.65 ‘I  conclude that in the ordinary case of a defaulting trustee who is liable to make good a capital loss to the fund, the equitable interest to be awarded can be regarded as a means of compensating the fund for the income that has been lost to the fund; and that the rate of interest to be awarded can therefore be one that acts as a proxy for the investment return that trust funds with the general characteristics of the fund in question could expect to make.’ He awarded interest at 6.5% based on indices published by ARC and STEP.3 The Court of Appeal dismissed an appeal on the basis to adopt a rate which included an investment return. Where the breach of trust or breach of fiduciary does not involve a trust fund or formal trust a custodial breach of duty a different approach may be justified. Nugee J  identified three categories of case: first, where the general assumption is that borrowing would replace the funds lost and the court should identify an interest rate approximating to the cost of borrowing which C would have incurred in the same kind of business. Secondly, where C would have received the relevant funds the court should identify a rate representing a minimum return based on deposit rates. Thirdly, in cases which do not fit into either category the court should compensate C  for the lost opportunity to invest where the returns are not measurable.4 1 [2018] EWHC 2483 (Ch). The judgment of McCombe LJ also contains a very detailed survey of the earlier authorities. 2 At [49]. 3 See [51]–[54]. ARC refers to Asset Risk Consultants and STEP to the Society of Trust and Estate Practitioners. 4 See [2019] EWCA Civ 1759, [2019] 4 WLR 145. The judgments of Nugee J and McCombe LJ (in the Court of Appeal) provide the best judicial sources of the historical development of the jurisdiction. It was conceded that D should pay compound interest and the Court of Appeal dismissed the appeal on the basis that Nugee J was entitled to rely on the two indices.

(b)  Compound interest 4.65 Compound interest is most clearly applicable to cases where money has been obtained and retained by fraud or misapplied by a fiduciary.1 But there is also a discretion to award compound interest against a non-fiduciary accessary who is liable for dishonest assistance2 and against a knowing recipient in accordance with the law of unjust enrichment generally.3 In the absence of fraud compound interest is primarily awarded in equity where a trustee or fiduciary has misappropriated funds which would have been used to earn profits. Instead of ordering the trustee to account for those profits, the court orders him or her to pay compound interest instead.4 In the past, it was usual to order interest to be compounded at yearly or half-yearly rests but more recently the court has ordered interest to be compounded at quarterly rests.5 1 See President of India v La Pintada Compania Navigacion SA  [1985]  AC  104, HL at 116A–B (Lord Brandon).

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4.66  Claims in equity 2 See Central Bank of Ecuador v Conticorp SA  [2015]  UKPC  11, [2016] 1  BCLC  26 at [185]  (Lord  Mance) applied in FM  Capital Partners Ltd v Marino [2019]  EWHC  925 (Cockerill J). 3 See Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch) (HHJ Grant) at [148]–[152] cited by the editors of Lewin on Trusts 20th edn (2020) at 42–095 (which contains a useful summary of the earlier authorities). 4 See Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, HL at 702D–E (Lord Browne-Wilkinson) followed by the Court of Final Appeal in Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 at [142] (Ribeiro PJ). 5 See Central Bank of Ecuador v Conticorp SA (above) at [189] and [190] (Lord Mance).

6  Section 61 of the Trustee Act 1925 4.66 The court has a power to relieve a trustee from liability under s 61 of the Trustee Act 1925.1 In order to obtain relief under the section, a solicitor trustee (S) must satisfy three conditions: first, that he or she acted honestly; secondly, that he or she acted reasonably; and, thirdly, that the trustee ought fairly to be excused. Satisfaction of the first two conditions are material to the question whether he or she should be granted relief but are not conclusive of that question. A  stricter approach is taken to the position of professional trustees (including solicitors) and the court must have regard to the effect of the breach on the beneficiaries.2 Moreover, there is no analogy between s 61 and the equivalent provision in the Companies Act 2006 (and earlier companies legislation).3 In Santander UK plc v RA Legal Solicitors Briggs LJ summed up the jurisdiction: ‘In this context mercy lies not in the free gift of the court. It comes at a price.’4 1 Section 61 provides as follows: ‘If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same.’ 2 See Santander UK plc v RA Legal Solicitors [2014] EWCA Civ 183, [2014] PNLR 20 at [33] and [34] (Briggs LJ) and P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 at [105]–[107] (Patten LJ citing Lawrence LJ In re Windsor Steam Coal Co (1901) Ltd [1929] 1 Ch 151). 3 See Santander (above) at [25] (Briggs LJ) and the comments of Sir Terence Etherton C at [107]– [112]. See further at para 4.70, below. 4 At [34].

(a) Honesty 4.67 If the trustee has not acted honestly, he or she will not obtain relief. But in the absence of any allegation of dishonesty, the approach taken by the 202

Compensation in equity  4.68 court is usually to assume honesty in S’s favour unless allegations of dishonesty are specifically raised and proved.1 1 See, eg Various Solicitors v Giambrone and Law [2015] EWHC 3315 (QB) (Foskett J) at [32] and Labrouche v Frey [2016] EWHC 268 (Ch) at [224]–[234] (Asplin J). See also P&P Property Ltd v Owen White and Catlin LLP (above) at [105] (Patten LJ).

(b) Reasonableness 4.68 The burden is on S to demonstrate that he or she acted reasonably.1 The court will look at each case taken as a whole and in the round.2 But S must act ‘with exemplary professional care and efficiency’ and be ‘careful, conscientious and thorough’.3 In order to discharge this burden, S  will have to provide a paper-trail demonstrating that the whole of the firm’s conduct satisfied the reasonableness test.4 If S is unable to produce the relevant matter file or documents, any application for relief is likely to fail.5 In Nationwide Building Society v Davisons Solicitors6 Sir Andrew Morritt C concluded that it was not necessary for S to demonstrate that he had complied with best practice in all respects and that the requisite standard was reasonableness not perfection. He also considered that the relevant conduct must be connected with the loss. In Santander UK plc v RA Legal Solicitors7 the Court of Appeal considered that issue further. Briggs LJ considered that a strict causation test should not be applied and that: ‘… it would not be appropriate to exclude as irrelevant conduct which consisted of a departure from best or reasonable practice which increased the risk of loss caused by fraud, even if the court concludes that the fraudster would nonetheless have achieved his goal if the solicitor had acted reasonably’.8 1 See Various Solicitors v Giambrone and Law [2015] EWHC 3315 (QB) (Foskett J) at [32] and Santander UK plc v RA Legal Solicitors [2014] EWCA Civ 183, [2014] PNLR 20 at [112] (Sir Terence Etherton C): ‘it is wrong in principle to cast on the beneficiary the onus of identifying the trustee’s unreasonable conduct and of satisfying the court of its causal connection to the loss suffered. The beneficiary may not be in a position to know all that occurred in the chain of events leading to the breach of trust.’ 2 See Santander (above) at [97] (Briggs LJ). 3 See Lloyds TSB Bank plc v Markandan & Uddin [2012] 2 All ER 884, CA at [60] and [61] (Rimer LJ). 4 See Santander (above) at [56] (Briggs LJ): ‘if the reasonableness of the solicitor’s conduct depends on anything not so recorded, the solicitor may simply be unable to discharge the burden of proof on that aspect of the matter, due to a perfectly understandable inability to recollect the detail. In such circumstances, the benefit of the doubt (or the burden of proof) is not to be given to the solicitor if the relevant question is as to the reasonableness, rather than the honesty, of his conduct. It is therefore likely that, in order to discharge the burden of proving that he acted reasonably under s.61, the solicitor will need to be able to provide a paper-trail demonstrating that the whole of his or his firm’s conduct sufficiently connected with the loss satisfied the reasonableness test.’ 5 See, eg  DB UK  Bank Ltd v Edmunds & Co [2014]  PNLR  12 (HHJ  Llewellyn QC) at [45]: ‘the conveyancing file has been lost, and there is no direct presently identified evidence as to what happened, there is no material sufficiently tangible to lead a Court to think there is a real prospect of relief under s.61 …’. 6 [2012] EWCA Civ 1626, [2013] PNLR 12.

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4.69  Claims in equity 7 [2014] EWCA Civ 183, [2014] PNLR 20. 8 See [25]–[27]. See also Sir Terence Etherton C at [110] (who gave the example of excusable conduct as submitting a premature certificate of title which caused no loss).

4.69 The four decisions of the Court of Appeal involving mortgage fraud illustrate these principles. In Lloyds TSB  Bank plc v Markandan and Uddin1 S was unable to discharge the burden because he had failed to check the veracity of the vendor’s solicitor’s address and obtain key information and undertakings. In Nationwide Building Society v Davisons2 the fraudster used the name of a genuine solicitor but offered a fictitious business address (which S checked). S discharged the burden by accepting apparently genuine replies to requisitions and an apparently genuine undertaking to discharge a prior mortgage. It was also important that there was no allegation of negligence. In Santander S failed to discharge the burden because of significant departures from best practice. S  had served inadequate requisitions and accepted inadequate replies to them before releasing the completion funds and had failed to ensure that a prior mortgage was discharged before completion.3 Finally, in P&P Property Ltd v Owen White and Catlin LLP4 S failed to carry out what the court characterised as a number of relatively basic checks on the identity of their client.5 1 [2012] 2 All ER 884, CA. 2 [2012] EWCA Civ 1626, [2013] PNLR 12. 3 [2014]  EWCA  Civ 183, [2014]  PNLR  20. S  also submitted a certificate of title which was considered to be bordering on the dishonest but this was not connected with the loss. 4 [2018] EWCA Civ 1082, [2019] Ch 273 at [108] (Patten LJ) 5 For other decisions at first instance see Ikbal v Sterling Law [2013]  EWHC  3291 (Ch), [2014] PNLR 9 (Nicholas Davidson QC) where S failed to discharge the burden because (1) no agreement was made to use the Code for Completion by Post and (2) S failed to chase for a TR1 after release of the completion funds. The court accepted that the second breach was not connected with the loss and granted relief on that basis: see [224]–[243]. Judgment was given before Santander in the Court of Appeal and it is suggested that it is doubtful authority in the light of that decision. See also Purrunsing v A’Court & Co [2016]  EWHC  789 (Ch), [2016] 4 WLR 81 (HHJ Pelling QC) where C sued both his own and the vendor’s solicitors and neither was able to discharge the burden because they had failed to carry out adequate customer due diligence which would have revealed the fraud. Finally, see DB UK  Bank Ltd v Edmunds & Co [2014] PNLR 12 (HHJ Llewellyn QC) where S also failed to discharge the burden.

(c) Fairness 4.70 Finally, the court has a general discretion to grant or refuse relief depending on whether the trustee ought fairly to be excused even if the trustee has acted honestly and reasonably.1 As stated above, the court will approach the question of fairness very differently in relation to a breach of trust committed by a professional trustee (including a solicitor) charging for its services and a private trustee acting gratuitously.2 In P&P Property Ltd v Owen White and Catlin LLP3 the individual factors which the trial judge took into account in deciding that it was not fair to grant relief were as follows: C was small, it had 204

Limitation  4.71 lost the purchase price, it had no insurance against fraud and it was left with creditors of more than £1.2m. The Court of Appeal held that his conclusion was unimpeachable. But they rejected his suggestion that he would have excused S from liability in the event that C had been able to recover against the other firm. This did not provide any grounds for relieving S of his own liability and any distribution of liability should be achieved through contribution proceedings.4 1 For a survey of the factors which the Court will take into account outside solicitors’ cases see Haley, ‘Section 61 of the Trustee Act 1925: a judicious breach of trust?’ (2017) 76 CLJ 537. 2 For the position generally see National Trustees Company of Australasia v General Finance Company of Australasia [1905] AC 373, PC. For a solicitors’ case but not involving a lender’s claim see Martin v Triggs Turner Bartons [2009] EWHC 1920 (Ch), [2010] PNLR 3 (Floyd J) at [113]: ‘I would not have been prepared to exercise my discretion to grant relief under the section in the present case. This is not a case where the executors were lay people who acted on independent legal advice. In the absence of some factor such as this, I think the liability should lie where it falls.’ 3 [2018] EWCA Civ 1082, [2019] Ch 273 at [110] and [111] (Patten LJ). 4 The only reported decision in which S has been excused in a lenders’ claim is Ikbal v Sterling Law [2013] EWHC 3291 (Ch), [2014] PNLR 9 (where Nicholas Davidson QC made it clear that he was only excusing S on the basis that the unreasonable behaviour was not causative of loss). As set out above, the decision must be regarded as doubtful.

E LIMITATION 1 Introduction 4.71 Limitation in equity is a complex subject.1 Equitable claims may involve the application of s  21 of the Limitation Act 1980 which applies to claims for breach of trust,2 the equitable doctrine of laches, a common law limitation period or no limitation period at all. What we attempt below, therefore, is a summary of the limitation periods which are likely to apply to actions for equitable compensation based upon the claims set out in this chapter. But in approaching this subject it is helpful to bear in mind the broad principles upon which the statutory limitation period for trustees and other fiduciaries is based. Since the Trustee Act 1888 the law has given no protection to trustees who face claims for fraudulent breach of trust or claims to recover trust property which the trustee should not be allowed to keep. Outside claims which fall within those categories the standard limitation period of six years should apply to claims against trustees and other fiduciaries. Further, even in those cases where no statutory limitation period is available, the defence of laches may be available.3 1 Chapter 20 of Lewin on Trusts 20th edn (2020) is 66 pages long. 2 S 38(1) applies the definition of ‘trust’ and ‘trustee’ set out in s 68(17) of the Trustee Act 1925 which includes implied and constructive trusts. 3 See Lewin (above) at 50–001 and 50–017.

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4.72  Claims in equity

2  Express, implied and resulting trusts (a)  Client funds 4.72 The trusts of client funds which we discuss in the first part of this chapter1 are true trusts and should be treated like category (1) constructive trusts for the purposes of limitation. This means that the statutory limitation period in s 21(3) of the Limitation Act 1980 will apply to claims for equitable compensation for the misapplication of client funds2 unless they fall within either exception in s 21(1): ‘(1)  No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action— (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use …3 (3)  Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.’ The cause of action accrues and time runs from the date on which the breach of trust occurred like a breach of contract4 and an action is ‘brought’ when the claimant has delivered his request (accompanied by the claim form and fee) to the court office.5 Most claims will be brought by the client who is the beneficiary of the trust. However, claims may be brought by a liquidator, a trustee in bankruptcy or even by the firm itself.6 If s  21(3) is construed literally then claims of this nature would fall outside the section. The better view appears to be that s 21(3) applies to all claims of this nature either directly or by analogy.7 1 See paras 4.02 to 4.05. 2 See UCB Home Loans Corporation Ltd v Carr [2000] Lloyd’s Rep PN 754 (Crane J) at [107]. See also Barnett v Creggy [2016]  EWC  Civ 1004, [2017] Ch  273 at [35]–[37] (Patten LJ), [44] (Sales LJ) and [53] where Sir Terence Etherton MR used the expression ‘claims against trustees for the recovery of trust money which was wrongly paid away or for compensation in respect of other trust assets wrongly misapplied’. The issue in that case was whether s 29(5) of the Limitation Act 1980 applied so that time started to run again when there was an acknowledgment. All members of the court agreed that it did not apply on the facts of that case. 3 S 21(2) is concerned with claims against a trustee who is also a beneficiary and retains trust property in that capacity. 4 See Re Somerset [1894] 1 Ch 231, CA (considered in Barnett v Creggy (above)).

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Limitation  4.74 5 See Page v Hewetts Solicitors [2012] EWCA Civ 805, [2012] WTLR 1427. 6 See para 4.13, fn 3, above. 7 See Lewin (above) at 50–033 and fn 160.

4.73 There is no limitation period for a fraudulent breach of a trust of client funds.1 The meaning of a fraudulent breach of trust has been considered above.2 It is not enough to show that the breach of trust was deliberate. There must also be an absence of honesty or good faith (although this can include recklessness).3 Although there is no statutory limitation period for a fraudulent breach of trust, the equitable defence of laches may still be available.4 As a general principle, one trustee is not liable for the fraud of a co-trustee although he or she may be personally liable for a failure to detect that fraud. In those circumstances, s 21(1) will apply to the fraudulent trustee but s 21(3) will continue to apply to the innocent trustee.5 But an action against a partner or employee of the trustee will fall within s 21(1).6 This is an important principle for both firms and insurers because it means that the innocent partners or members of a firm cannot rely on the limitation period in s 21(3) if they are found to be vicariously liable for the fraudulent breach of trust of another partner, member or employee. There is no limitation period either if the trustee remains in possession of the trust funds or has converted them to his or her own use.7 The retention or conversion of property exception is unlikely to apply in many cases. But even if the solicitor trustee has a limitation defence under s 21(3) the retention of property exception may well apply to a claim for the recovery of fees paid out of trust property. A personal claim for equitable compensation falls within s 21(1)(b) as well as a proprietary claim to recover trust property.8 1 See s 21(1)(a). 2 See para 4.11, above. 3 See First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [45] (Patten LJ). 4 See Mellor v Partridge [2013] EWCA Civ 477 at [52] (Lewison LJ): ‘If a claim falls within section 21(1) it may still be defeated by the equitable defence of laches.’ Laches does not apply to innocent breaches of trust within s 21(3): see Lewin (above) at 50–055. 5 See Lewin (above) at 50–009. 6 See Moore v Knight [1891] Ch 547 applying Blair v Bromley (1847) 2 Ph 354 in which one partner in a solicitor’s firm stole trust funds from a trust for whom the firm acted. Stirling J summarised the effect of the decision in Moore v Knight at 555: ‘It appears, therefore, that the money came into the hands of the firm of Messrs. Bromley without fraud and that one of the firm afterwards committed a fraud in respect of it, but made misrepresentations (some of which were attributable to the firm) which prevented the fraud from being discovered until the period fixed by the Statute of Limitations had expired. It was held that the innocent partner was deprived of the benefit of the statute by those representations which bound him as a partner.’ 7 See s 21(1)(b). 8 See Burnden Holdings (UK) Ltd v Fielding [2016]  EWCA  Civ 557, [2017] 1 WLR  39 at [38] (David Richards LJ). The point was not argued in the Supreme Court: see [2018]  UKSC  14, [2018] AC 857 at [13]. See also Brent LBC v Davies [2018] EWHC 2214 (Ch) at [547] (Zacaroli J).

(b)  Third-party funds 4.74 The trusts of third-party funds which we also discuss in the first part of this chapter may be express or implied trusts1 or they may be resulting 207

4.75  Claims in equity trusts.2 In both cases s 21 will apply to them. Resulting trusts are not expressly included in the definition of ‘trust’ in the Limitation Act 1980 but there is authority that trusts of this kind should be treated as category (1) constructive trusts.3 It follows that the principles (above) which apply to trusts of client funds also apply to trusts of third-party funds. 1 See paras 4.06 to 4.08. Consider, for example, the trust in P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273. 2 See paras 4.09 to 4.10. Quistclose type trusts are a form of resulting trust. See the famous passage in Lord Millett’s speech in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] AC 164 at [100]: ‘As Sherlock Holmes reminded Dr Watson, when you have eliminated the impossible, whatever remains, however improbable, must be the truth. I  would reject all the alternative analyses, which I find unconvincing for the reasons I have endeavoured to explain, and hold the Quistclose trust to be an entirely orthodox example of the kind of default trust known as a resulting trust.’ 3 See High Commissioner for Pakistan in the United Kingdom v Prince Mukkaram Jah [2016] EWHC 1465 (Ch), [2016] WTLR 1763 at [125]–[131] (Henderson J).

3  Constructive trusts (a)  Dishonest assistance 4.75 In Williams v Central Bank of Nigeria1 a majority of the Supreme Court held that s 21(1) of the Limitation Act 1980 does not apply to category (2) constructive trusts. It was common ground, however, that claims for dishonest assistance and knowing or unconscionable receipt fell within s  21(3)2 and it now seems to be accepted as settled that the statutory six-year limitation period applies to both types of claim.3 Lord Neuberger also accepted that it was possible to extend the limitation period by invoking s 32(1)(a) (fraud) or s 32(1)(b) (deliberate concealment).4 In category (2) constructive trust cases s  21(3) provides a defence against both personal and proprietary claims.5 Perhaps surprisingly, there is no clear authority on when time starts to run for the purpose of the limitation period. But it is suggested that the cause of action is complete and time starts to run when the accessory provides the relevant assistance or the breach of trust is committed (whichever is later).6 1 [2014] UKSC 10, [2014] AC 1189. 2 Lord Neuberger (with whom Lord Sumption and Lord Hughes agreed) considered that s 21(1) should not be interpreted in the same way for the following reason (at [97]): ‘At first sight, there is force in Lord Clarke of Stone-cum-Ebony JSC’s argument that, if that expression in section 21(3) covers dishonest assistance or knowing receipt, the similar expression “an action … in respect of any … fraudulent breach of trust” in section 21(1)(a) should do so as well. But the vital words “to which the trustee was a party or privy” are not to be found in section 21(3). The essential point in this connection is that the fact that the expression “in respect of” in section 21(3) has a broad, rather than a restrictive, effect suggests that the expression should also have a broad effect in section 21(1)(a), in which case the words “to which the trustee was a party or privy” are otiose unless section 21(1)(a) as a whole is given the narrower meaning for which Central Bank of Nigeria contends, rather than the wider meaning supported by Dr Williams.’ Lord Clarke dissented on that point but agreed that s 21(3) was wide enough to include dishonest assistance and knowing receipt: see [173].

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Limitation  4.77 3 See, eg, Brent LBC v Davies [2018] EWHC 2214 (Ch) at [569] (Zacaroli J): ‘A claim in knowing receipt, although using the language of “constructive trust”, is not a claim in respect of a breach of trust so as to fall within s.21 of the Limitation Act 1980 … The limitation period is therefore six years from the date of receipt of the relevant payment, unless the period is extended pursuant to s.32 of the Limitation Act 1980.’ 4 See [119]. See also Cattley v Pollard [2006] EWHC 3130 (Ch), [2007] Ch 353 at [103]–[106] (Richard Sheldon QC) and Brent LBC v Davies (above) at [571]–[576]. For the application of those sections see Chapter 7, paras 7.72 to 7.84. Presumably, the limitation period could also be extended under s 32(2) on appropriate facts: see para 7.82. In Brent LBC v Davies (above) Zacaroli J refused to extend the limitation period on the facts but there was no discussion on whether it applied in principle: see [582]. 5 See Lewin (above) at 50–066. 6 The editors of Snell’s Equity 34th edn (2020) consider that time runs from the date of assistance: see 30–088. But those acts may, of course, precede the breach of trust.

(b)  Knowing or ministerial receipt 4.76 In Williams v Central Bank of Nigeria1 the Supreme Court drew no distinction between dishonest assistance and knowing receipt for the purposes of s 21 of the Limitation Act 1980. The section applies therefore in the same way to claims of both kinds subject to two points. First, in Brent LBC v Davies2 Zacaroli J held that the limitation period could not be extended under s 32(1)(a) because fraud or dishonesty was not an essential element of the cause of action. He accepted, however, that the limitation period could be extended under s 32(1)(b) (although he refused to extend it on the facts). Secondly, it seems likely that the court would approach a claim against a solicitor for inconsistent dealing with trust assets as a category (1) constructive trust. This is because the solicitor receives the trust assets under a lawful transaction and remains in lawful possession of them until he or she becomes liable for later dealing with the assets contrary to the terms of the trust.3 The cause of action accrues and time begins to run upon the receipt of the property.4 1 [2014] UKSC 10, [2014] AC 1189. 2 [2018] EWHC 2214 (Ch) at [571]–[581]. 3 See Lewin (above) at 50–069 to 50–071. The editors suggest that both categories of case described in para  4.21, above would give rise to a category (1) constructive trust. See also Snell’s Equity 34th edn (2020) at 30–87. 4 See Taylor v Davies [1920] AC 636, PC.

4  Breach of fiduciary duty (a) General 4.77 The normal limitation period for a claim for equitable compensation for a non-custodial breach of fiduciary duty is six years. However, there are two different legal justifications for this proposition. The first is that a court of equity will apply the common law limitation periods to a breach of fiduciary duty which arises out of the same facts as a common law claim in contract or tort by analogy under s 36 of the Limitation Act 1980.1 In Coulthard v Disco Mix Club 209

4.78  Claims in equity Ltd2 the court applied the limitation period of six years for common law fraud to allegations of deliberate and dishonest breaches of fiduciary duty. In Cia de Seguros Imperio v Heath (REBX) Ltd3 it was also held that a claim for equitable compensation was barred by limitation because the facts upon which it was based were identical to those which could have founded a claim in contract and tort. Waller LJ held that it made no difference that the claim included the extra allegation of ‘intention’ and that the relief claimed was equitable compensation as well as damages. Finally, in Seaton v Seddons4 members of a band made claims for breach of fiduciary duty against their former solicitors. Roth J struck out an allegation of fraud and held that a six-year limitation period applied to the remaining allegations of breach of trust and breach of fiduciary duty.5 1 S 36 provides that the primary limitation periods in the Limitation Act 1980 ‘shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940.’ The section has been much criticised. 2 [2000] 1 WLR 707 applying the speech of Lord Westbury in Knox v Gye (1872) LR 5 HL 656. 3 [2001] 1 WLR 112, CA. For a useful summary of the authorities see Wood v Commercial First Business Ltd [2019] EWHC 2205 (Ch) at [172]–[179] (James Pickering QC). 4 [2012] EWHC 735 (Ch), [2012] 1 WLR 3636. 5 See [76]: ‘But all the allegations against Woolf Seddon brought under this head amount to a breach of their duties as solicitors and therefore mirror the allegations that would lie for breach of contract or negligence. The claim is a personal one, although by reason of Woolf Seddon’s position as fiduciaries the claimants have available the equitable remedy of an account. Accordingly … the six year limitation period applies by analogy pursuant to section 36 of the 1980 Act.’

4.78 The second justification for the six-year time limit is that claims for breaches of fiduciary duty in the Mothew sense1 are very similar to category (2) constructive trust claims and fall within s 21(3) of the Limitation Act 1980 either directly or by analogy.2 In Gwembe Valley Development Co Ltd v Koshy (No  3)2 Mummery LJ examined both lines of authority and then set out the following guidance:3 ‘In the light of those cases, in our view, it is possible to simplify the court’s task when considering the application of the 1980 Act to claims against fiduciaries. The starting assumption should be that a six year limitation period will apply — under one or other provision of the Act, applied directly or by analogy — unless it is specifically excluded by the Act or established case law. Personal claims against fiduciaries will normally be subject to limits by analogy with claims in tort or contract (1980 Act ss  2 and 5; see Seguros). By contrast, claims for breach of fiduciary duty, in the special sense explained in Mothew, will normally be covered by section 21. The six-year timelimit under section 21(3) will apply directly or by analogy, unless excluded by subsection 21(1)(a) (fraud) or (b) (Class 1 trust).’4 It follows that where the claimant alleges that he or she has suffered loss as a consequence of a breach of a non-custodial fiduciary duty by a solicitor the 210

Limitation  4.79 limitation period will be six years. Moreover, it should not make a difference whether the claim is for non-disclosure arising out of a conflict of interest and duty5 or for non-disclosure arising out of a conflict of duty and duty.6 In all but a very few cases it should also make no difference whether the limitation period applies by analogy with contract and tort or whether s 21(3) applies.7 Finally, it should also make no difference whether the relief sought includes a claim for an account.8 It may, however, be possible to extend the limitation period under s  32(1)(b) or s  32(2) on appropriate facts. But it is suggested that it cannot be extended under s 31(1)(a) because fraud or dishonesty is not an essential ingredient of the cause of action even for a breach of the duty of good faith.9 1 For the relevant Mothew fiduciary duties see para 4.27, above. 2 See, eg, Brent LBC v Davies [2018] EWHC 2214 (Ch) at [545] (Zacaroli J). 3 [2003] EWCA Civ 1048, [2004] 1 BCLC 131 at [111]. 4 The last sentence has generated some confusion because it appears to suggest that s 21(1)(a) and (b) may apply to any breach of fiduciary duty. However, elsewhere in his judgment Mummery LJ made it clear that he subscribed to the distinction between category (1) and category (2) cases: see [86]–[91]. For further discussion see para 4.79, below. See also Seaton v Seddons [2012]  EWHC  735 (Ch), [2012] 1 WLR  3636 at [72]–[74] (Roth J) and First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [51]–[57] (Patten LJ). 5 See paras 4.28 to 4.29, above. 6 See paras 4.35 to 4.42, above. 7 It is possible that the date of accrual of the cause of action might matter. If the court applies the limitation period in tort by analogy, the cause of action will accrue when the claimant suffers damage. A claim for breach of trust or fiduciary duty accrues at the date of breach: see para 4.74, fn 2. 8 See s 23 of the Limitation Act 1980: ‘An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account.’ This is subject to one qualification. Where the substantive complaint is that the fiduciary has failed to provide an account rather than a claim based on an underlying breach of fiduciary duty, no limitation period applies: see Al-Dowaisan v Al-Salam [2019] EWHC 301 (Ch), [2019] 2 BCLC 328 at [134]–[150] (HHJ Hodge QC). 9 See Beaman v A.R.T.S. Ltd [1949] 1 KB 550, CA and Brent LBC v Davies (considered above in para 4.76). Millett LJ made it clear in Mothew that a breach of the duty of good faith must be deliberate but does not require proof of dishonesty: see para 4.41, above.

(b)  The no profit rule 4.79 It is clear that a fiduciary may be a category (1) trustee in relation to some liabilities and a category (2) trustee in relation to others.1 This explains the different treatment for limitation purposes of claims against a solicitor for breach of trust and claims for breach of fiduciary duty. Moreover, once a fiduciary has been found to be a trustee in the category (1) sense (eg  an express trustee or a company director), the exception for fraud in s 21(1)(a) will apply even to liabilities which fall within category (2). For example, a trustee or company director who dishonestly accepts a bribe from a competitor will not be able to rely on s 21(3) even though liability to account for the bribe is usually treated as a category (2) constructive trust.2 In most solicitors’ cases, however, there will be no pre-existing trust relationship and the breaches of 211

4.80  Claims in equity fiduciary duty which we have discussed above3 will give rise to category (2) liabilities. It is suggested, therefore, that claims based on breaches of the no profit rule like Regal (Hastings) Ltd v Gulliver4 and Phipps v Boardman5 will generally give rise to category (2) constructive trusts.6 Section 21(3) will apply subject to any extension of the limitation period under s 32.7 1 See First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [63] (Patten LJ): ‘The Paragon case and Williams v Central Bank of Nigeria (and the authorities on which they are based) are concerned with identifying the class of fiduciaries who fall within the definition of “trustee” in section 38(1). This, as I  mentioned earlier, is a question of status which is determined by the nature of the office which they lawfully hold and the power over the trust property which that gives them. A defendant fiduciary cannot move from class 2 to class 1 or vice versa dependent on the type of breach of duty which he commits. Once he is a class 1 fiduciary and therefore a trustee within the meaning of section 38(1), it seems to me that he must be that for all Limitation Act purposes under section 21.’ 2 See Gwembe Valley Development Co Ltd v Koshy (No  3) [2003]  EWCA  Civ 1048, [2004] 1 BCLC 131. In Davies v Ford [2020] EWHC 686 (Ch) Adam Johnson QC summarised the effect of s 21 on claims against company directors as follows: ‘In cases involving a misapplication of pre-existing corporate assets by a company director, LA 1980 section 21(1)(b) will apply, and relevant claims will not be subject to the usual six year limitation period. However, in cases involving other breaches of fiduciary duty by a company director, relevant claims will be subject to the usual limitation period, and will therefore be time-barred after six years unless there is fraud. For these purposes, pre-existing corporate property does not include benefits such as bribes or maturing business opportunities.’ 3 See paras 4.30 to 4.33, above. 4 [1967] 2 AC 49. 5 [1967] 2 AC 134 (Note). 6 See First Subsea Ltd v Balltec Ltd (above) at [59]. 7 In both cases the solicitor was held to have exploited confidential information which gave rise to a category (2) constructive trust. The position would have been different if in either case the solicitor had been a director of the company or a trustee of the trust. If they had been, they would have fallen within the definition of a ‘trustee’ in s 38 of the Limitation Act 1980.

(c)  Abuse of confidence 4.80 The primary relief for breach of the ‘fair dealing’ rule is rescission and claims for equitable compensation are rare. It is suggested that the court would treat a liability to account for the undisclosed commission in Johnson v EBS Pensioner Trustees Ltd1 as a category (2) constructive trust in the same way as a bribe or secret profit.2 Section 21(3) will therefore apply subject to any extension of the limitation period under s 32. 1 [2002] EWCA Civ 164, [2002] Lloyd’s Rep PN 309, CA. 2 See para 4.82, below.

(d)  Undue influence 4.81 Again, the primary relief for undue influence is rescission and claims for equitable compensation are rare.1 Where a solicitor is found liable for undue influence, it is suggested that the court would treat a claim for compensation as the equivalent of a claim for fraud or a category (2) constructive trust. In either 212

Limitation  4.82 case a six-year limitation period would apply subject to any extension of the limitation period under s 32. 1 In Mahoney v Purnell [1996] 3 All ER 61 May J awarded compensation in lieu of rescission because the company had gone into liquidation.

(e)  Bribes and secret benefits 4.82 The liability of an agent or fiduciary to account for or disgorge a bribe has traditionally been treated as a category (2) constructive trust.1 However, in many cases this analysis was based on the assumption that liability for a bribe or secret profit was personal only and in FHR European Ventures LLP v Cedar Capital Partners LLC2 the Supreme Court held that a fiduciary who accepts a bribe in breach of his or her fiduciary duties holds the bribe in equity on trust for their principal or beneficiary. It is suggested that this change in the law does not affect the position in relation to limitation. A solicitor who accepts a bribe acts unlawfully and takes the bribe for his own personal benefit and he or she is therefore a constructive trustee of the category (2) kind.3 At common law the principal or beneficiary would also be able to bring a claim for money had and received. For both causes of action a six-year limitation period would apply subject to any extension of the limitation period under s 32.4 1 See Lewin (above) at 50–079. 2 [2014] UKSC 45, [2015] AC 250. 3 See First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186, [2018] Ch 25 at [59] (Patten LJ). 4 See Wood v Commercial First Business Ltd [2019] EWHC 2205 (Ch) at [172]–[179] (where James Pickering applied the six-year common law period).

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Chapter 5

Authority, vicarious liability and undertakings

A AUTHORITY 1 Introduction 5.01 The liability of a solicitor or a firm of solicitors to a third party involves elements of the law of agency, partnership and employment but usually gives rise to two distinct questions: first, whether the firm is liable for the actions of a partner, member or employee and, secondly, whether the client is bound by the actions of the solicitor or the firm of solicitors. The answer to the first question may often determine whether a liability incurred by an individual solicitor is covered by the insurance policy of the firm and often arises in the context of undertakings to hold or pay over funds. The second question usually gives rise to a number of further issues. If the client is not bound, the actions of the solicitor may give rise to a claim by the third party for breach of warranty of authority. If the client is bound by the solicitor’s actions, he or she may have a claim against the solicitor for breach of contract either by exceeding the client’s authority or failing to take proper instructions. Where a solicitor is a partner or member of a limited liability partnership, the law of partnership will determine the scope and extent of the solicitor’s authority to bind the firm. Where a solicitor is an employee, or in a position akin to employment, the doctrine of vicarious liability will determine whether the firm or limited liability partnership is bound. Where the question is whether a solicitor had the authority of a client the extent of the solicitor’s actual authority will be governed by the terms of the contract of retainer.1 1 The normal principles of contractual construction apply to determine the scope of that authority: see Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2  QB  480 at 502 (Diplock LJ).

5.02 Since actual authority can only be based on an express or implied term of the agreement between principal and agent, it can therefore be divided up into (a) express actual authority, and (b) implied actual authority. Ostensible or apparent authority is a form of estoppel1 and is based on a representation by the principal to a third party that the agent has his or her authority. Usual authority can be used to describe a form of implied actual authority. Agents such as 214

Authority  5.04 solicitors whose profession involves them carrying out certain functions or performing certain acts have the authority usually possessed by members of that profession. Usual authority can also be used to describe ‘incidental authority’ in the sense of authority to do what is necessary or incidental to their express authority.2 There can be a significant overlap between the usual authority of a solicitor (in the sense of implied actual authority or incidental authority) and the usual authority of a solicitor (in the sense of apparent or ostensible authority). The materials upon which a third party relies to demonstrate that the solicitor had usual authority will often tend to demonstrate that he or she was held out as having authority by the firm. 1 See Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503. 2 See Bowstead & Reynolds on Agency (21st edn, 2018), Article 27 (p 138). For an example see Strover v Harrington [1988] Ch 390 (Sir Nicolas Browne-Wilkinson V-C) at 409–410 (solicitor has usual authority to receive communications in a real estate transaction). For discussion of incidental authority see Hopkins v TL  Dallas Group Ltd [2004]  EWHC  1379 (Ch), [2005] 1 BCLC 543 (where Lightman J stated that the actual authority of an agent extends to ‘whatever is necessary for, or ordinarily incidental to, the effective execution of his actual authority’).

2  Partners: authority to bind the firm (a)  Section 5 of the Partnership Act 1890 5.03 Where solicitors are partners in an unlimited partnership, the source of their authority to bind each other is principally governed by ss 5, 10, 11 and 13 of the Partnership Act 1890. The combination of these provisions means that it is usually unnecessary to consider whether a solicitor partner’s actions had the authority of the firm. Nevertheless, there are cases where the firm disputes the partner’s authority and the general authority of partners to bind their firm is contained in s 5 of the Partnership Act 1890: ‘Every partner is an agent of the firm and his other partners for the purposes of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority, or does not know or believe him to be a partner.’ The position in relation to limited liability partnerships is similar although there are significant differences which are considered separately (below).1 1 See the Limited Liability Partnerships Act 2000, s 6 considered in paras 5.13–5.16, below.

5.04 There are two limbs to s  5. The first limb is concerned with actual authority. If the act was done for the purpose of the business of the partnership, then the partner had actual authority (even if there is no express authority in the 215

5.05  Authority, vicarious liability and undertakings partnership deed or agreement). The second limb is concerned with ostensible authority. Even if the partner had no actual authority under the first limb, the firm may be bound if he or she had ostensible authority. A partner will have ostensible authority if the act in question was an ‘act for carrying on in the usual way business of the kind carried on by the firm’ and the third party had no notice of the lack of authority. In Bank of Scotland v Henry Butcher1 Chadwick LJ explained the operation of both limbs in the following terms: ‘It can be seen that the section comprises two distinct limbs. The first limb may be said to define the circumstances in which a partner has implied authority to bind the firm; the second to define the circumstances in which there will be ostensible authority. The inquiry under the first limb of s 5 of the 1890 Act is whether the act of one partner, say partner A, is done for the purpose of the business of the partnership. If it is, then, in doing that act, A is the agent of the firm and the other partners are bound by A’s act. There is no need, in such a case, for the person seeking to rely on the act to invoke the second limb. The hypothesis which underlies the second limb of s 5 is that A’s act is not, in fact, done for the purpose of the partnership business – so that the first limb is not in point. The inquiry under the second limb – in a case where it is necessary to invoke that limb – is whether A’s act is an “act for carrying on in the usual way business of the kind carried on by the firm”. That requires consideration of two elements: (i) what business is “business of the kind carried on by the firm”; and (ii) is A’s act “an act for carrying on in the usual way” that business. Where those two elements are present, the person with whom A is dealing is entitled to treat the act as done for the purpose of the business of the partnership unless he knows that A  has in fact no authority, or does not know or believe A to be a partner. In effect, A has ostensible authority to bind the firm in relation to acts which appear to be for the purpose of the business of the partnership because they are acts which could be done in the carrying on in the usual way of business of the kind carried on by the firm.’ 1 [2003] EWCA Civ 67, [2003] 1 BCLC 575 at [87]–[89].

5.05 The first limb of s 5 operates, therefore, to imply into the partnership agreement a term that a transaction entered into by one partner for the purpose of the business of the partnership will bind all of the other partners unless there is an express term to the contrary.1 There is some doubt whether s  5 applies to dealings between the partners themselves2 but there is no doubt that a third party may rely on the effect of the section. The second limb comes into operation where the partner exceeds the express authority conferred by the partnership agreement but the members of a firm have conducted themselves in a way that leads a third party to believe that a partner has the authority to act on their behalf. To come within the first limb it must be shown that the act was one ‘for the purposes of the business’ and to come within the second 216

Authority  5.06 limb it must be shown that the act was one ‘for carrying on in the usual way business of the kind carried on by the firm’. Because of the similarities in the wording of the two limbs, it may be thought that there is little difference between them. However, they can apply in very different circumstances.3 There is also a difference between the factual basis of the two tests. Whether work on a transaction is ‘an act for carrying on in the usual way’ requires not just consideration of the nature of the business of the firm and whether the transaction falls within it but also the manner in which the transaction was carried out.4 1 See Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155  CLR  541 at 547: ‘The first [limb] deals with actual authority. It provides not that every partner is deemed to be an agent of the firm and his other partners for the purposes of the partnership business but that every partner is an agent of the firm and his other partners for that purpose. The actual authority to which it refers is, however, but prima facie in that it may be negated or qualified by contrary agreement of the partners.’ 2 See Lindley & Banks on Partnership (20th edn, 2017) at 12–02 commenting on the decision of Warren J at first instance in Hammonds v Danilunas [2009] EWHC 216 (Ch). 3 See, eg, ACC Bank plc v Johnston [2011] IEHC 108 (where Clarke J held that a solicitor and his former partner had ostensible authority to act on behalf of the firm after it had been dissolved because he took no steps to inform the public, the practice’s clients, or other firms of solicitors who might have to deal with it that the partnership was at an end). 4 See JJ Coughlan Ltd v Ruparelia [2003] EWCA Civ 1057, [2004] PNLR 4 (considered in detail in para 5.08, below) and Lim Hsi-Wei Marc v Orix Capital Ltd [2010] SGCA 24 at [34].

(i)  Limb 1 5.06 The expression ‘for the purposes of the business’ has usually been interpreted to mean that an act performed by one partner in the ordinary or usual course of the business of the firm is within his or her implied authority.1  A  number of old cases also suggest that the usual or incidental authority of a solicitor partner is wide.2 But in United Bank of Kuwait v Hammoud3 Staughton LJ stated that these cases should be treated with caution and emphasised the changing nature of a solicitor’s practice. He also stated that he would prefer ‘to have regard to the expert evidence of today in deciding what is the ordinary authority of a solicitor’. Nevertheless it is possible to make some generalisations. A solicitors’ firm is not a trading partnership and thus it is not part of the business of a firm of solicitors to trade, to buy or sell goods4 (except goods which are incidental to the business of a solicitor’s practice such as office equipment) or to lend or borrow money. In Lim Hsi-Wei Marc v Orix Capital Ltd5 the Court of Appeal of Singapore explained the position in this way: ‘A law firm’s business is to provide legal services. It does not buy, sell or trade in goods; neither does it engage in the business of extending credit. Although like other partnership businesses in general, it is usual for a partner to buy goods reasonably incidental to the law firm’s business, the individual partners of a law firm (or even the managing partner) generally have no ostensible authority to, inter alia, 217

5.07  Authority, vicarious liability and undertakings borrow money, enter into financial commitments or give guarantees. Such a power must be expressly conferred by the partnership articles to bind the firm and its partners or impliedly given by clear and incontrovertible conduct. The borrowing of money by a partner in a non-trading firm is not usual conduct unless the firm’s business is of such a kind that it cannot be carried on in the usual way without such a power… Plainly, a law firm does not satisfy this criterion.’ The issue often arises in the context of financial commitments undertaken by one partner. In Hirst v Etherington6 the Court of Appeal held that it was not part of the business of a solicitors’ firm to give a guarantee on behalf of a client. Lord Hoffmann expressed a similar view in Twinsectra Ltd v Yardley.7 These cases can be contrasted with Bank of Scotland v Henry Butcher8 where it was held to be within the usual business of a firm of property consultants to guarantee the overdraft of client with whom they had entered into a consultancy agreement. 1 See Lindley & Banks on Partnership (20th edn, 2017) at 12–12 to 12–17.United Bank of Kuwait v Hammoud [1988] 1 WLR 1051 at 1063 (Staughton LJ). 2 For a survey of the authorities on litigation see Waugh v HB Clifford & Sons [1982] Ch 374, CA at 383G–387C (Brightman LJ). Many of these decisions date from a time when the distinction between actual and ostensible authority was not properly understood. 3 [1988] 1 WLR 1058 at 1063. See also Bank of Scotland v Henry Butcher [2003] EWCA Civ 67, [2003] 1 BCLC 575 at [22] (Chadwick LJ). For the admissibility and relevance of expert evidence generally see paras 2.21–2.27, above. Although the tendency is to exclude expert evidence in solicitors’ claims it may be that this is one of the rare instances in which the court would be receptive to admitting expert evidence of current practice. 4 See JJ Coughlan Ltd v Ruparelia [2003] EWCA Civ 1057, [2004] PNLR 4 at [25]: ‘Thus, for example, if the solicitor enters into a contract for the sale of double-glazing, he cannot bind his firm under s 5, nor will his firm be vicariously liable for any wrongful act in relation to the transaction under s 10. It is not the ordinary business of solicitors to sell double-glazing.’ 5 See Lim I-Wei Marc v Orix Capital Ltd [2010] SGCA 24 at [41] (Rajah JA). 6 See [1999] Lloyd’s Rep PN 938 at [23] (Stuart-Smith LJ): ‘[i]t is not part of the usual normal business of a solicitor either to receive money or a promise from a client in order that without more they can give an undertaking to a third party or to give a guarantee for the debt incurred by the client.’ 7 [2002] UKHL 12, [2002] 2 AC 164 at [15]: ‘Nothing is more usual than for solicitors to act on behalf of clients in the acquisition of property. On the other hand, an undertaking to repay a straightforward unsecured loan might be more problematic.’ 8 [2003] EWCA Civ 67, [2003] 1 BCLC 575.

5.07 The issue of one partner’s implied authority to bind the firm often arises in the context of undertakings. The question whether a solicitors’ partnership is liable on an undertaking given by one of its partners is governed by the normal principles of agency law1 and in a number of cases the Court of Appeal has held that the undertaking does not fall within the ordinary course of business of a law firm unless it is given in the context of a legitimate transaction in which the solicitor is acting for one of the parties.2 In United Bank of Kuwait v Hammoud3 the Court of Appeal held that a solicitor does not have authority unless the undertaking is referable to the provision of some other legal services for which the solicitor or the firm has been retained. Staughton LJ stated this:4 218

Authority  5.07 ‘The evidence establishes that two requirements must be fulfilled before an undertaking is held to be within a solicitor’s ordinary authority. First, in the case of an undertaking to pay money, a fund to draw on must be in the hands of, or under the control of, the firm; or at any rate there must be a reasonable expectation that it will come into the firm’s hands. Solicitors are not in business to pledge their own credit on behalf of clients unless they are fairly confident that money will be available so that they can reimburse themselves. Secondly, the actual or expected fund must come into their hands in the course of some ulterior transaction which is itself the sort of work that solicitors undertake. It is not the ordinary business of solicitors to receive money or a promise from their client, in order that without more they can give an undertaking to a third party. Some other service must be involved.’ The court held that undertakings given by a solicitor to two banks had been given in the ordinary course of business. The test which Glidewell LJ applied in deciding this issue was whether ‘a reasonably careful and competent bank [would] have concluded that there was an underlying transaction of a kind which was part of the usual business of a solicitor.’5 The same test was applied in Hirst v Etherington.6 In that case a client was asked to make a short-term loan at a high rate of interest and with a premium and was offered a solicitor’s undertaking as security. His own solicitor rang up the solicitor who was to give the undertaking and he assured her that it was binding on his partner (who was unaware of it). Despite this assurance the Court of Appeal held that the undertaking was not binding on the innocent partner because it was in effect a guarantee. They distinguished Hammoud on the basis that the underlying transactions in that case appeared to be normal conveyancing transactions. In both Ruparel v Awan7 and Halliwells LLP v NES Solicitors8 the undertakings given by the solicitors were not referable to any underlying legal services and the test in Hammoud was not satisfied. In the first case the solicitor had given two undertakings on behalf of a third party which did not relate to the provision of legal services and the court rejected the argument that the claimant (who was seeking to enforce the undertaking against the firm) was entitled to rely on representations made by the third party that the solicitors were providing legal services to which the undertakings were related. In the second the court rejected the evidence of the solicitors that they were acting for the client in relation to a legitimate sale of shares. 1 See Harcus Sinclair LLP v Your Lawyers Ltd [2017] EWHC 2900 (Ch), [2018] 1 WLR 2479 at [195]–[197] (Edwin Johnson QC) discussing many of the authorities identified in the text. The decision was reversed in part on appeal (although not on this point): see [2019] EWCA Civ 335, [2019] 4 WLR 81, [2019] PNLR 19. An appeal is outstanding to the Supreme Court and it is possible that on the appeal the court may consider the issues decided at first instance in relation to the effect of the undertaking. The decision is considered further in paras 5.39–5.42, below in the context of limited liability partnerships. 2 In Harcus Sinclair (above) the judge rejected the argument that a solicitor’s undertaking could only be given where there was an underlying transaction for the client and held that an undertaking given in a non-disclosure agreement was given ‘as part of a solicitorial service’: see [237]. For the detailed reasoning see [225]–[242]. He found the following example at

219

5.08  Authority, vicarious liability and undertakings [232] compelling: ‘the example of a prospective client going to see a solicitor, and providing the solicitor with confidential documents to review, against an undertaking on the part of the solicitor to preserve the confidentiality of the documents’. The purpose of the review would be to decide whether the solicitor could act for the client and would, therefore, be ‘solicitorial’. 3 [1988] 1 WLR 1058. 4 [1988] 1 WLR 1058 at 1060G–H. 5 [1988] 1 WLR 1058 at 1058H. 6 [1999] Lloyd’s Rep PN 938. Although no single test was adopted by the three members of the court in Hirst both Stuart-Smith and Pill LJJ adopted Glidewell LJ’s test which is set out in the text above. 7 [2001] Lloyd’s Rep PN 258 (David Donaldson QC). 8 [2011] EWHC 947 (QB), [2011] PNLR 30 (a coverage dispute in which the insurers declined cover on the basis that the claim on the undertaking did not arise out of the provision of legal services).

(ii)  Limb 2 5.08 The question whether a solicitors’ firm is bound under limb 2 of s 5 usually arises where one partner has been guilty of fraud or dishonesty. For instance, a partner has no actual authority to make a fraudulent representation to a third party for financial gain.1 But it will bind the firm if it was made ‘for carrying on in the usual way business of the kind carried on by the firm’. JJ Coughlan Ltd v Ruparelia2 involved a prime bank or advanced fee fraud. The principal fraudster, H, told C that if he made a loan of $500,000 for one month he would receive a payment of $2.5m (a return of 6,000 per cent). C paid the money to R, a solicitor, who gave an undertaking to return the initial $500,000 if the $2.5m was not paid. C did not receive the $2.5m and sued R for deceit and for breach of undertaking. He succeeded against R and the question was whether R’s firm was also liable on the undertaking. R’s conduct consisted of drawing up two agreements containing a number of fraudulent representations and accompanying H to a meeting at which H and he promoted the fraudulent investment scheme. After considering whether R’s acts were within a solicitor’s ordinary course of business, Dyson LJ continued as follows:3 ‘But, in my view, it is not always a sufficient condition for bringing an act within the purview of ss 5 and 10 of the 1890 Act that it can properly be classified as belonging to the general category of acts which are part of the ordinary business of a solicitor. I do not consider that the issue of whether the acts of a solicitor are of the kind or class which fall within the ordinary business of a solicitor should always be determined without taking into account the nature or characteristics of those acts … Rather, it is necessary to examine the substance of the transaction to see whether, viewed fairly and properly, it is the kind of transaction which forms part of the ordinary business of a solicitor. This exercise requires the detail of the transaction to be taken into account. Most transactions will obviously fall on one side of the line or the other. There will be a few cases where the answer may not be plain. For the policy reasons that I have mentioned, the court should not be too ready to find that the ordinary business requirement is not satisfied.’ 220

Authority  5.10 The nature and characteristics of the act do not depend on the motive or honesty of the solicitor.4 But the investment scheme which R was assisting H to promote was so abnormal that it could not reasonably be regarded as within the ordinary course of business of a solicitor.5 In Lim Hsi-Wei Marc v Orix Capital Ltd6 the Court of Appeal of Singapore applied Ruparelia to reach a similar conclusion. In that case one partner entered into a substantial equipment leasing contract for a number of photocopiers on behalf of the firm. The agreement was highly unusual and was in substance a disguised loan which required the firm to repay sums worth several times more than the value of the equipment. It did not therefore bind the other members of the firm. 1 See Uxbridge Permanent Benefit Building Society v Pickard [1939] 2  KB  248 (Sir Wilfred Greene MR). For a case in which the fraud of the solicitor fell within limb 2 but not within limb 1 see Crouch & Lyndon (A  Firm) v IPG  Finance Australia Pty Ltd [2013]  QCA  220, [2014] PNLR 3 (Queensland Court of Appeal) where a dishonest partner induced a client to make five bogus loans to companies controlled by him. His representations did not fall within the Australian equivalent of limb 1 but did fall within limb 2: see [41]–[64]. 2 [2003] EWCA Civ 1057, [2004] PNLR 4. The case was argued under ss 5, 10 and 11 of the Partnership Act 1890 and although Dyson LJ applied the same test to both ss 5 and 10, Longmore LJ considered that a broader test applies to s 10: see para 5.10, below. Ruparelia was applied in Bakhtiar v Keoshgerian [2003] EWHC 3084 (QB) (where HHJ Overend held that a letter offering to hold jewellery for safekeeping on behalf of a client fell within the usual business of a firm of solicitors). For a further example see Balfron Trustees Ltd v Peterson [2002] Lloyd’s Rep PN 1 (although this was decided before Dubai Aluminium in the House of Lords and only involved a finding that the claimant had an arguable case). 3 [2003] EWCA Civ 1057, [2004] PNLR 4 at [26] and [30]. 4 See [27]: ‘I  accept that the motive or purpose of the solicitor is irrelevant in this context. It is immaterial that the solicitor is acting dishonestly. That is why the solicitor who enters into a conveyancing transaction dishonestly nevertheless renders his firm liable. Conversely, it is also irrelevant that a solicitor who enters into a contract for the sale of double-glazing is acting honestly.’ 5 [2003] EWCA Civ 1057, [2004] PNLR 4 at [30]-[36] (Dyson LJ) and [41] (Longmore LJ). 6 [2010] SGCA 24. See, in particular, the conclusions at [59]–[61]. The Court also stated that the fact that the transaction might have been intended for the benefit of the firm did not bring it within the section: see [47].

5.09 Even if the third party is able to demonstrate that the transaction fell within the kind of business carried on by the firm and that it was conducted in the usual manner, it will not bind the firm if the third party knew that the partner conducting the transaction had no authority or did not know or believe him to be a partner. The claim in Ruparelia failed on this ground also. The trial judge found that the claimant’s directors were aware that the transaction ‘was not something which any solicitor had business to be actively assisting in’.1 1 [2003] EWCA Civ 1057, [2004] PNLR 4 at [16] and [35].

(b)  Section 10 of the Partnership Act 1890 5.10 Section 5 of the Partnership Act 1890 is concerned with liabilities of all kinds (including trading debts) and is not specifically directed to breaches of contract or torts or breaches of fiduciary duty. Where the conduct of a partner 221

5.10  Authority, vicarious liability and undertakings amounts to a breach of duty, however, the other partners of the firm may be liable to third parties under the specific statutory liability imposed by s 10 of the Partnership Act 1890. This provides as follows: ‘Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, the firm is liable therefor to the same extent as the partner so acting or omitting to act.’ In Dubai Aluminium Co Ltd v Salaam1 Lord Millett stated that s  10 is ‘in the widest terms’ and he considered that the question whether a solicitor was acting in the ordinary course of the business of the firm was determined by asking whether the employee or partner was authorised to do acts of the kind in question.2 He stated that: ‘All depends on the closeness of the connection between the duties which, in broad terms, the employee was engaged to perform and his wrongdoing’3 and that ‘dishonest and deliberate conduct committed by a partner for his own sole benefit is legally capable of being within the ordinary course of business of the firm’.4 These formulations suggest that s 10 is wider in its operation than the second limb of s 5 (at least in the way in which it was applied by Dyson LJ in Ruparelia5). Moreover, in Dubai Aluminium the House of Lords held that s 10 could apply to dishonest assistance or accessory liability where the ‘ordinary course of business’ test was satisfied. But the section does not necessarily apply to breaches of trust committed by a solicitor acting as the trustee of an express trust or as a de facto trustee or trustee de son tort.6 The determination of this issue will depend on what acts the solicitor performed and whether they were performed in his or her capacity as a trustee or as a solicitor. Moreover, even if the solicitor performs the relevant acts in the capacity of trustee, the firm may be liable if it has agreed to provide trust services as well as legal services (and is paid for doing so). Finally, there is Commonwealth authority that the equivalent section does not apply to a breach of warranty.7 1 [2002] UKHL 48, [2003] 2 AC 366 at [103]. 2 See [122]. 3 See [129]. Lord Nicholls reached the same conclusion at [23]: ‘Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business or the employee’s employment.’ In the context of the vicarious liability of employees, see further para 5.17, below. 4 See [130]. Peter Smith J  applied Dubai Aluminium to the dishonest assistance of a solicitor partner in Attorney-General of Zambia v Meer Care & Desai [2007] EWHC 952 (Ch) at [660]– [679]. In Group Seven Ltd v Nasir [2017] EWHC 2466 (Ch), [2018] PNLR 6 Morgan J also applied the same principles to an employee of a solicitors’ firm on the basis that s 10 restated the common law of vicarious liability for the wrongful acts of an employee (including dishonest assistance and unlawful means conspiracy): see [531]–[550]. The Court of Appeal did not deal with this issue. 5 In Ruparelia Longmore LJ considered s 10 to be wider than s 5. See [2003] EWCA Civ 1057, [2004] PNLR 4 at [37]: ‘So far as s 10 is concerned, I would also arrive at the same conclusion, and for the same reasons, by applying the rather broader test propounded in Dubai Aluminium by Lord Nicholls (para 23) and Lord Millett (para 124)’.

222

Authority  5.11 6 See Mara v Browne [1896] 1 Ch 199. The decision was explained by Lord Millett in Dubai Aluminium at [143]: ‘If, as I think, it is still not within the ordinary scope of a solicitor’s practice to act as a trustee of an express trust, it is obviously not within the scope of such a practice voluntarily to assume the obligations of a trustee and so incur liability as a de facto trustee or a constructive trustee of the first kind.’ Lord Nicholls left open the question whether Mara v Browne was still good law: see [42]. But both agreed that accessory liability for dishonest assistance fell within s 10. 7 See Crouch & Lyndon (A  Firm) v IPG  Finance Australia Pty Ltd [2013]  QCA  220, [2014] PNLR 3 where the Queensland Court of Appeal held that the equivalent provision in the Queensland Partnership Act 1891 did not apply to a breach of warranty following Lord Millett in Dubai Aluminium: see [29] and [30] (Fraser JA).

(c)  Sections 11 and 13 of the Partnership Act 1890 5.11 Sections 11 and 13 of the Partnership Act 1890 deal with the liability of partners to account for the misappropriation or misapplication of client funds by another partner. Section 11 provides as follows: ‘In the following cases; namely— (a) Where one partner acting within the scope of his apparent authority receives the money or property of a third person and misapplies it; and (b) Where a firm in the course of its business receives money or property of a third person, and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm; the firm is liable to make good the loss.’ Section 13 of the 1890 Act deals with the specific situation where a solicitor holds money in the capacity of a trustee. It provides: ‘If a partner, being a trustee, improperly employs trust property in the business or on the account of the partnership, no other partner is liable for the trust property to the persons beneficially interested therein. Provided as follows: (1)

This section shall not affect any liability incurred by any partner by reason of his having notice of a breach of trust; and

(2) Nothing in this section shall prevent trust money from being followed and recovered from the firm if still in its possession or under its control.’ The liability to account under both sections is a primary one imposed on the partners of the firm and not a vicarious liability for the breach of duty of the defaulting partner. In Bass Brewers Ltd v Appleby1 Millett LJ explained the different operations of the two sections: ‘Section 11 and s  13 are both concerned with third party money received by the firm. Section 11 deals with money which is properly 223

5.12  Authority, vicarious liability and undertakings received by the firm (or by one of the partners acting within the scope of his apparent authority) for and on behalf of the third party but which is subsequently misapplied. The firm is liable to make good the loss. Section 13 is concerned with money held by a partner in some other capacity, such as trustee, which is misapplied by him and then improperly and in breach of trust employed by him in the partnership business. His partners can be made liable only in accordance with the ordinary principles of knowing receipt.’ If a firm receives funds in the ordinary course of business and one of the partners then misapplies them, it is no answer on the part of the other partners to say that the partner acted outside the scope of the business or without authority.2 The critical issue for the purpose of s  11 is whether the funds received by the firm are received in the course of the firm’s business. It is part of the ordinary course of business of a solicitor to receive funds from or on behalf of a client in the course of handling a client transaction but it is not part of a solicitor’s business simply to accept funds from one party and to pay them to another where there is no underlying transaction. In Antonelli v Allen3 Neuberger J applied Hammoud4 and Hirst v Etherington5 to s 11 and held that it was not within the ordinary course of business of a solicitor to accept funds from a party who was not an existing client of the firm and without any further instructions (other than to hold it). 1 [1997]  BCLC  700 at 711g–j. See also Walker v Stones [2001]  QB  902 at 948h–949A (Sir Christopher Slade). 2 See Dubai Aluminium Co Ltd v Salaam [2002]  UKHL  48, [2003] 2 AC  366 at [110] (Lord Millett): ‘Section 11 deals with money which is properly received by the firm in the ordinary course of its business and is afterwards misappropriated by one of the partners. The firm is not vicariously liable for the misappropriation; it is liable to account for the money it received, and cannot plead the partner’s wrongdoing as an excuse for its failure to do so. Section 13 deals with money which is misappropriated by a trustee who happens to be a partner and who in breach of trust or fiduciary duty afterwards pays it to his firm or otherwise improperly employs it in the partnership business. The innocent partners are not vicariously liable for the misappropriation, which will have occurred outside the ordinary course of the firm’s business. But they are liable to restore the money if the requirements of the general law of knowing receipt are satisfied.’ 3 [2001] Lloyd’s Rep PN 487 at [58]–[77]. Judgment was handed down before the House of Lords had decided Dubai Aluminium. But it is suggested that the both the decision and the reasoning would have been the same. 4 United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051: see para 5.07, above. 5 Hirst v Etherington [1999] Lloyd’s Rep PN 938: again, see para 5.07, above.

(d)  Section 14 of the Partnership Act 1890 5.12 Finally, it may be necessary in the context of a professional liability claim to consider the position of any salaried partner or employee who is 224

Authority  5.12 styled a ‘partner’. The first point to note is that a solicitor may be a partner in an unlimited partnership even though he or she does not share in the profits.1 However, even if the solicitor is not a partner, the partners of an unlimited partnership may be liable for the conduct of the solicitor if he or she is held out as a partner. This often arises in the context of professional firms where an employee is named as a partner on the notepaper or website or in emails.2 Section 14 of the Partnership Act 1890 provides as follows: ‘Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.’ The provisions of s  14 are derived from the general principles of estoppel by conduct.3 In Nationwide BS v Lewis4 it was conceded at first instance that ‘giving credit’ should not be construed restrictively and the Court of Appeal did not have to decide the limits of the section. In Sangster v Biddulph5 Etherton J  followed the same approach. The precise limits of the section therefore remain open.6 But even if the claimant is unable to rely on s 14 for this reason only, he or she may be able to rely on the doctrine of estoppel at common law. In Nationwide the Court of Appeal also held that it was necessary for the claimant to establish that it had relied on the representation that the defendant was a partner in the sense that it had a material influence on the decision to proceed. The holding out or reliance does not need to have had a decisive effect but it must have been a contributing causative factor in the claimant’s decision. In Nationwide this test was not satisfied but in Sangster it was.7 1 See M Young Legal Associates Ltd v Zahid [2006] EWCA Civ 613, [2006] 1 WLR 2562 where it was held that a person could be a partner even where the agreement was ‘not that he should be entitled to participate in [the firm’s] profits but that he should be paid by the firm a specified sum, irrespective of profits, for work to be done by him on its behalf’: see [38] and [41] (Hughes LJ). The position is the same in relation to a member of an LLP: see Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35, [2012] 1 WLR 1887. However, there is no binary distinction between a member and employee since a member of an LLP may also be a worker for the purposes of employment rights legislation: see Bates van Winkelhof v Clyde & Co LLP [2014] UKSC 32, [2014] 1 WLR 2047. 2 For example, an insurer may decline cover in respect of a dishonest principal where the firm’s notepaper identifies one or more employees as ‘partners’ in the firm. 3 See Hudgell Yeates & Co v Watson [1978] QB 451, CA at 470 (Megaw LJ). 4 [1998] Ch 482, CA. 5 [2005] EWHC 568 (Ch), [2005] PNLR 33. 6 See Commissioners of HM Revenue & Customs v Pal [2006] EWHC 2016 (Ch) at [24]–[34] (Patten J). 7 For a useful summary of the requirements see Sangster v Biddulph (above) at [16]–[20]. See also Walsh v Needleman Treon [2014] EWHC 2554 (Ch) where Barling J followed both cases and held that the claim failed because there was no reliance.

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5.13  Authority, vicarious liability and undertakings

3  LLPs: members’ authority to bind the firm (a)  Section 6(1) of the Limited Liability Partnership Act 2000 5.13 A  principal purpose of the Limited Liability Partnerships Act 2000 was to give members of professional firms greater protection from exposure to liabilities to outsiders or third parties than the traditional law of partnership.1 The way in which this purpose was given effect was to give the firm separate legal personality and then to limit the liability of members. A limited liability partnership (‘LLP’) enjoys full legal personality.2 It contracts in its own name and in a similar way to a company.3 As a corporate entity, it cannot be a litigant in person4 and the knowledge of individual members is not automatically attributed to the LLP.5 However, the relationship between an LLP and its members differs from the relationship between a company and its members in a key respect. Section 6(1) of the Limited Liability Partnerships Act 2000 provides that every member of an LLP is the agent of the LLP.6 It follows that each member has the power to bind or commit the LLP to contracts and other obligations. Section 6(1) corresponds, therefore, to limb (1) of s  5 of the Partnership Act 1890. But there are important differences between the two provisions. First, every member is the agent of the LLP but not of the other individual members.7 Secondly, s 6(1) does not limit the agency of members to acts carried out ‘for the purposes of the business of the partnership’.8 The duties which individual members owe to the LLP and each other fall outside the scope of this book and the extent to which membership of an LLP gives rise to a fiduciary relationship equivalent to partnership has proved to be controversial.9 But there appears to be no issue that a member owes the fiduciary duties of an agent when acting on behalf of the LLP in dealing with outsiders and third parties.10   1 A  wider discussion of the Limited Liability Partnerships Act 2000 is outside the scope of this book. For the rationale and background to the provisions of s  6, see Palmer’s Limited Liability Partnership Law (3rd edn, 2017) at A7–01. See also Bates van Winkelhof v Clyde & Co LLP [2014] UKSC 32, [2014] 1 WLR 2047 at [16]–[20] (Baroness Hale) where the issue was whether a member of an LLP could be a worker for the purposes of the Employment Rights Act 1996.   2 See s 1 of the Limited Liability Partnerships Act 2000.   3 See the Limited Liability Partnerships (Application of the Companies Act 2006) Regulations 2009 (SI 2009/1804), reg 4 (which modifies ss 43–47 of the Companies Act 2006 to apply to LLPs). An LLP will have a seal and can enter into a contract under seal in accordance with the formalities and primary rules of attribution applicable to a company.  4 See Halborg v EMW Law LLP [2017] EWCA Civ 793, [2017] CP Rep 30.  5 See Kidd v Paull & Williamsons LLP  [2017]  CSOH  16 at [31] (Lord Tyre). See para  5.16, below.  6 ‘’Every member of a limited liability partnership is the agent of the limited liability partnership.’ In MCashback Software 6 LLP v Revenue and Customs Commissioners [2013] UKFTT 679 (TC), [2014] SFTD 510 (where a single member sought to represent an LLP before the Firsttier Tax Tribunal) Judge Cannon suggested that s 6 only applies where the member has been authorised to act. See [29]: ‘It is clear however that s 6 confers power on a member to bind the LLP only where the LLP has authorised the member to do so. It is accepted that the LLP has not validly authorised Mr Warren to act on behalf of the LLP in this appeal.’ It is suggested that

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Authority  5.14 this conclusion begs the question. Section 6(1) defines the authority of a member. Moreover, it is clear that the LLP may be bound where there are internal limitations on the member’s authority: see s 6(2)(a) and para 5.14, below. It is suggested, therefore, that s 6 was intended to take effect rather like the ‘indoor management rule’ for companies.   7 For the wording of s 5 see para 5.03, above.   8 See para 5.06, above. The position of undertakings given by a solicitor on behalf of the LLP is problematic for the reasons considered below: see para 5.40, below.  9 See F&C Alternative Investments (Holdings) Ltd v Barthelemy (No  2) [2011]  EWHC  1731 (Ch), [2012] Ch  613 (Sales J) at [207]–[221] and Recovery Partners GP  Limited Revoker LLP v Rukhadze [2018] EWHC 2918 (Comm) (Cockerill J) at [92]–98]. 10 See F&C Alternative Investments (above) at [219] and Hosking v Marathon Asset Management LLP [2016] EWHC 2418 (Ch), [2017] Ch 157 (Newey J) at [27]–29].

(b)  Section 6(2) of the Limited Liability Partnership Act 2000 5.14 The limitations on the power of a member to commit or bind an LLP are contained in s 6(2) of the Limited Liability Partnerships Act 2000 which provides as follows: ‘(2) But a limited liability partnership is not bound by anything done by a member in dealing with a person if – (a)

the member in fact has no authority to act for the limited liability partnership by doing that thing, and

(b) the person knows that he has no authority or does not know or believe him to be a member of the limited liability partnership.’ This provision is derived from limb (2) of s  5 of the Partnership Act 1890.1 A third party is only prevented from relying on the member’s power to commit or bind the LLP if two conditions are satisfied. First, the member must be acting without authority or have exceeded the limits of their authority. But secondly, the LLP remains bound unless the third party knows that the member (or individual purporting to be a member) has no authority or does not believe that the contracting party is a member of the LLP. The wording of the first limb of s 6(2)(b) is very similar to the equivalent words in s 5.2 The wording of the second limb of s 6(2)(b) differs, however, from the equivalent words in s 5. The second limb of s 5 applies where the third party ‘does not know or believe him [the member] to be a partner’. By contrast, the second limb of s 6(2)(b) applies where the third party ‘does not believe him [the member] to be a member of the limited liability partnership’. The relevant knowledge or belief for the purposes of s 5 is whether the individual was a partner at all. The relevant knowledge or belief for the purposes of s 6(2)(b) is whether the individual was a member of this particular LLP. It remains to be seen whether this change of language will make any practical difference.3 But it may be that the change was intended to limit the operation of s 6(1) to circumstances in which a party is purporting to contract or act on behalf of this particular LLP.4 1 See para 5.08, above.

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5.15  Authority, vicarious liability and undertakings 2 Those words are: ‘and the person with whom he is dealing either knows that he has no authority’: see para 5.03, above. It is highly unlikely that an outsider will have actual knowledge of the terms of the membership agreement or any express limitations on an individual member’s authority. It is an open question whether the court will adopt the same approach to this limb as in Ruparelia [2003] EWCA Civ 1057, [2004] PNLR 4 at [16] and [35] (see para 5.09, above) where the third party did not know the terms of the partnership but it was not bound because the acts performed by the partner were known to the third party to be ‘not something which any solicitor had business to be actively assisting in’. 3 The editors of Palmer’s Limited Liability Partnership Law (3rd edn, 2017) state that this change was a response to academic debate about the uncertain meaning of s 5: see A7–04. 4 There is some authority for the proposition that the LLP will not be bound at all if the outsider or third party is not aware that the contracting party is or was a member at all. See F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch), [2012] Ch 613 at [219] where Sales J suggested that s 6(1) only applies where the member purports to do anything of relevance on behalf of the LLP. See also Riley v Reddish LLP [2019] 6 WLUK 96 at [29]– [31] (Nugee J). Consider a domestic house purchase where P (who is a solicitor and member of S LLP) contracts to buy a house from V on her own account for her family. Section 6(1) contains no words limiting the member’s agency to contracts made for the purpose of the partnership (unlike the first limb of s 5). Unless s 6(2) applies, the LLP is liable if P defaults. However, s 6(2) prevents V from enforcing against S LLP because V does not know that P is a solicitor or a member of the LLP and was not purporting to act on the LLP’s behalf.

(c)  Section 6(3) of the Limited Liability Partnership Act 2000 5.15 Section 6(3) of the Limited Liability Partnerships Act 2000 prevents an LLP from relying on the fact that a member has left the firm unless notice of this fact has been filed with the Companies Registrar1 or the outsider or third party has notice that the solicitor has ceased to be a member. Section 6(3) provides as follows: ‘(3) Where a person has ceased to be a member of a limited liability partnership, the former member is to be regarded (in relation to any person dealing with the limited liability partnership) as still being a member of the limited liability partnership unless – (a)

the person has notice that the former member has ceased to be a member of the limited liability partnership, or

(b)

notice that the former member has ceased to be a member of the limited liability partnership has been delivered to the registrar.’

There is no authority on the construction or application of this provision. But it is suggested that ‘notice’ in s  6(3)(a) means actual notice rather than constructive notice. It is also suggested that the effect of the section is not to create an independent basis of liability separate from s 6(1) (above) or s 6(4) (below). It is suggested that the effect of s 6(3) is that the termination of the member’s membership is disregarded and the remainder of s  6 is applied on the assumption that the solicitor remained a member until the change of membership was registered or the third party had actual notice of the change. 1 Section 9 (as amended) imposes a duty upon an LLP to register changes of membership: ‘(1) A limited liability partnership must ensure that – (a) where a person becomes or ceases to

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Authority  5.16 be a member or designated member, notice is delivered to the registrar within fourteen days, and (b) where there is any change in the particulars contained in its register of members or its register of members’ residential addresses, notice is delivered to the registrar within 14 days.’ See also: ‘Life of a limited liability partnership’ (www.gov.uk/government/publications/life-ofa-limited-liability-partnership).

(d)  Section 6(4) of the Limited Liability Partnership Act 2000 5.16 Section 6(4) of the Limited Liability Partnerships Act 2000 imposes liability on an LLP for wrongs committed by members just as s  10 of the Partnership Act 1890 imposes liability upon an unlimited partnership for the wrongs of partners. Section 6(4) provides as follows: ‘Where a member of a limited liability partnership is liable to any person (other than another member of the limited liability partnership) as a result of a wrongful act or omission of his in the course of the business of the limited liability partnership or with its authority, the limited liability partnership is liable to the same extent as the member.’ Although s 6(4) is clearly derived from s 10 there are no additional provisions which correspond to ss  11 and 13. This suggests that the provision was intended to apply to all breaches of duty committed by a member in the course of business and not to replicate the fine distinctions between the provisions of the Partnership Act (above).1 Section 6(4) has been held to apply to liability for discrimination under the Equality Act 20102 and it is suggested that it extends to all forms of civil liability including tort, breach of trust, knowing receipt, dishonest assistance and breach of statutory duty.3 It should also be noted that the effect of the section is to make the LLP vicariously liable for the wrongs of its members. It does not impose direct liability on the LLP by attributing the acts and knowledge of the member to the LLP and treating them as its acts and knowledge.4 The provision also adopts the concept of wrongs committed in the ‘the course of business’ used in s 10 of the Partnership Act 1890. But s 6(4) omits the word ‘ordinary’.5 This must have been intended to extend the category of wrongful acts to which it applies. However, there must be some limit on the LLP’s liability and it remains to be seen whether this change will have any practical significance either. The section had come into force before the House of Lords had interpreted s 10 ‘in the widest terms’ in Dubai Aluminium Co Ltd v Salaam.6 1 See the Law Commission Report, ‘Partnership Law’ (2003) (Cm 6105) at 6.42. 2 See Ince Gordon Dadds LLP v Tunstall [2020] ICR 124 at [35]–[37]. 3 Based on a comparison with s 10 the editors of Palmer’s Limited Liability Partnership Law (3rd edn, 2017) suggest that it was not intended to include criminal wrongs: see A7–13. 4 See Kidd v Paull & Williamsons LLP [2017] CSOH 16 at [31] (Lord Tyre): ‘There is in my view no basis in the 2000 Act for that suggestion. Section 6(4) is clear: it imposes liability on the LLP for the wrongful act or omission of a member. That is not the same thing as deeming the LLP to have itself committed the wrongful act or omission, and I find nothing else in the Act that would have that effect.’

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5.17  Authority, vicarious liability and undertakings 5 See para 5.10, above. 6 [2002]  UKHL  48, [2003] 2 AC  366 at [103] (Lord Millett). Consider the examples given in para  5.10, fn 6 and fn 7 (above). It is suggested that similar considerations would apply to whether an LLP is liable for the breaches of trust committed by a trustee de son tort or for breach of warranty.

4  Employees: vicarious liability of the firm (a)  General principles 5.17 The general principles of the law of vicarious liability fall outside the scope of this book. But what may be attempted is a brief summary of the principles which apply to the liability of a firm for a wrong which is committed by an employee. The principles discussed here apply in deciding whether an employee is vicariously liable for the wrongful acts of an employee; in addition, if the relationship between the wrongdoer and a third party is ‘akin’ or ‘analagous’ to employment then the same principles will apply.1 In such cases, in Dubai Aluminium v Salaam2 Lord Nicholls concluded that the best general test for the imposition of vicarious liability was: ‘that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business or the employee’s employment.’ In the recent case of Various Claimants v Wm Morrison Supermarkets PLC3 Lord Reed stated that Lord Nicholls’s test was ‘authoritative’. This is therefore the test to be applied. It involves asking (i) what the employer had authorised the employee to do, and (ii) whether the wrongful conduct of the employee was so closely connected to the acts which the employee was authorised to do that the wrongful conduct may fairly and properly be regarded as done while acting in the ordinary course of the employee’s employment.4 In deciding what is ‘fair and proper’, however, judges should rely not on their ‘personal sense of justice’ but on decided case law.5 Further, Lord Reed stated that, in applying test (ii), it is important to bear in mind a second distinction which Lord Nicholls drew in Dubai Aluminium, between ‘cases … where the employee was engaged, however misguidedly, in furthering his employer’s business, and cases where the employee is engaged solely in pursuing his own interests …’6 Thus, on the facts of Morrison itself, it appears that, in a case where the wrongdoing of the employee was designed specifically to harm the employer, the employer will in general not be vicariously liable for the wrong of the employee. This is because, in committing the wrong, such an employee is engaged purely in furthering their own interests.7 On the other hand, in 230

Authority  5.18 Morrison Lord Reed approved Kooragang Investments Pty Ltd v Richardson & Wrench Ltd.8 Kooragang is a useful pointer to the outer limits of vicarious liability, particularly in professional liability cases. In that case, a valuer became a director of a former client and provided negligent valuations to a lender on his old firm’s notepaper and signed them in its name. But he had ceased to be an employee and prepared the valuations at his new offices without the knowledge or authority of his old firm. Indeed, the firm had refused to provide any further valuations for the former client because of non-payment of fees. The acts which the valuer was doing were similar in kind to the acts which he had formerly done when employed by the defendant, but that was not enough to establish vicarious liability. Applying the approach of Morrison, the valuer was acting in his own interests, not in the interests of the former employer, so the former employer was not vicariously liable. 1 Various Claimants v Barclays Bank plc [2020] UKSC 13, [2020] 2 WLR 960. 2 Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366 at [19]. He considered that the rationale for imposing vicarious liability upon partners was essentially the same as the reasons which the House had given for adopting a wider test for employees in Lister v Hesley Hall Ltd [2002] 1 AC 215. See also Mattis v Pollock [2003] EWCA Civ 887, [2003] 1 WLR 2158 at [18] where the Court of Appeal confirmed that s 10 and vicarious liability are indistinguishable. 3 [2020] UKSC 12, [2020] 2 WLR 941 at [25]. 4 Ibid, at [32]. 5 Ibid, at [24]. 6 Dubai Aluminium, above, at [32], cited with approval by Lord Reed in Morrison at [38] and [47]. 7 See also the useful discussion of applicable principles, albeit before the recent Morrison decision, in Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614, [2020] Ch 129 at [143]–[153]. 8 [1982] AC 462, PC, and see Morrison at [35].

5.18 The principles applicable to the tort of deceit require separate treatment. Lloyd v Grace Smith & Co1 establishes that a solicitors’ firm may be vicariously liable for the fraud of an employee. However, there are two limitations on the vicarious liability of an employer for the fraud of an employee which do not apply more generally. First, in Crédit Lyonnais Nederland NV v Export Credits Guarantee Department2 the House of Lords held that ‘before there can be vicarious liability, all the features of the wrong which are necessary to make the employee liable have to have occurred in the course of the employment’. In Dubai Aluminium3 Lord Nicholls explained this principle more precisely: ‘… vicarious liability is not imposed unless all the acts or omissions which are necessary to make the servant personally liable took place within the course of his employment. That is the present case. That was not the position in Credit Lyonnais Bank Nederland NV v Export Credits Guarantee Department …In the present case, drafting the consultancy agreement and other agreements were acts of assistance by Mr Amhurst and, coupled with dishonesty, they were sufficient in themselves to give rise to equitable liability on his part. That assistance 231

5.19  Authority, vicarious liability and undertakings was given by Mr Amhurst while acting in the ordinary course of the firm’s business, as discussed above. The firm is liable accordingly. It matters not, for the purpose of establishing vicarious liability, that Mr Amhurst may have done other, additional acts while acting outside the ordinary course of the firm’s business.’ The assumed facts4 of Dubai Aluminium, which concerned vicarious liability for the acts of solicitors, neatly illustrate this point. C was induced by fraud to pay $50m pursuant to a bogus consultancy agreement. C alleged that A, the solicitor acting for one of the fraudsters, had dishonestly assisted them by drafting the bogus consultancy agreement and a number of sub-agreements. Although A was alleged to have had a much wider role in the fraud, his acts in drafting the dishonest consultancy agreements would have been sufficient to give rise to liability and they were sufficiently closely connected with acts which he was authorised to do to be fairly regarded as being done in the ordinary course of the firm’s business. 1 [1912] AC 716. See further para 5.20, below. 2 [2000] 1 AC 486 at 1058 (Lord Woolf). The facts were complex and are helpfully summarised by Davies in ‘Accessory liability for assisting torts’ (2011) 70 CLJ 353 at 371: ‘Chong was the principal figure in the fraud; he fabricated contracts of sale, and supported these contracts with fraudulent bills of exchange which were signed by imaginary buyers. Mr Chong effectively sold these bills of exchange to Credit Lyonnais. The fraud was helped by the fact that these bills of exchange were guaranteed by the Export Credits Guarantee Department (“ECGD”). A senior employee of the ECGD, Mr Pillai, was corrupted by Mr Chong; in return for payment, Mr Pillai ensured that there were no problems with the underwriting of ECGD guarantees. Mr Chong made over £10 million from this fraudulent scheme, but then disappeared.’ Davies comments at 373: ‘The comments of Lord Woolf in Credit Lyonnais need to be treated with great caution.’ This is presumably because the facts of the case were so unusual that his comments need to be seen in that context. 3 [2002] UKHL 48, [2003] 2 AC 366 at [39]. 4 The claim against the solicitors was settled and the claim considered by the House of Lords was the subject matter of a contribution claim. The facts were therefore assumed: see [69] and [70] (Lord Hobhouse).

5.19 Secondly, a firm of solicitors will be vicariously liable for a fraudulent misrepresentation made by an employee only if the employee had actual or ostensible authority to make it. In Hockley Mint Ltd v Ramsden1 the Court of Appeal has recently confirmed that in the case of deceit it is not enough to satisfy the ‘close connection’ test. The claimant must demonstrate ‘a holding out or representation by the principal to the claimant, intended to be and in fact acted upon by the claimant, that the agent had authority to do what he or she did, including acts falling within the usual scope of the agent’s ostensible authority’. Flaux LJ pointed out that Lister and Dubai Aluminium did not concern a ‘reliance-based tort’ and were not about the ostensible authority of an agent or employee as a result of a holding out by the principal or employer.2 Lister concerned the ordinary course of employment and Dubai Aluminium the ordinary course of a firm’s business.3 1 [2018] EWCA Civ 2480, [2019] 1 WLR 1617. The point was left open by the Court of Appeal (which also included Flaux LJ) in Frederick v Positive Solutions (Financial Services) Ltd [2018] EWCA Civ 431.

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Authority  5.20 2 See [63]. 3 The original source of this principle is the decision of the House of Lords in Armagas Ltd v Mundogas SA (The Ocean Frost) [1987] AC  717 where a chartering manager fraudulently misrepresented to the purchaser of a ship that he had authority to agree to the sale of the ship with a three year charter back to the defendants. His employers were held not liable in the absence of any representation by them as to his authority.

(b) Clients 5.20 Applying the approach of Lord Reed in Morrison, it would appear that firms of solicitors will not be liable for the acts of their employees if the employee did the act with the intention of harming the firm, but will be liable if the employee did the act with the intention of furthering the business of the firm, even if the employee was trying to further the firm’s interest in a way that was wrongful and which the firm would not have approved of. What about the case where the employee steals money which a client of the firm has entrusted to the firm or the employee, and uses it to buy a new car for him/herself? Is the firm vicariously liable to the client? It might be argued, by analogy with Dubai Aluminium, that the employee took the money while doing work for the firm, so that in that sense they were furthering the interests of the employer so as to give rise to vicarious liability. But it might also be argued that there is no vicarious liability because, in taking the money, the employee was purely out for themselves and was not acting in the capacity of employee. We suggest that, even if the latter approach is correct, so that there is no vicarious liability, it is unlikely to assist the firm. This is because, in such a case, it is likely to be held that ‘the wronged party is defrauded by an employee acting within the scope of his apparent authority’,1 so that the firm is liable for the wrong on the basis of apparent authority. In Lloyd v Grace Smith & Co2 the employee was authorised by the firm to carry out conveyancing work. C engaged him in that capacity in relation to the sale of two cottages that she owned and he defrauded her. The House of Lords held that the firm was liable for the employee’s dishonesty. The firm held out the employee as authorised to undertake conveyancing work on its behalf, C believed that he was authorised to do so and in reliance on this she entrusted the sale of the properties to him. The firm was liable because it had held him out as qualified to do this kind of work and it did not matter that he was acting for his own rather than the firm’s benefit. In Dubai Aluminium3 Lord Millett said that the decisive factor in Lloyd v Grace Smith was ‘that the employee who committed the fraud for his own benefit was the person to whom his employer invited the client to entrust her affairs’. The limits of this form of liability are illustrated by Nayyar v Denton Wilde Sapte4 where Hamblen J held that the firm was not liable because the solicitor was acting as a ‘deal broker’, no formal client retainer was established and the solicitor charged a fixed fee which amounted to a commission. Applying the approach of Lord Reed in Morrison, it is suggested that there was no vicarious liability because, although the solicitor was employed by the defendant solicitors’ firm, in doing the wrongful act she was acting for herself, in order to earn commission for 233

5.21  Authority, vicarious liability and undertakings herself and not the firm. Hamblen J held not only that the defendant was not vicariously liable for the solicitor’s acts, but also that she was not acting within the scope of her actual or apparent authority from the employer. This was because the wrongful acts were not done as part of the job which the defendant held her out as being authorised to do. 1 Dubai Aluminium [2002] UKHL 48, [2003] 2 AC 366 per Lord Nicholls at [28], describing the facts of Lloyd v Grace Smith & Co. 2 [1912] AC 716, HL. For other cases involving clients see Balfron Trustees Ltd v Peterson [2002] Lloyd’s Rep PN  1 (although the case was a strike out application and decided before Dubai Aluminium). See also Nathan v Dollars & Sense Ltd [2008] NZSC 20 at [29] to [50] where the Supreme Court of New Zealand held that the principle was sufficiently wide make a lender liable for the forgery of an agent. In that case the solicitor had delegated the authority for obtaining the victims’ signatures on a guarantee to the borrower. But the decision would also apply to a dishonest solicitor. Finally, see Goldberg v Miltiadous [2010]  EWHC  450 (QB) which is an accountant’s case but contains a useful statement of the principles and an illustration of their application. In that case Tugendhat J held that the firm was liable for the negligence and deceit of a partner who promoted an investment scheme: see [25] to [36]. 3 [2002] UKHL 48, [2003] 2 AC 366 at [129]. 4 [2009] EWHC 3218 (QB), [2010] PNLR 15. The claim failed in any event on the grounds that the transaction was tainted by illegality. The case contains a useful statement of the principles of ostensible authority discussed in 5.19 (above): see [134] (applied by Tugendhat J in Goldberg).

(c)  Third parties 5.21 It will be much more difficult to establish a finding of vicarious liability where C is not a client of the firm and has had no direct involvement with the firm or employee. The firm will not owe a duty of care to third parties and the ‘ostensible authority’ principle will make it difficult for C to establish liability for fraudulent misrepresentations where the representations are made by third parties (eg in a prospectus). However, the employer may be vicariously liable for the dishonest assistance of an employee where he or she assists a fraudster to launder funds through the firm’s client account or acts for the fraudster in preparing legal documents which are used to deceive or dupe third parties. On its assumed facts, Dubai Aluminium1 fell into this category. The employer may also be vicariously liable for the fraud or dishonest assistance of an employee where the employee meets the third party at the firm’s premises and uses the firm’s notepaper or email account. 1 [2002] UKHL 48, [2003] 2 AC 366. See also Attorney General of Zambia v Meer Care & Desai [2007] EWHC 952 (Ch) at [669].

5  Solicitors: authority to bind the client (a)  Express authority 5.22 Very similar factual and legal issues arise where the question is not whether the acts or statements of a partner, member or employee bind the firm but whether the acts or statements made by a solicitor bind the client. Express 234

Authority  5.23 actual authority depends on the express terms of the retainer between solicitor and client. In TFS Stores Limited v Designer Retail Outlet Centres (Mansfield) General Partner Ltd,1 where the question was whether warning notices under s 38A of Part II of the Landlord and Tenant Act 1954 had been validly served, solicitors acting for the tenant were held to have express authority to accept service. They had express instructions to bring the relevant transaction to completion and in the circumstances this included accepting service of the notices. The view of the experienced solicitor who received the notice that she had authority was not determinative. But it was ‘a probative piece of evidence to weigh in the balance’.2 One reason for the absence of many cases in which there is an issue about the scope of a solicitor’s actual authority may be that a solicitor is under a duty to consult on questions of doubt.3 An agent of the client can, of course, confer express authority on the solicitor. But the transmission of instructions by an agent or third party also raises other issues which we consider in more detail in Chapter 9.4 1 [2019] EWHC 1363, [2020] 1 P & CR 6 at [107]. HHJ Davis-White QC held that the solicitors had incidental and ostensible authority in the alternative. At the time of preparation of this text the decision is subject to appeal. 2 See [109]. See also Carr v Cotton [2002] EWCA Civ 1788 at [52] (Chadwick LJ): ‘A solicitor’s understanding of instructions which he has received cannot, of course, be determinative. If the instructions are contained in a document, the court’s task is to construe the document. But, where the document has been signed by the client immediately following a discussion between client and solicitor as to the need for it, the solicitor’s contemporary understanding as to the instructions which he has been given in that document is, to my mind, a powerful indication of the meaning which they both intended the words used in that document to bear. And that indication is the more powerful where the client is himself a solicitor and acts in a way which is consistent (and only consistent) with that meaning.’ 3 See Groom v Crocker [1939] 1 KB 194 at 222 (Scott LJ) (cited in Ball v Druces & Attlee (No 2) [2004] EWHC 1402 (QB) (Nelson J), [2004] PNLR 745): ‘The retainer when given puts into operation the normal terms of a contractual relationship, including in particular the duty of the solicitor to protect the client’s interest and carry out his instructions in the matters to which the retainer relates, by all proper means. It is an incident of that duty that the solicitor shall consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him, and shall keep the client informed to such an extent as may be reasonably necessary according to the same criteria.’ 4 See paras 9.05 to 9.08, below.

(b)  Implied or incidental authority 5.23 A  relationship of agency and the terms of the agent’s authority may be implied in the same way as the existence and terms of a solicitor’s retainer.1 However, cases involving the implication of actual authority to bind the client are also rare.2 The scope of a solicitor’s implied authority arises much more frequently where the question is whether the solicitor had authority to perform an act or make a statement because it was incidental to the performance of the solicitor’s retainer from the client either to carry out a transaction or to resolve a dispute. A number of old cases suggest that the incidental authority of solicitors is wide.3 But the caution sounded by Staughton LJ in United Bank of Kuwait v Hammoud4 about relying on old cases applies equally to these cases too. In principle, a solicitor 235

5.23  Authority, vicarious liability and undertakings only has authority to carry out any procedural steps that are directly incidental to the transaction or proceedings in which he or she is instructed. Some examples of this from the cases are as follows: a solicitor had usual authority to serve replies to preliminary enquiries;5 a solicitor holding a signed contract for the sale of land with authority to exchange had usual authority to exchange at any time and by telephone;6 and a solicitor on the record had incidental authority to accept service and to carry out any procedural steps.7 On the other hand, a solicitor has no incidental authority to bind the client in matters of substance which reasonably require the decision of the client and which are not properly incidental to the solicitor’s existing instructions. Some examples of this from the cases are as follows: a solicitor had no implied authority to accept service of a bankruptcy notice;8 to enter into a contract;9 to exchange contracts;10 or to amend the parties to a contract and then exchange.11 A solicitor had no incidental authority to issue proceedings or accept service until on the record (even though instructed to act in relation to the dispute);12 and a solicitor on the record had no incidental authority to enter into a compromise without express instructions.13   1 For implied retainers, see Chapter 1, para 1.9, above.  2 See Sino Channel Asia Ltd v Dana Shipping and Trading Pte Singapore [2017] EWCA Civ 1703, [2018] 1 Lloyd’s Rep 17 distinguishing Lantic Sugar Ltd v Baffin Investments Ltd [2009]  EWHC  3325 (Comm), [2010] 2 Lloyd’s Rep 141 (Gross J). Both cases concerned the authority of an agent rather than solicitor to accept service of a notice of arbitration. But it is suggested that both provide useful assistance in deciding whether actual authority can be implied. ‘The establishment of such implied actual authority requires an intense scrutiny of the particular, no doubt rare, facts from which it is said to arise’: see [45].   3 For a survey of the early authorities on litigation see Waugh v HB  Clifford & Sons [1982] Ch 374, CA at 383G–387C. Many of these cases also date from a time when the distinction between actual and ostensible authority was not fully understood: see the comments of Brightman LJ at 387C–D.   4 [1988] 1 WLR 1058 at 1063. See para 5.06, above.  5 See Gran Gelato Ltd v Richcliff [1992] Ch 560 (Sir Donald Nicholls V-C) at 570G–571A.  6 See Domb v Isoz [1980] Ch 548.  7 See Prestwich v Poley (1865) 18 CB (NS) 806 at 816: ‘The attorney is the general agent of the client in all matters which may reasonably be expected to arise for decision in the cause’. For a recent example see R v Newell (Alan) [2012] EWCA Crim 650, [2012] 1 WLR 3142 where the advocate had recorded an admission in a Plea and Case Management Form from which the client later attempted to resile. See [22]: ‘In our view, an advocate plainly has implied actual authority to do what is normally incidental, in the ordinary course of his profession, to the execution of the advocate’s express authority … Recording a matter on a PCMH form is incidental to that which the advocate has been authorised to do—to conduct the defence of a client.’  8 See Re Munro [1981] 1 WLR 1358 (Walton J) at 1361E: ‘It is of course a common fallacy to think that solicitors have an implied authority on behalf of their clients to receive notices. They may have express authority so to receive them but in general a solicitor does not have any authority to accept a notice on behalf of his client.’ Contrast Westway Homes Ltd v Moores (1992) 63  P&CR  480, CA where a solicitor who had express authority to extend time for compliance with an option notice was held to have incidental authority to accept service of it. See also TFS Stores Limited v Designer Retail Outlet Centres (Mansfield) General Partner Ltd [2019] EWHC 1363, [2020] 1 P & CR 6 (HHJ Davis-White) where a solicitor was held to have both express and incidental authority to accept notices under the Landlord and Tenant Act Part II where they were an essential step in completing new business leases. See para 5.22, above.  9 See Eccles v Bryant [1948] Ch 93 at 106 (Cohen LJ): ‘It seems to me to be plain from the cases which were cited to us, including the case of Lockett v Norman-Wright [1925] Ch 56 at 62 that the solicitor would have no authority to make any such bargain. In that case Tomlin J as

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Authority  5.24 he then was, said “Solicitors are not, in the absence of specific authority, agents of their client to conclude a contract for them …”.’ 10 See Gavaghan v Edwards [1961] 2 QB 220, CA where solicitors acting for both parties already in agreement were held to have implied authority to make an additional memorandum for the purpose of recording a final term agreed by the parties. 11 See OPM Property Services Ltd v Venner [2003] EWHC Ch 427 (Michael Brindle QC). 12 See Wright v Castle (1817) 3 Mer 12 and Re Gray (1891) 65 LT 743. Gross J followed this line of authority in Lantic Sugar Ltd v Baffin Investments Ltd [2009] EWHC 3325 (Comm), [2010] 2 Lloyd’s Rep 141 at [44]: ‘… the Club’s position in this regard is at least broadly analogous to that of solicitors, where even a wide general authority to deal with a case on behalf of a client will not (without more) translate into authority to accept service of originating process …’ 13 See Waugh v HB Clifford & Sons [1982] Ch 374, CA at 387F–G.

(c)  Ostensible authority 5.24 In order to establish that a solicitor had ostensible authority to act on behalf of a client it is necessary for the third party to establish that the client held the solicitor out as having authority and that the third party relied on that representation. The classic statement of the test is set out by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd:1 ‘It must be shown: (1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor; (2) that such representation was made by a person or persons who had “actual” authority to manage the business of the company either generally or in respect of those matters to which the contract relates; (3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and (4) that under its memorandum and articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent.’ In general, there are two kinds of ostensible authority: first, where the principal instructs or permits the agent to assume a particular role or position which carries with it a usual authority and, secondly, where the principal makes a specific representation about the agent’s authority.2 Most cases involving solicitors fall into the first category. The solicitor has ostensible authority where the action of the solicitor was within the range of actions for which a third party would usually expect the solicitor to have authority on behalf of a client.3 If the actions taken by the solicitor fall within that range and the opposing party has relied on the solicitor’s authority (eg by completing the relevant transaction), the client will be bound even though the client has placed internal limits on the solicitor’s authority.4 Where the solicitor has no usual authority, it will require cogent evidence to establish that the client made a specific representation to clothe the solicitor with ostensible authority of the second kind.5 1 [1964] 2 QB 480 at 505–6 (Diplock LJ). For a recent restatement of the principles see East Asia Company Ltd v PT Satria Tirtatama Energindo (Bermuda) [2019] UKPC 30 at [41]–[43] (Lord Kitchin).

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5.25  Authority, vicarious liability and undertakings 2 See SEB Trygg Liv Holding Aktiebolag v Manches [2005] EWCA Civ 1237, [2006] 1 WLR 2276 at [32] (Buxton LJ): ‘As to the facts of this case, Bowstead and Reynolds points out that ostensible authority covers two types of case: where the agent has been permitted to assume a particular position that carries a usual authority; and where a specific representation is made as to the agent’s authority. If either type of conduct on the part of the principal gives rise to an estoppel, that is because of the understanding that it creates in the mind of the third party representee. An alteration on the principal’s part of the relationship between himself and the agent cannot, once the estoppel has been created, alter or withdraw the representation if the alteration of the relationship is not communicated to the representee.’ 3 See American Jewellery Co Ltd v Commercial Corp Jamaica Ltd [2013] UKPC 5 at [29] where Lord Wilson stated that in this statement from the second edition we ‘paraphrase the requisite inquiry in attractively straightforward terms’. 4 For a clear statement to this effect see McCarthy v Prison Service [2005] All ER (D) 145 (Park J). 5 See A/S Dan Bunkering Ltd v FG Hawkes (Western) Ltd [2009] EWHC 3141 (Comm) at [27] (Gloster J).

5.25 Some recent examples of cases in which a solicitor has been held to have the ostensible authority of the client are as follows: a solicitor on the record had ostensible authority to enter into a compromise;1 to withdraw a claim;2 to conduct arbitration proceedings (such as the service of written submissions or attending a hearing);3 to make an admission on behalf of his client in criminal proceedings;4 and to make concessions in civil proceedings.5  A  solicitor instructed in relation to a land transaction had ostensible authority to negotiate a reduction in the purchase price of land;6 and to accept service of a notice.7 Some recent examples of cases in which a solicitor has not been held to have the ostensible authority of the client are as follows (and all can be explained on the basis that the opposing party would not reasonably expect the relevant act to be within the authority of the solicitor carrying out the underlying transaction): a solicitor had no ostensible authority to enter into a contract for the sale or purchase of land;8 or to bind the Legal Services Commission to a compromise;9 or to withdraw an enforcement notice on behalf of a local authority.10  1 See Waugh v HB Clifford & Sons Ltd [1982] Ch 374, CA, Harford v Birmingham City Council (1993) 66 P&CR 468 (HHJ Marder QC) and Amalgamated Metal Corporation plc v Wragge & Co [2011] EWHC 887 (Comm) (David Steel J).  2 See McCarthy v Prison Service [2005] All ER (D) 145 (Park J).  3 See SEB  Trygg Liv Holding Aktiebolag v Manches [2005]  EWHC  35 (Comm), [2005] 2 Lloyd’s Rep 129 (Gloster J) at [127] (upheld on appeal at [2005] EWCA Civ 1237, [2006] 1 WLR 2276).  4 See R v Hayes [2004] EWCA Crim 2844, [2005] Cr App 33 at [12] (statements in a solicitor’s letter) and R v Newell (Alan) [2012] EWCA Crim 650, [2012] 1 WLR 3142 (in the alternative to incidental authority: see para 5.23, fn 7, above).  5 See Clarke v Securitas UK Ltd [2002] EWCA Civ 1179 at [12].  6 See American Jewellery Co Ltd v Commercial Corp Jamaica Ltd [2013] UKPC 5.  7 See TFS  Stores Limited v Designer Retail Outlet Centres (Mansfield) General Partner Ltd [2019] EWHC 1363, [2020] 1 P & CR 6 (HHJ Davis-White) at [110]: ‘KBL was instructed in the process of completing the legal formalities and bringing the transaction to completion. As such, it was held out as having authority to make representations as to the extent of its authority … I am also satisfied that reliance on such apparent authority, by entering into the agreements for lease without more, is also made out. I also accept the submission of Mr Clark that to hold otherwise would mean that solicitors who made representations that they had

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Authority  5.27 authority to accept service (whether or notices of proceedings) would not be capable of being relied on without some further evidence of authority from the client, which would be a great change in the manner in which matters customarily proceed at present.’ A finding of incidental authority was also made: see paras 5.22 and 5.23, above.  8 See James v Evans [2000] 3 EGLR 1 at 5C-E: (Wright J): ‘[I]t is not within the ordinary course of a solicitor’s authority, when negotiating the sale or purchase of an interest in land that has been conducted on a “subject to contract” basis, to conclude a contract on behalf of his client.’  9 See McCarthy v Prison Service (above). 10 See South Buckinghamshire DC v Flanagan [2002] EWCA Civ 690.

6  Breach of warranty of authority 5.26 There is no difference between the liability of a solicitor for breach of warranty of authority and that of any other agent. But such claims against solicitors are common and tend to arise most frequently in two factual contexts: •

Litigation: A  solicitor either commences or carries on proceedings on behalf of a client who has died or is incapable or does not exist. Obvious examples are where a solicitor purports to act on behalf of a company which has been struck off the register1 or commences proceedings on behalf of a client who does not have the mental capacity to give instructions.2

•

Identity fraud: A  solicitor accepts instructions from someone who provides a fictitious identity or accepts instructions from a person who claims to have the authority of a third party.3

1 See, eg  SEB  Trygg Liv Holding Aktiebolag v Manches [2005]  EWCA  Civ 1237, [2006] 1 WLR 2276 (claim by German company that arbitration proceedings commenced in the name of a predecessor company not binding). 2 See the famous case of Yonge v Toynbee [1910] 1 KB 215 (where the C had become incapable without S’s knowledge) and Masterman-Lister v Brutton & Co [2003] EWCA Civ 1889, [2003] 1 WLR 1511 (in which the claimant claimed damages for professional negligence against his solicitors on the basis that he did not have capacity to enter into the settlement of a personal injury claim). 3 See Penn v Bristol & West BS  [1997] 1  WLR  1356, CA (claim by wife that not bound by charge forged by husband) and Mortgage Corporation v Shaire [2001] Ch 743 (Neuberger J) (claim for an order for sale by bank to enforce equitable charge created by H’s forgery). In each case the solicitor was joined as a third party. For the current Money Laundering Regulations (‘MLR’) and Law Society guidance see Chapter 4, para 4.20, above. In P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 Patten LJ emphasised that the MLR do not create a statutory liability towards innocent third parties although the MLR and the obligations which they may impose may be important background features in determining what liability should be imposed on solicitors and agents: see [29]–[31].

(a)  Basis of liability 5.27 Liability for breach of warranty of authority is strict. The origin of the modern doctrine is Collen v Wright1 (a decision of the Exchequer Chamber). In that case an agent executed an agreement for lease with a third party. He executed it purporting to act ‘as agent to [P]’ but he did not in fact have 239

5.27  Authority, vicarious liability and undertakings authority to do so. The agent was not liable in deceit because he believed that he had his principal’s authority and it could not be said that he had contracted personally because he expressly stated that he was acting as an agent. The Court found that there was an implied or collateral contract between the agent and the third party. Willes J stated:2 ‘I am of opinion that a person, who induces another to contract with him as the agent of a third party by an unqualified assertion of his being authorised to act as such agent, is answerable to the person who so contracts for any damage which he may sustain by reason of the assertion of authority being untrue. This is not the case of a bare misstatement by a person not bound by any duty to give information. The fact that the professed agent honestly thinks that he has authority affects the moral character of his act; but the moral innocence, so far as the person whom he has induced to contract is concerned, in no way aids such person or alleviates the inconvenience and damage which he sustains. The obligation arising in such a case is well expressed by saying that a person professing to contract as agent for another, impliedly, if not expressly, undertakes or promises the persons who enter into such contract, upon the faith of the professed agent being duly authorised, that the authority which he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent, as such, is good consideration for the promise.’ In Yonge v Toynbee3 a firm of solicitors which defended an action for libel was not aware that its authority had been terminated by the incapacity of the client (who had been certified and detained). The Court of Appeal held (following Collen v Wright) that it was liable even though it was unaware of the client’s incapacity (and there was no suggestion of negligence). Swinfen Eady J explained the rationale for imposing liability in the following way:4 ‘The manner in which business is ordinarily conducted requires that each party should be able to rely upon the solicitor of the other party having obtained a proper authority before assuming to act. It is always open to a solicitor to communicate as best he can with his own client, and obtain from time to time such authority and instructions as may be necessary. But the solicitor on the other side does not communicate with his opponent’s client, and, speaking generally, it is not proper for him to do so …’ 1 (1857) 8 E&B 647. 2 (1857) 8 E&B 647 at 657–658. The passage was cited in full by Patten LJ in P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 at [32]. His own statement of the principle was: ‘An agent who represents to a third party that he has authority to act on behalf of someone else is treated as warranting that he has such authority and is liable for any loss caused to the third party in reliance on the representation.’ 3 [1910] 1 KB 215. 4 See 234.

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Authority  5.29

(b)  Nature of the warranty (i) Litigation 5.28 There is an obvious difference between a solicitor executing a contract without authority and a solicitor either commencing or defending proceedings without authority. In the case of litigation there is no contractual relationship between a claimant and defendant and (in the absence of special circumstances) a solicitor owes no duty of care to an opposing party. A number of attempts have been made to explain what appears to be an anomaly that a solicitor can be strictly liable for breach of warranty of authority in litigation even though there is no contract between the solicitor and the opposing party. In the early cases there was some debate about whether the basis of liability was contractual or quasi-contractual or tortious (and analogous with deceit). It is now authoritatively established that the basis of liability is contractual. In SEB Trygg Liv Holding Aktiebolag v Manches1 Buxton LJ stated this:2 ‘The legal basis for making a solicitor liable was settled by this court in Yonge v Toynbee [1910] 1 KB 215. In that case, unknown to his solicitors, the client was of unsound mind and therefore lacked capacity to instruct the solicitors to defend proceedings on his behalf. The court held that the solicitors were liable to pay the plaintiff’s costs on the basis of an implied warranty or contract that they had authority. This contractual theory had been developed in earlier cases involving agents other than solicitors, notably Collen v Wright (1857) 8 E & B 647 at 657–658 … In other words he was describing what we would now call a collateral contract. Although this contractual theory presents some conceptual problems in the case of a solicitor conducting litigation, this is nevertheless the established basis for the liability. It is clear, as with any warranty, that liability for its breach is strict. Making the solicitor liable in such circumstances avoids the injustice which would otherwise be caused by the fact that the person for whom the unauthorised solicitor was purporting to act could not himself be made responsible for the opposing party’s costs.’ 1 [2005] EWCA Civ 1237, [2006] 1 WLR 2276. See also Adams v Ford [2012] EWCA Civ 544, [2012] 1 WLR 3211 at [31] (Toulson LJ). 2 [2005] EWCA Civ 1237, [2006] 1 WLR 2276 at [60]–[61].

5.29 Possibly because liability is strict and not dependent on negligence or actual knowledge attempts have been made to confine the nature of the warranty given by a solicitor in litigation within narrow bounds. Where a solicitor acts for a party in litigation the warranty is that the agent has the authority of his or her principal. The solicitor warrants that he or she has a client, that the client exists and that the client has given the solicitor authority. The solicitor does not warrant that the client is solvent.1 In SEB Trygg Liv Holding Aktiebolag v Manches2 it was held that the solicitor did not warrant that he had correctly 241

5.30  Authority, vicarious liability and undertakings named his client in legal proceedings. In that case a German company was incorrectly named as a party to arbitration proceedings and sought to contest jurisdiction on the basis that the solicitors had no authority to act for it in the proceedings and that it was not properly named as a party to the proceedings. Buxton LJ said this:3 ‘[G]enerally a solicitor conducting proceedings does not warrant what he says or does on behalf of his client. Thus he does not warrant that his client, the named party to the proceedings, has title to sue, is solvent, has a good cause of action or defence or has any other attribute asserted on his behalf. The solicitor relies upon his client’s instructions for all these things, as he will normally do for naming his client correctly. As he gives no warranty as to the accuracy of his instructions generally, it is difficult to see why the naming of his client should be treated as an exception. Why should this be any different, for example, from the naming of a client who has no title to sue? There is an obvious distinction between such matters and the solicitor’s own authority to act because the solicitor will usually know whether he has such authority or not. The imposition of strict liability on a solicitor for breach of warranty of authority is justified because otherwise the opposing party will be left without remedy against his supposed client. The warranty which a solicitor gives is that he has a client who has instructed him to assert or deny the claims made in the proceedings against the opposing party. We do not think he warrants that the client has the name by which he appears in the proceedings. As a matter of principle it would not be right to impose strict liability upon a solicitor for incorrectly naming his client. Otherwise solicitors could be made liable for any case of misnomer including, for example, typographical errors or change of corporate name without a change of rights.’4 1 See Nelson v Nelson [1997] 1 WLR 233, CA. 2 [2005] EWCA Civ 1237, [2006] 1 WLR 2276. 3 [2005] EWCA Civ 1237, [2006] 1 WLR 2276 at [66]–[67]. In fact a predecessor company had been named as the party but it was common ground that under the German law of universal succession the party contesting jurisdiction had succeeded to both its rights and liabilities. In P&P  Property Ltd v Owen White and Catlin LLP  [2018]  EWCA  Civ 1082, [2019] Ch  273 Patten LJ stated that the decision provides confirmation of the need for caution in identifying the precise scope and content of the warranty. He also stated that he was not sure that it provided a ‘sound or sufficient basis’ for resolving the issues which arose in the present case (which was an identity fraud case). 4 See also Bronze Monkey LLC  v Simmons and Simmons LLP  [2017]  EWHC  3097 (Comm), [2018] PNLR 14 (Andrew Henshall QC) where the judge rejected the argument that solicitors had warranted in correspondence that they had authority to act for a Delaware LLC. He reached this conclusion after a careful analysis of the correspondence and statements of case: see [66]– [75]. He also refused to grant a negative declaration: see [77]–[84].

5.30 A  solicitor’s warranty of authority does not necessarily last for the entire proceedings, however. In Re the Sherlock Holmes International Society Ltd1 it was common ground that solicitors acting on the instructions of a 242

Authority  5.31 director had warranted that they had the authority of the company to oppose a winding up petition. However, the petitioner’s solicitors questioned the validity of his appointment and issued an application to determine this issue. The court held that he had been validly appointed but that his appointment had been terminated. It also held that the solicitors’ warranty of authority came to an end when their authority became the ‘very issue in the litigation’.2 Thereafter, the company’s solicitors were advancing the director’s case that they had the company’s authority but they were not warranting it.3 In Zoya Ltd v Sheikh Nasir Ahmed (No 2)4 the court reached a similar conclusion. In that case the court determined as a preliminary issue that a person who described himself as the sole director and shareholder of a company had not been validly appointed and had no authority to instruct solicitors to commence proceedings. Following the earlier decision in Re the Sherlock Holmes International Society Ltd the judge held that the solicitors were no longer warranting that they had authority from the date on which the preliminary issue had been ordered.5 1 [2016] EWHC 1392 (Ch), [2016] 4 WLR 173, [2016] PNLR 31 (Mark Anderson QC). 2 See [27]–[32]. Part of the judge’s reasoning was that the rationale for the warranty of authority set out in Yonge v Toynbee (see para 5.27, above) had come to an end. 3 The judge also held that the solicitors continued to have ostensible authority because notice of termination of the director’s appointment was never given to the petitioner, on the basis of the famous decision in Scarf v Jardine (1882) 7 App Cas 345: see [40]–[47]. It seems right that ostensible authority should be a complete answer to a claim for breach of warranty of authority because the effect of such a finding is to preclude the principal from denying that the agent has authority (whatever they may have agreed between them). But it is more questionable whether the solicitors could have had ostensible authority or the petitioner could have relied on any holding out in circumstances where the petitioner was denying their authority. 4 [2016] EWHC 2249 (Ch), [2016] 4 WLR 174 (William Trower QC). 5 See [58]. The judge expressed some qualifications to the general principle at [50]: ‘In my view, some qualification is required to what might otherwise be read as a general statement of principle. If a solicitor remains on the record in the litigation without making clear his position, it will normally only be where it is obvious that somebody other than the disputed principal is the real party engaged in the litigation (being a person therefore susceptible to an adverse order for costs), that it is possible to infer that no warranty is given. Even then I doubt that it would be proper for the solicitors to continue to remain on the record for their supposed principal unless they had formed a bona fide view that they did in fact have authority to take such steps in the action as they purported to take on its behalf.’

(ii)  Identity fraud 5.31 The authorities relating to identity fraud have generally addressed two factual situations. First, there are cases in which one co-owner of property has instructed the solicitor claiming to have the authority of the other co-owner (such as their wife or partner). Secondly, there are cases in which an imposter impersonates the owner of a registered property or gives a false name when purchasing property and applying for mortgage finance. The leading case on the first type of identity fraud is Penn v Bristol & West BS1 in which a husband forged his wife’s signature on a transfer of property which was owned jointly by them both. The firm of solicitors whom the husband had instructed held 243

5.32  Authority, vicarious liability and undertakings themselves out as acting for both husband and wife and it was held that this warranty of authority was given by the solicitors not only to the purchaser but also to the lender who was funding the purchase. The Court of Appeal held that it was not necessary that a transaction between the vendor and the party seeking to enforce the warranty should have been induced. They also held that the warranty arose simply from the holding out in the course of correspondence.2 1 [1997] 1 WLR 1356. 2 See also Bristol & West BS v Fancy & Jackson [1997] 4 All ER 582 at 612–613 (where Chadwick J followed Penn on very similar facts although he found that the warranty was slightly different) and Zwebner v The Mortgage Corporation plc [1998]  PNLR  769 (where Robert Walker LJ reached a similar conclusion).

5.32 The leading case on the second type of identity fraud is now P&P Property Ltd v Owen White and Catlin LLP.1 In that case the solicitors signed a contract for the sale of land ‘on behalf of the Seller’ which was a term defined as ‘Clifford Michael Philip Harper of 52 Brackenbury Road London W6 0BB’, the property which was the subject matter of the contract. The selling agents also sent a memorandum of sale to the purchaser in which ‘Clifford Harper’ was named as the vendor and they referred to him in their covering letter as ‘our client’.2 The issue was whether the solicitors and agents warranted that they had the authority of the individual who had instructed them but using the owner’s name or whether they warranted that they had the authority of the true owner of the property. Decisions at first instance and in Scotland had considered the analogous situation in which a solicitor acts for a borrower in a loan transaction or both borrower and lender.3 But this was the first occasion on which the scope of the warranty given by solicitors or agents acting for a seller had reached the Court of Appeal.4 Patten LJ considered the question to be one of construction and following Shogun Finance Ltd v Hudson5 held that the solicitors warranted that they had the authority of the Clifford Harper who owned the property. He stated:6 ‘But it is equally clear that the purchaser in relation to a written contract for the sale of land negotiated and made at a distance through the formal machinery of exchange and then completion contracts only with the person whose name and identity appears on the contract and not with the actual individual with whom the sale has been negotiated and agreed. A written contract entered into with a fraudster is treated on an objective analysis of the words used as one with the person he purported to be as identified in the contract itself.’ He reached the opposite conclusion in relation to the estate agents, however.7 Reasonably read, the memorandum of sale (which pre-dated the contract) was no more than a statement of the details which the agents had been given by the fraudster and a reasonable bystander would not regard it as a statement or warranty by the selling agent that they had received instructions from the true owner. 1 [2018] EWCA Civ 1082, [2019] Ch 273. See Reynolds, ‘Of Warranty of Authority and Related Topics’ (2018) 134 LQR 511. For reliance see para 5.34, below. For discussion of the decision

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Authority  5.33 in the context of the duty to third parties see paras 1.19–1.22, above. For discussion of trusts and third party funds and s 61 of the Trustee Act 1925 see paras 4.07–4.08 and 4.66–4.70, above. For more detailed discussion of the real estate issues (and, in particular, the scope of undertakings given on completion): see paras 9.07–9.08, 9.26 and 9.31, below. 2 See [33]. 3 See Excel Securities plc v Masood [2010] Lloyd’s Rep PN 16 (where HHJ Hegarty QC held that a solicitor who acted for a borrower and lender did not warrant the borrower’s identity to the lender or that he had acquired good title to the property) and Cheshire Mortgage Corporation plc v Grandison [2012] CSIH 66, [2013] PNLR 3 (where the Court of Session also held that solicitors acting for a bogus borrower did not warrant his identity to a lender as in Masood). In Frank Houlgate Investment Co Ltd v Biggart Baillie LLP [2011] CSOH 160, [2012] PNLR 2 (where the solicitors were also acting for a bogus borrower in a loan transaction) Lord Glennie reached a similar conclusion although the facts were unusual and his decision was upheld on different grounds: see [2014] CSIH 79, [2015] PNLR 3. See also Reynolds, ‘Breach of Warranty of Authority in Modern Times’ [2012] LMCLQ 190 at 192 suggesting that a solicitor warrants only that he or she ‘has authority from another existing person (or another entity) in some relevant respect’. Patten LJ did not suggest that these cases were wrongly decided and it is suggested that they still stand as good authority in cases where solicitors deal with lenders on similar wording. 4 Breach of warranty of authority had been considered by the Court of Appeal in Knight Frank v Du Haney [2011] EWCA Civ 404 but the facts were very different. A firm of surveyors carried out a development appraisal on the instructions of the defendant who signed the engagement letter as agent on behalf of a limited company, the name of which was misspelt. When the principal failed to pay their fees, the surveyors claimed against the agent for breach of warranty of authority. The Court of Appeal held that there had been no breach. The agent had ‘identified and named his principal in a manner which was entirely adequate for all practical purposes’ and it was neither a sensible nor a necessary analysis that he was ‘to be regarded as having warranted, in the sense of having guaranteed, the precise accuracy of the name supplied’. 5 [2004] UKHL 62, [2004] 1 AC 919 at [153] and [154] (Lord Phillips). 6 See [54]. 7 See [57].

(iii)  Exclusion of the warranty 5.33 Because the doctrine of implied warranty of authority is based on implied contract it is possible to exclude or qualify such a warranty with express words.1 This probably provides the best explanation of the decision in Midland Bank v Cox McQueen.2 In that case a bank brought a claim against a firm of solicitors alleging both negligence and breach of warranty of authority for failing to ensure that the wife of the borrower executed the charge. The Court of Appeal held that the nature of the retainer was to be determined as a matter of construction (as in P&P Property) and that the bank had not intended to ask for – or the solicitors to give – a guarantee against the husband’s fraud even if it could not be detected by exercising proper care. They adopted the same approach to the construction of the certificate containing the warranty of authority. For similar reasons, it is suggested that the standard form certificate of title given by a solicitor to a lender qualifies any warranty of authority given by the solicitor to the lender.3 This would be consistent with the approach which the court has taken to the construction of similar obligations.4 1 See Yonge v Toynbee [1910] 1 KB 215 at 227 (Buckley LJ) cited by Patten LJ in P&P Property Ltd v Owen White and Catlin LLP  [2018]  EWCA  Civ 1082, [2019] Ch  273 at [39]. For

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5.34  Authority, vicarious liability and undertakings a more detailed examination of the principle see Zoya Ltd v Sheikh Nasir Ahmed (No  2) [2016] EWHC 2249 (Ch), [2016] 4 WLR 174 (William Trower QC) at [28]–[33]. For a simple example see Suleman v Shahsavari [1988] 1 WLR 1181 (Andrew Park QC) at 1184G–1185D. 2 [1999] Lloyd’s Rep PN 223, CA (followed in UCB Corporate Services Ltd v Clyde & Co [2000] Lloyd’s Rep PN  653 and Halifax v Brookes Parry & Co (HHJ  Behrens QC, 23  May 2000, unreported)). 3 Clause 3.1.5 of the current edition of the UK  Finance Mortgage Lenders’ Handbook (1  July 2017) provides as follows: ‘Unless you personally know the signatory of a document, you must ask the signatory to provide evidence of identity, which you must carefully check. You should check the signatory’s identity against one of the documents from list A or two of the documents in list B  …’. In the current edition of the Law Society and Council of Mortgage Lenders Approved Certificate of Title (22  January 2020) the solicitor certifies: ‘If so instructed, we have checked the identity of the Borrower (and anyone else required to sign the mortgage deed or other document connected with the mortgage) by reference to the document or documents precisely specified in writing by you.’ The certificate also contains the following limitation: ‘OUR duties to you are limited to the matters set out in this certificate and we accept no further liability or responsibility whatsoever. The payment by you to us (by whatever means) of the mortgage advance or any part of it constitutes acceptance of this limitation and any assignment to you by the Borrower of any rights of action against us to which the Borrower may be entitled shall take effect subject to this limitation.’ 4 For the construction of the Handbook and the unwillingness of the courts to construe it as imposing absolute obligations upon a solicitor see Nationwide Building Society v Davisons Solicitors [2012] EWCA Civ 1626, [2013] PNLR 12 (discussed in Chapter 1, para 1.02, above).

(c) Reliance 5.34 In Penn v Bristol & West BS1 the Court of Appeal dealt briefly with the question of causation but did not discuss the question of inducement or reliance separately. In Donsland Ltd v Hoogstraten2 Tuckey LJ stated that it was not clear whether inducement or reliance was an ingredient of the cause of action but left the question open. However, the issue has now been settled in Knight Frank v Du Haney3 where Tomlinson LJ stated that reliance was ‘an essential element in the creation of the unilateral contract for breach of which the third party may sue’ and was ‘inducement of the third party to act in a manner in which he would not have acted if that representation had not been made’. In P&P Property Ltd v Owen White and Catlin LLP4 the solicitor gave evidence that he agreed to act as stakeholder because he thought that he was dealing with a reputable firm of solicitors who would have carried out due diligence on their vendor client. But he did not say in terms that he relied on the warranty of authority or exchanged contracts on that basis. The judge held that this was insufficient to prove reliance and dismissed the claim. The Court of Appeal held that there was no basis for interfering with his decision. 1 [1997] 1 WLR 1356, CA. 2 [2002] EWCA Civ 253, [2002] PNLR 26. 3 [2011] EWCA Civ 404 at [23]. For further detailed discussion of the authorities in the litigation context see Zoya Ltd v Sheikh Nasir Ahmed (No 2) [2016] EWHC 2249 (Ch), [2016] 4 WLR 174 at [36] and [37] where William Trower QC concluded that: ‘inducement was required, although it would often be implied’. See also [60] where he stated that it was necessary to demonstrate that the relevant party had ‘relied on the warranty in the sense that he was induced by it to act to his prejudice’. His reasoning was adopted Patten LJ in P&P Property (below).

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Authority  5.36 4 [2018] EWCA Civ 1082, [2019] Ch 273 at [58]–[61]. The necessity for reliance was challenged again but Patten LJ accepted that reliance was ‘an essential feature or condition of the cause of action’: see [59].

(d) Compensation 5.35 The purpose of compensation for breach of warranty of authority is to place C in the position in which he or she would have been if the warranty had been true, that is if the agent had obtained the authority of the principal. However, compensation for breach of warranty cannot put C in a better position than if the warranty had been true.1 1 See Skylight Maritime SA  v Ascot Underwriting Ltd [2005]  EWHC  15 (Comm), [2005]  PNLR  450 (Colman J) at [15]–[20] applied in Re the Sherlock Holmes International Society Ltd [2016] EWHC 1392 (Ch), [2016] 4 WLR 173, [2016] PNLR 31 (Mark Anderson QC) at [33]–[39].

(i)  Transactional cases 5.36 Where the principal is in existence and solvent the normal measure of damage is the amount which the third party could have recovered from the principal for breach of contract if the principal had been bound.1 Thus, where the solicitor acting for the seller enters into a contract for the sale of goods or shares without authority of the client the measure of damage will be the difference between the contract price and the market value of the shares at the date of delivery or transfer. Where the solicitor enters into a contract for the sale of land without authority the measure of damage will usually be the difference between the contract price and the market value of the property at the date of sale. The position becomes more complex in cases where the solicitor is acting for the purchaser. In Suleman v Shahsavari2 the court applied Johnson v Agnew3 where the House of Lords had held that damages should be assessed at the date when the principal elected to accept the repudiation of the contract and claim damages. Likewise, where the principal is insolvent or would have had a number of defences to a claim for breach of contract against the third party, the agent is entitled to rely on the same defences in answer to a claim for breach of warranty of authority or to reduce the damages. In Singh v Sardar Investments Ltd4 Patten J stated this: ‘It is clear that the loss for which the Claimants are seeking to be compensated is that occasioned by the solicitor’s lack of authority. Put another way the damages are those required to put the Claimants in the position in which they would have been had the warranty been true … it seems to me that on principle an agent sued for breach of warranty of authority ought to be able to rely upon any defences which would have been available to his principal had the contract in fact been authorised. If this is right then the claim against the Fourth Defendant must fail.’ 247

5.37  Authority, vicarious liability and undertakings For example, where the purchaser was insolvent and would have been unable to complete or to pay damages or had a good defence to a claim for breach of contract, the seller will be entitled to nominal damages only. 1 See Habton Farms v Nimmo [2003]  EWCA  Civ 68, [2004]  QB  1 at [49]–[55] (Clarke LJ), [110]–[113] (Jonathan Parker LJ) and [119]–[120] (Auld LJ). 2 [1988] 1 WLR 1181 (Andrew Park QC). In Greenglade Estates Ltd v Chana [2012] EWHC 1913 (Ch) David Donaldson QC applied Suleman v Shahsavari although he expressed some reservations about the correctness of the decision: see [11]–[14]. It was distinguished by the Court of Appeal in Rabiu v Marlbray Ltd [2016] EWCA Civ 476, [2016] 1 WLR 5147 on the basis that a binding contract had come into existence. 3 [1980] AC 367. 4 [2002]  All ER (D) 243 at [58]. The insolvency of the principal is also a factor which the court may take into account in assessing damage: see [60] and Skylight Maritime SA v Ascot Underwriting Ltd [2005] EWHC 15 (Comm), [2005] PNLR 450 (Colman J) at [20]. He also held that events which occurred after the date on which the breach of warranty occurred were irrelevant in order to determine whether the third party would have obtained an order for specific performance against the principal. The decision was upheld on this point by the Court of Appeal: see [2002] EWCA Civ 1706. Another example of the application of this principle is Campden Hill Ltd v Chakrani [2005] EWHC 911 (Ch) in which Hart J held that the defences which would have been available to a party to a loan agreement to avoid enforcement were also available to the agent found liable for breach of warranty of authority: see [56] and [62]. He also held that the fact that the warranty was given fraudulently did not affect the measure of loss.

5.37 The court will not always apply the contractual measure, however. This will depend on what the principal could reasonably have been expected to do if the solicitor had obtained their authority. Penn1 suggests that the court may award damages on the basis that the principal would have withdrawn from the transaction rather than on the basis that they would have completed it: ‘The promise which on the above analysis was made, was that Mr Brill had the authority of Mrs Penn to negotiate and complete the transaction on her behalf. It was that warranty that was broken. If Mr Brill had actually obtained Mrs Penn’s instructions, then either the transaction would never have gone as far as completion, and Bristol and West would not have advanced any money or (and not very likely) the transaction would have been completed properly without forged signatures and they would have had security for their loan.’2 1 [1997] 1 WLR 1356, CA at 1364C–E (Waller LJ). 2 Habton Farms v Nimmo [2003] EWCA Civ 68, [2004] QB 1 illustrates this flexible approach. The facts are detailed and it is not a solicitors’ case. For detailed consideration see the third edition of this book at para  5.31. For similar issues see also BHPB  Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FC 1087 (discussed in Reynolds, ‘Breach of Warranty of Authority in Modern Times’ [2012] LMCLQ 190 at 191–192).

(ii)  Litigation cases: costs 5.38 Where a solicitor commences or defends proceedings without authority, the usual consequence is that he or she is ordered to pay the costs of the proceedings personally from the point in time at which the solicitor first 248

Authority  5.39 became involved until the mistake is discovered. In Skylight Maritime SA  v Ascot Underwriting Ltd1 Colman J stated: ‘It is important not to lose sight of the fact that the relevant breach of warranty is the non-existence of the authority that was warranted. Therefore, the opposite party or promise has lost the benefit of the position he would have been in had the warranty been true. In other words, the court is concerned to quantify what benefit has been lost by reason of the fact that the supposed client is not after all a party to the proceedings. In the ordinary case, the promisee will have lost the ability to recover from the client the costs of the proceedings in the event of a costs order in the promisee’s favour. This is usually quantified as the amount of costs thrown away by the promisee in relation to the proceedings from the first participation in them of the solicitor until the promisee is apprised of the solicitor’s lack of authority.’ The court may also make an order for costs against the solicitor in the existing proceedings under its summary jurisdiction without the need for the opposing party to commence separate proceedings.2 This is not an invariable rule, however. Where there are serious issues to be tried, the court may refuse to make a summary order and require the opposing party to commence separate proceedings.3 In Skylight the solicitors had come off the record and the court struck the proceedings out. In defence of the claim for breach of warranty of authority the solicitors asserted that they had in fact had authority to bring the proceedings. The court ordered this issue (and the question of loss) to go to trial. Costs are assessed on the usual principles and it does not follow from the fact that the solicitor has been acting without authority that costs will be awarded on an indemnity basis.4 1 [2005] EWHC 15 (Comm), [2005] PNLR 450 at [16]. See also Adams v Ford [2012] EWCA Civ 544 at [31]. 2 See Yonge v Toynbee [1910] 1 KB 215 and Babury Ltd v London Industrial plc [1989] NLJ 1596 (Steyn J). For further discussion of the supervisory jurisdiction see para 5.40, below. Both Zoya Ltd v Sheikh Nasir Ahmed (No 2) [2016] EWHC 2249 (Ch), [2016] 4 WLR 174 (William Trower QC) and Re the Sherlock Holmes International Society Ltd [2016]  EWHC  1392 (Ch), [2016] 4 WLR 173, [2016] PNLR 31 (Mark Anderson QC) involved applications in existing proceedings under the court’s supervisory jurisdiction. Both applications failed although in the second case the court made an order under s 51 of the Senior Courts Act 1981. In deciding what costs to order the solicitor to pay it may be relevant, therefore, to consider whether any non-parties are liable. 3 See Skylight Maritime SA v Ascot Underwriting Ltd [2005] EWHC 15 (Comm), [2005] PNLR 450 (above) at [13]. The court adopts a similar approach to the enforcement of undertakings: see para 5.50, below. 4 In Penn v Bristol & West BS [1997] 1 WLR 1356, CA the court rejected the argument that the solicitors were obliged to pay indemnity costs as a matter of course because the opposing party would have been entitled to recover those costs by separate action: see 1366B–C (Waller LJ). For discussion of this issue see para 3.71, above.

(iii)  Unauthorised proceedings 5.39 Where a claim form or acknowledgement of service (or subsequent statements of case) have been served without authority, they must be struck out 249

5.40  Authority, vicarious liability and undertakings although they can be cured if the client named in the proceedings ratifies and adopts them. In Adams v Ford1 Toulson LJ stated this: ‘The legal consequence of proceedings being issued without authority is also well established. The proceedings are defective and liable to be struck out on that account, but they are not devoid of legal effect until they are struck out. Moreover, the court is not bound to strike them out if at the time of the strike out application the client on whose behalf the action was commenced wishes it to continue and to accept responsibility for it.’ Moreover, the proceedings may be ratified even if a limitation period has expired in the meantime.2 The client may also ratify the proceedings even if they have been brought in the wrong name (provided that it is a case of misnomer and they were not intended to be commenced on behalf of a different party).3 Where the solicitor has commenced or defended proceedings in the name of a company that has been struck off the register, the court may in certain circumstances restore the company to the register purely in order to validate the actions of a solicitor.4 1 [2012] EWCA Civ 544, [2012] 1 WLR 3211 at [32]. 2 See Presentaciones Musicales SA v Secunda [1994] Ch 271 applied in Bao Xiang International Garment Centre v British Airways Plc [2015] EWHC 3071 (Ch), [2016] CP Rep 8 (Rose J). However, this will not always be the case. For an example of a case in which the court struck out the proceedings as an abuse of process even though C later took an assignment of the cause of action, see Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543, [2009] PNLR 31. 3 See The Elikon [2003] EWCA Civ 812, [2003] 2 Lloyd’s Rep 430 at [75] and SEB Trygg Liv Holding Aktiebolag v Manches [2005] EWCA Civ 1237, [2006] 1 WLR 2276. 4 See Aegon Insurance Company (UK) Ltd v Registrar of Companies Re Alan Meek Wagstaff Ltd [2000] 12 WLUK 262 (Robert Englehart QC).

B UNDERTAKINGS 1  The court’s summary jurisdiction 5.40 The court has a disciplinary jurisdiction over the conduct of solicitors which is now reflected in s 50 of the Senior Courts Act 1981.1 This jurisdiction is an extraordinary one and is most commonly invoked to enforce solicitors’ undertakings although the jurisdiction is wider than this.2 In Myers v Elman3 Lord Wright described it as follows: ‘The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors … The matter complained of need not be criminal. It need not involve peculation or dishonesty. A  mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor’s duty to ascertain with accuracy may suffice. Thus, a solicitor may be held bound in certain events to satisfy himself that he has a retainer to act, or 250

Undertakings  5.40 as to the accuracy of an affidavit which his client swears. It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term professional misconduct has often been used to describe the ground on which the court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the court and to realise his duty to aid in promoting in his own sphere the cause of justice. This summary procedure may often be invoked to save the expense of an action. Thus it may in proper cases take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action.’ The supervisory jurisdiction is confined, however, to solicitors as officers of the court and does not extend to recognised bodies, such as LLPs or companies (through which solicitors conduct their practice).4 This has some significance for the enforcement of undertakings given by a solicitor on behalf of an LLP or company: see para 5.43, below. 1 Section 50 of the Senior Courts Act 1981 provides as follows: ‘(1) Any person duly admitted as a solicitor shall be an officer of the Supreme Court; …(2) Subject to the provisions of this Act, the High Court, the Crown Court and the Court of Appeal respectively, or any division or judge of those courts, may exercise the same jurisdiction in respect of solicitors as any one of the superior courts of law or equity from which the Supreme Court was constituted might have exercised immediately before the passing of the Supreme Court of Judicature Act 1873 in respect of any solicitor, attorney or proctor admitted to practise there. (3) An appeal shall lie to the Court of Appeal from any order made against a solicitor by the High Court or the Crown Court in the exercise of its jurisdiction in respect of solicitors under subsection (2).’ Section 142 of the County Courts Act 1984 also confers specific jurisdiction on the county court in relation to undertakings: ‘A county court shall have the same power to enforce an undertaking given by a solicitor in relation to any proceedings in that court as the High Court has to enforce an undertaking so given in relation to any proceedings in the High Court.’ 2 See Fox v Bannister, King & Rigbeys [1988] QB 925, CA at 931F–G and Gupta v Comer [1991] 1 QB 629, CA at 632E–F (both Sir John Donaldson MR). Another example of the jurisdiction is an order for costs against a solicitor who acts in breach of warranty of authority: see para 5.38, above. 3 [1940] AC 282 at 319. In Fox v Bannister, King & Rigbeys [1988] QB 925, CA at 931G–H Sir John Donaldson MR explained the summary nature of the jurisdiction: ‘Its summary character lies not in the burden or standard of proof, although it is only exercisable where there has been a serious dereliction of duty, but in the procedure whereby it is invoked. This is normally by originating summons, although it can be by simple application in an action where the conduct complained of occurred in the course of that action, and will not automatically or usually involve pleadings, discovery or oral evidence, although the court can, in appropriate circumstances, require a definition of the issues (by pleadings or otherwise), discovery and oral evidence.’ 4 See Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491, [2015] PNLR 8 at [46]–[47] (Christopher Clarke LJ) applied in Harcus Sinclair LLP  v Your Lawyers Ltd [2017] EWHC 2900 (Ch), [2018] 1 WLR 2479 (Edwin Johnson QC). The decision was reversed in part but not on this point: see [2019] EWCA Civ 335, [2019] 4 WLR 81, [2019] PNLR 19). An appeal is pending to the Supreme Court on the application of the restraint of trade doctrine.

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5.41  Authority, vicarious liability and undertakings It is possible that the judge’s findings on the scope and effect of the undertaking may also be considered by the Supreme Court.

2  Construction and enforcement (a) Introduction 5.41 The term ‘undertaking’ is defined in the Glossary to the SRA Standards and Regulations 2019 as follows: ‘a statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking”, to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something’ This definition replaced the definition in Chapter 14 of the SRA Code of Conduct 2011 which was in similar although not identical terms.1 Both definitions are wide and are consistent with the way in which the court has interpreted solicitors’ undertakings in exercising its summary jurisdiction.2 In Fox v Bannister, King & Rigbeys3 a solicitor agreed to hold £18,000 and not to release it without referring to a second solicitor. He also confirmed his firm’s agreement in a letter on headed notepaper. Although he did not use the words ‘undertakes’ or ‘undertaking’ he was held to have given an undertaking which could be enforced under the summary jurisdiction.3 The court will also enforce an oral undertaking under the summary jurisdiction (where it is sufficiently clear)4 and a solicitor’s undertaking that the client will perform an obligation (provided that it is clear that the solicitor assumed a personal liability for that performance).5 1 The new definition excludes the words ‘made by or on behalf of you or your firm, in the course of practice, or by you outside the course of practice but as a solicitor or REL’. It also involves a change in the words ‘that you or your firm will do …’ to ‘that you or a third party will do …’. Paragraph 1.3 of each of the SRA Code of Conduct for Solicitors 2019 and the SRA Code of Conduct for Firms 2019 both impose a conduct obligation to perform all undertakings: ‘You perform all undertakings given by you, and do so within an agreed timescale or if no timescale has been agreed then within a reasonable amount of time.’ The SRA Code of Conduct 2011 also required a solicitor to ‘perform all undertakings given by you within an agreed timescale or within a reasonable amount of time’: see O(11.2). For the position before 6 October 2011 see the Solicitors Code of Conduct 2007 r 24 which defined the term undertaking for the purposes of r 10.05 and r 15.10 (which dealt with overseas practice). 2 In Greenpine Investment Holding Ltd v Howard de Walden Estates Ltd [2016] EWHC 1923 (Ch) Timothy Fancourt QC held that it was appropriate to adopt the definition from the SRA Handbook because the enforcement of an undertaking was a quasi-disciplinary matter. For discussion of the same definition see Harcus Sinclair LLP  v Your Lawyers Ltd [2017]  EWHC  2900 (Ch), [2018] 1 WLR 2479 (Edwin Johnson QC) at [223]–[225]. For the appellate history of this case see para 5.39, fn 4, above. 3 [1988] QB 925, CA. See also Hastingwood Property Ltd v Saunders Bearman Anselm [1991] Ch 114 (Edward Nugee QC) at 126A–B. 4 See Udall v Capri Lighting Ltd [1988] QB 907 at 920A: ‘… most solicitors would no doubt agree that, as a matter of normal good practice, oral undertakings should be confirmed in writing forthwith by the recipient’. 5 See Udall v Capri Lighting Ltd (above) at 912A (Balcombe LJ) and 919E–F (Kerr LJ). The change in the definition of an undertaking in the Glossary to the SRA Standards and Regulations

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Undertakings  5.42 2019 recognises this point: see fn 1, above. But it is suggested that the earlier wording would have been understood in the same way.

(b) Construction 5.42 Although the normal rules of contractual construction generally apply to undertakings, there is a special rule that an ambiguous undertaking given by a solicitor will normally be interpreted in favour of the recipient. This rule was originally a principle of professional conduct.1 But it was applied by the Court of Appeal as a principle of construction in Reddy v Lachlan.2 In that case a solicitor gave an undertaking that: ‘on completion of the sale of the business of Lacering Limited, which is anticipated to take place next week, I  am to remit £26,000 to you. I  now confirm those instructions.’ The solicitor was never provided with funds to make the payment and he argued that he had not undertaken an absolute obligation to make the payment but a qualified obligation only to make the payment out of the proceeds of sale. The Court of Appeal rejected this argument on the basis that the reasonable recipient would have regarded it as an unqualified promise to pay the money.3 They also found that, if the undertaking had been ambiguous, they would have applied the principle of professional conduct in favour of the recipient.4 The tendency of the court is to treat undertakings given by a solicitor (particularly undertakings to pay money) as unqualified and absolute obligations which do not depend on the performance of the client.5 This is because a reasonable recipient would reach such a conclusion. A  solicitor’s undertaking is normally required by a third party as security for performance of the client’s obligations (and the solicitor has no professional obligation to the client to give the undertaking and is free to refuse). But in other contexts a solicitor’s undertaking will not necessarily be construed in favour of the recipient.6 1 See Principle 18.07 of the Guide to the Professional Conduct of Solicitors (1999) at 355. The same principle was contained in para 10 of the guidance notes to r 10.05 of the Solicitors’ Code of Conduct 2007. 2 [2000] Lloyd’s Rep PN 858, CA. 3 See [2000] Lloyd’s Rep PN 858 at [15] (Simon Brown LJ): ‘In my judgment the critical question to be asked in a case like this is: how would the solicitor’s letter reasonably have been understood by the recipient in the circumstances in which he received it?’ For applications of this test see Greenpine Investment Holding Ltd v Howard de Walden Estates Ltd [2016] EWHC 1923 (Ch) at [54]–[66] (Timothy Fancourt QC) and Thomas v Agnew [2017] NICh 28, [2018] PNLR 18 (McBride J). See also Smith v Eversheds [2014]  EWHC  2622 (Ch) (where Sir William Blackburne arrived at a similar conclusion). 4 See [2000] Lloyd’s Rep PN  858 at [22] (Simon Brown LJ) and [26] (Judge LJ). For further recognition of this principle see Templeton Insurance Ltd v Pennington Solicitors LLP [2006] EWHC 685 (Ch) (Lewison J) at [8] and [9]. 5 See Goldman v Abbott [1989] 2  EGLR  78, CA (where the court enforced an undertaking to pay the landlord’s costs of granting licence to assign even though the transaction did not proceed); Citadel Management Inc v Thompson [1999] 1 FLR 21 (where the court enforced an undertaking to make payments of in excess of US $17m despite the client’s default); and Hole & Pugsley v Sumption [2001] Lloyd’s Rep PN 419 (where Hart J implied a negative obligation

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5.43  Authority, vicarious liability and undertakings not to release any greater sums than were necessary to discharge the undertaking). See also Bhanabhai v Inland Revenue Comr [2007] NZCA 368, [2007] NZLR 478 at [42] (Young P) for useful comments on how to approach unconditional undertakings. 6 See Bentley v Gaisford [1997] QB 627 (where the Court of Appeal construed an undertaking given by one firm of solicitors to another to obtain the release of their lien) and Hastingwood Property Ltd v Saunders Bearman Anselm [1991] Ch 114 (Edward Nugee QC) (where the court held that the undertakings did not extend or enlarge the solicitors’ obligations as stakeholders).

(c) Capacity 5.43 The court can exercise its jurisdiction to enforce any undertaking given by a solicitor provided it was given by the solicitor in his or her capacity as a solicitor. The reason for this requirement was explained by Sir John Donaldson MR in John Fox v Bannister, King & Rigbeys.1 Because the jurisdiction is a disciplinary one, it can only be invoked where there has been professional misconduct or a serious breach of a professional duty. If the obligation is not a professional one or does not involve the provision of the services of a solicitor the jurisdiction is not engaged. In Geoffrey Silver & Drake v Baines2 an assistant asked another firm of solicitors to make a loan to a client of his and gave an undertaking on behalf of his firm to repay it. His principal was unaware of the undertaking. It was held that the undertaking was not given by the assistant in his capacity as a solicitor because it was effectively a guarantee. The decision was applied in Ruparel v Awan3 where the court dismissed the claimant’s application to enforce two undertakings on the grounds that they were not given in the capacity of a solicitor and could not be enforced under the supervisory jurisdiction. In Harcus Sinclair LLP v Your Lawyers Ltd4 a related issue arose, namely, whether an undertaking given by a member or solicitor on behalf of an LLP should be treated as given in a personal capacity or on behalf of all of the members. The court held that the general principle that an agent contracted on behalf of a disclosed principal applied equally to a solicitor’s undertaking and that the solicitor had not therefore given the undertaking in a personal capacity. It also held that the court had no jurisdiction to enforce it against all of the individual members of the firm or the LLP itself. 1 [1988] QB 925 at 931H–932B. 2 [1971] 1 QB 396. See, in particular, 403F–H and 402G–403A (Lord Widgery CJ). 3 [2001] Lloyds Rep PN  258 (David Donaldson QC) at 262–4. Similar considerations led the court to find that the firm was not bound under s 5 of the Partnership Act 1890: see para 5.07, above. 4 [2017]  EWHC  2900 (Ch), [2018] 1  WLR  2479 (Edwin Johnson QC) at [193]–[203]. The undertaking appeared in a non-disclosure agreement and the judge also rejected the argument that it was not capable of being a solicitor’s undertaking or given in the capacity of a solicitor because it did not relate to a transaction involving a client on the basis that it formed part of a solicitorial service: see [227]–[242]. This is a very similar question to the one which arises in the context whether the undertaking binds the firm at all: see para 5.07, above. The judgment contains a useful survey of the law covering both issues: see [204]–[227]. The judge also found that the outcome was unsatisfactory because the obligation in question was a solicitor’s undertaking but could not be enforced against either the individual or the firm: see [246] and [247]. For the appellate history of this case see para 5.40, fn 4, above.

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Undertakings  5.44

(d) Enforcement 5.44 There are three ways in which the recipient of an undertaking may seek to enforce it: first, by a claim for breach of contract or breach of trust;1 secondly, by an application to the court to exercise the summary jurisdiction over solicitors (as explained above); and, thirdly, by a complaint to the Solicitors Regulation Authority.2 In Udall v Capri Lighting Ltd3 the Court of Appeal held that an undertaking given by a solicitor to procure that the directors of his client would provide security for a claim by creating second charges on their personal properties was enforceable under the court’s summary jurisdiction. In the course of his judgment Balcombe LJ set out the following principles on the exercise of the jurisdiction:4 ‘(1) The nature of the summary jurisdiction is explained in the following passage from the speech of Lord Wright in Myers v Elman:5 (2) Although the jurisdiction is compensatory and not punitive, it still retains a disciplinary slant. It is only available where the conduct of the solicitor is inexcusable and such as to merit reproof … (3) If the misconduct of the solicitor leads to a person suffering loss, then the court has power to order the solicitor to make good the loss occasioned by his breach of duty … (4) Failure to implement a solicitor’s undertaking is prima facie to be regarded as misconduct on his part, and this is so even though he has not been guilty of dishonourable conduct … However, exceptionally, the solicitor may be able to give an explanation for his failure to honour his undertaking which may enable the court to say that there has been no misconduct in the particular case … (5) Neither the fact that the undertaking was that a third party should do an act, nor the fact that the solicitor may have a defence to an action at law (eg the Statute of Frauds), precludes the court from exercising its supervisory jurisdiction … However, these are factors which the court may take into account in deciding whether or not to exercise its discretion and, if so, in what manner. (6) The summary jurisdiction involves a discretion as to the relief to be granted … In the case of an undertaking, where there is no evidence that it is impossible to perform, the order will usually be to require the solicitor to do that which he had undertaken to do … (7) Where it is inappropriate for the court to make an order requiring the solicitor to perform his undertaking, eg  on the grounds of impossibility, the court may exercise the power referred to in paragraph (3) above and order the solicitor to compensate a person who has suffered loss in consequence of his failure to implement his undertaking …’ 1 For examples see Global Marine Drillships Ltd v Landmark Solicitors LLP [2011] EWHC 2685 (Ch) at [23] (where Henderson J accepted that a solicitor’s undertaking to hold and apply money gave rise to a Quistclose-type trust and could be enforced by an action for breach of trust); Tradegro (UK) Ltd v Wigmore Street Investments [2011] EWCA Civ 268, [2011] 2 BCLC 616 at [16] (where Lord Neuberger MR accepted that an undertaking might ‘give rise to a trust, a

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5.45  Authority, vicarious liability and undertakings stakeholder arrangement, a solicitor’s undertaking, or a personal contract (and not all of these are by any means mutually exclusive)’); and Ruparel v Awan [2001] Lloyd’s Rep PN 258 (where David Donaldson QC suggested that a claim in contract might have succeeded in relation to one of the undertakings). P&P Property Ltd v Owen White and Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273, considered in detail in para 5.32, above, is also an example of enforcement by an action for breach of trust and breach of contract. For references to the decision in other parts of this book see para 5.32, fn 1, above. For the effect of the standard form undertakings see Chapter 9, para 9.31, below. 2 See Udall v Capri Lighting Ltd [1988] QB 907, CA at 916D–F (Balcombe LJ). Paragraph 1.3 of each of the SRA Code of Conduct for Solicitors 2019 and the SRA Code of Conduct for Firms 2019 provides as follows: ‘You perform all undertakings given by you, and do so within an agreed timescale or if no timescale has been agreed then within a reasonable amount of time.’ The SRA Code of Conduct 2011 also required a solicitor to ‘perform all undertakings given by you within an agreed timescale or within a reasonable amount of time’: O(11.2). The relevant provision of the Solicitors Code of Conduct 2007 which was in force prior to 6 October 2011 was r 10.05 which contained similar provisions. 3 [1988] QB 907, CA. 4 [1988] QB 907 at 916H–918B. For helpful summaries of these principles see Clark v Lucas Solicitors LLP [2009] EWHC 1952 (Ch), [2009] 3 EGLR 83 (Sarah Asplin QC) at [30] and Bank of Ireland Mortgage Bank v Coleman [2009] IESC 38, [2009] 3 IR 699 at [15] (Geoghegan J). 5 The passage is set out in para 5.40, above.

5.45 A solicitor’s undertaking may be enforced by an order for committal although, before making an application to commit, the recipient of the undertaking must apply for an order for enforcement.1 For a committal for contempt for breach of an undertaking, all of the elements of the alleged contempt must be proved to the criminal standard and to prove contempt for breach of an undertaking requiring the performance of a specific act, it has to be proved to the requisite standard that the solicitor (a) failed to perform the act within the time specified by the order, (b) intended not to do the act and (c) did so in the knowledge of all the facts which made the omission a breach of the order.2 It is no defence that no consideration was given for the undertaking3 or that there was a defence to a claim in contract4 or that the underlying transaction did not proceed.5 Nor is there a limitation period for the enforcement of a solicitor’s undertaking although an application to enforce an undertaking may be struck out as an abuse of process.6 The dishonest purpose of the client or the fact that the solicitor was induced to give it as part of a fraudulent scheme will not prevent the recipient from enforcing it either.7 Neither will the fact that an undertaking has been given without the authority of the client affect its enforcement.8 1 See Geoffrey Silver & Drake v Baines [1971] 1 QB 396 at 402A (Lord Denning MR) and Fox v Bannister, King & Rigbeys [1988] QB 925 at 929F–G (Nicholls LJ). 2 See Discovery Land Co LLC v Jirehouse [2019] EWHC 2249 (Ch), [2020] PNLR 1 (Zacaroli J). 3 See Fox v Bannister, King & Rigbeys [1988] QB 925 at 931G (Sir John Donaldson MR). 4 See Udall v Capri Lighting Ltd [1988]  QB  907 at 919H–920A (Kerr LJ) (contract did not comply with s  40 of the Law of Property Act 1925). See also Hastingwood Property Ltd v Saunders Bearman Anselm [1991] Ch 114 at 125H–126A (Edward Nugee QC). 5 See Goldman v Abbott [1989] 2 EGLR 78, CA at 83D–E (Lloyd LJ). 6 See Taylor v Ribby Hall Leisure Ltd [1998] 1 WLR 400, CA at 407H–408B (Mummery LJ). Delay may be a ground for refusing to enforce an undertaking: see para 5.47, below.

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Undertakings  5.46 7 See Rooks Rider v Steel [1994] 1 WLR  818 at 828G–831B (where Knox J  enforced a costs undertaking between two firms of solicitors). 8 See Fox v Bannister, King & Rigbeys [1988] QB 925 at 928H–929A. Nicholls LJ did, however, suggest that if the recipient was aware that the solicitor did not have the client’s authority to give the undertaking, this might affect the court’s attitude to the exercise of its residual discretion: see 929B–C.

(e) Impossibility 5.46 The inability of the solicitor to perform the undertaking may be a ground for refusing to make an order requiring the solicitor to perform the undertaking and then an order for committal and instead making an order for compensation.1 In Fox v Bannister, King & Rigbeys2 where the solicitor had paid away the fund on the instructions of his client, the court did not make an order compelling the solicitor to comply with the undertaking but ordered him to pay compensation instead. In contrast, in Citadel Management Inc v Thompson3 the Court of Appeal refused to discharge an order for compliance with an undertaking and a subsequent order for committal despite the fact that the solicitor was unable to comply with an undertaking to pay US $17m to a third party. The facts were unusual, however. The solicitor had personally assured the third party (and also the court) that he could perform the undertaking. Buxton LJ stated: ‘The case does not, in my view, raise any issue of impossibility in the sense in which that term was used in Udall. The undertaking in this case was based on a representation by a solicitor and repeated by him to the court that made the original order. The alleged “impossibility” does not spring from a state of affairs or turn of events external to the solicitor, but rather is based on a contention that the solicitor now finds that he cannot perform acts which he assured the court he could perform. The alleged impossibility is thus the inability of the solicitor to do what he assured the court who made the order enforcing the undertaking that he could in fact do. I do not think that a solicitor can be heard to assert that as a reason why he should not suffer the penalty for breach of an order that was properly made on the basis of those assurances.’ It is clear from this extract that ‘impossibility’ does not mean that the solicitor can escape committal simply because he or she does not have the funds available to comply with the undertaking or is unable to recover them from the third party on whose behalf the undertaking was given.4 Moreover, it is no answer for the solicitor to say that in order to achieve compliance with the undertaking the solicitor will be required to discharge liabilities to a third party which are now substantially more than the amount which would have been necessary at the original date for compliance.5 In Hole & Pugsley v Sumption6 Hart J  also rejected the submission that there was a principle of law that a 257

5.47  Authority, vicarious liability and undertakings solicitor is discharged from liability to perform the undertaking if he notifies the recipient that he is unable to perform at the earliest opportunity. 1 See proposition (7) of the extract from Udall v Capri Lighting Ltd [1988] QB 907 set out in para 5.31, above. 2 [1988] QB 925, CA. See the judgment of Nicholls LJ at 929F–930D. 3 [1999] 1 FLR 21, CA. 4 In Discovery Land Co LLC  v Jirehouse [2019]  EWHC  2249 (Ch), [2020]  PNLR  1 Zacaroli J cited this passage in Citadel distinguishing between those cases in which compliance with an undertaking became impossible because of outside factors and those undertakings which the individual knew at the time to be impossible to comply with. He found that the solicitor had deliberately committed breaches of a number of disclosure undertakings and an undertaking for payment of funds. 5 See the cases discussed in para  5.47, below and, in particular, Clark v Lucas Solicitors LLP [2009] EWHC 1952, [2009] 3 EGLR 83 (Sarah Asplin QC). 6 [2001] Lloyd’s Rep PN 419, [2002] PNLR 20 at [23]–[29].

(f) Discretion 5.47 The court has a discretion both in relation to the procedure to be adopted and in relation to substantive relief. The court also has a residual discretion to discharge a solicitor from performance of the undertaking and award compensation or to refuse to enforce the undertaking at all. Delay is one reason why the court will exercise its discretion against enforcement. In Taylor v Ribby Hall Leisure Ltd1 the Court of Appeal refused to interfere with the judge’s discretion to strike out a claim for enforcement of an undertaking under the supervisory jurisdiction on the grounds of inordinate and inexcusable delay.2 The claimants had been aware of the breach of the undertaking for almost five years and it had caused no loss. In Fox v Bannister, King & Rigbeys3 Nicholls LJ suggested that another situation in which the court might refuse to enforce an undertaking or award compensation is ‘where there was real scope for genuine misunderstanding on what was said or meant by a solicitor on a particular occasion’. In Hole & Pugsley v Sumption4 Hart J  referred to this passage but declined to exercise his discretion in the solicitor’s favour. 1 [1998] 1  WLR  400, CA. Compare Inland Revenue Comr v Bhanabhai [2007]  NZCA  368, [2007] NZLR 478 where the court enforced an undertaking after a period of six years. 2 This would not, of course, prevent the recipient from seeking to enforce the undertaking if it had contractual force (which was not the case in Taylor v Ribby Hall Leisure Ltd where the undertaking was given in the course of proceedings). Moreover, it would not be necessary to satisfy the court that solicitor had been ‘guilty of professional misconduct or a serious dereliction of professional duty’ required to exercise the supervisory jurisdiction: see Udall v Capri Lighting Ltd [1988] QB 907 at 924B (Kerr LJ). 3 [1988] QB 925, CA at 930G. 4 [2001] Lloyds Rep PN 419, [2002] PNLR 20 at [35].

5.48 In a series of cases where buyers of land have sought to enforce undertakings given by the seller’s solicitors in replies to requisitions on title the court has been asked to consider whether it was proportionate to require the solicitor to comply with the undertaking.1 In each of those cases the solicitors 258

Undertakings  5.49 failed to comply with their undertakings to discharge existing charges and the question was whether the solicitor should be required to repay the creditor in full in order to achieve compliance with the undertaking. In each case the court recognised that there might be exceptional circumstances which might justify refusing an order for enforcement.2 However, in each case the court ordered enforcement because the relevant circumstances were not exceptional.3 The only circumstances in which the court is likely to refuse enforcement are where the breach of undertaking has not caused a loss and the solicitor has been able to complete the transaction.4 Moreover, the prudent course for the recipient of the undertaking would be to apply to court in any event. Even if the second mortgagee made an unjustified demand, the mortgagee could be joined as a party and the court could determine what was required to redeem the second charge. 1 L Morgan & Co v Jenkins O’Dowd & Barth [2008] EWHC 3411 (Ch) (Henderson J), Angel Solicitors v Jenkins O’Dowd & Barth [2009] EWHC 46 (Ch), [2009] 1 WLR 1220 (HHJ Hodge QC), Clark v Lucas Solicitors LLP [2009] EWHC 1952 (Ch), [2009] 3 EGLR 83, [2010] PNLR 2 (Sarah Asplin QC) and Thames Valley Housing Association Ltd v Elegant Homes (Guernsey) Ltd [2009] EWHC 2647 (Ch), [2010] 1 EGLR 73 (Mann J). 2 In L Morgan & Co v Jenkins O’Dowd & Barth [2008] EWHC 3411 (Ch) at [21] Henderson J  stated: ‘[I]f the bank were now to change its stance and to require terms which appear wholly unreasonable or to go beyond the scope of anything which could possibly have been contemplated when the undertaking was originally given, there may then, and I say no more than that, there may be a case for applying to the court to discharge the existing order and replace it with an inquiry as to damages suffered by the purchasers.’ This dictum was accepted as correct in each of the subsequent cases. 3 In Clark v Lucas Solicitors LLP [2009] EWHC 1952 (Ch) [2009] 3 EGLR 83, [2010] PNLR 2 the judge enforced the undertaking even though the second mortgagee was demanding payment in full and the amount demanded was almost double the value of the plot to which the undertaking related. In Thames Valley Housing Association Ltd v Elegant Homes (Guernsey) Ltd [2009] EWHC 2647 (Ch), [2010] 1 EGLR 73, where the facts were similar, Mann J followed that decision. 4 See Bank of Ireland Mortgage Bank v Coleman [2009] IESC 38, [2009] 3 IR 699 where the solicitor gave an undertaking not to release the mortgage advance without obtaining a legal charge over the property. By the date of the hearing in the Supreme Court the lender had been registered. The court refused to enforce the undertaking but remitted the claim to the High Court for an inquiry as to the losses which the lender had suffered as a result of the late registration of the charge.

(g) Compensation 5.49 The principles on which compensation is awarded were set out by Mummery LJ in Taylor v Ribby Hall Leisure Ltd:1 ‘The supervisory power over solicitors also stands comparison with criminal proceedings. The power is essentially a summary disciplinary one exercised by the court over its own officers to ensure their observance of an honourable standard of conduct and to punish derelictions of duty. The court has the necessary powers of enforcement which extend, unlike the contempt power … to 259

5.50  Authority, vicarious liability and undertakings the payment of compensation for loss suffered in consequence of misconduct of a solicitor in failing to implement an undertaking given to the court. The award of compensation is not, however, dependent on an enforceable civil law right on the part of the person who has suffered loss … Compensation is only available under this jurisdiction where the conduct of the solicitor is inexcusable and such as to merit reproof … The discretionary nature of the jurisdiction should be emphasised. The discretion extends both to procedure and substantive relief. It is flexible and unfettered by any absolute rules and is to be exercised according to the facts of the particular case.’ In Hole & Pugsley v Sumption2 the court awarded compensation on a contractual basis, namely, on the basis that the recipient was entitled to be placed in the position in which she would have been if the solicitors had performed their undertaking. In that case solicitors acting in matrimonial proceedings gave an unqualified undertaking to make certain payments out of the proceeds of sale of trust property including £275,000 to a bank to discharge a second charge and also £25,000 in agents’ fees and pay half of the remaining balance to the wife. In the event both the bank and the agents required substantially more than £275,000 and £25,000 to discharge the second charge and the fees and the solicitors discharged the second charge and the agents’ fees out of the balance of the proceeds of sale. The wife made a claim under the summary jurisdiction for compensation on the basis that the solicitors had undertaken to pay the specific sums of £275,000 and £25,000 and that they had broken their undertaking by paying the bank and the agents in full. Hart J held that they had given an unqualified undertaking to pay the specified sums and had acted in breach of the undertaking. He held that it was appropriate to award damages on the contractual basis.3 1 [1998] 1 WLR 400, CA at 408G–409B (cited by McBride J in Thomas v Conor Agnew [2017] NICh 28, [2018] PNLR 18 at [33]). In Allied Irish Bank Plc v Maguire & Co [2016] IESC 57, [2017]  PNLR  6 (where the facts were similar to Coleman (above) and the solicitor failed to comply with an undertaking to discharge an existing security in flagrant breach of undertaking) the Supreme Court of Ireland analysed many of the English cases in considering whether in an appropriate case it was possible to award damages for breach of a solicitor’s undertaking which went beyond compensating the victim. They held that the position was not clear and awarded damages by reference to the value of the security at the time of the loan: see section 6. 2 [2001] Lloyds Rep PN 419, [2002] PNLR 20. 3 See [2001] Lloyd’s Rep PN 419, [2002] PNLR at [30]–[33]. Compare Inland Revenue Comr v Bhanabhai [2006] 1  NZLR  797 (Laurenson J) (affirmed on appeal at [2007]  NZCA  368, [2007] NZLR 478) and Bank of Ireland Mortgage Bank v Coleman [2009] IESC 38, [2009] 3 IR 699 at [16] and [17] (where Geoghegan J stated that the claimant lender was entitled to recover for all loss flowing from the breach of the undertaking but refused to award damages on a ‘no transaction’ basis).

(h) Procedure 5.50 An application to enforce an undertaking under the summary jurisdiction should be made under CPR  Part 8 or by application in the 260

Undertakings  5.50 action if there are existing proceedings.1 If the claimant applies immediately for an order for committal the court will normally make an order for enforcement.2 The jurisdiction to make an order for enforcement should be exercised only in clear cases3 although, as the passage from Mummery LJ’s judgment in Taylor v Ribby Hall Leisure Ltd (above) indicates, the court has a flexible and unfettered discretion over the procedure which it may adopt. In Fox v Bannister, King & Rigbeys4 Nicholls LJ stated that in an appropriate case the court can resolve issues of fact with the assistance of disclosure and cross-examination. In Taylor v Ribby Hall Leisure Ltd5 the Court of Appeal also went out of its way to give clear guidance that an application to enforce an undertaking should be made promptly once the recipient of the undertaking becomes aware that it has been broken. They also stated that submissions on all relevant issues (such as delay, prejudice and injustice) should be dealt with at a single substantive hearing. Finally, a solicitor may well be negligent if he or she fails to apply promptly to enforce an undertaking. For instance, where the seller’s solicitor gives an undertaking to discharge a charge on the completion of a sale of land, it is the duty of the buyer’s solicitor to take steps to enforce that undertaking immediately if the seller’s solicitor is in breach and fails to produce the relevant documents on completion.6 1 See Fox v Bannister, King & Rigbeys [1988] QB 925, CA at 931G–H (Sir John Donaldson MR). For an example of the various stages in the procedure (where a suspended order for committal was made): see Citadel Management Inc v Thompson [1999] 1 FLR 21. No order for enforcement appears to have been made in Discovery Land Co LLC v Jirehouse [2019] EWHC 2249 (Ch), [2020] PNLR 1 (Zacaroli J). However, the undertakings in that case were given by the solicitor to the court and then when he acknowledged them to be impossible, were replaced by a freezing order. 2 See Re a Solicitor (Lincoln) [1966] 1 WLR 1604 (Pennycuick J) at 1608E–F: ‘No case was cited in which the court made an order for committal upon a direct application to commit for breach of the undertaking without having first made an order to perform the undertaking. I do not say that there is no jurisdiction to make such an order, but neither counsel was able to point to a case in which such an order had been made.’ See also Geoffrey Silver & Drake v Baines [1971] 1QB 396 at 402AD (Lord Denning MR). 3 See Geoffrey Silver & Drake v Baines [1971] 1  QB  396 at 403B–D  (Lord Denning MR), 404D–F (Widgery LJ) and 405B–D (Megaw LJ). 4 [1988] QB 925, CA at 930E. This passage was cited by Knox J in Rooks Rider v Steel [1994] 1 WLR 818 at 826H–827E. He refused to exercise his discretion to decline jurisdiction on the basis that there was ‘no factual difficulty’ that had not been resolved in favour of the solicitors or their client and ‘no jurisdictional impediment’ to deciding the point of law: see 828A. In Hole & Pugsley v Sumption [2001] Lloyd’s Rep PN 419, [2002] PNLR 20 Hart J took the same course on the basis that although there were underlying disputes of fact, the only real issues on enforcement were issues of construction: see [16]. Compare Udall v Capri Lighting Ltd [1988] QB 907, CA at 919F where Kerr LJ considered that if there was a dispute over the terms of an oral undertaking, the court might decline jurisdiction (although the judge at first instance had ordered statements of case and disclosure). For a decision in which the court refused to exercise the supervisory jurisdiction (with full citation of the English authorities) see McIlraith v Ilkin [2007] NSWSC 911 (Brereton J). 5 [1998] 1 WLR 400, CA at 409H–410A. 6 See Patel v Daybells [2001]  EWCA  Civ 1229, [2001] Lloyd’s Rep PN  738 at [66] (Robert Walker LJ): ‘[W]e would regard it as being normally part of a purchaser’s solicitor’s duty to

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5.50  Authority, vicarious liability and undertakings his client to take speedy steps to enforce the undertaking of a vendor’s solicitor (in relation to the discharge of a mortgage) once he is aware that the solicitor is in breach of his undertaking. It is an unsatisfactory feature of this case that on one of the very rare occasions on which a completion has gone wrong otherwise than through fraud and the matter has come to court, a solicitor’s undertaking seems to have failed to provide the necessary protection.’

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Chapter 6

Solicitors’ duties of confidentiality

A INTRODUCTION 6.01 It is a trite statement that a solicitor owes an obligation to his or her client to preserve the client’s confidences and not reveal to third parties information learnt in the course of the retainer.1 Indeed long before the modern law of confidentiality started to develop in the mid-nineteenth century the courts recognised that a lawyer owed to the client a duty not to disclose the client’s confidences except with the client’s express or implied consent.2 The new version of the Solicitors Regulation Authority Code of Conduct for Solicitors, RELs and RFLs 20193 states the duty as follows: ‘You keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents.’4 Indeed it has been said that, since solicitors are officers of the court, the solicitor’s obligations of confidence are stricter than those of other professional confidants; the court ‘can fix a higher standard for the behaviour of its officers than it would be practicable to exact from persons in other confidential relations’.5 It is easy to state in broad terms the obligation of confidentiality, but nonetheless its precise ambit and application can generate difficulties. The purpose of this chapter is to investigate the width of the solicitor’s obligation of confidentiality and the circumstances when it is typically tested in the courts. The chapter will be divided as follows: first we consider the relationship between the solicitor’s duty of confidentiality and the law of legal professional privilege (section B); at section C we consider the incidents and content of the duty and how the duty may be breached; finally at section D the remedies available to the client or former client to restrain a breach or otherwise obtain financial recompense are discussed. 1 So Gaselee J in Taylor v Blacklow (1836) 3 Bing (NC) 235 at 249, said that it was ‘the first duty of an attorney … to keep the secrets of his client. Authority is not wanted to establish that proposition’. In fact this case appears to be the first decision in which a solicitor’s duty of confidentiality was recognised in an action at law for damages: see Hardy v Veasey (1868) LR 3 Ex 107. The case is of interest in that the court clearly recognised that the claim did not depend upon it being established that the information communicated to the solicitor could have been withheld from a court as privileged, ie a distinction was drawn between the law of privilege and the law of confidence. For early cases decided by courts of equity, which typically involved attempts to prevent a solicitor acting, see Earl of Cholmondeley v Lord Clinton (1815) 19 Ves 261; Beer v Ward (1821) Jac 77; Bricheno v Thorp (1821) Jac 300; Davies v Clough (1837) 8 Sim 262; Johnson v Marriott (1833) 2 C&M 183; Lewis v Smith (1849) 1 Mac & G 417. In addition, a person’s communications with their lawyers are protected by virtue of Art.8 of the European Convention on Human Rights: see Foxley v United Kingdom (2001) EHRR 637.

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6.02  Solicitors’ duties of confidentiality 2 See General Mediterranean Holdings SA v Patel [2000] 1 WLR 272 at 280–281, (Toulson J). See also the historical survey of the early cases, dating back to the sixteenth century, in R v Derby Magistrates Court, ex p B [1996] 1 AC 487, HL. 3 Which came into force on 25 November 2019. In the Introduction to this new Code it is stated ‘The Code of Conduct describes the standards of professionalism that we, the SRA, and the public expect of individuals (solicitors, registered European lawyers and registered foreign lawyers) authorised by us to provide legal services.’ See generally Chapter 15. The SRA also issued Guidance on ‘Confidentiality of client information’ on the same day, referred to below as the ‘SRA Guidance’. 4 See paragraph 6.3. Client is defined in the Glossary as “the person for whom you act and, where the context permits, includes prospective and former clients.” The Conflicts and Confidentiality part of the new Code is in Section 6 and replaces Chapter 4 of the previous Code of Conduct 2011, which was headed ‘Confidentiality and disclosure’. The opening narrative to the previous Chapter 4 contained the following: ‘Protection of confidential information is a fundamental feature of your relationship with clients. It exists as a concept both as a matter of law and as a matter of conduct. The duty continues despite the end of the retainer and even after the death of the client.’ The term ‘client’ was likewise defined in the Glossary to the Code of Conduct 2011 as follows: ‘the person for whom you act and, where the context permits, includes prospective and former clients’. Hence it is suggested that the use of the word ‘client’ in both Codes clearly embraces both prospective and former clients. See also the previous r 4.01 of the 2007 Code of Conduct. Rule 4 of the 2007 Code replicated the former r 16E of the Solicitors Practice Rules 1990, which earlier Rule was introduced in 2006. Rule 16E was the first time that confidentiality, disclosure and information barriers had been dealt with by practice rules. In this chapter we continue to refer to the Guidance Notes to the 2007 Code of Conduct, notwithstanding the introduction of the 2011 and 2019 Codes. Those Guidance Notes remain an accurate and useful summary of law and practice. It seems that the reason why the Notes have not been retained is part of a ‘move away from prescriptive rules wherever that is appropriate’. For a detailed analysis of the origins and philosophy of the 2019 Code of Conduct see Chapter 15 below generally. 5 Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831, CA, 840. This case should be treated with care in the light of Bolkiah v KPMG [1999] 2 AC 222, HL, discussed at para 6.57ff, below.

B  CONFIDENTIALITY AND LEGAL PROFESSIONAL PRIVILEGE 6.02 The solicitor’s duty of confidentiality is closely interrelated with the law of legal professional privilege.1 Legal professional privilege (‘LPP’) is a substantive2 right3 which has two manifestations; the first, known as legal advice privilege (‘LAP’), applies, in summary terms, to communications made in confidence between lawyers and their clients for the purpose of giving or obtaining legal advice even at a stage when litigation is not in contemplation;4 the second, known as litigation privilege, applies to communications between the client or the client’s lawyer on the one hand and third parties on the other hand, or other documents created by or on behalf of the client or the client’s lawyer, which come into existence once litigation is in contemplation or has commenced, for the dominant purpose of obtaining information or advice in connection with, or of conducting or aiding in the conduct of, such litigation.5 LPP has often in the past been treated as a negative personal right, vesting in the client, to resist the compulsory disclosure6 of information or 264

Confidentiality and legal professional privilege  6.02 documents which are subject to its ambit, though it has more recently been described as an “immune status”.7 However the protection of that right also requires that where confidential documents otherwise subject to LPP have been mistakenly handed over8 by the client’s former solicitor9 or surreptitiously obtained10 then the court will intervene to protect LPP.11   1 We consider issues of disclosure and privilege in the procedural context of claims brought against solicitors at Chapter 14, below.  2 The old view that LPP was a rule of evidence is now dead and buried. It is now clearly established that LPP is a substantive right which, unless waived, cannot be overridden or infringed except by statute. See generally R  v Derby Magistrates Court, ex p B  [1996] 1 AC 487, HL at 507–508; R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563; B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736 at [37]ff.   3 But not a duty, in the sense that one talks of tortious, contractual or equitable duties. One does not talk of a breach of legal professional privilege as giving rise to a claim for damages etc. Moreover, being personal to the client, it is not a property interest which automatically vests in trustees in bankruptcy in the event of the insolvency of the client (if a natural as opposed to a legal person) and so is outwith s 436 of the Insolvency Act 1986: see Shlosberg v Avonwick Holdings Ltd [2016] EWCA Civ 1138, [2017] Ch 201 at [53]. Legal professional privilege was recently classified as an ““immune status”, which could exist irrespective of the existence of the previous right-holder (eg where it was a company which had been dissolved): Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255 at [45].  4 See Three Rivers District Council v Bank of England (No  6) [2004]  UKHL  48, [2005] 1 AC 610 at [50] (Lord Rodger). To what communications the privilege applies is the subject of considerable controversy, as is evident from the Three Rivers District Council v Bank of England litigation: see Chapter 14 below, and Thanki (ed), The Law of Privilege (3rd edn, 2018) at Chapters 2 and 3.  5 This description has been adapted from the helpful analysis in Thanki (ed), The Law of Privilege (3rd edn, 2018), at para 3.07. The convoluted description gives an indication of the complexities that can arise when applying the law of litigation privilege to particular factual situations. See generally Thanki, at Chapter 3.   6 Whether in court or arbitral proceedings or otherwise.   7 See footnote 3 above.  8 See for instance Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1  WLR  1027, CA. Mistaken disclosure of privileged documents by a litigant in court proceedings gives rise to special rules because issues of waiver arise: see para 6.73ff, below.  9 Hence in Goddard v Nationwide Building Society [1987] QB 670, CA, the claimant sued the defendant in respect of the valuation of a house which he had purchased. In the usual way the purchase and mortgage were handled by a single firm of solicitors acting for both the claimant and the defendant lender (which had also performed the valuation alleged to be negligent). After proceedings had been issued the solicitors disclosed to the defendant, in breach of their duty of confidence to the claimant, a document which was confidential to the claimant. The defendant sought to rely on the contents of the document in its defence. It was held that the document was privileged and so could not be relied upon by the defendant in its defence. Further the defendant was injuncted from use or reliance on the document or its contents and ordered to deliver up to the claimant all copies of the document. A more recent application of the jurisdiction identified in Goddard is Macpherson v Wise [2011] EWCA Civ 399, [2011] BPIR 824, where the court refused to accept in evidence a letter sent by a party’s former solicitor to the other party to the litigation because it contained privileged information. That case is a good example of the court refusing to entertain the suggestion that the privileged information should be admitted because otherwise the fairness of the trial would be impeded. It has also been suggested that there are two broad classes of case involving disclosure by solicitors: (i) those where there had been a previous lawyer-client relationship and the lawyer who had acquired confidential or privileged information in the course of his retainer now wished to act for another party who was in dispute

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6.03  Solicitors’ duties of confidentiality with the original client; and (ii) cases in which a lawyer came into possession of confidential or privileged information belonging to the other side in the course of a dispute. In both scenarios the court will restrain use of confidential or privileged information, but only in the former class of case is an injunction likely to be granted restraining the solicitor from acting for their existing client, as opposed to simply restraining the use of the confidential information: see Stiedl v Enyo Law LLP  [2011]  EWHC  2649 (Comm), [2012]  PNLR  4 at [39]. A  potential third class, where the solicitor is subject to express confidentiality obligations arising out of a mediation was posited at first instance in Glencairn IP Holdings Ltd v Product Specialities Inc (t/a Final Touch) [2019] EWHC 1733 (IPEC), [2019] PNLR 31, discussed further at para 6.75, below. 10 See Lord Ashburton v Pape [1913] 2 Ch 469, CA, where the claimant’s solicitor’s clerk was suborned into handing over privileged letters passing between the claimant and his solicitor to the defendant. An injunction was granted preventing the defendant from adducing the documents in evidence or otherwise making use of them. 11 In doing so the court is exercising its equitable jurisdiction to protect confidential information. See Goddard, above, at 680, 684–686: ‘[O]nce it is established that a case is governed by Lord Ashburton v Pape [1913] 2 Ch 469 there is no discretion in the court to refuse to exercise the equitable jurisdiction according to its view of the materiality of the communication, the justice of admitting or excluding it or the like. The injunction is granted in aid of the privilege which, unless and until it is waived, is absolute. In saying this, I do not intend to suggest that there may not be cases where an injunction can properly be refused on general principles affecting the grant of a discretionary remedy, for example on the ground of inordinate delay …’ (at 686). The jurisdiction was stated as follows in Nationwide Building Society v Various Solicitors (No.2) (unreported, 30 March 1998), at pp 35–36 of the transcript (Blackburne J): ‘where … disclosure of a confidential and privileged communication has been made to a third party by someone bound by the confidence but having no authority of any kind from the person entitled to that privilege, then, ordinarily, the court will act on the latter’s application to restrain the third party’s use of that communication and will do so however innocent the conduct of the third party.’ There is controversy whether the equitable jurisdiction is a discretionary one, so that relief can in any circumstances be refused, with the result that a privileged document may be capable of being adduced in evidence. See generally Istil Group Inc v Zahoor [2003] EWHC 165 (Ch), [2003] 2 All ER 252 (Lawrence Collins J). To the extent that Istil is authority for the proposition that when considering whether or not to grant an injunction the court must embark upon a ‘balancing exercise’ doubt has been cast on this decision subsequently: see JP Morgan Multi-Strategy Fund LP v Macro Fund Limited [2003] CILR 250, B v Auckland Law Society [2003] UKPC 38, [2003] 2 AC 736 and London Borough of Redbridge v Johnson [2011] EWHC 2861 (QB). In Toulson & Phipps, Confidentiality (3rd edn, 2012), the position is stated, at para 18-068, as follows: ‘Where privileged information has been improperly or accidentally disclosed without the consent of the person entitled to the benefit of it, the court ought not to conduct a general balancing exercise in deciding whether to grant relief to protect the privilege. Such relief ought to be granted unless there are other grounds for not doing so (for example, that the information has already been deployed publicly or so widely that it can no longer sensibly be regarded as confidential). This is probably the present law, but it is not entirely settled.’ See also the views expressed in Hollander, Documentary Evidence (13th edn, 2018) at 25-17 and the summary of the case law at 25-18. In Lachaux v Independent Print Ltd [2017] EWCA Civ 1327 the Court of Appeal treated it is as obvious that the public interest of protecting LPP was paramount where privileged documents had been passed to the other party in litigation and trumped the countervailing public interest in the emergence of the truth.

6.03 However LPP can only apply to, and protect, communications which are otherwise confidential.1 This is because at the root of LPP (and more particularly LAP) lies the obligation of confidence which a legal adviser owes his or her client in relation to confidential communications passing between 266

Confidentiality and legal professional privilege  6.03 them. LAP provides a form of overlay of added protection to the confidentiality of those communications.2 It is LAP which distinguishes the confidentiality inhering in communications between client and lawyer and those between the client and other professionals. Whereas the confidentiality of communications between client and doctor is not an absolute ground, of itself, to resist disclosure of those communications in court or other proceedings (whether by the patient or the doctor),3 confidential communications between lawyer and client are (in general) privileged from disclosure by LPP. The justification for this distinct status has been the subject of considerable debate. Its most famous exposition is perhaps that of Lord Taylor CJ in R v Derby Magistrates’ Court, ex p B:4 ‘The principle which runs through all these cases, and the many other cases which were cited, is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests … it is not for the sake of the applicant alone that the privilege must be upheld. It is in the wider interests of all those hereafter who might otherwise be deterred from telling the whole truth to their solicitors.’ LPP thus accords the confidentiality of lawyer/client communications, and hence the duty of confidence owed by the lawyer to his or her client, a special status which, as we will see, affects the way the courts act so as to protect the client’s confidentiality and so regulate the conduct of solicitors. 1 It is suggested in Thanki (ed), The Law of Privilege (3rd edn, 2018), at para 2.83ff, that, for the purpose of asserting privilege, the precondition that the communication should be ‘confidential’ should be broadly, and liberally, interpreted. 2 See Paragon Finance plc v Freshfields [1999] 1 WLR 1183, CA at 1188. 3 See, famously, The Duchess of Kingston’s Case (1776) 20 State Tr 355 at 386–391 where the defendant’s doctor was compelled by the court to give evidence of communications which he had had with the defendant which were otherwise confidential. Had the witness been a lawyer not only would he not have been obliged to answer questions tending to reveal such communications, but he would have had a positive obligation to refuse to answer such questions. In Three Rivers District Council v Governor and Company of the Bank of England (No  6) [2004] UKHL 48, [2005] 1 AC 610, Lord Scott said, at [28]: ‘In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he

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6.04  Solicitors’ duties of confidentiality is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail.’ However in determining whether specific disclosure should be ordered the court is required to balance the right to a fair hearing of the party seeking disclosure with the other party’s right to respect for private life under Article 8 of the ECHR: see Nayler v Beard [2001] EWCA Civ 1201, [2001] CP Rep 104. 4 [1996]  AC  487, HL at 507. There was an attempt to extend legal advice privilege to communications between accountants and clients in relation to tax advice on the basis that nowadays accountants give legal advice about fiscal liabilities in the same way that lawyers do. This attempt failed at every appellate level all the way up to the Supreme Court, in R (Prudential plc) v Special Commissioner of Income Tax (Pandolfo) [2013] UKSC 1, [2013] 2 AC  185. Although the case generated two important and interesting dissenting judgments from Lord Clarke and Lord Sumption JJSC, nonetheless the principle that it is the special status of lawyers which gives rise to legal advice privilege must now be considered as settled unless and until Parliament enacts legislation on the subject. This area of jurisprudence may well lead to difficulties in the context of the Alternative Business Structures (or ABSs). These hybrid firms are now permitted under the Legal Services Act 2007, enabling lawyers and non-lawyers to provide multi-disciplinary services to clients. For a consideration of some of the issues this may give rise to, see Stockdale and Mitchell, “Legal professional privilege and the alternative business structure” (2012) 33 The Company Lawyer 204.

6.04 It follows from this that one of the most important aspects of the solicitor’s duty of confidentiality, whether or not the retainer is at an end, is that, if faced with a demand for disclosure by a third party, whether or not in the context of court or arbitral proceedings to which the solicitor is a party, or if served with a witness summons to attend to give evidence at a trial, the solicitor must uphold and assert their client’s or former client’s privilege, even if it would otherwise be in the solicitor’s interests to make disclosure.1 This means that the solicitor, if a substantive defendant to proceedings, cannot plead a defence which is founded on privileged material except to the extent that the privilege is waived.2 The principle also extends to the situation where the solicitor, as a defendant to proceedings, is met with a request for further information or an application for specific disclosure. If the request or application, were it to be acceded to, would result (or arguably result) in the disclosure of privileged information or documents then the solicitor must assert that privilege and resist the request or application.3 However, it appears that where the solicitor is a defendant to proceedings and that solicitor inadvertently discloses to the claimant confidential documents to which privilege applies (the privilege belonging to a client or former client who is not party to the litigation), then the solicitor has no locus him or herself to subsequently assert that privilege as against the claimant. It was held in Nationwide Building Society v Various Solicitors4 that the fact that a solicitor is subject to a duty to preserve the confidentiality of privileged communications does not mean that, if, for whatever reason, including the solicitor’s own inadvertence, the communications come into the possession of a stranger (in that case the claimant building society), the solicitor acquires a locus to assert his or her client’s (or former client’s) right of confidence. Any claim to restrain use of those documents, based as it would 268

Confidentiality and legal professional privilege  6.04 be on the Ashburton v Pape5 jurisdiction, would have to be made by the client rather than the solicitor.6 1 See R  v Derby Magistrates Court, ex p B  [1996] 1 AC  487 at 504–505. So, if a solicitor is asked a question in cross-examination the answer to which would tend to reveal privileged communications, he or she is both entitled and obliged to refuse to answer. Indeed it would appear that the court will intervene to prevent him or her giving such an answer, even if otherwise willing. See for instance Wilson v Rastall (1792) 4 Durn & E 753. (Contrast Hunter v Mann [1974]  QB  767 where a doctor was required by the police under s  168 of the Road Traffic Act 1972 to divulge the identity of two people whom he had treated and who were suspected of having committed the crime of dangerous driving. He declined to do so on the ground that such information was confidential as having been obtained through the relationship of doctor and patient. It was held that that was not a proper basis to refuse the requirement and the doctor was convicted for failing to comply with the request). This duty was recognised in Quinn Direct Insurance Ltd v Law Society of England and Wales [2010] EWCA Civ 805, [2011] 1 WLR  308, where the Law Society, which had intervened in a solicitors’ practice (and had taken possession of the solicitors’ files) was held to be entitled (and indeed obliged) to refuse to provide copies of those files to the solicitors’ insurers on the grounds that they were confidential to the solicitors’ clients and those clients enjoyed a right of privilege over them. The case has substantial implications for professionals with ‘claims made’ insurance policies. The Chancellor said, at [23]–[24] that: ‘I  do not accept that an insured solicitor under any form of “claims made” policy is either entitled or bound to disclose to his insurer, either on inception, renewal or notification, confidential and privileged documents or information of the client without the client’s consent. The documents and information are held by the solicitor subject to the right and privilege of the client requiring them to be kept confidential … If the client will not waive his privilege to enable a proper notification to be made by the solicitor either before inception or during the currency of the policy then the solicitor will no doubt so inform the qualifying insurer. The solicitor is not entitled to ignore the client’s privilege … It may be that, if the client will not waive his privilege to enable proper disclosure to be made, the consequence of the resulting conflict of interest will be that the insurance is vitiated or the notification inadequate but that is the problem of the solicitor not the client, cf Hilton v Barker Booth & Eastwood [2005] 1 WLR 567. The solicitor’s duty of disclosure cannot override the entitlement of the client.’ Whilst the result in Quinn is clearly correct, the reasoning is pitched very widely and can give rise to real practical difficulties. For further analysis of this decision see para 14.11, below. 2 The privilege may be prospectively waived. So in Mortgage Express v Sawali [2010] EWHC 3054 (Ch), [2011] PNLR 11 a clause in a mortgage application contained an authority by the borrower permitting disclosure of the transaction file to the lender by the solicitor acting for both parties. On an application for such disclosure by the lender the solicitor asserted the borrower’s supposed privilege but the court, in ordering disclosure, held that the borrower had expressly waived it. 3 See, for instance, Raiffeisen Bank International AG  v Asia Coal Energy Ventures Ltd [2019] EWHC 3 (Comm). 4 [1999]  PNLR  52 (Blackburne J). That does not mean that the solicitors necessarily have to incur costs in upholding their former client’s privilege, especially in the absence of an indemnity being offered by that former client. But it was held in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255 at [91]–[93], that if the solicitors, in order to ‘fulfil that duty … incur costs (including costs in resisting an application for disclosure) they are doing no more than fulfilling that duty’ and therefore, when the defendant solicitors in that case successfully resisted disclosure, they were entitled to costs which they themselves had incurred. 5 See para 6.02, above. 6 It is suggested that the reasoning in this case is suspect. In Nationwide the documents disclosed by the solicitors, and which they tried to claw back, relying on their former client’s privilege, were plainly detrimental to their defence. But what if A sues solicitor B and B seeks to deploy in support of his defence plainly privileged documents which are confidential to C? Assume that

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6.05  Solicitors’ duties of confidentiality B does not inform C of his decision and is clearly acting in breach of C’s rights of confidentiality and privilege. The court would surely intervene to prevent B’s breach, regardless of C’s intervention. C might be wholly unaware of B’s conduct. The position would be analogous to the court’s own intervention in the case referred to by Buller J in Wilson v Rastall (1792) 4 Durn & E 753 to prevent the attorney from giving evidence of privileged communications. In another early case, Beer v Ward (1821) Jacob 77, Lord Eldon LC said, at 80, that: ‘It would be the duty of any Court to stop [a lawyer] if he was about to disclose confidential matters … the Court knows the privilege of the client, and it must be taken for granted that the attorney will act rightly, and claim that privilege; or that if he does not, the Court will make him claim it’. Similarly in R v Derby Magistrates Court, ex p B [1996] AC 487, at 404–405, Lord Taylor CJ referred to: ‘… the rule that the privilege is that of the client, which he alone can waive, and that the court will not permit, let alone order, the attorney to reveal the confidential communications which have passed between him and his former client.’

C  THE DUTY OF CONFIDENTIALITY 1  Sources of the duty 6.05 Solicitors may be engaged by clients on the basis of contracts of retainer which contain express contractual obligations of confidentiality. But even where, more usually, that is not so, the solicitor will, as part of the wider collection of contractual, tortious and fiduciary duties owed to his or her client, owe obligations of confidentiality to the client. So: (a)

Even where there are no relevant express terms of the retainer, there will be implied into the contract of retainer between solicitor and client a term imposing a duty of confidentiality.1

(b) The usual criterion for the imposition of an equitable duty of confidentiality, by reference to the general law of confidence, will in almost all (if not all) circumstances be met – ie the solicitor will receive the information knowing, or being taken to know, that it is intended that it be kept secret.2 Such a duty is recognised whether or not the confidant stands in a fiduciary relationship with the confider.3 (c)

The fiduciary duties owed by the solicitor to the client, arising out of the relationship of trust and confidence recognised by the law as subsisting between solicitor and client,4 will carry with them an implicit obligation of confidentiality as an aspect of the wider duty of loyalty owed to the client.5

(d)

The tortious/implied contractual duty to exercise reasonable skill and care in the performance of the retainer, which is owed by the solicitor to the client, can itself carry with it duties to preserve and protect the client’s confidentiality. The solicitor who leaves confidential documents belonging to his or her client on a train or who mistakenly sends a confidential 270

The duty of confidentiality  6.05 document to a third party may well be guilty of negligence, quite apart from being liable for breach of other duties owed by the solicitor.6 (e) On 25  April 2006 a new Solicitors’ Practice Rule, r 16E, came into force dealing with confidentiality and disclosure. This became r 4 of the Solicitors’ Code of Conduct 2007 (and then chapter 4 of the 2011 Code of Conduct) and the professional obligations relating to confidentiality and disclosure are now contained in Section 6 of the 2019 Solicitors Regulation Authority Code of Conduct. This Section does not give rise to directly enforceable duties, but a failure to comply will carry substantial weight when considering whether or not a solicitor has acted in breach of duty.7 1 See Parry-Jones v Law Society [1969] 1 Ch 1, CA at 7 per Lord Denning MR: ‘The law implies a term into the contract whereby a professional man is to keep his client’s affairs secret and not to disclose them to anyone without just cause … This particularly applies in the relationship of solicitor and client. The solicitor is not to disclose his client’s affairs to anyone at all except under the most special and exceptional circumstances.’ The case is also authority for the proposition that statutory rules may override any privilege or confidence that might otherwise exist between solicitor and client. 2 The classic analysis is to be found in Coco v A N Clarke Engineers Ltd [1969] RPC 41 at 48–49, where Megarry J stated the elements to be proved in a claim for breach of confidence. The first was that the information ‘must be of a confidential nature’. The second, relevant here, was that: ‘the information must have been communicated in circumstances importing an obligation of confidence. However secret and confidential the information, there can be no binding obligation of confidence if that information is blurted out in public or is communicated in other circumstances which negative any duty of holding it confidential … if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence.’ Megarry J’s third element was unauthorised use of the information to the detriment of the confider. See also A-G v Guardian Newspapers (No 2) [1990] 1 AC 109, HL at 281B, per Lord Goff (the Spycatcher case). 3 However, as discussed at para 6.40, below, a solicitor may be under a special disability in that he or she may be prohibited from publishing information concerning the client even where that information does not strictly fulfil the criterion of confidentiality. 4 In Re van Laun, ex p Chatterton [1907] 2 KB 23, CA, 29 Cozens-Hardy MR referred to the ‘relation between the parties of solicitor and client … [as] … one of the most important fiduciary relations known to our law’. For fiduciary duties generally, see para 4.26ff, above. 5 In A-G v Blake [1998] Ch 439, CA at 454, the duty of confidentiality was described as itself a ‘fiduciary relationship’ which ‘arises whenever information is imparted by one person to another in confidence’, and which usually subsists within the context of another fiduciary relationship. Whether the duty of confidentiality was properly to be categorised as a fiduciary one was left open by the Privy Council in Arklow Investments v Maclean [2000] 1 WLR  594 at 600. In principle, it seems preferable to characterise the obligation of confidence as an equitable, rather than fiduciary, duty except where it arises within the context of a pre-existing and ongoing fiduciary relationship. This accords with the general law of confidence. A duty of confidence does not per se carry with it any fiduciary obligation of loyalty: see for instance the decision of the Supreme Court of Canada in LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14, at 64, quoted below at fn 3 of para 6.06 and the New Zealand case of Hunt v A [2008] 1 NZLR 368 at [64]. See also the views expressed in Toulson & Phipps, Confidentiality (3rd edn, 2012), at 2-101. 6 See for instance Weld-Blundell v Stephens [1919] 1 KB 520, CA, and [1920] 1 AC 956, HL, and Swinney v Chief Constable of Northumbria Police Force [1997] QB 464, CA. 7 See para 2.12ff, above.

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6.06  Solicitors’ duties of confidentiality 6.06 Although, therefore, the source of the obligation of confidence can be founded upon a number of separate juridical bases, in practice, at least during the currency of the retainer, the obligation is often analysed as an aspect of the solicitor’s fiduciary duties. This is, first, because the fiduciary duties owed by a solicitor may be wider than his or her contractual duties: the source of the fiduciary duties owed by a solicitor to the client is not the retainer itself, but all the circumstances (including, where relevant, the retainer) creating a relationship of trust and confidence, from which relationship flow obligations of loyalty and transparency.1 Hence, such duties may exist irrespective of a retainer and may preand post-date the period of the retainer. On the other hand a solicitor’s fiduciary duties generally come to an end at the date of termination of the retainer2 (though this is not always so as the case of Longstaff v Birtles demonstrates) and so the basis for the solicitor’s continuing duty of confidence post-retainer will generally be founded upon contract or the equitable duty of confidence. Secondly, there is a potential advantage to the client (or former client) in relying on equitable obligations of confidence (whether or not as an aspect of the solicitor’s fiduciary duties), most obviously in the choice of remedies available.3 Whereas a claimant alleging breach of a common law duty will generally be confined to a remedy reflecting loss sustained flowing from the breach, equitable remedies include claims for an account of profits or that property acquired as a result of a breach of duty is held on constructive trust for the claimant.4 1 Longstaff v Birtles [2001]  EWCA  Civ 1218, [2002] 1  WLR  470 at [1]; Ratiu v Conway [2005] EWCA Civ 1302, [2006] 1 All ER 571 at [71]–[73]; Allison v Clayhills (1907) 97 LT 709. Hollander & Salzedo, Conflicts of Interest, (5th edn, 2016) suggest, at para 2–044ff, that these cases should be given a restricted application. See also para 4.27, above. 2 See A-G v Blake [1998] Ch 439, CA at 453: ‘We do not recognise the concept of a fiduciary obligation which continues notwithstanding the determination of the particular relationship which gives rise to it’. See also Bolkiah v KPMG [1999] 2 AC 222, HL at 235C, discussed at para 6.57ff, below. 3 Note however the statement by Sopinka J in LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14, at 64 that: ‘… the fact that confidential information is obtained and misused cannot itself create a fiduciary obligation. No doubt one of the possible incidents of a fiduciary relationship is the exchange of confidential information and restrictions on its use. Where, however, the essence of the complaint is misuse of confidential information, the appropriate cause of action in favour of the party aggrieved is breach of confidence and not breach of fiduciary duty’. This dictum was cited with approval in the Court of Appeal case of Indata Equipment Supplies Ltd v ACL Ltd [1998] 1 BCLC 412 at 419. Neither of these cases involved professionals, but rather the attempt by claimants to establish a fiduciary relationship between commercial parties. 4 See para 6.54ff, below.

6.07 Notwithstanding that the solicitor’s fiduciary duties are founded upon a juridical basis which is distinct from the solicitor’s contractual duties, nonetheless, during the currency of the retainer, those fiduciary duties will typically be co-extensive with the contractual duties owed. ‘A solicitor’s duty of single-minded loyalty to his client’s interest, and his duty to respect his client’s confidences, do have their roots in the fiduciary nature of the solicitor272

The duty of confidentiality  6.08 client relationship. But they may have to be moulded and informed by the terms of the contractual relationship’.1 The point is that although fiduciary duties arise independently of contract (and may exist irrespective of the existence of a contractual relationship), nonetheless where a fiduciary relationship does co-exist alongside a contractual one, then the scope and width of those fiduciary duties will be defined by the terms of the contract (whether implied or express): fiduciary duties do not exist in a vacuum and are not immutable in their ambit and content.2 The classic statement of the position is in Mason J’s judgment in the Australian case of Hospital Products Ltd v United States Surgical Corpn:3 ‘That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.’ 1 Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567 at [30]. Discussed at fn 1 to para 1.01, para 2.13 and para 4.27, above, and para 6.37, below. 2 See per Lord Browne-Wilkinson in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, HL at 206: ‘The phrase “fiduciary duties” is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. This is not the case.’ 3 (1984) 156 CLR 41 at 97. See also Ross River Ltd v Waveley Commercial Ltd [2012] EWHC 81 (Ch) at [235]ff.

2  Incidents of the duty (a)  The duty post-dates the termination of the retainer 6.08 Although during the period of the retainer the obligation of confidentiality is typically analysed as an aspect of the solicitor’s fiduciary duties, the obligation clearly survives the termination of the retainer (which usually marks the end of the fiduciary relationship between solicitor and client). So the obligation to preserve the (former) client’s confidentiality continues even after the retainer has come to an end, though the solicitor will generally no longer be subject to fiduciary obligations: ‘Where the court’s intervention is sought by a former client, however the position is entirely different. The court’s jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client 273

6.09  Solicitors’ duties of confidentiality comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality imparted during its subsistence’.1 1 Bolkiah v KPMG [1999] 2 AC 222, HL at 235C (emphasis added). Note also the view expressed by Lightman J in Campbell v Frisbee [2002] EWHC 328 (Ch), [2002] EMLR 31 at [31] that: ‘It is plain beyond question that the obligation of confidence of eg a lawyer, doctor or security consultant survives acceptance by the service provider of the repudiation of his contract by the client. Indeed that is surely the premise upon which the relationship between client and service provider is created.’ Although the appeal against Lightman J’s order of summary judgment in favour of the claimant was allowed (at [2002]  EWCA  Civ 1394), this statement is surely correct (and was not commented upon by the Court of Appeal). See also Walsh v Shanahan [2013] EWCA Civ 411 at [38] and [68].

6.09 This duty of silence theoretically continues indefinitely, even after the death of the client.1 As was pointed out in an early case, where an attorney had been prevented from giving evidence which would have involved imparting information learnt by the attorney in the course of the retainer: ‘I  thought that the privilege of not being examined to such points was the privilege of the party, and not of the attorney: and that the privilege never ceased at any period of time. In such a case it is not sufficient to say that the cause is at an end; the mouth of such a person is shut forever.’2 The authors of Confidentiality suggest that this dictum may overstate the position in that information can lose its quality of confidentiality and so, applying normal principles relating to the general law of confidence, the obligation will be discharged.3 While it is undoubtedly the case that, in normal circumstances, a confidant will be discharged from his or her duty of confidence where the subject matter of the duty itself ceases to be confidential,4 it is suggested that different principles may apply to fiduciaries (and in particular solicitors) such that even where the subject matter of the duty enters the public domain, the solicitor is still, in general, disabled from disclosure. We discuss this issue further at para 6.21, below. 1 And, if the client was a company, its dissolution: see Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255. On the death of a human client the duty will become owed to, and the right to sue for breach will vest in, the client’s personal representatives. See for instance Fogg v Gaulter and Blane (1960) 110 LJ 718: accountants were held liable for breach of confidence where, after their client’s death, they disclosed information which damaged his estate. See also Bluck v Information Commissioner [2008] WTLR 1 and para 5 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007. In the 2019 SRA Guidance it is stated that the duty continues ‘despite the end of the retainer or the death of the client when the right to confidentiality passes to the client’s personal representatives’. 2 Per Buller J in Wilson v Rastall (1792) 4 TR 753 at 759, recalling an earlier case decided by the judge. 3 Toulson & Phipps, Confidentiality (3rd edn, 2012), at 16–005. 4 See Mustad & Son v Dosen [1964] 1 WLR 109, HL.

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The duty of confidentiality  6.11

(b)  To whom is the duty owed? 6.10 A solicitor may owe fiduciary duties not just to his or her immediate client but also to others. Because, as has been noted above, a fiduciary relationship may exist independently of a contractual relationship, there may be circumstances in which fiduciary duties (including a duty of confidentiality) may arise not only between the solicitor and the client but also between the solicitor and a third party who is closely connected with the client. For instance, where a solicitor acts for a special purpose vehicle company incorporated in respect of a particular transaction, then the solicitor may additionally owe fiduciary duties to the holding company or owners of the company, even though the retainer is solely with that company. It seems that equity may recognise a person who is not as a matter of law in a contractual relationship with the solicitor as ‘the true client’ and hence a person to whom fiduciary duties may be owed.1 Referring to the decision in Ratiu v Conway the Court of Appeal in Diamantides v JP Morgan Chase Bank stated: ‘The importance of this passage2 lies in the recognition that, in a case where a fiduciary relationship arises out of a contractual relationship, it does not matter whether the person to whom the [fiduciary] duty is owed entered into the contract directly or through an agent or through a nominee company. What matters is whether a relationship of trust and confidence has come into being. As I  understand it, Auld LJ was seeking to emphasise in these passages that because a fiduciary relationship does not depend on the existence of contractual relations, there may be circumstances in which a duty of that kind may arise not only between the fiduciary and the client but also between the fiduciary and a third person who is closely connected with the client’.3 A similar principle was recognised in the Australian case of MacQuarie Bank Ltd v Myer,4 where it was held that a solicitor could come under a duty of confidence to a person who was ‘as good as a client’, for instance a director of a client company. 1 See, for instance, Ratiu v Conway [2005] EWCA Civ 1302, [2006] 1 All ER 571 (discussed in further detail below at para 6.29) and Diamantides v JP Morgan Chase Bank [2005] EWCA Civ 1612. Ratiu was applied in JD Wetherspoon Ltd v Van de Berg Co [2009] EWHC 639 (Ch). For an exposition of the relevant principles see Ross River Ltd v Waveley Commercial Ltd [2012] EWHC 81 (Ch) at [235]ff. 2 Ie [78] of Ratiu v Conway. 3 At [35]. 4 [1994] 1 VR 350. The question of whether a relationship of trust and confidence has come into being is an objective one and whether or not a person subjectively places confidence in the solicitor is not therefore the relevant test. The question is whether that person was entitled so to do in light of all the circumstances: see Al Nehayan v Kent [2018] EWHC 333 (Comm) at [163].

6.11 Further, irrespective of the existence or not of any fiduciary relationship, a solicitor may owe a freestanding equitable duty of confidence to a person who is not his or her client. So, it is suggested that where a client 275

6.12  Solicitors’ duties of confidentiality (in the broad sense used above) discloses to his or her solicitor confidential information concerning, say, a family member, or an associated company, then it is likely that that person/company (as well as the client) could directly enforce an obligation of confidentiality against the solicitor, notwithstanding the absence of any solicitor/client relationship existing between them or indeed any fiduciary relationship between them.

(c)  The duty is absolute 6.12 The duty of confidentiality owed by a solicitor to his or her client arises out of the relationship of trust and confidence which the law recognises as existing between solicitor and client, not as an aspect of the solicitor’s duties in respect of the provision of skilled services. Accordingly the duty to preserve confidentiality is ‘unqualified. It is a duty to keep the information confidential, not merely a duty to take all reasonable steps to do so.’1 So, on this analysis, the duty is not an aspect of the solicitor’s duty to take reasonable care (whether arising in contract or tort). It is not therefore a negligence-based liability. It is essentially a strict liability obligation.2 1 Bolkiah [1999] 2 AC 222, HL at 235G. 2 Though note that in Weld-Blundell v Stephens [1919] 1 KB 520, CA (on appeal to the House of Lords at [1920] AC 956, though not on this point) each member of the Court of Appeal treated the case (involving a claim against an accountant for having accidently revealed the contents of a confidential letter received from his client to a third party) as one requiring proof by the claimant of a breach of an obligation to use reasonable care; see [1919] 1 KB 520 at 526, 531, 538. However the claimant’s pleaded case was for breach of an implied term to use reasonable care to keep secret the contents of letters passing between the claimant client and the defendant accountants, so that the judgments may simply reflect the way the case was put.

6.13 An example of the application of this principle, albeit in circumstances which availed the solicitor, is Marsh v Sofaer, which illustrates that a client cannot be assumed to consent to communication of confidential information from one set of solicitors to another set of solicitors retained by the same client.1 In that case the defendant solicitor was acting for the claimant, a woman of low intelligence, in relation to civil proceedings under the Inheritance (Provision for Family and Dependants) Act 1975. The claimant was at the same time being prosecuted for certain fraud offences. She retained separate solicitors to represent her in the criminal proceedings. She was convicted. She later brought a claim against the solicitor in the civil proceedings alleging that (i) he should have realised during the course of the retainer that she lacked capacity; (ii) he should have disclosed that fact to the criminal solicitors; and (iii) had he done so, she would not have been convicted because she would have been found unfit to plead. The claim was struck out. The judge held that: (a) the communications between the client and the civil solicitor were confidential; and equally confidential were any conclusions which were or should have been drawn by the civil solicitor as to the claimant’s mental condition;2 276

The duty of confidentiality  6.14 (b) therefore it would have been a breach of his duty of confidentiality to inform the criminal solicitors of those conclusions.3 While the first stage in this reasoning is sound, and properly recognises the all-encompassing nature of the duty, the second stage leads, it is suggested, to an odd result. Although the issue was not canvassed in detail, it seems at least arguable that in those circumstances the civil solicitor had a duty to seek the claimant’s permission to disclose his conclusions to the criminal solicitors and was therefore arguably in breach of that duty. 1 [2003] EWHC 3334 (Ch), [2004] PNLR 24 (Sir Andrew Morritt V-C). 2 At [42]–[44]. 3 At [44]–[48].

6.14 However it may be an oversimplification to state the duty as in all circumstances an absolute or strict one and indeed it is notable that the leading case on the subject, Bolkiah v KPMG,1 was concerned not with actual breach but with the risk of future breach and the proper remedial response of the court to such a risk. A  solicitor has a general implied authority to communicate information to a third party during the course of his or her retainer in order to further the interests of the client. It is this implied authority which permits the solicitor to correspond with third parties on the client’s behalf.2 What if, while corresponding with such a third party, the solicitor discloses information which is of a confidential nature? It may be that the disclosure can be properly justified in the circumstances and hence fall within the implied authority. The issue may well be one of judgment on the part of the solicitor. In such a case it is suggested that the question of whether the disclosure is actionable as a breach of duty is more properly analysed by reference to the court’s negligence jurisdiction so that it is judged by reference to the duty of skill and care. 1 Discussed at para 6.57ff, below. 2 In Cordery on Solicitors (looseleaf edition, as at 2008, which has subsequently been superseded, the work being now known as Cordery on Legal Services) the issue was put as one of implied consent to what would otherwise be a breach of confidence: ‘Implicitly the client will have given consent for his affairs to be discussed by the solicitor with the other party’s representatives, but only in so far as disclosure is necessary and relevant to the fulfilment of the solicitor’s instructions’: F[147]. See for instance Hirst v Etherington [1999] Lloyd’s Rep PN 938, CA at [25]: ‘if X, wishing to borrow money from Y, wants his solicitor to give an undertaking to Y  for the benefit of X, X  should and impliedly does, give the solicitor authority to disclose sufficient information to Y  to enable him to judge safely whether the undertaking is in the ordinary course of business of a solicitor. If it is important that the undertaking is binding on the other partners, and it usually will be, before Y is prepared to lend, then it seems to me he is entitled to ask for the information.’ Similarly in United Bank of Kuwait v Hammoud [1988] 1  WLR  1051, CA at 1066 Lord Donaldson MR had stated that the duty of confidentiality involved solicitors ‘keeping to themselves everything about their clients and their clients’ business which it is not necessary for others to know’ (emphasis added). In the SRA 2019 Guidance it is stated that: ‘Disclosure of information is only allowed where the client consents to it or it is permitted by law. Before approaching a client for consent, you should consider whether disclosure is necessary to

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6.15  Solicitors’ duties of confidentiality proceed with a specific matter. Consent to disclosure of confidential information must be clear, so that the client knows to whom their information should be made available, when and for what purpose. Where you have their general consent, it may still be appropriate to obtain the client’s consent to a specific piece of information being disclosed as the issue arises, for example by sending them a draft letter to the opponent to approve. However, whatever arrangements that you make for obtaining consent, the ultimate test will be that the client if asked would say “Yes I  agreed to that information being disclosed for that purpose” rather than being surprised or concerned or not having understood.’

(d)  The type of information protected 6.15 The duty of confidentiality extends to everything learnt by the solicitor in the course of the retainer. Subject to the solicitor’s implied authority to reveal this information (which may or may not exist, depending on the facts), this includes the identity and address of the solicitor’s client. It may be a breach of confidence for the solicitor even to state that he or she has been retained by a particular person. The duty extends to both information acquired and documents received from the client.1 Likewise the duty extends not just to information learnt concerning the client (or persons connected to the client), but also includes other confidential information (which may be unrelated to the client and which may not be information which, using the term broadly, ‘belongs’ to the client) which the solicitor learns during the course of the retainer, for instance the views of an expert witness or the evidence of a proposed witness of fact. An example of this is the leading case of Boardman v Phipps.2 We discuss the issues raised here in further detail at 6.17ff, below. It follows that the duty of confidentiality also extends to the opinions which the solicitor forms concerning his or her client’s veracity or character, or of the merits of the client’s case.3 The ‘trivia’ exception recognised in the general law of confidence (ie that the equitable duty of confidence will not apply so as to protect trivial or useless information imparted to the confidant)4 will not, it is suggested, apply, at least insofar as it relates to matters concerning the client’s private life.5 1 See for instance the famous case of Lord Ashburton v Pape [1913] 2 Ch 469, CA, where the claimant’s solicitor’s clerk wrongfully disclosed to the other side to litigation letters written by the claimant to his solicitor. An injunction was issued restraining any disclosure or use of copies of those letters, or any information contained therein. See also Minter v Priest [1930] AC 558, HL at 581. The duty may extend to information which has ceased to be confidential in the commonly recognised sense of that word: see the discussion below at para 6.22. The fact that a client’s address or contact details will, if imparted in confidence, be protected by the solicitor’s general duty of confidentiality was accepted in Ex p Campbell; In re Cathcart (1870) LR 5 Ch App 703. This plainly extends to phone numbers and email addresses, etc. In JSC BTA Bank v Solodchenko [2011] EWHC 2163 (Ch), [2013] Ch 1 the defendant, against whom a claimant had obtained a freezing order, had failed to comply with the terms of that order. A committal order was made sentencing the defendant to 18 months’ imprisonment. The defendant had by this stage disappeared. The claimant applied for an order under s 37 of the Senior Courts Act 1981 or the court’s inherent jurisdiction against the defendant’s solicitors requiring them to disclose the defendant’s contact details, information about his assets, and information about the way the defendant funded the solicitors. Henderson J  acceded to the application seeking disclosure of the defendant’s contact details on the basis that it would help to secure compliance

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The duty of confidentiality  6.15 with the court’s previous orders, in particular the committal order. The judge drew a distinction between information which was subject to LPP and information which was simply confidential. The information relating to the defendant’s contact details was confidential, but not privileged. Although the Court should pay great respect to the fact that a client might have provided his or her contact details in confidence to solicitors, it could override that confidence in exceptional circumstances. On the other hand in JSC BTA Bank v Ablyazov [2012] EWHC 1252 (Comm) Teare J had held that information relating to a conference call dial in service and email address created for the specific purpose of confidential communications between the defendant and his solicitors was both confidential and privileged: ‘In my judgment the connection between the telephone number and the email address and the seeking and receiving of legal advice in the present case is clear and manifest.’ Hence he refused to order the solicitors to disclose that information, distinguishing Solodchenko. In SRJ  v Person(s) Unknown [2014]  EWHC  2293 (QB), the claimant sought an order requiring a firm of solicitors to disclose the identity of one of its former clients who was accused of publishing confidential information on internet blogs and who was in breach of prior court orders. The judge, Sir David Eady, described as “questionable” the proposition that the court had never treated the identity of a client as information that can be the subject to a claim for legal professional privilege. He concluded, surely rightly, that, in appropriate circumstances, privilege can attach to identity itself, but that, in any event, there were powerful reasons not to override the duty of confidence on the facts before him. 2 [1967] 2 AC 46. In Re a Firm of Solicitors [1997] Ch 1, Lightman J said, at 9: ‘Confidential information includes not merely information communicated in confidence by the client to the solicitor but also confidential information acquired by the solicitor on behalf of his client, eg on consulting experts, as well as advice communicated in confidence by the solicitor to the client.’ 3 Marsh v Sofaer [2003] EWHC 3334 (Ch), [2004] PNLR 24 at [43] (Sir Andrew Morritt V-C). The wide ambit of the type of ‘information’ protected was explained in the Australian case of Yunghanns v Elfic Pty Ltd [1999] VSC 291, as follows: ‘it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases, the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard, the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressures or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the “getting to know you” factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client.’ (See also Black v Taylor [1993] 3  NZLR  403, and the extensive review of the authorities in Ismail-Zai v State of Western Australia [2007] WASCA 150.) The breadth of this formulation (in a case involving an application by a former client to prevent a solicitor from acting in a later engagement adverse to the interests of the former client) is criticised, in that context, in Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), at para 7-008ff, who point out that it may well be difficult to characterise such ‘getting to know you’ factors as having the necessary attributes of confidential information. But it is suggested that it would be a plain breach of confidence for a solicitor to disclose to a third party the fact that a former (or existing) client (eg a bank or insurer) was, say, prone to settling cases too low or was very reluctant to take cases through to trial. Responding to this sentence in the last edition of this book (which pre-dated the 5th edition of Conflicts of Interest) Hollander and Salzedo write: ‘This sort of issue may be fact specific, depending on exactly what information is disclosed and exactly how it is obtained. Is such information really information at all and if so is it confidential? There is a danger that if the bar is set low, then it will be too easy for a litigant, to persuade a court that there is a risk that there is some “getting to know you factor” which may be disclosed and which should lead to

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6.16  Solicitors’ duties of confidentiality the grant of an injunction. The fact is that there is no English case where an injunction has been granted in such circumstances.’ 4 See A-G v Guardian Newspapers (No 2) [1990] 1 AC 109, HL at 282. 5 As opposed to, say, the client informing the solicitor in passing that there remain tickets available to attend a particular football match. The solicitor would be entitled to ‘make use’ of that information by then proceeding to book tickets without seeking client consent. The information was entirely extraneous to the solicitor-client relationship and the imposition of a duty in relation to that information could accord no benefit to the client. The law would also probably imply consent on the part of the client to the use of the information.

(e)  Source of the information 6.16 Where the solicitor learns the information directly from his or her client then there is no difficulty. The solicitor is under a duty to keep that information confidential. But what if the solicitor learns the information from a third party? It seems that the proper analysis is that where the solicitor learns the information ‘in the character’ of solicitor to a client (as where, for instance, he or she receives an unsolicited letter containing allegations against the client which is written to the solicitor qua solicitor for the client) then the solicitor is subject to a duty of confidentiality in respect of the information learnt, irrespective of the identity of the source of the information.1 The editors of Cordery on Solicitors went even further and suggested that the information may be learnt quite casually: ‘The duty to keep information about a client and his affairs confidential applies irrespective of the source of the information, so that information obtained about a client from a mutual friend is still subject to the duty of confidentiality.’2 1 See the landmark case involving bankers’ confidentiality, Tournier v National Provincial and Union Bank of England [1924] 1 KB 461, CA, where Bankes LJ said, at 471: ‘The case of the banker and his customer appears to me to be one in which the confidential relationship between the parties is very marked. The credit of the customer depends very largely upon the strict observance of that confidence. I cannot think that the duty of non-disclosure is confined to information derived from the customer himself or from his account. To take a simple example. A police officer goes to a banker to make an inquiry about a customer of the bank. He goes to the bank, because he knows that the person about whom he wants information is a customer of the bank. The police officer is asked why he wants the information. He replies, because the customer is charged with a series of frauds. Is the banker entitled to publish the information? Surely not? He acquired the information in his character of banker.’ In Gurry, Breach of Confidence (1984), it was suggested, at 150, that ‘a solicitor will be bound to keep secret any information directly received from a client … and in addition, any information acquired from other sources while acting as the client’s solicitor’. The case of Carter v Palmer (1842) 8 Cl & F 657 is cited in support of this proposition, which is also fortified by the passage quoted above from Tournier. There is a relatively recent new edition of Gurry (2nd edn, 2012), which does not repeat this sentence. See also In Re a Firm of Solicitors [1997] Ch 1, quoted at fn 2 of para 6.15 above. 2 Cordery on Solicitors, at F[147] (looseleaf edition as at 2008, which has subsequently been superseded and is now called Cordery on Legal Services). The Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 were in similar form: see at para 4. The 2019 SRA Guidance

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The duty of confidentiality  6.18 says that ‘The duty of confidentiality applies to information about your client’s affairs irrespective of the source of the information … Confidentiality will attach to all information given to you, by your client or a third party, in connection with the retainer in which you or your firm are instructed.’

3  The contents of the duty 6.17 The solicitor’s duty of confidentiality is a duty not to misuse any information acquired by the solicitor in the course of his or her retainer in any way, that is to say, not without the consent of the client (or former client), which may be express or implied, to make any use of it or to cause any use to be made of it by others other than for the client’s benefit.1 The concept of misuse is a broad one. It may involve use of the information for the professional’s own benefit or for the benefit of another client or simply the disclosure of that information to a third party, whether or not for the solicitor’s or a third party’s benefit. 1 Per Lord Millett in Bolkiah [1999] 2 AC 222, HL, at 235–236. The phrase ‘other than for the client’s benefit’, while unqualified in Lord Millett’s speech in Bolkiah, is a reference, it would appear, to the implied authority of the solicitor, discussed above at para 6.14, to make use of confidential information in relation to the furtherance of the client’s interests. It cannot mean that the solicitor has a general right to use confidential information for what the solicitor perceives as ‘the client’s benefit’.

6.18 However in each case the consent of the client or former client to the particular use in question will absolve the solicitor of liability. This is because a breach of confidence is an unauthorised disclosure or use of information.1 In such a case the burden will probably be upon the solicitor to prove the existence of such consent to justify what would otherwise be a breach of duty. As noted earlier, consent may be express or implied. The following instances are situations where the law will typically imply consent on the part of the client to the disclosure or use of confidential information by the solicitor. (a)

The solicitor is permitted to disclose such information as is necessary for the proper conduct of the retainer. During the course of most retainers the solicitor will be involved in correspondence and communication with third parties and will be permitted to disclose such facts which the solicitor has learnt as are required to promote the client’s interests in the relevant dispute or issue. This is in reality disclosure of confidential information with the implied (if not express) consent of the client (of course the consent will be express if, for instance, the solicitor has passed a draft of a proposed letter to the client which contains confidential information, and the client has agreed to its being sent). We have already discussed this issue above in Section 2, at para 6.14.

(b) The solicitor is generally entitled to disclose the information to other partners or employees/support staff within his or her firm who are working on the client’s case or file.2 A solicitor is probably entitled to 281

6.19  Solicitors’ duties of confidentiality discuss points with colleagues with a view to obtaining their views.3 Similarly the solicitor will be entitled to out-source photocopying or word-processing of confidential documents. Again this is on the basis of implied consent.4 (c)

Likewise, in a transaction where the client has both legal and non-legal advisors, then in appropriate circumstances, it be may that disclosure of information by the legal advisors to the non-legal advisors is permitted by the client’s implied consent, as an ‘implied qualification to the duty of confidence’ owed to the client.5

1 Coco v AN  Clark (Engineers) Ltd [1969]  RPC  41 at 47. On consent to disclosure by professionals, see generally Pattenden, Law of Professional-Client Confidentiality (2nd edn, 2016), at Chapter 13. 2 This is of course subject to information barrier limitations where individuals within the firm may hold information confidential to a third party. We discuss this below. The SRA Guidance 2019 states that ‘all your staff members including support staff, consultants and locums, owe a duty of confidentiality to all clients and disciplinary proceedings may involve both the firm and employees’. 3 The daily experience of lawyers is of course that it is beneficial to discuss difficult points with a professional colleague. See for instance McKaskell v Bensemen [1989] 3 NZLR 75. 4 See Slater v Bissett (1986) 85 FLR 118 at 121. This may well be the subject of express provision in the terms of engagement. IB(4.3) of the SRA  Code of Conduct 2011 provides: ‘you only outsource services when you are satisfied that the provider has taken all appropriate steps to ensure your client’s confidential information will be protected’. The 2019  SRA  Guidance provides: ‘Where firms outsource services, they will need to consider the arrangements they have in place to ensure adequate protection of clients’ confidential information. Clients may not have agreed or understood that their confidential information may be considered by an unregulated third party and that in certain cases, information will be considered in a foreign jurisdiction. A firm’s standard terms of engagement may set out details of any such arrangements and the agreements in place between organisations regarding the sharing of confidential information and personal data.’ 5 NRG v Bacon & Woodrow [1995] 1 All ER 976, 984. See paras 14.21ff and 14.32ff, below. This case related to a substantial share purchase transaction under which the claimant client acquired various insurance companies. The judge held that: ‘It is no doubt true that as between [the client] and its legal advisers the duty of confidence owed by those advisers to [the client] was qualified to the extent that, if for the purpose of giving advice in relation to the … transaction, the legal advisers exercising their professional judgment considered it necessary in the performance of their duties to disclose to any of the non-legal advisers written or oral communications or advice passing between them and [the client], it was open to those advisers to do so. They had a professional discretion in the matter.’ This supports the suggestion, made at para 6.08ff, above, that there will be occasions when the question of whether or not a solicitor is in breach of a duty of confidence should be decided by reference to the criteria applicable to standard negligence claims.

6.19 Where confidential information is obtained by the solicitor in the context of a joint retainer by two or more clients, then any disclosure or use of that information by the solicitor must be with the consent of all the clients. On the other hand, where the solicitor obtains information in such a context he or she must disclose it to all of the clients.1 While there is a community of interest between the clients then there will generally be implied consent to the solicitor to disclose information obtained from each client to the other, or to use information obtained from one for the benefit of all.2 Joint retainers 282

The duty of confidentiality  6.20 of solicitors by insured and insurer, which are of course commonplace in the context of professional negligence claims, can give rise to complex issues concerning confidentiality and privilege as between the two clients. Although the clients have a common interest in defending the third party’s claim, their interests may diverge in relation to coverage questions. An insured may be taken to have impliedly consented to his or her instructions being relayed by the solicitor to the insurer in furtherance of the common interest, but not where their interests diverge. So where a valuer was being sued in negligence by a bank, and solicitors were jointly retained by the valuer and his insurers to conduct the defence of the action, then, at a time when the insurer was considering repudiating cover, and the solicitors sought to elicit information from the valuer to found such a repudiation, it was held that the information provided by the valuer to the solicitors was confidential and privileged and there could be no implied consent on his part to the information being passed to the insurers (and so no implied waiver of his privilege). At that stage a conflict of interest existed between the clients. The insurer, having sought to repudiate cover, could not plead that information in defence of the valuer’s subsequent claim for indemnity under the policy of insurance.3 1 See para 6 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 and Hellenic Mutual War Risks Association (Bermuda) Ltd v Harrison (The Sagheera) [1997] Lloyd’s Rep 160 at 165. Further, absent special circumstances, the act of one joint representative in waiving privilege will bind all, Birdseye v Roythorne & Co [2015]  EWHC  1003 (Ch). The issues discussed in this paragraph are analysed in greater detail at para 14.05ff below. 2 Brown v Guardian Royal Exchange Assurance plc [1994] 2 Lloyd’s Rep 325, CA. The law was analysed as follows in Singla v Stockler [2012] EWHC 1176 (Ch) at [10]–[11]: ‘Where a solicitor acts on a joint retainer by two or more clients in relation to the same matter then, subject to any agreement between them to the contrary, there will generally be no obligation on the solicitor to keep his communications with one of those clients confidential from the other. In that context, his obligation of confidence to his joint clients may only be released by all of them acting together. By analogy, it occasionally happens that there exists such a community of interest between a litigant (A) and a third party to that litigation (B) that A’s solicitor is under no obligation to keep confidential from B information arising in the performance of that retainer, even though B is not his client in that litigation. The solicitor’s partial release from his ordinary obligation of confidence to A frequently arises from express written agreement between A and B. But it may also arise by way of necessary implication from the circumstances about the relationship between A and B in connection with the litigation. Furthermore, a conclusion (after the event) that the relationship necessarily involved such a release of the solicitor from any obligation of confidence to A as against B may arise by way of inference from evidence as to their mutual conduct.’ 3 TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826, CA. The court in fact made no finding on whether the solicitors had breached their duty of confidentiality to the insured, and infringed his privilege, but it seems to be necessarily implicit. Despite the particular facts this case is in reality an application of the Ashburton v Pape jurisdiction, referred to at 6.02 above.

6.20 As we have seen, the solicitor’s obligations as regards information learnt or obtained during the course of the retainer can be broken down into two separate broad categories: (a) an obligation not to disclose to a third party any information which the solicitor learns during the course of the solicitor’s retainer; 283

6.21  Solicitors’ duties of confidentiality (b) an obligation not to make use of such information for the solicitor’s or some third party’s own benefit. We consider each of these categories in turn.1 1 Specific instances where confidentiality is required are set out at para 9 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007.

(a)  Wrongful disclosure 6.21 Essentially, absent compulsion (as to which see below) or consent (whether express or implied), the solicitor cannot disclose information learnt during the course of the retainer to a third party.1 But how wide is this disability and to what information does it extend? This question has already been partially addressed at para  6.08ff, above. In Mortgage Express Ltd v Bowerman the duty was expressed very broadly: ‘All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client.’2 This is an interesting passage, because it suggests that the law deems all information supplied by the client to be confidential even if it would not otherwise have the normal indicia of confidentiality. Compare this with the standard equitable obligation of confidentiality as stated by the Privy Council: ‘It is common ground that the obligation not to use confidential information attaches only to information which has the necessary element of confidentiality and continues only so long as the information remains confidential.’3 It certainly seems to be the case that the special nature of the solicitor/client relationship4 means that the law affords particular protection to the client so that the solicitor is placed under a special disability as regards information learnt in the course of the retainer pertaining to the client (whether or not directly from the client). This makes sense. Assume that a celebrity seeks advice from a solicitor about a threatened disclosure of information concerning his or her private life by a former employee of the celebrity. During the course of the retainer the celebrity imparts information to the solicitor about the state of the celebrity’s marriage. In the event the former employee makes substantial disclosures via a newspaper about the client’s marriage. The solicitor should nonetheless be prevented from disclosing the same facts. The fact that the solicitor is making the disclosure would be likely to carry the imprimatur of truth whereas the disclosures of an ex-employee might be perceived by the reading public, or a proportion of it, as tittletattle. During the currency of the retainer the prohibition on the solicitor can be easily explained by reference to the fiduciary duties of loyalty and good faith. But it would be extraordinary if the position were different after the termination of the retainer: the continuing broad prohibition upon the solicitor from disclosure of information learnt during the retainer, even though now in the ‘public domain’, can be ascribed to the special relationship of trust and confidence between solicitor and client which means that some aspects of the 284

The duty of confidentiality  6.22 fiduciary relationship survive even after the formal termination of the retainer, even though transformed into a particularly strict form of duty of confidence. 1 An example of a wrongful disclosure by a professional is Satnam Investments Ltd v Dunlop Heywood [1999] Lloyd’s Rep PN  201, CA. The defendant surveyors were retained by the claimant developers to acquire a series of adjoining properties which had development potential. The claimant went into administration and the surveyors wrote a letter to a rival company disclosing the fact that the claimant owned various interests in the properties, and had options over others, and that the local authority was disposed to giving planning permission. This was held to be a breach of fiduciary duty, albeit the disclosure could have been characterised as a breach of confidence. For an example of a claim where a solicitor was held to be in breach of confidence in passing information confidential to one client to another client see National Westminster Bank plc v Bonas [2003] EWHC 1821 (Ch). The claim failed because the claimant could not demonstrate any damage caused by the breach. 2 [1996] 2 All ER  836, CA at 845. The case is discussed in the context of lenders’ claims in Chapter 10. Contrast what Lightman J  said in Re a Firm of Solicitors [1997] Ch  1 at 9–10: ‘Confidential information passing between solicitor and client and otherwise acquired by a solicitor on behalf of his client may, like any other confidential information communicated to anyone else, subsequently cease to be confidential. Confidential documents and information may become common knowledge or at least known to an opponent in the course of a trial. Some information may be memorable and some eminently forgettable.’ This was said in the context of an application by a former client seeking to prevent a solicitor from subsequently acting against the client, where the issues and concerns are different to a straight claim for breach of confidence. 3 Arklow Investments Ltd v Maclean [2000] 1 WLR 594 at 600. 4 Referred to in Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831, CA at 834–835 and 842.

6.22 The correctness of this position was implicitly accepted by the House of Lords in Hilton v Barker Booth & Eastwood1 where it was acknowledged that solicitors would be in breach of their duty to a client if they were to divulge to a third party that the client had been convicted of a criminal offence. Although such a fact is not strictly speaking confidential, because of course the conviction takes place in open court, nonetheless: ‘It is a solicitor’s duty to act in his client’s best interests and not to do anything likely to damage his client’s interests, so far as this is consistent with the solicitor’s professional duty. To disclose discreditable facts about a client, and to do so without the client’s informed consent, is likely to be a breach of duty, even if the facts are in the public domain.’2 This prohibition would surely continue after the termination of the retainer (ie  at a time when the solicitor is no longer subject to fiduciary duties), so that the solicitors would be in breach of duty were they, say, to disclose to a prospective employer, or a newspaper, that their former client had, years previously, been convicted of a minor offence. It will be recalled that in Bolkiah v KPMG Lord Millett had stated that the only duty to a former client which survived the termination of the retainer was ‘a continuing duty to preserve the confidentiality of information imparted during its subsistence’.3 It is suggested that this statement should be given a broad interpretation so as to extend to all information learnt during the course of the retainer. On the other hand there 285

6.23  Solicitors’ duties of confidentiality must clearly be a degree of latitude here. Memoirs by solicitors or barristers are not uncommon. When Sir David Napley published his own memoirs and devoted a long chapter to the Jeremy Thorpe trial (he having of course acted as Thorpe’s solicitor), it would run contrary to common sense to characterise his conduct as a breach of confidence owed to his former client. It is suggested that if charges laid against a former client, or a former client’s conviction(s), have achieved a sufficient degree of notoriety then for a solicitor to refer to those facts in his or her memoirs (or on a web cv) would not be wrongful. (Of course the publication by the lawyer of his or her retainer by a particular former client is to be distinguished from, say, publication of confidential disclosures made by the client during the course of that retainer.) 1 [2005] UKHL 8, [2005] 1 WLR 567 at [30]. Discussed at paras 1.01 fn 1, 2.13, and 4.27, above. The facts are set out at para 6.39, below. 2 At [34], per Lord Walker. See also at [7], per Lord Scott. 3 [1999] 2 AC 222, HL at 235C.

6.23 The principle discussed above is explicable because, it is suggested, information imparted to the solicitor or learnt by the solicitor during the course of the retainer should in general be deemed, as between solicitor and client, to be confidential, regardless of whether the information was confidential at the time it was received or has ceased to be so at some later period.1 The underlying point is that although information may technically have lost its confidentiality (in the sense of it having entered ‘the public domain’), nonetheless it may well be that that information still has (or has re-acquired) a degree of relative secrecy2 and that the former client has an interest in ensuring that there is no fresh publication. It is probable that the courts would approach the issue of the solicitor’s post-retainer duty without starting from an absolutist position which prohibited forever the disclosure by the solicitor of any information at all learnt by the solicitor during the course of the retainer, regardless of the status of the information and its public notoriety. On the other hand it is suggested that the court should start from a presumption that any such disclosure was wrongful and should require persuasion that (i) the information sought to be disclosed (or actually disclosed) lacked any degree of confidentiality; and (ii) the former client had no legitimate interest in preventing publication. The court should also take into account that disclosure by a solicitor is likely to carry particular weight to the persons to whom disclosure is given. Such an approach would mean that the former client could prevent disclosure by the solicitor of a criminal offence committed some years earlier or even an account by the solicitor of a civil trial where the client’s evidence was disbelieved on oath and he was shown in an unfavourable light. The reality is that, aside from cases of notoriety, a conviction or trial which occurred a number of years ago, even if technically ‘in the public domain’, is not likely to be known to the majority of the public, so that a former client will have a very real interest in preventing his or her former solicitor from disclosing information relating to that conviction or trial. On the other hand such an approach might well permit the solicitor to disclose, for instance in publicity material, that he acted for a particular 286

The duty of confidentiality  6.24 client in relation to a particular matter (for instance a high-profile takeover of another company).3 This is consonant with the example provided by the Court of Appeal in A-G v Blake: ‘If the Crown’s argument represented the law, then a former director of a public company, who had been privy to secret and highly confidential discussions in the course of a takeover bid, would be prevented from including in his memoirs anything of these negotiations, even though the bid had been successful, he himself had long since retired and the information in question was public knowledge.’4 1 Certain dicta in A-G v Blake [1998] Ch 439, CA, do not fully support this analysis. There it was held by the Court of Appeal that Blake ceased to stand in a fiduciary relationship with the Crown once he ceased to be an employee; and that his continuing fiduciary duty of confidentiality (as it was characterised) itself continued only so long as the information remained confidential: ‘Equity does not demand a duty of undivided loyalty from a former employee to his former employer, and it does not impose a duty to maintain confidentiality of information which has ceased to be confidential … The duty to respect confidence is also a fiduciary duty but it subsists only so long as the information remains confidential.’ See at 453–454. It is suggested that such dicta should be confined to public confidences where there is a public interest in the revelation of information, subject only to issues of national security. 2 To use a phrase adopted in Franchi v Franchi [1967] RPC 149. This position is supported by the analysis in Toulson & Phipps, Confidentiality (3rd edn, 2012), at paras 3-137–3.153. In KJO v XIM [2011] EWHC 1768 (QB) at [21], Eady J remarked that information in a ‘public record’ may not in reality be in the ‘public domain’ because provision may be made prohibiting the information from being made available to the public at large. 3 Although it is not in doubt that the fact that a particular solicitor has been retained by a particular client is itself capable of being confidential information. 4 [1998] Ch 439 at 455B.

6.24 Support for this general approach can be found in the case of Schering v Falkman.1 This was not a solicitor case but is nonetheless of direct relevance because it involved a claim against a person whom the court treated as equivalent to a professional adviser. The claimant company had manufactured a drug which was alleged to cause birth defects. Much adverse publicity was generated. The claimant retained a public relations company to provide its executives with training in dealing with the media. The PR company in turn hired E, a professional broadcaster, to provide some of the training. Much information was provided by the claimant to E for the purpose of the training course. Some time later, E decided to make a documentary about the drug and the allegations which had been made in relation to it. The claimant sought an injunction to prevent its broadcast. E argued that, although he had made use of information obtained from the claimant, all that information was in the public domain. The Court of Appeal granted an injunction.2 The majority took the view that the fact that E may have been able to make the documentary without drawing on anything learned directly from the claimant was irrelevant. The terminology used by Templeman LJ in support of the grant of the injunction 287

6.25  Solicitors’ duties of confidentiality shows that it was E’s position as a confidential adviser which placed him under a special disability: ‘[B]y agreeing to advise [the claimant] and by accepting information from them to enable him to advise [the claimant], [E] placed himself under a duty, in my judgment, not to make use of that information without the consent of [the claimant] in a manner which [the claimant] reasonably considered to be harmful to their cause. As between [the claimant] and [E], the information which [E] received from [the claimant] was confidential and cannot be published.’3 1 [1982] QB 1, CA. Contrast the analysis in Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), at paras 2-047–2.048, where it is suggested with some justification that the law was too widely stated in that case. 2 Albeit Lord Denning MR dissented. 3 [1982] QB 1 at 38A–B.

6.25 Schering v Falkman is a case which has attracted criticism largely because of the inroads it made into media freedom to broadcast material which was of public interest.1 However, the majority’s rejection of E’s ‘public domain’ argument was one which is of direct applicability to the situation of the solicitor. As Shaw LJ said: ‘… though facts be widely known, they are not ever-present in the minds of the public. To extend the knowledge or to revive the recollection of matters which may be detrimental or prejudicial to the interests of some person or organisation is not to be condoned because the facts are already known to some and linger in the memories of others.’2 It is suggested, by reference to the approach put forward above, that the solicitor who, having been retained in a case in which his or her client was subjected to criticism, sought to publish a book about it, even though the solicitor was scrupulous to draw on ‘public’ sources (eg the transcript of the trial), would nonetheless be at risk of an injunction at the instance of his or her former client.3 Such former clients are likely to wish to put the past behind them. But, as per the example of Sir David Napley’s memoirs mentioned earlier, the matter must be one of ‘fact and degree’. The allegations against Thorpe were so notorious that it cannot be doubted that Napley committed no breach of confidence. But public facts may be forgotten. Take the example of a solicitor who acted for a client in relation to a shop-lifting case many years earlier. Assume the client has now become a celebrity. That client would surely have a legitimate and protectable interest in preventing the solicitor from reminding the public of this discreditable, but now forgotten, fact.4 1 See for instance BBC v HarperCollins Publishers Ltd [2010] EWHC 2424 (Ch), [2011] EMLR 6 at [60]. 2 [1982] QB 1 at 28D–E. 3 See the Canadian case of Stewart v Canadian Broadcasting Commission [1997] 150 DLR (4d) 24 where a Queen’s Counsel, who had represented a client in criminal proceedings many years earlier, was subsequently involved in a television programme about those proceedings and the

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The duty of confidentiality  6.26 crime which gave rise to them. He was held to be in breach of a continuing fiduciary duty, notwithstanding that his retainer had ended long before. 4 See also XKF v The British Broadcasting Corporation [2018] EWHC 1560 (QB) in relation to old convictions and a past offender’s desire to protect his privacy. This was a case outside of the professional context.

(b)  Wrongful use 6.26 Cases of wrongful use of confidential information learnt during the course of the retainer can involve diverse factual scenarios. They also are often treated as breaches of fiduciary duty because they will typically involve abuses by the solicitor of the duty of loyalty and the duty to promote the client’s interests and not to act for the solicitor’s own benefit.1 A fertile area of litigation in recent years has related to the exercise by divorcing spouses of the self-help ‘remedy’ of taking copies of confidential documents belonging to the other spouse for use in the divorce proceedings, where it is feared that that other party will not provide proper disclosure of assets. Such documents will usually be handed to solicitors acting for the spouse who has taken the documents. In White v Withers LLP2 it was held (on a strike out application by the defendant solicitors) that there was no claim against such solicitors for breach of confidence/invasion of privacy on the ground that the mere receipt of confidential documents could not be described as a misuse of such information although the solicitor might be liable for conversion or trespass to goods in respect of original documents handed to him by his client wife.3 In Imerman v Tchenguiz4 the Court of Appeal rejected the views expressed in White as regards the solicitors’ potential liability in breach of confidence, at least insofar as they sought to exclude the claimant’s right to an order for delivery up against the solicitor (as opposed to a claim in damages). The law was stated as follows: ‘In our view, it would be a breach of confidence for a defendant, without the authority of the claimant, to examine, or to make, retain, or supply copies to a third party of, a document whose contents are, and were (or ought to have been) appreciated by the defendant to be, confidential to the claimant. It is of the essence of the claimant’s right to confidentiality that he can choose whether, and, if so, to whom and in what circumstances and on what terms, to reveal the information which has the protection of the confidence. It seems to us, as a matter of principle, that, again in the absence of any defence on the particular facts, a claimant who establishes a right of confidence in certain information contained in a document should be able to restrain any threat by an unauthorised defendant to look at, copy, distribute any copies of, or to communicate, or utilise the contents of the document (or any copy), and also be able to enforce the return (or destruction) of any such document or copy.’5 The court went on to hold that: ‘it must depend on the precise facts of a particular case whether a solicitor, who has been provided by his client with 289

6.27  Solicitors’ duties of confidentiality documents which are confidential to a claimant, is a proper defendant, in addition to his client, in confidence proceedings brought by the claimant. A  solicitor who receives, reads, and passes on such documents, particularly knowing that they have been taken from the claimant unlawfully, may well be an appropriate defendant.’6 1 An unusual, but vivid, example is a Canadian case, Szarfer v Chodos (1988) 66 OR (2d) 250. A  client informed his lawyer during the course of the retainer that he was impotent and his relationship with his wife was failing. The lawyer made use of the information by starting an affair with the wife. He was found liable for breach of fiduciary duty. This was a clear misuse of confidential information for the benefit of the solicitor. 2 [2008] EWHC 2821 (QB), [2009] 1 FLR 383 (QB); and at [2009] EWCA Civ 1122, [2010] 1 FLR 859 (CA). 3 See per Eady J at first instance, at [8] and [16]; and per Ward LJ, in the Court of Appeal, at [23]. 4 [2010] EWCA Civ 908, [2011] Fam 116. 5 At [69]. This passage was cited with approval by Nicol J in HML PM Ltd v Canary Riverside Estate Management Ltd [2019] EWHC 3496 (QB), at [60]. 6 At [159]. For a case where a solicitor who had received confidential information relating to proceedings for which he had previously been engaged and was the subject of an interim injunction preventing his use of that information see the Australian case of British American Tobacco Australia Ltd v Peter Gordon [2007] NSWSC 230.

6.27 But actionable misuse of confidential information need not relate to information which is specific to or related to the client, or which is learnt directly from the client. The rule is wider and means that the solicitor cannot, without consent, make use, for his or her own (or some third party’s) benefit, of any information coming into his or her possession as a result of the retainer.1 The width of the rule was established in the well-known and controversial case of Boardman v Phipps.2 This case has not been traditionally treated as a breach of confidence claim, but nonetheless it can be properly analysed as such. The defendant (B) was solicitor to a trust. The trust held a minority shareholding in an underperforming company. B  was tasked to investigate. He attended board meetings and obtained detailed information relating to the company in his capacity as solicitor to the trust. The trustees themselves had neither any interest in acquiring further shares in the company (nor any funds available to do so). Some (but not all) of the trustees agreed with B’s proposal that he should himself acquire a shareholding in the company so that a majority block holding was created which would allow the company to be reorganised, with a view to increasing the value of the shareholdings in the company. This would benefit the trustees as well as B personally. B acquired the shares and re-organised the company. The shareholdings subsequently increased substantially in value. In an action brought against B, it was held that he held the shares on constructive trust and he was required to disgorge his profit. He had acquired confidential information3 during the course of, and as a result of, his retainer and with that information had acquired an asset and made a profit thereby without the informed consent of his principal. The controversial aspect of the decision in Boardman v Phipps was that the principal suffered no harm as a result of the solicitor’s conduct (quite the 290

The duty of confidentiality  6.29 reverse). No opportunity was lost. Nonetheless confidential information had been (mis)used and a restitutionary remedy was imposed. 1 See for instance Palmer v Carter (1842) 8 Cl & F 657. 2 [1967] 2 AC 46, HL. 3 A phrase used by Lord Hodson at 107 and 109–110. Lord Hodson, who was in the majority, effectively treated the case as a misuse of confidential information. Hence he said, at 107: ‘I agree with the learned judge and with the Court of Appeal that the confidential information acquired in this case which was capable of being and was turned to account can be properly regarded as the property of the trust. It was obtained by Mr. Boardman by reason of the opportunity which he was given as solicitor acting for the trustees in the negotiations with the chairman of the company, as the correspondence demonstrates. The end result was that out of the special position in which they were standing in the course of the negotiations the appellants got the opportunity to make a profit and the knowledge that it was there to be made.’

6.28 It would seem to follow that the ‘misuse’ which is prohibited, absent consent (whether express or implied), is not only of information provided directly by the client, but of any information which is learnt by the solicitor in the course of the retainer, whether that information is of direct value to the client or not; the rationale being that in such a case it is the fact of the retainer which gave the solicitor the opportunity to acquire the information, with the result that the solicitor acquired it in a fiduciary capacity and could not, without consent, make use of it other than for the benefit of the client. That inhibition from (mis)use will continue even after the fiduciary relationship has come to an end. 6.29 A  more recent example of a wrongful use case is Ratiu v Conway.1 A solicitor, Conway, had acted for a company, PB, which had been incorporated as a special purpose vehicle (and was owned by another company, R) for the purchase and subsequent sale of a property (P1) in St John’s Wood, London. During the course of that retainer Conway had acquired knowledge about R’s business and intentions. R then proposed to buy a nearby property (P2). It made an offer which was accepted, subject to contract. A director of R then telephoned Conway to seek to instruct him to act for R in respect of the contemplated purchase of P2. The director told Conway that R had made an offer in a particular amount for P2 which had been accepted. Having acquired this information, Conway then himself made an offer to purchase P2 which was in an amount higher than the offer made by R. R  wrote a letter to the vendor complaining about Conway’s conduct. The circumstances in which the issue of the nature of Conway’s obligations arose were unusual; in the event the vendor decided to sell P2 to R at the price originally offered so Conway’s conduct, whether wrongful or not, did not cause any loss to R. But Conway sued R  for libel and in this context the question of whether Conway had breached any obligation owed to R arose. It was held that even though PB was the purchaser of P1 Conway nonetheless owed fiduciary duties to R because PB was simply a vehicle of R, incorporated for the purpose of purchasing P1, and therefore R was Conway’s true client and Conway owed R, as well as PB, fiduciary obligations. Therefore in bidding against R in relation to P2, 291

6.30  Solicitors’ duties of confidentiality albeit after the termination of the conveyancing retainer by PB in respect of P1, he was arguably in breach of his fiduciary duty to R (the point was not in fact decided). This aspect of the decision is important because it involves a recognition that fiduciary duties (including duties of confidentiality) may be owed by solicitors (and other professionals) not merely to the client but also to others. This issue has been discussed earlier. But it was also held that when the director of R telephoned Conway with a view to R instructing him as its solicitor in relation to the purchase of P2 then the information provided could have been confidential information which Conway misused in making his own bid (this being a matter for the jury), even though Conway did not accept the retainer. 1 [2005] EWCA Civ 1202, [2006] 1 EGLR 125.

6.30 Although the facts in Ratiu v Conway were complicated and never fully resolved, nonetheless the implications of the decision are clear: (a)

So, where a person informs his or her solicitor that he or she has agreed to purchase property for a given price, and, say, that the property is in fact worth considerably more, and the solicitor then puts in a higher offer to purchase the same property (or suggests to another client putting in a higher offer), the solicitor will clearly be guilty of a breach of his or her duty of confidentiality (as well as a breach of fiduciary duty). This analysis will be equally applicable to any type of commercial information or opportunity. If a solicitor learnt during the course of his or her retainer that shares in a particular company were substantially undervalued, then if he or she were to acquire such shares without the client’s consent the solicitor would hold them on constructive trust. The decision in Boardman v Phipps suggests that the question whether the client had any interest itself in acquiring the shares is irrelevant.

(b) Even if the solicitor has not been formally retained by the (prospective) client (so that no contract is actually formed between them, and prior to any fiduciary relationship arising) then it might well be that the information is nonetheless received subject to a duty of confidentiality and so cannot be lawfully used by the solicitor (whether for the solicitor’s personal benefit or that of another client) without consent.

(c)  Burden of proof 6.31 It was said in the old case of Erlanger v New Sombrero Phosphate Co1 that where a fiduciary relationship exists between two parties which may be the occasion of unfair advantage to one of them, the burden of proof lies on that party to show that he or she has not used that advantage for his or her own benefit. So, where a bank had acquired, in competition with its customer, the shares in a company, and the customer claimed that the bank had misused confidential information, disclosed by the customer to the bank, in acquiring 292

The duty of confidentiality  6.33 the shares, it was held that, in view of the fiduciary relationship between the bank and the customer, the onus was upon the bank to prove that it had not used the confidential information.2 1 (1878) LR 3 App Cas 1218. 2 United Pan-Europe Communications v Deutsche Bank [2000] 2 BCLC 461, CA at [34].

4  Multiple principals: conflicting duties of confidentiality and disclosure (a) Introduction 6.32 As well as being subject to a duty of confidentiality solicitors are also subject to a duty to their client to disclose information known to them which may be relevant to the business in which they are retained by the client. This duty was classically stated as follows: ‘A solicitor must put at his client’s disposal not only his skill but also his knowledge, so far as is relevant; and if he is unwilling to reveal his knowledge to his client, he should not act for him. What he cannot do is act for the client and at the same time withhold from him any relevant knowledge he has.’1 This duty is one of the normal incidents of the relationship between agent and principal. However, there is no principle of attribution or imputation of knowledge in relation to this duty. So where partner A in a firm of solicitors knows facts which would be relevant to the client, but partner B is dealing with that client, and partner B does not know the facts known by partner A, the firm will not be liable for breach of duty.2 1 Spector v Ageda [1973] Ch 30 at 48. 2 See Re a Firm of Solicitors [1992] Ch 959 at 973 and Bolkiah v KPMG [1999] 2 AC 222, HL at 235F. See, more recently, Bowser v Caley [2006] EWHC 902 (Ch). There is a detailed discussion of the issue of attribution of knowledge in Hollander and Salzedo, Conflicts of Interest (5th edn, 2016), at para 6–024ff.

6.33 On the other hand, using the example above, partner B’s duty of disclosure to the client is, generally, not limited to knowledge learnt during the course of the retainer by that client. So if partner B has acquired information from one client which is relevant for another client to know, then the fact that B is subject to a duty of confidentiality to the first client will not absolve B from liability for breach of duty to the other. This can place the solicitor in a situation where he or she owes conflicting duties simultaneously to two clients. Such conflicts usually arise where the solicitor is acting for two clients in the same transaction where the clients are on different sides and have potentially conflicting interests.1 In such a case it is easy to envisage circumstances where information acquired from client A will be highly material to client B but will likewise be confidential to client A and where disclosure could be damaging to 293

6.34  Solicitors’ duties of confidentiality client A. In such a situation the solicitor is placed in an impossible situation, a situation which the law has been notably unsympathetic towards: ‘It will be his fault for mixing himself up with a transaction in which he has two entirely inconsistent interests’.2 1 The classic case is Moody v Cox & Hatt [1917] 2 Ch 71, CA. 2 Moody v Cox & Hatt [1917] 2 Ch 71, CA at 91. See to the same effect Bristol & West Building Society v May May & Merrimans [1996] 2 All ER 801 at 815 (Chadwick J).

6.34 These issues are subject to professional regulation. Chapter 4 of the SRA Code of Conduct 2011 provided that the solicitor must achieve the following outcomes: ‘O(4.2) any individual who is advising a client makes that client aware of all information material to that retainer of which the individual has personal knowledge O(4.3) you ensure that where your duty of confidentiality to one client comes into conflict with your duty of disclosure to another client, your duty of confidentiality takes precedence.’ The following Indicative Behaviours set out in the 2011 Code were relevant: ‘IB(4.4) where you are an individual who has responsibility for acting for a client or supervising a client’s matter, you disclose to the client all information material to the client’s matter of which you are personally aware, except when: (a) the client gives specific informed consent to nondisclosure or a different standard of disclosure arises; (b) there is evidence that serious physical or mental injury will be caused to a person(s) if the information is disclosed to the client; (c)

legal restrictions effectively prohibit you from passing the information to the client, such as the provisions in the money-laundering and anti-terrorism legislation;

(d) it is obvious that privileged documents have been mistakenly disclosed to you; (e)

you come into possession of information relating to state security or intelligence matters to which the Official Secrets Act 1989 applies …’.

The notes to Chapter 4 commented as follows: ‘The duty of confidentiality to all clients must be reconciled with the duty of disclosure to clients. This duty of disclosure is limited to information of which you are aware which is material to your client’s matter. Where you cannot reconcile these two duties, then the 294

The duty of confidentiality  6.34 protection of confidential information is paramount. You should not continue to act for a client for whom you cannot disclose material information, except in very limited circumstances, where safeguards are in place. Such situations often also give rise to a conflict of interests which is discussed in Chapter 3.’1 Paragraphs 21–26 of the 2007 Guidance Notes provided a commentary on the relevant rule in the 2007 Code of Conduct (quoted at fn 1 below). These Notes remain useful. Paragraph 21 stated: ‘You have a duty to disclose all information material to your client’s matter. Your duty is limited to information of which you are aware (and does not extend to information of which others in your firm may be aware) but is not limited to information obtained while acting on the client’s matter.2 You will not be liable, therefore, for failing to disclose material information held by others within your firm of which you are unaware.’ Paragraphs 22–23 recognised that although as a matter of professional conduct a duty of confidentiality to one client overrode a duty of disclosure to another, it did not excuse in law a failure to disclose material information to a client. However those paragraphs3 recognised that terms can be expressly agreed between solicitor and client (whether at the inception of the retainer or by way of variation) so as to excuse the solicitor from complying with the duty of disclosure otherwise imposed by law upon him or her. This would be a way of resolving the problem of the solicitor facing potentially inconsistent duties. Otherwise, where the solicitor owed an inconsistent duty of confidentiality to another client, the solicitor should refuse instructions from or cease to act for the client to whom the duty of disclosure would otherwise be owed. 1 This difficulty was previously recognised by the Solicitors’ Code of Conduct 2007. We have already referred to para 4.01 of that Code, which sets out the duty of confidentiality, at para 6.1 above. Paragraph 4.02 sets out the duty of disclosure as follows: ‘You must disclose to a client all information of which you are aware which is material to that client’s matter regardless of the source of the information, subject to: (a) the duty of confidentiality in 4.01 above, which always overrides the duty to disclose; and (b) the following where the duty does not apply: (i) where such disclosure is prohibited by law [eg  under statutory money laundering provisions or because the solicitor receives privileged documents which have been disclosed by mistake]; (ii) where it is agreed expressly that no duty to disclose arises or a different standard of disclosure applies; or (iii) where you reasonably believe that serious physical or mental injury will be caused to any person if the information is disclosed to a client.’ 2 The duty is more narrowly stated in the judgment of Bingham MR in Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER  836, CA at 842. But this is probably confined to mortgage cases. There are clear policy reasons why solicitors acting, with the knowledge of

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6.35  Solicitors’ duties of confidentiality the lender, for lender and borrower simultaneously, should not be subject to the full extent of the disclosure obligation, as set out above and the way this policy can be carried into effect is by reading the terms of the retainer as either expressly or impliedly limiting the duty of disclosure: see also Bristol & West Building Society v Baden, Barnes Groves [2000] Lloyd’s Rep PN 788 (Chadwick J, decided in 1996), National Home Loans v Giffen Couch & Archer [1998] 1 WLR  207, CA (discussed below at fn 1 to para  6.36), and Nationwide v Balmer Radmore [1999] Lloyd’s Rep PN 241, (Blackburne J), at 263. See generally Chapter 10. 3 See also para 26.

6.35 The 2019 Code of Conduct is altogether leaner, and does not grapple with the difficulties discussed above. Paragraph 6.4 simply provides: ‘Any individual who is acting for a client on a matter makes the client aware of all information material to the matter of which the individual has knowledge except when: (a) the disclosure of the information is prohibited by legal restrictions imposed in the interests of national security or the prevention of crime; (b)

the client gives informed consent, given or evidenced in writing, to the information not being disclosed to them;

(c) the individual has reason to believe that serious physical or mental injury will be caused to the client or another if the information is disclosed; or (d) the information is contained in a privileged document that the individual has knowledge of only because it has been mistakenly disclosed.’ 6.36 Such an express agreement would involve the solicitor, by contract, limiting and modifying the fiduciary duties to which he or she would otherwise be subject.1 We have already seen2 how the law recognises that the fiduciary relationship must accommodate itself to the contractual one existing between client and professional. This may be the case even where the term of the contract which is said to delimit the (fiduciary) duty of disclosure of all material facts is an implied one. The classic example is the estate agency case of Kelly v Cooper.3 The claimant owned a house fronting the sea and retained the defendant estate agent to market it in return for a commission. The defendant was also separately retained as selling agent by the owner of the adjoining house. A purchaser expressed interest in both houses. He made an offer through the defendant on the adjoining house, which was accepted. He then made an offer on the claimant’s house. The defendant did not inform the claimant of the purchaser’s existing interest in the adjoining house. The claimant accepted the purchaser’s offer. Only after the sale had completed did the claimant discover the purchaser’s interest in both properties. He alleged that the defendant should have informed him of the purchaser’s interest in the adjoining property, as a material fact relevant to his decision to sell his property 296

The duty of confidentiality  6.37 and at what price. It meant that the purchaser had a special interest in the claimant’s property and would therefore have been prepared to pay a premium. In the Privy Council it was accepted that the purchaser’s interest in buying both properties was a material factor which could have influenced the negotiations for the price at which the claimant’s property was sold. It was also accepted that the normal rule is that agents have a duty to disclose to their principal material information which comes into their possession. However the Privy Council held that, given that estate agents have to act for multiple principals in order to function as businesses, there had to be implied into the terms of their retainer that the agent would keep confidential information learnt during the course of their agency with client 1 even though that information might be material to client 2. The defendant had acquired the information about the purchaser’s interest in the adjoining property as agent for the adjoining owner and accordingly owed him a duty to keep that information confidential. ‘[T]he scope of the fiduciary duties owed by the defendants to the [claimant] … are to be defined by the terms of the contract of agency’.4 Accordingly, the fiduciary obligations of the defendant to the claimant (which would ordinarily require disclosure of all material information) had to be modified to take account of the fact that the defendant would learn information of a confidential nature from other principals which, although material to the claimant, could not be disclosed to him. 1 An example is National Home Loans v Giffen Couch & Archer [1998] 1 WLR 207, CA, where it was held that where the conveyancing solicitors’ duties had been closely defined by the claimant lender then they had no duty to pass on to the claimant the fact, discovered by them, that the borrowers (also their clients) were in arrears on their existing mortgage. See further 10.44 and 10.55. See also Credit Lyonnais SA v Russell Jones & Walker [2003] Lloyd’s Rep PN 7 and Jackson LJ’s summary of the relevant principles in Minkin v Landsberg [2016] 1 WLR 1489 at [38], emphasising that it is implicit in the solicitor’s retainer that he or she will advise on matters reasonably incidental to the work which he or she is carrying out. 2 See above at para 6.07. 3 [1993] AC 205. See further para 4.38, above. 4 [1993] AC 205 at 215.

6.37 Kelly v Cooper was an example of a case where the implied terms of the contract between the professional and the client shaped – and narrowed – the fiduciary obligations of the professional. The existence of duties of confidentiality owed to one client modified duties of disclosure to another so that there was no conflict between them. The approach in Kelly v Cooper was followed in the Court of Appeal in Hilton v Barker Booth & Eastwood1 where it was held that there was to be implied into the retainer between the claimant client and the defendant solicitors a term that the solicitors were not obliged to disclose to that client material, but confidential, information learnt in the course of a retainer by another client.2 However, as we discuss below, this analysis was rejected in emphatic terms by the House of Lords in the same case. Lord Walker was unable to discern any basis on which such a term could be implied.3 Kelly v Cooper is also the subject of penetrating criticism in the leading modern textbook on conflicts of interest.4 Apart from in the field of 297

6.38  Solicitors’ duties of confidentiality solicitors’ duties when acting simultaneously for borrowers and lenders, where special rules apply, it may be that Kelly v Cooper has limited status as authority in the field of solicitors’ liabilities. 1 [2002] EWCA Civ 723, [2002] Lloyd’s Rep PN 500, CA. 2 At [32]. 3 [2005] UKHL 8, [2005] 1 WLR 567 at [37]. Discussed at para 6.39, below. It is notable that in Harlequin Property (SVG) Ltd v Wilkins Kennedy (A Firm) [2016] EWHC 3188 (TCC), [2017] 4 WLR 30 Coulson J, at [494] distinguished the case before him, in which an accountant found himself in a conflict of interest, from Hilton v Barker Booth & Eastwood on the basis that, unlike a solicitor, an accountant did not usually come under a duty to disclose confidential information about one client to another. As he put it ‘a solicitor acts in a different personal, regulatory and ethical context to an accountant … more akin to that of the estate agent in Kelly v Cooper.’ 4 Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), at para 4–021, questioning the basis on which the term contended for could properly be implied. The authors contend (at para 4–022) that the decision is best explained as one where the claimant client gave deemed consent to the defendant agent acting for other principals and withholding confidential information learnt in the course of those other retainers which would be otherwise disclosable. The decision in Kelly v Cooper was described as ‘controversial’ by the New Zealand Supreme Court in Stevens v Premium Real Estate Ltd [2009] NZSC 15 and it was said in Rossetti Marketing Ltd v Diamond Sofa Company Ltd [2012]  EWCA  Civ 1021, [2013] Bus LR  543 at [27], that ‘it is highly questionable whether the reasoning in Kelly … should be extended to other cases of agency’.

(b)  Acting for the borrower and lender 6.38 The conflicting duties difficulty usually arises in circumstances where the solicitor is retained simultaneously by two parties in the same transaction. The typical situation is of course where a solicitor is retained by both borrower and lender in respect of a purchase of property where the purchaser is acquiring the property with the assistance of loan finance, to be secured on the property. The solicitor has accepted two retainers, albeit with the consent of both clients. Although each client has a mutuality of interest in ensuring that the borrower obtains good title to the security, nonetheless apart from that the clients may well have conflicting interests. The problem of disclosure of information and maintaining confidence as between the two clients gave rise to considerable litigation in the 1990s. In Mortgage Express Ltd v Bowerman & Partners1 it was said: ‘A solicitor who acts both for a purchaser and a mortgage lender faces a potential conflict of duty. A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitors is confidential and may be disclosed only with the consent, express or implied, of his client. There is therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.’2 How the law has resolved the problems arising in such situations is the subject of discussion elsewhere in this book.3 In a series of decisions the courts have 298

The duty of confidentiality  6.40 been concerned to delimit the disclosure duties of the solicitor very narrowly. In the light of the House of Lords decision in Hilton v Barker Booth & Eastwood it seems likely that these authorities will be confined to the mortgage situation. 1 [1996] 2 All ER 836, CA. 2 Per Millett LJ, at 844–845. This passage was quoted with approval by Sir Stanley Burnton in Goldsmith Williams Solicitors v E.Surv Ltd [2015] EWCA Civ 1147, [2016] 4 All ER 229 at [34]. 3 See at para 10.101ff, below. See also Tomlinson & Grant, Lender Claims (2010), at Chapter 3.

(c)  Acting for purchaser and vendor 6.39 Similar problems can also arise when a solicitor acts simultaneously for both the purchaser and vendor of a property. Such a dual retainer gives rise to an obvious potential conflict between the solicitor’s duties to each client. This conflict came into acute focus in Hilton v Barker Booth & Eastwood.1 The claimant (H) had agreed with a man called Bromage (B) that H would acquire from a third party a property with development potential which H would develop into flats and then sell to B at an agreed price. B and H were both established clients of the solicitors and jointly instructed them. H  acquired the property and developed it. B then failed to complete on his own obligation to acquire the site from H, who suffered substantial losses, having borrowed significant sums to complete the development. In fact B had, prior to his dealings with H, been made bankrupt and sent to prison for fraud offences, facts known to the solicitors (who had acted for him in the criminal trial), but not disclosed by them to H. It was found by the judge that H would not have gone ahead with the transaction had he been informed of these facts. It was accepted by the solicitors that they could not properly act for both H and B on the transaction and that they had breached their duty to H. However the solicitors went on to argue that the only breach they had committed was the failure to refuse to act for H and to advise him to consult another solicitor: however, it was argued, had they informed H that they could not act then H would still have entered into the transaction and suffered the same losses. Any new solicitor instructed by H in place of the defendant firm would not have learnt of the fact of B’s conviction and bankruptcy.2 1 [2005] UKHL 8, [2005] 1 WLR 567. Discussed at fn 1 to para 1.01, para 2.13 and para 4.27, above. 2 At [36].

6.40 It was accepted by the House of Lords that it would have been a breach of the solicitors’ duty to B to inform H of the facts of B’s bankruptcy and convictions. Although those facts were not, strictly speaking, confidential the solicitors’ duty to protect and promote their client’s interests prevented them from disclosing them to a third party (even if that third party happened to be another client).1 But, nonetheless, it was held by the House of Lords (disagreeing with the lower courts) that the solicitors were in breach of their duty to H  not simply in continuing to act for H  (when they faced a conflict 299

6.41  Solicitors’ duties of confidentiality as between their duties to H  and B), but also, having wrongly continued to act, in then not disclosing to H the facts of B’s convictions and bankruptcy.2 The solicitors had put themselves in a position where they owed inconsistent and irreconcilable duties to two clients: a duty of confidentiality to B (in the wide sense discussed earlier) and a duty of disclosure to H in respect of the information the subject of the conflicting duty to B. This gave rise to a paradox: the solicitors could not disclose the information concerning the convictions and bankruptcy to H  because it would involve a breach of duty to B, but nonetheless the solicitors were in breach of duty to H. The House of Lords dealt with this paradox as follows: ‘Since [the solicitor] may not prefer one duty to another, he must perform both as best he can. This may involve performing one duty to the letter of the obligation, and paying compensation for his failure to perform the other. But in any case the fact that he has chosen to put himself in an impossible position does not exonerate him from liability.’3 So the solicitors could not rely upon a conflicting duty to one client as a defence to a claim for breach of duty to another client.4 1 See [34]. The Court of Appeal had left open the question whether H, having jointly instructed the solicitors with B  in relation to the property transaction, had impliedly consented to the solicitors disclosing to H the fact of his bankruptcy and conviction and so released them from their duty to B  as regards non-disclosure of these facts: this had not been argued by H. See [2002] Lloyd’s Rep PN 500. 2 Pursuant to the general obligation on an agent to disclose to the principal all relevant facts and matters known to the agent, referred to in Spector v Ageda [1973] Ch 30 (Megarry J): see para 6.32, above. 3 At [44]. 4 The House of Lords treated this as a straightforward application of Moody v Cox and Hatt [1917] 2 Ch 71, CA.

6.41 The Court of Appeal in Hilton, in deciding that the only breach committed by the solicitors was in failing to decline to act for H (which breach was not causative of any loss), had held that there had to be implied into the retainer between H and the solicitors a term that the solicitors were not obliged to disclose to H any fact which they were legally obliged (to any other client, including B) to treat as confidential. As we have seen, the House of Lords expressly disagreed with that analysis.1 The result is the potential for the solicitor to be faced with two conflicting duties to different clients from which, unless he or she declines to act for at least one of them at any stage, he or she cannot escape. Such a conflict will generally arise where the solicitor has accepted a joint retainer from two clients with potentially conflicting interests. So, where a solicitor is instructed by client A in relation to a particular matter, and is subsequently instructed by client B on a different matter, the solicitor may find that his or her duty of confidentiality to client A conflicts with his or her duty of disclosure to client B. As we have seen above, as a matter of professional conduct the SRA Code of Conduct 2011 previously provided that, 300

The duty of confidentiality  6.43 although the solicitor must disclose to a client all information material to that retainer of which the individual solicitor has personal knowledge, regardless of the source of the information, that obligation is subject to the duty of confidentiality, which is paramount, and so always takes precedence over the duty to disclose.2 However the advice offered in the 2007 Guidance Notes, which clearly sought to take account of the decision in Hilton, was as follows, and remains valid as a statement of the law, and indeed rather more accurate: ’You cannot, however, excuse a failure to disclose material information, because to do so would breach a separate duty of confidentiality. Unless the retainer with the client to which the information cannot be disclosed can be varied so that the inability to disclose is not a breach of duty, you should refuse the instructions, or, if already acting, immediately cease to act for that client. Any delay in ceasing to act is likely to increase the risk that you are liable for breach of duty.’3 1 At [37]. 2 See introduction to Chapter 4 and O(4.3). In Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), it is pointed out, at para 15-009, that in fact where the duties clash the solicitor should cease to act. 3 Para 23 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007.

5  Overriding or releasing the duty 6.42 The duty of confidentiality owed by the solicitor to his or her client may, in exceptional circumstances, be overridden or released. In this section we consider the types of circumstance (apart from express or implied consent, which has been discussed above) which may give rise to such an overriding or release.

(a)  Greater duty to client 6.43 As has been pointed out in a useful article1 the decision in Marsh v Sofaer (referred to earlier2) is arguably in conflict with an earlier Court of Appeal decision, Howell-Smith v Official Solicitor3 which involved relatively similar facts. In that case the solicitor, Mr Price, had been retained by an elderly woman who lived in a residential mental hospital under the care of a doctor, Dr Price (who was unrelated to Mr Price). The claimant invested £73,000 with Dr Price on terms which were unclear. The solicitor was concerned that the claimant might be vulnerable, and, without instructions, sought the return of the £73,000 and reported Dr Price to his professional body and to the hospital administrator. In an action brought by the claimant for breach of duty and breach of confidence (the claimant asserting that she had not and would not have consented to those steps) the Court of Appeal held that the solicitor had acted correctly: ‘He had a duty to protect her position.’ The judgment is not particularly closely reasoned but the analysis of the first instance judge was quoted and was broadly adopted: 301

6.44  Solicitors’ duties of confidentiality ‘… where what the solicitor is concerned about is improper influence being brought to bear on his client which actually affects the instructions which the client is giving, there must be an entitlement in a solicitor to break any duty of confidence that there may be and report that matter to the authorities to enable some independent advice to be given to the client and/or to make some check in relation to the activities of the person about whom the solicitor is complaining.’4 1 Ian Gatt QC, The Solicitors’ Duty of Confidentiality (2006) 2 PNBA Professional Negligence Law Review 8. 2 At para 6.13, above. 3 [2006] PNLR 21, CA (but decided in 1996). 4 The Court of Appeal commented on this passage, at [23]: ‘That entitlement may be stated too broadly in that passage, but it demonstrates that the judge had in mind a duty owed by Mr Price [the solicitor] to the client herself. Whether it is appropriate for a solicitor to make such a report upon a third party will of course depend on the circumstances of the particular case.’

6.44 The general position is that the solicitor is not entitled to make a disclosure, without client consent, simply because the solicitor perceives it to be in the client’s best interests (this is to be distinguished from the implied authority of the solicitor to disclose information in the proper course of the retainer, discussed above at para  6.18).1 However it is easy to posit other examples of situations where the solicitor will be entitled to break confidence for the greater benefit of the client. Assume that the client informs the solicitor that he or she intends to harm themselves or to commit suicide: it seems unlikely that the solicitor who informed the client’s spouse or doctor would be held liable for breach of duty,2 although the result would plainly be different if the solicitor were to inform a national newspaper. Similarly if the client is a child or vulnerable adult and reveals to his or her solicitor that he or she is the victim of sexual abuse, but refuses to allow the solicitor to disclose this fact, the solicitor would be entitled to make appropriate disclosure where he or she considers that the threat to the child’s life or health, both mental and physical, is sufficiently serious to justify a breach of the duty of confidentiality.3 1 See Tournier v National Provincial and Union Bank of England [1924] 1 KB 461, CA at 481. 2 See Weld-Blundell v Stephens [1919] 1 KB 520, CA at 527. 3 See paras 13 and 14 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 and SRA Guidance Note on ‘Disclosure of client’s confidential information’, issued on 5 February 2016, which has been updated in the 25 November 2019 SRA Guidance. Another example posited is the disclosure of the commission of a future criminal offence, as to which see further below.

(b)  Public interest/iniquity 6.45 It is clearly established that under the general law a duty of confidentiality may be overridden by reference to some greater public interest in disclosure to a particular person or group of persons, or even the world at large. There is a substantial body of authority which has built up over the last 150 years defining the circumstances where the duty of confidentiality may be overridden and the extent of the disclosure that may be permitted.1 So, in the 302

The duty of confidentiality  6.46 professional sphere, a doctor who had been consulted by a psychiatric patient with a view to his providing a report to support an application for relaxation of the conditions of his confinement was entitled to disclose that report to the medical officer of the mental hospital at which the patient was confined where the doctor in fact concluded that the claimant patient still presented a danger to the public.2 The public interest in disclosure, albeit to a limited body of recipients, overrode the patient’s entitlement to confidentiality. 1 See Toulson and Phipps, Confidentiality (3rd edn, 2012), at Ch  6, and Gurry, Breach of Confidence (2nd edn, 2012), at Chapter 16, for a review of the authorities. 2 W v Edgell [1990] 1 Ch 108, CA.

6.46 As we have seen, the confidential relationship between client and solicitor is fortified by the privilege which attaches to all, or almost all, communications between client and solicitor, a privilege which distinguishes solicitors from other confidential advisors or confidants. This means that the courts have not recognised the public interest defence, or exception, as applying to solicitors except in narrowly confined circumstances.1 The underlying policy which strives to ensure that when a client retains a solicitor the client should be able to make ‘a clean breast’2 of the position requires that where the client discloses behaviour which is criminal or otherwise unlawful, whether or not within the context of seeking legal advice concerning proceedings directed against the client in respect of that conduct, the solicitor should be prohibited from breaching that confidence, for instance by informing the relevant prosecuting authorities.3 The solicitor’s duty of confidentiality can only be overridden in closely defined circumstances: (a) Where the solicitor believes disclosure to be necessary to prevent the client or a third party committing a criminal act likely to result in serious bodily harm.4 (b) Where the solicitor believes it necessary to prevent continuing or anticipated child abuse. We have mentioned above the case of the child revealing the existence of abuse but refusing disclosure; a similar analysis would apply where it was the client who was the abuser.5 (c)

Where the solicitor or a third party has reasonable grounds to suspect that the retainer is being used as a cloak for fraud, whether civil or criminal.6 This is because it is clearly established that where a solicitor, whether knowingly or not, has been retained to carry out or promote a fraudulent enterprise or to stifle or cover up a fraud, no privilege attaches to the communications between solicitor and client and nor is the solicitor subject to any duty of confidentiality in respect of such communications.7 The usual situation where the issue arises is where disclosure of documents held by the solicitor is sought against the solicitor by a third party in the context of civil proceedings. The solicitor may either be a party to the proceedings or the subject of a third party disclosure application. The other party to the litigation may seek disclosure of the relevant documents 303

6.46  Solicitors’ duties of confidentiality on the basis that they are not privileged and are otherwise disclosable by reference to the criteria laid down by CPR Part 31. In such a case the solicitor may be placed in a delicate position: on the one hand he or she is, at least on the face of it, subject to a duty of confidence to his or her (former) client, which carries with it a duty to uphold the client’s privilege; on the other hand he or she is subject to a request for disclosure, failure to accede to which may carry an adverse costs sanction if the application is successful. In such a situation the solicitor should discuss with his or her client or former client the fact of the application and seek instructions. The client may wish to be represented on the application so as to protect his or her privilege. Of course the solicitor has a duty to guard and assert the client’s privilege, but if a strong prima facie case of fraud is established by the applicant party then, assuming the former client cannot be contacted, or does not take steps to intervene, the solicitor may not be obliged to act only under a court order, but may voluntarily provide disclosure.8 Where a relatively cogent case of fraud is made out, and the former client cannot be contacted, the safest course may be to adopt a neutral position and act only pursuant to a court order. The solicitor’s duty to assert privilege may not mean that he or she is obliged to expend their own money to resist disclosure (for instance where the client cannot be located or declines to fund the solicitor), though if the solicitor chooses to do so and succeeds in resisting disclosure then he or she will generally be entitled to recover those costs from the applicant party; conversely if the active resistance fails then the solicitor may be at risk on costs.9 (d)

However it may be that the issue arises not in the context of a subsequent request for disclosure by a third party, but where the solicitor, during the course of the retainer itself, comes to suspect that he or she is being used as an instrument for a fraudulent purpose. In such circumstances the solicitor may terminate the retainer or apply to court for directions.10 In Finers v Miro11 the claimant solicitors were retained by the defendant to set up a series of overseas companies and trusts to hold assets belonging to the defendant. The solicitors came to suspect that the assets were derived from a wrongful misappropriation perpetrated by the defendant upon a US insurance company. The solicitors, who were holding funds on behalf of their client, sought directions from the court under the old RSC Ord 85 in relation to what to do with those funds.12

In each of these cases it is suggested that, if the solicitor has a reasonable basis for believing that there exist grounds which permit disclosure of matters otherwise subject to a duty of confidentiality, then, even if it is subsequently proven by the client that in fact the suspected wrongdoing had not occurred, the solicitor should not be liable for breach of his or her duty of confidentiality to the client.13 1 The special position of the solicitor is commented on by Scrutton LJ in his dissenting judgment in Weld-Blundell v Stephens [1919] 1 KB 520, CA at 545–546. The judge referred to an unreported case, Mellor v Thompson, decided in the 1880s (reported on a separate point at (1886) 31 Ch

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The duty of confidentiality  6.46 D 55 (CA)). Two traders, M and P, entered into a secret agreement by which P bought out M but it was provided that P and M would continue to trade as if they were separate and competing concerns. T, in his capacity as M’s solicitor, acquired knowledge of this arrangement and threatened to make it public. An interlocutory injunction was granted, which was continued as a final injunction at the trial. T’s defence that he wished to expose a fraud upon the Revenue was rejected. This is a somewhat different approach from that in the line of cases starting with Gartside v Outram (1856) 26 LJ Ch (NS) 113, which set out the ‘public interest’ defence as it exists within the general law of confidentiality. In Toulson & Phipps, Confidentiality (3rd edn, 2012), the test gleaned from those authorities is stated as follows (at para 6-076): ‘(1) Respect for confidentiality is itself a matter of public interest. (2) To justify disclosure of otherwise confidential information on the grounds of public interest, it is not enough that the information is a matter of public interest. Its importance must be such that the duty otherwise owed to respect its confidentiality should be overridden. (3) In broad summary either the disclosure must relate to serious misconduct (actual or contemplated) or it must otherwise be important for safeguarding the public welfare in matters of health and safety, or of comparable public importance, that the information should be known by those to whom it is disclosed or proposed to be disclosed. (4) (i)

Even if the information meets that test, it does not necessarily follow that it would be proper for the defendant to disclose it.

(ii) The court must consider the relationship between the parties and the risks of harm which may be caused (or avoided) by permitting or prohibiting disclosure, both in the particular case and more generally. For example, if the law inhibits a doctor from disclosing information about a patient which may affect another person, it may lead to risk of avoidable injury or death; but if it permits a doctor to do so, it may impair a patient’s willingness to confide in the doctor and receive treatment. (5) Ultimately the court has to decide what is conscionable or unconscionable, which will depend on its view of what would be acceptable to the community as a fair and proper standard of behaviour. This requires the court to make an evaluative judgment, but it does not have an unfettered discretion. (6) In cases where the party claiming confidentiality is a branch of Government, or a body performing a governmental function, a separate principle applies. In such cases detriment to the public interest is an essential ingredient of the cause of action.’ 2 The phrase is used by Jessel MR in Anderson v British Bank of Columbia (1876) 2 Ch D 644, 649. A  modern restatement of this principle is Sir Thomas Bingham MR’s judgment in Ridehalgh v Horsefield [1994] Ch 205, CA at 224: ‘Parties must be free to unburden themselves to their legal advisers without fearing that what they say may provide ammunition for their opponent. To this end a cloak of confidence is thrown over communications between client and lawyer, usually removable only with the consent of the client.’ For Ridehalgh, see further Chapter 13, below. 3 In such a case, if ‘the solicitor in breach of his confidence and privilege announced his intention of informing the prosecution of the contents of his client’s communication, I  cannot believe that the Court would not restrain him before publication …’: Weld-Blundell v Stephen [1919] 1 KB 520, CA at 544–545. 4 Para 13 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 and SRA Guidance Note on ‘Disclosure of client’s confidential information’ issued on 5 February 2016, updated

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6.46  Solicitors’ duties of confidentiality in the SRA 2019 Guidance. See the vivid example provided by Cockerill J in Saab v Angate Consulting Ltd [2019] EWHC 1558 (Comm) at [216]: ‘If a client disclosed crucial details of an intended bomb attack on a nursery school as part of his consultations with his lawyer, would this court say that the obligation of confidentiality could not be overridden by the need to save the lives of hundreds of children? I strongly suspect it would not.’ 5 Special rules apply to proceedings under the Children Act 1989: see para 15 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 and the discussion in Toulson & Phipps, Confidentiality (3rd edn, 2012), at para 16–044ff. 6 The concept of fraud is treated broadly by the courts and extends, for instance, to conduct in fraud of creditors falling within s 423 of the Insolvency Act 1986: see generally Barclays Bank v Eustice [1995] 1 WLR 1238, CA, discussed in para 14.28ff, below. 7 See O’Rourke v Derbyshire [1920] AC  581, HL and Finers v Miro [1991] 1 WLR  35, CA. A  recent, and particularly egregious and far-reaching example of this kind of case occurred within the context of the long running JSC BTA Bank v Ablyazov litigation. In a 2014 decision in one of the proceedings making up that dispute ([2014]  EWHC  2788 (Comm)), at [99] Popplewell J said of the defendant’s strategy of concealment, forgery and deceit in relation to his assets in the face of court orders that: ‘the solicitors were not being employed in the ordinary course of professional engagement. On the contrary, they were being unwittingly used as an instrument to pursue a strategy which, had they known of it, they would have been unable to pursue on their client’s behalf. It was an abuse of the normal relationship between solicitor and client to engage the solicitors in order to effect such a strategy, and there can be no confidence in communications between solicitor and client by which a client seeks to further such a strategy whilst trying to keep the solicitor in the dark about it. If the solicitors had connived at it, which is not suggested in this application, it would have involved a conspiracy to pervert the course of justice in which there can be no confidence. The quality of confidence is equally negated by the solicitors being used as the unwitting instrument of Mr Ablyazov in seeking to achieve the same purpose. There is at the least a very strong prima facie case that his strategy in relation to his assets is one which brings relevant communications within the iniquity exception.’ Such a retainer should of course be distinguished from the situation where the client consults his or her solicitor after the commission of a crime for the purpose of seeking legal advice as to the legal position and of being defended against a criminal prosecution or even where the client discloses facts to the solicitor which amount to a criminal offence. The line may not always be easy to draw. 8 See generally Abbey National plc v Clive Travers [1999] Lloyd’s Rep PN 753, CA. The claimant bank sued the defendant solicitors for negligence. The defendants had acted for the vendor, purchaser/borrower and the bank in the same purchase/mortgage transaction. In professional negligence proceedings the claimant sought disclosure from the defendants of documents in their possession which recorded communications between the defendants and their vendor client which were prima facie subject to privilege. The solicitors asserted the vendor’s privilege. It was held that the claimant had established a prima facie case of fraud sufficient to override the privilege. It was remarked that usually in such circumstances the solicitors should ask their former client whether they wished to assert the privilege. See also R v Central Criminal Court ex p Francis and Francis [1989] 1 AC 347, HL at 385E and 386E and the guidance contained in para 17 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007. 9 See Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255 at [91]– [93]. There Lewison LJ said that ‘As Blackburne J held in Nationwide and Lord Hoffmann held in Morgan Grenfell it is the lawyer’s duty to assert privilege. If, in order to fulfil that duty, they incur costs (including costs in resisting an application for disclosure) they are doing no more than fulfilling that duty … It may well be that they will be unable to recoup their costs from their client (or former client) but that is a matter for them … It is perfectly true that there are circumstances in which a person is unwilling to release information without a court order; and requires the court order as a form of protection against any complaint by the

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The duty of confidentiality  6.47 person whose information is sought. In such cases the person holding the information may choose not to defend the application. But that is a matter of choice. I do not say that solicitors must always participate in contested proceedings for disclosure; merely that they may do so without overstepping the limits of their duty.’ It is does not appear to be the case that Lewison LJ was there saying that to fulfil that duty the solicitor must incur costs in actively asserting the privilege, but that where the solicitor chooses to do so, and succeeds, then he or she should be entitled to the costs so incurred. 10 Or even make disclosure to the relevant authorities. In R v Pearson [2005] EWCA Crim 1412 a solicitor attended a police station to act for an arrested person. That person asked the solicitor in a menacing way to go to a particular address to remove money hidden there. The solicitor disclosed this fact to the police. It was held that this was not a breach of confidence: the solicitor was being asked to commit a criminal offence or at least to remove evidence. There could be no confidence or privilege in such instructions. 11 [1991] 1 WLR 35, CA. 12 See also at para 6.51ff, below, in relation to statutory obligations of disclosure. 13 See Toulson & Phipps, Confidentiality (3rd edn, 2012), at para 16–023. The authors suggest, by reference to Finers v Miro, that the proper test is whether a prima facie case resting on solid grounds has been established justifying the disclosure (at para 16–016).

(c)  Proceedings against or by the solicitor 6.47 Where a solicitor is sued for negligence or other breach of duty by a former client then the privilege inhering in documents and communications passing between that client and the solicitor is waived and the solicitor is released from his or her duty of confidentiality to the extent necessary to allow him or her to defend the claim.1 The former client has invited the court to adjudicate on the dispute and thereby has waived privilege and confidence in communications passing between the client and solicitor to the extent necessary to permit the court to do so fully and fairly. This principle has been applied to fee disputes where a former client has challenged the solicitor’s bill.2 1 See Lillicrap v Nalder [1993] 1 WLR 94, CA and Paragon Finance plc v Freshfields [1999] 1  WLR  1183, CA where the test was stated more narrowly. The waiver is not necessarily confined to the documents and communications between solicitor and client within the specific retainer forming the subject matter of the proceedings, as the decision in Lillicrap demonstrates. On the other hand this principle does not allow a solicitor (or other defendant) who has been sued to open up the privilege otherwise protecting communications between the claimant and other lawyers where that would be evidentially relevant to an issue. So when a claimant brought negligence proceedings against its accountants in relation to advice given concerning a particular transaction, the accountants could not obtain disclosure of communications between the claimant and its solicitors evidencing advice provided to the claimant in relation to the same transaction: NRG v Bacon & Woodrow [1995] 1 All ER 978 (Colman J). Where a solicitor has acted for a borrower and lender on a mortgage transaction, the starting point is that the lender will not be allowed to see privileged communications between the solicitor and the borrower, unless a strong prima facie case of iniquity is established: Abbey National plc v Clive Travers [1999] Lloyd’s Rep PN  753, CA. However, contractual arrangements between the borrower and the lender may result in a waiver of such rights: Mortgage Express v Sawali [2010] EWHC 3054 (Ch), [2011] PNLR 11. In an appropriate case (particularly if there is an overarching criminal investigation) the client’s interests may be protected by the court ordering that the dispute with their solicitors be heard in private: Eurasian Natural Resources Corp v Dechert [2016] EWCA Civ 375, [2016] 1 WLR 5027. This category of case is discussed further in para 14.28ff, below. 2 See Eurasian Natural Resources Corp v Dechert [2016] EWCA Civ 375, [2016] 1 WLR 5027.

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6.48  Solicitors’ duties of confidentiality 6.48 In para  19 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 it was stated that a solicitor was entitled to rely upon and reveal confidential information concerning a client to the extent that it is reasonably necessary to establish a defence to a criminal charge brought against the solicitor or where the solicitor’s conduct was under investigation by the Solicitors Regulation Authority or under consideration by the Solicitors Disciplinary Tribunal. Clearly, where a complaint has been made by the former client to the SRA then privilege is impliedly waived, and the Lillicrap principle applies. However we consider that para 19 of the Guidance Notes is too widely stated (it was not repeated in the SRA 2011 or 2019 Codes of Conduct) and fails to reflect the substantive (as opposed to evidential) nature of LPP that the courts have insisted upon in recent years.1 1 Toulson & Phipps doubt that a solicitor can, absent consent, deploy privileged material in defence of criminal proceedings, by reference to the absolute nature of legal professional privilege, as stated in R v Derby Magistrates ex p B [1996] AC 487, HL: see Confidentiality (3rd edn, 2012), at para 16–033. Similarly, they express doubt as to the proposition that a solicitor can deploy privileged material in defence of disciplinary proceedings, where the complaint is not made by the former client. As regards privilege and investigations by the Law Society see the discussion in Confidentiality, at paras 16–036 to 16–041.

6.49 Similarly, where a solicitor is the subject of an application for a wasted costs order by the other party to litigation (as opposed to by his or her own client1) then, absent the consent of the client, the solicitor is not entitled to rely upon documents or communications, or reveal information, protected by legal professional privilege in order to defend him or herself against such an application.2 So in General Mediterranean Holdings SA v Patel3 solicitors who had acted for the defendants in court proceedings were the subject of a wasted costs application by the claimant. They were prevented from relying upon privileged communications between themselves and their former clients and the provision of the CPR as it then stood (r 48.7(3)) which purported to permit such reliance was struck down as ultra vires. The same analysis applies where the solicitor is sued by a third party (ie by a non-client). The solicitor cannot, without the consent of the client or former client, deploy privileged material or documents, even if such documents are relevant to his or her defence to the proceedings. 1 When the Lillicrap principle will apply. See the discussion below at para 14.28ff. 2 Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120. The result is that in such a case the solicitor (or indeed barrister) is hampered in defending him or herself against the application and so the court should make every allowance in his or her favour: see [23]ff: ‘Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order’. This applies particularly if allegations against the lawyer are complicated and would have to be substantively determined: Kagalovsky v Balmore Invest Ltd [2015] EWHC 1337 (QB), [2015] PNLR 26. See also 13.19ff below. 3 [1999] 1 WLR 272 (Toulson J).

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The duty of confidentiality  6.52 6.50 Finally, where the solicitor brings proceedings against the former client for unpaid fees, then it may be that the solicitor is entitled to deploy otherwise privileged material. In Hakendorf v Countess of Rosenborg1 the claimant solicitor had referred to privileged material in an affidavit in support of an application for a freezing order. This was held, obiter, to be justified on the basis that where a solicitor has cause to sue for fees he or she should be permitted to rely on material which supports that case. Otherwise the solicitor would be hampered in bringing proceedings to vindicate a right.2 1 [2004] EWHC 2821 (QB),Tugendhat J. The difficulty is that the client has at that stage on the face of it done nothing to put the relationship in issue so as bring into play the implied waiver doctrine; though it may be said that the very fact of failure to pay the solicitors’ bill has had that effect. 2 For criticism see fn 4 to para 14.13, below.

(d)  Statutory legal compulsion/right 6.51 Professional obligations of confidentiality, including those owed by solicitors, may be overridden by statutory obligations. So it was said in a case involving solicitors that a ‘duty of confidence is subject to, and overridden by, the duty of the party to that contract to comply with the law of the land. If it is the duty of such a party to a contract … to disclose in defined circumstances confidential information, then he must do so, and any express contract to the contrary would be illegal and void’.1 Clearly a solicitor who complies with a statutory obligation of disclosure commits no breach of confidence actionable by his or her client or former client. 1 Parry-Jones v Law Society [1969] 1 Ch  1, at 9. Some of the reasoning in Parry-Jones was questioned in the House of Lords decision of R (Morgan Grenfell) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563 at [30].

6.52 Statutes overriding confidentiality and privilege may take a number of forms: (a)

They may empower governmental bodies or agencies to require a person to disclose documents and/or information. It may not be clear in such statutory provisions whether privilege is being abrogated. The recent tendency of the courts is to insist on express wording (or necessary implication) in a statute in order to override legal professional privilege.1 This is important because if the relevant provision does not abrogate privilege then the solicitor, faced with a demand for disclosure, would not merely be under no duty to disclose privileged documents (which are likely to comprise a substantial proportion of documents within his or her control), but would be potentially in breach of duty to his or her client in complying with any disclosure request by providing privileged documents. In cases of doubt it may be advisable for the solicitor to seek directions from the court.2 309

6.53  Solicitors’ duties of confidentiality (b) They may oblige or permit the solicitor to specifically report matters otherwise subject to duties of confidentiality and protected by legal professional privilege, to a particular agency in the event of certain conditions being met. The most obvious examples are the Proceeds of Crime Act 20023 and the Money Laundering Regulations. (c)

They may empower a court to make an order which requires disclosure. For instance, s 33 of the Family Law Act 1986 provides that ‘where in proceedings … in respect of a child there is not available to the court adequate information as to where the child is, the court may order any person who it has reason to believe may have relevant information to disclose it to the court.’

1 R (Morgan Grenfell) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563, concerning s  20 of the Taxes Management Act 1970. Where a solicitor is subject to a Law Society intervention (under s 35 of the Solicitors Act 1974) then he or she must deliver to the Law Society or its nominee any document notwithstanding any obligation of confidence owed to or privilege of the client: see Quinn Direct Insurance Ltd v Law Society of England and Wales [2010] EWCA Civ 805, [2011] 1 WLR 308 at [14]. See also McE v Prison Service of Northern Ireland [2009] UKHL 15, [2009] 1 AC 908 at [10]. 2 Paragraph 10 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 provided the following advice: ‘A number of statutes empower government and other bodies, for example HM Revenue and Customs, to require any person to disclose documents and/or information. In the absence of the client’s specific consent, you should ask under which statutory power the information is sought, consider the relevant provisions and consider whether privileged information is protected from disclosure. You should only provide such information as you are strictly required by law to disclose.’ Note also the guidance given at paras 16 and 17 of the Guidance Notes in relation to requests made for disclosure of documents by the police. 3 See generally Bowman v Fels [2005] EWCA Civ 226, [2005] 1 WLR 3083.

(e)  Loss of confidentiality 6.53 Mention has previously been made of the general rule in confidentiality cases that once the information the subject of the duty has entered the public domain, then the confidant is released from his or her duty of confidentiality to the confider. The subject matter of the duty has disappeared. However it does not appear that this rule applies in its full rigour to solicitor/(former) client cases.1 1 See paras 6.21–6.25, above.

D REMEDIES 6.54 We have seen that a solicitor who has misused confidential information may be in breach of a variety of duties, equitable, contractual and fiduciary.1 There are a variety of remedies available to the client or former client who has been the victim of a misuse of confidential information, including damages, an account or profits, the imposition of a constructive trust, and an order for 310

Remedies  6.56 delivery up or destruction of documents either belonging to the claimant or said to contain confidential information. 1 And even tortious.

6.55 However the client or former client will generally be most concerned to prevent a breach of confidentiality before it has actually occurred. The paradigm situation where a solicitor’s duty of confidentiality (continuing as it does of course post-retainer) to his or her current or (more usually) former client is called into question, and is the subject of litigation, is where the solicitor accepts, or seeks to accept, a new retainer from a different client where the existing or former client and the new client have potentially conflicting interests. In such a case the existing or former client may wish to obtain an injunction to restrain the solicitor from acting for the new client so as to prevent any perceived risk of a breach of confidentiality by the solicitor. An injunction simply preventing a breach of confidence itself will typically be unnecessary and will not meet the mischief which is apprehended: the solicitor will not be threatening to breach the former client’s confidentiality and will no doubt be providing assurances to the former client to that effect.

1  Claim for an injunction by an existing or former client to protect confidential information 6.56 Where the solicitor accepts a retainer from a new client with interests adverse to the existing or former client, that client may be concerned that a breach of confidentiality may occur, whether inadvertent or not, in the form of the solicitor disclosing to the new client information confidential to the existing or former client or utilising that information for the benefit of the new client. The existing/former client may seek to enjoin the solicitor from accepting or continuing in the new engagement. Although the typical scenario relates to new engagements after the termination of the prior retainer, the problem can arise even where the prior retainer remains on foot. However where the prior retainer remains in existence the existing client will also be able to found a claim on the basis of the solicitor’s continuing fiduciary obligations to him or her, rather than simply on the basis of the post-retainer duty of confidence.1 There are also variants of the scenario which engage the same overall principles: for instance where a partner in a firm of solicitors which has acted for or is acting for a particular client leaves that firm to join a different firm which is acting for a client whose interests are in conflict with the first client.2 In this section we analyse the principles underlying the exercise of the jurisdiction to grant an injunction to a current or former client to prevent a risk of a breach of professional confidentiality. 1 See para 6.65 below. 2 This example in turn breaks down into at least two sub-scenarios: (i) where the departing solicitor had no or limited involvement with the client but wishes to undertake work, via the new firm, for a new client with adverse interests to the old client (see for instance Re A Firm of Solicitors

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6.57  Solicitors’ duties of confidentiality [1997] Ch 1 (Lightman J); (ii) where the departing solicitor was the solicitor undertaking the work for the old client and has moved to a firm where other solicitors (but not the departing solicitor) are acting for a different client with adverse interests to the old client (see for instance Koch Shipping Inc v Richards Butler [2002] EWCA Civ 1280, [2003] PNLR 11).

(a)  Bolkiah v KPMG 6.57 The leading case is the House of Lords’ decision in Bolkiah v KPMG.1 Lord Millett’s speech, which was the only reasoned judgment, provides the starting point for any consideration of the jurisdiction. Although this was a claim for an injunction against a firm of accountants (so as to prevent them acting for a particular client) the case was decided on the basis that the principles were the same whether or not the defendants were solicitors or accountants, so that Bolkiah has direct application to cases involving solicitors. KPMG had acted for Prince Jefri Bolkiah providing litigation support services in relation to litigation brought in England to which Prince Jefri was a party. In the course of providing those services KPMG had acquired detailed knowledge of Prince Jefri’s assets and the corporate structures which held them. The litigation retainer came to an end. Prince Jefri was the chairman of the Brunei Investment Agency (BIA), which held government funds. KPMG had for many years conducted the annual audit of the BIA. Thereafter, Prince Jefri having been dismissed as chairman of the BIA by the government of Brunei, the BIA instituted an investigation into his chairmanship and what had become of various funds held by the BIA. The BIA retained KPMG to carry out that investigation and to assist in the tracing and recovery of those funds. KPMG accepted the retainer about two months after Prince Jefri’s litigation retainer had come to an end. It became clear that the assignment was at least in part adverse to Prince Jefri’s interests and that the investigations might well lead to civil or criminal proceedings against Prince Jefri. Some of the information which KPMG had obtained during the litigation retainer would be relevant to the later BIA retainer. KPMG undertook various steps to create a ‘Chinese Wall’ between those personnel who acted on the previous litigation retainer and those acting on the BIA retainer. Nonetheless Prince Jefri sought an injunction preventing KPMG acting for BIA on the assignment at all. On appeal by Prince Jefri to the House of Lords the injunction was granted. 1 [1999] 2 AC 222, CA. The previous leading authority was Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831, CA. Parts of the reasoning of this case were disapproved in Bolkiah. Important pre-Bolkiah cases include David Lee & Co (Lincoln) Ltd v Coward Chance [1991] Ch  259 (Browne-Wilkinson V-C), Re A  Firm of Solicitors [1992]  QB  959, CA and Re A  Firm of Solicitors [1997] Ch 1 (Lightman J). For a more recent application of the Bolkiah principles see Georgian American Alloys Inc v White and Case [2014] EWHC 94 (Comm), [2014] 1 CLC 86.

6.58 (a)

What emerge from Bolkiah are the following principles: The jurisdiction to prevent a solicitor or other professional from accepting or continuing in a particular engagement is founded upon the right of a former (as opposed to existing) client (‘the old client’) to protect his or 312

Remedies  6.58 her confidential information, not on the avoidance of any perception of possible impropriety. There is no absolute rule in English law (unlike in the USA) that a solicitor cannot act for a client with an interest adverse to that of the former client in ‘the same or a connected matter’; it follows that in the case of an old client ‘there is no basis for granting relief if there is no risk of the disclosure or misuse of confidential information’.1 The position is different where the client seeking to protect its interests is an existing client of the solicitor. We consider that situation below. (b)

Therefore the old client must show that the professional is (i) in possession of information which is confidential to it, and to the disclosure of which it has not consented; and (ii) that such information is or might be relevant to the new matter on which the professional is instructed by the new client in which the interest of the other client is or may be adverse to the old client’s own interest. It will generally be simple for the former client to establish these facts.2

(c) Because the professional’s duty of confidentiality is an absolute one3 the old client is entitled to the assistance of the court to prevent the professional from exposing the old client to any avoidable risk of misuse of its confidential information, which includes the increased risk of misuse by acceptance of a later instruction by a new client with an adverse interest to the old client in a matter to which the information is or may be relevant.4 In the case of solicitors, this is so as to protect the policy that it is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what the client tells his or her lawyer will remain secret.5 (d) Therefore once the old client establishes the matters set out at (b) above, an injunction (to prevent the risk of disclosure or other misuse of confidential information) will be granted against the professional so as to prohibit it acting for the new client unless the professional can satisfy the court that ‘there is no risk of disclosure’. The risk must be real as opposed to fanciful; but it need not be substantial.6 So, once the old client has established the facts referred to at (b) above, then the evidential burden shifts to the professional.7 The court will restrain the professional from acting for the new client unless satisfied on the basis of clear and convincing evidence that effective measures have been taken to ensure that no disclosure will occur.8 (e) The law in this area does not involve imputation or attribution of the knowledge of one partner in a professional firm to his or her fellow partners.9 Therefore the issue will often be the consideration of the degree of risk of information known to one defined set of people (who dealt with the old client) in a firm passing to another defined set of people in the same firm (who are to deal with the new client). Of course where the same person or people who dealt with the old client are going to deal with the new client then the professional cannot act and will in any event 313

6.58  Solicitors’ duties of confidentiality be prohibited from doing so. There can never be ‘an information barrier of the mind’. (e) The jurisdiction whether or not to grant an injunction does not involve a ‘balancing exercise’. If the professional cannot discharge the heavy burden upon him or her then an injunction will be granted, even though the effect of the injunction would be to deprive the new client of the benefit of the representation of their choice. On the other hand, although the starting point is that, unless special measures are taken, information moves within a firm, there is no rule of law that information barriers or similar measures are insufficient to eliminate the risk of misuse.10   1 [1999] 2 AC 222 at 234E and 236B. The law appears to be different in Australia. In Spincode Pty Ltd v Look Software Pty Ltd [2001]  VSCA  248 Brooking JA took the view that the relevant jurisdiction to intervene was too narrowly stated in Bolkiah (where the House of Lords stated that the Court’s power to protect the former client was limited to protection against possible misuse of his or her confidential information) and that there was a wider supervisory jurisdiction, not mentioned in Bolkiah, which could be exercised over solicitors as officers of the Court to prevent them from acting for later clients even where there was no risk of confidential information being misused. Under this jurisdiction the court could intervene where there was a perception of impropriety in the later retainer. See the detailed analysis in Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), in Chapter 5. The authors state, at para 5-005, the test as follows, quoting from a later Australian decision, Kallinicos v Hunt [2005] NSWSC 1181 at [76]: ‘… whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice including the appearance of justice’. The English courts have recognised on occasion the existence of an exceptional jurisdiction to prevent a lawyer from acting even where there is no issue relating to confidential information and no existing client conflict: see Geveran Trading Company v Skjevesland [2002] EWCA Civ 1567, [2003] 1 WLR  912 where Arden LJ said, at [126], that the court had an ‘an inherent power to prevent abuse of its procedure and accordingly has the power to restrain an advocate from representing a party’ if this was necessary to ensure a fair trial. For instance in Re L (Minors) (Care Proceedings: Solicitors) [2001] 1 WLR 100, Wilson J exercised the court’s supervisory jurisdiction to prevent a cohabiting couple from acting as solicitors on either side in care proceedings. In Winters v Mishcon de Reya [2008] EWHC 2419 (Ch); (2008) 158 NLJ 1494 Henderson J was prepared to accept, at [94], that ‘there may be rare circumstances in which the court will intervene, in exercise of its general jurisdiction over solicitors as officers of the court, notwithstanding that there is no risk of misuse of confidential information’.   2 At 235E–F. For a more recent case where the old client could not establish these facts see Singla v Stockler [2012] EWHC 1176 (Ch), (2012) 162 NLJ 713, in which it was held that where two parties, A and B (a liquidator of a company and the main creditor of that company, who was funding A in proceedings against third parties), had a community of interest so that A’s solicitor, with no objection from A, did not keep confidential from B information arising in the performance of that retainer, the result was that A  could not object to the solicitor subsequently acting for B against A. Briggs J stated the principle as follows, at [15]: ‘where the question is whether A  may prevent his former solicitor from acting for B in litigation between A and B, I consider that the principle which emerges from the authorities requires the court to ask whether A’s ordinary expectation that his former solicitor will treat their communications as confidential has been displaced by contract, or by the mutual conduct towards each other of A, B and the solicitor, so as to displace any obligation on the solicitor to keep his communications with A confidential from B. In circumstances falling short of a joint retainer the court will be slow to deprive A of that ordinary expectation of confidence, but circumstances

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Remedies  6.60 may arise, or the parties may be shown to have conducted themselves in such a way, that the only realistic explanation is that the ordinary obligation of confidence has been wholly removed, as between the solicitor and B, even if it remains in place as between the solicitor and the rest of the world.’ In essence A  failed in his claim because there was no information known to the solicitors arising from the previous retainer in respect of which he could assert confidentiality as against B. A  similar conclusion was reached in Winters v Mishcon de Reya [2008]  EWHC  2419 (Ch), (2008) 158  NLJ  1494 where the defendant solicitors had previously been instructed by a charity and its chief executive on various matters. Subsequently the chief executive was dismissed and brought wrongful dismissal proceedings against the charity. The solicitors were held to be entitled to act for the charity in those proceedings. The chief executive was unable to identify any information which he had imparted to the solicitors in earlier retainers which was confidential as against the charity.   3 Although see para 6.08ff, above.  4 At 235H–236A.  5 At 236G.  6 At 237A.  7 At 237H.  8 At 237H–238A.  9 At 235F. 10 At 237H.

6.59 The case thus created a very stringent test which was designed to provide high levels of protection for clients who had, during the course of their retainer of solicitors (or other professionals), imparted confidential information to them. In holding that KPMG had failed to meet the test, and so in granting the injunction preventing KPMG from continuing to act for the BIA, the House of Lords was influenced by the facts that the information barrier in that case had been created ad hoc within the same department of KPMG, and that the number of people engaged on each of the retainers by Prince Jefri and BIA was very large and revolving. Indeed, 168 members of KPMG’s staff had been engaged on the earlier retainer by Prince Jefri at various times over 18 months. KPMG had charged around £4.6m for the work. On the other hand 50 of its staff were engaged on the new retainer by BIA.

(b)  The Bolkiah test 6.60 It follows that where an old client seeks to prohibit the solicitor from acting for a new client, the court will analyse the case by posing the following questions: (a) Does the firm of solicitors hold information confidential to the old client to the disclosure of which the old client has not consented? Establishing this should not be hard, indeed it may readily be inferred. However the claimant will need to identify with some degree of precision the confidential information.1 The information may be held in the minds of members of the firm, or in files or computer databases. (b) If the answer to the first question is yes, then the next question is whether that information is or may be relevant to the new matter in which the 315

6.60  Solicitors’ duties of confidentiality interest of the new client may be adverse to the old client’s. It is clear that this question breaks down into two sub-issues: (i) the materiality of the information to the new matter, a question which will not usually present problems; and (ii) whether the interest of the new client is ‘adverse’ to the interests of the old client. This latter issue has received surprisingly little analysis in the cases. In the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 it was suggested that ‘adversity arises where one party is, or is likely to become, the opposing party on a matter whether in negotiations or some form of dispute resolution’.2 (c)

If the answer to the second question is also yes, then, unless the solicitor can show on the basis of clear and convincing evidence that there is no risk that the confidential information will be disclosed or otherwise used, an injunction will, in general, be granted.

It remains vital to bear in mind though that the Bolkiah test for the grant of an injunction should not be treated as synonymous with or exhaustive of the solicitor’s obligations of confidentiality to the old client. So, where a solicitor personally has confidential information learnt from an old client which would be material to the new client, then, even though the old and new client’s interests are not ‘adverse’, the solicitor is still disabled from breaching his or her duty to the old client and therefore should decline the instruction by the new client unless the new client has consented to a lesser duty of disclosure than that imposed by the law.3 Bolkiah is only concerned with identifying the circumstances which justify the intervention of the law by injunction to protect the old client against a possible future misuse of its confidential information; the pre-condition of an adverse interest between the old and new client is a way of keeping the jurisdiction within sensible bounds and confining it to those cases where there is a heightened risk of misuse and harm. 1 Although see Bricheno v Thorp (1821) Jac 300 and Re A  Firm of Solicitors [1997] Ch  1 (Lightman J). In the latter case a solicitor left the solicitors’ firm acting for the claimant to go to a new firm which subsequently accepted instructions from a client with interests adverse to the claimant. An application for an injunction to prevent the new firm from acting was refused because it was not shown that the departing solicitor actually had any confidential information relating to the claimant. Lightman J said, at 10: ‘it is in general not sufficient for the client to make a general allegation that the solicitor is in possession of relevant confidential information if this is in issue; some particularity as to the confidential information is required.’ In practice courts do not insist on over-precise particularisation: see for instance Western Avenue Properties Ltd v Soni [2017] EWHC 2650 (QB) where the judge said, at [40]. ‘In my judgment it is not necessary for the Claimants to particularise each and every item of such information in order to establish the point, nor would it have been practicable for them to have done so.’ Of course the claimant can face a conundrum; too much precision may demonstrate too clearly the claimant’s concerns and weaknesses. The claimant is likely to need to seek a hearing in private under CPR r.39.2(3) so as to preserve the confidentiality sought to protected, as happened in, for instance, Georgian American Alloys Inc v White and Case [2014] EWHC 94 (Comm), [2014] 1 CLC 86: see at [2]. 2 See at para 28. It is suggested at para 29 that, by contrast, ‘action which seeks to improve the new client’s commercial position as against others generally within a particular sector would

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Remedies  6.61 not be “adverse” to the interests of another client which is one such competitor’. For a recent example of the liberal approach taken to these questions see Georgian American Alloys Inc v White and Case, [2014] EWHC 94 (Comm), [2014] 1 CLC 86 at [81]–[82]. 3 This is a point well made at para 30 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007.

6.61 The cases considered above have all involved retainers between clients and firms of solicitors and claims to protect the confidentiality of that solicitor/ client relationship. But solicitors of course often work ‘in-house’ as employees of their ‘clients’. A question left unanswered in Bolkiah was the extent to which the principles enunciated in that case applied to former solicitor employees who held information confidential to the former employer.1 In PCCWHKT Telephone Ltd v Aitken2 the defendant employee left the employment of the claimant to go to work for a rival. Although he was a qualified solicitor the defendant had not been employed by the claimant in a legal capacity. But he had been privy to a large amount of privileged communications. The Hong Kong Court of Final Appeal refused to grant an injunction preventing the defendant from engaging in particular types of activity in his new employment where the confidential information learnt during the former employment might be relevant. The fact that the defendant had learnt confidential information which was also subject to LLP did not differentiate his position from that of any other employee.3 Thereafter in Caterpillar Logistics Services (UK) Ltd v Huesca de Crean4 the Court of Appeal held that the Bolkiah principles had no application to the ordinary relationship of employee and employer. Finally in Generics (UK) Ltd v Yeda Research & Development Co Ltd5 the Court of Appeal had to confront head-on the case of an in-house solicitor. The claimant brought proceedings against the defendant seeking a declaration of noninfringement in respect of various patents. An in-house patent attorney (A) was employed by the defendant. A then left that position to become the claimant’s director of intellectual property. In that capacity she provided instructions to the claimant’s external solicitors in the non-infringement proceedings. The defendant sought an injunction effectively preventing A from participating in the proceedings on behalf of the claimant. The injunction was refused on two grounds: first, because it was held that A did not have any relevant confidential information relating to the subject matter of the proceedings derived from her former employment; and secondly, and of more significance to the wider law, because it was held (by a majority of the Court of Appeal)6 that the Bolkiah principles did not apply to the employer/employee relationship, even where the employee was a solicitor or the equivalent of a solicitor (a patent attorney being an equivalent). Instead, in respect of an employed solicitor, the burden lay upon the former employer to satisfy the court of the probability, or real risk, of wrongful disclosure or use of confidential information.7 It seems therefore that Bolkiah principles are limited to the provision of legal services (or their equivalent, such as those of accountants) by third party professionals. It is established that the Bolkiah principles apply in the field of family law.8 1 In Rakusen v Ellis, Munday and Clarke [1912] 1 Ch 831, CA, Fletcher Moulton LJ had drawn a distinction between solicitors who learn information confidential to their clients during their

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6.62  Solicitors’ duties of confidentiality retainers and employees who learn information confidential to their employers during their employment: ‘The view the law takes of the rights of the parties in that position is too clear to be disputed. The employee is quite free to go into the service of people who may be the rivals or opponents of his former master. The law does not say that the possession of those secrets shall cripple his work, or sterilize it. He may go into employment quite inconsistent with the employment which he had in the past. All that the law says is: You shall not disclose or put at the service of your new employer the secrets that belong to your old employer.’ 2 [2009] 2 HKC 342. 3 As to which Lord Hoffmann NPJ said, at [62]: ‘There is a very considerable difference between the position of a solicitor and an employee, even though the confidential information which they have obtained may be the same. The solicitor will normally have many clients and will not be dependent upon one for his livelihood. Even if the new client is important to him, he does not have to act for him in a matter in which he previously acted for the other side. The employee can have only one employer at a time and, in the nature of things, his new employer is likely to be in the same line of business and therefore in competition with the previous one. I  therefore see no reason of logic or policy which requires the special remedy against solicitors to be extended to employees who have information which would be protected by LPP.’ 4 [2012] EWCA Civ 156, [2012] 3 All ER 129. 5 [2012] EWCA Civ 726, [2013] Bus LR 777. 6 Etherton LJ and Ward LJ: Sir Robin Jacob dissented on this point. 7 Per Etherton LJ at [43], [82]. The policy reasons why the law should differentiate between the employed solicitor and the solicitor in private practice are explored in depth in Etherton LJ’s judgment. 8 In the Matter of T  & A  (Children) [2000] Lloyd’s Rep PN  452 and see more recently S  v S  (Application to Prevent Solicitor Acting) [2017]  EWHC  2660 (Fam) where the Russian husband’s representative had had preliminary discussions with a number of English solicitors prior to divorce proceedings being issued. One of those solicitors was subsequently retained by the wife. This was an unusual case because the solicitor had never been formally retained by the husband. Williams J set out the principles applicable to matrimonial cases at [10].

(c)  Cases post-Bolkiah: adequacy of information barriers 6.62 Since Bolkiah there has been a spate of applications for injunctive relief by former clients to prevent a particular firm of solicitors (or, in some instances, an accountancy firm) accepting a new engagement by a client with a potentially adverse interest.1 The cases have sought to wrestle with the practical consequences of the principles established in Bolkiah in situations rather different from the unusual and extreme facts in Bolkiah. The typical battleground has been whether the professional firm has discharged the burden of proof upon it to show no risk of disclosure. What has emerged is what appears to be a rather less stringent application of the principles set out in Bolkiah to more ‘everyday’ situations. So one can deduce the following: (a)

There is no rule of law that information barriers etc are per se insufficient to eliminate the risk of disclosure. The steps taken or proposed by the professional, including undertakings offered to the court, will 318

Remedies  6.62 be scrutinised carefully: the outcome has often turned on the efficacy (or otherwise) of the information barriers which are proposed by the professional in order to protect the old client’s information. ‘The crucial question is “will the barriers work?”’.2 (b) There is no rule that ad hoc information barriers are per se objectionable. In the GUS3 case X  and Y  were engaged in a heavy arbitration. The legal team acting for X  moved from Debevoise Plimpton solicitors to LLGM. LLGM had acted some years earlier for Y in relation to some of the underlying transactions which were in issue in the arbitration. An injunction was refused. It was accepted that the information barrier erected, although ad hoc, would be effective to protect Y.4 However an existing information barrier is likely to be considered more capable of obviating a risk of leakage. (c)

The fewer the number of potential disclosers, the less the risk. One common situation is where a solicitor moves from firm A to firm B in circumstances where those firms are acting in litigation for respective clients against each other. So in the Koch Shipping5 case X and Y were engaged in an arbitration against each other. Y’s solicitor (Ms P) was a partner in the firm of Jackson Parton. X’s solicitors were Richards Butler. Ms P  left Jackson Parton and was given employment as a consultant at Richards Butler. Y sought to prevent Richards Butler from continuing to act for X. They alleged that there was a risk that Ms P would (inadvertently) disclose information confidential to Y to the lawyers at Richards Butler acting for X. The Court of Appeal refused to grant an injunction. There was only one potential source of disclosure (ie Ms P) and the information barriers put in place and undertakings offered were adequate.6 The Halewood7 case also involved a solicitor moving from the old client’s firm to the new client’s firm. An injunction was refused subject to an undertaking being given that the solicitor would not work in or enter the building from which the team acting for the new client worked.

1 Those cases include: Re a firm of solicitors [1999] PNLR 950 (Mr Recorder Susman QC); Young v Robson Rhodes [1999] Lloyd’s Rep PN 641 (Laddie J); Davies v Davies [1999] 1 FLR 39, CA; Halewood International Ltd v Addleshaw Booth [2000] PNLR 788 (Neuberger J); Koch Shipping Inc v Richards Butler [2002] EWCA Civ 1280, [2003] PNLR 11; Bogle v Coutts & Co [2003] EWHC 1865 (Ch) (Peter Smith J); Marks & Spencer v Freshfields [2004] EWHC 1227 (Ch), [2004] 1  WLR  2331 (Lawrence Collins J); and on appeal [2004]  EWCA  Civ 741, [2005]  PNLR  4 (application for permission refused); GUS  v Leboeuf Lamb Greene & Macrae [2006] EWCA Civ 683, [2006] PNLR 32; Re Z (Restraining Solicitors from Acting) [2009] EWHC 3621 (Fam), [2010] 2 FLR 132; Georgian American Alloys Inc v White and Case [2014] EWHC 94 (Comm), [2014] 1 CLC 86 (Field J); Western Avenue Properties Ltd v Soni [2017] EWHC 2650 (QB) (HHJ Curran QC). 2 See Young v Robson Rhodes, at [42]. 3 [2006] EWCA Civ 683; [2006] PNLR 32. 4 See also Marks & Spencer v Freshfields [2004] EWHC 1337 (Ch), [2004] 1 WLR 2331, at [18]. 5 [2002] EWCA Civ 1280, [2003] PNLR 11. 6 The considerations which weighed with the Court of Appeal, and which are likely to be significant in future cases, included: (1) the fact that Ms P retained no documents relating to the arbitration; (2) there was physical separation between Ms P and the case handlers at Richards Butler acting for

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6.63  Solicitors’ duties of confidentiality X (they worked on different floors); (3) undertakings were offered by Ms P and the case handlers not to go into each other’s offices or to communicate with each other; (4) Ms P undertook not to discuss the arbitration with anyone. The more time has passed the less likely the solicitors are to have retained papers or recollection of the confidential information: see Alfred Street Properties Ltd v Dunne Stores (Bangor) Ltd [2017] NICh 19 and para 6.64(g) below. 7 [2000] PNLR 788.

6.63 In practice many such cases will turn upon the adequacy of the information barriers created and any undertakings offered to the court by the solicitor or other relevant professional. The enquiry will be highly fact-sensitive. ‘Each case turns on a careful judicial analysis and assessment of the quality of the evidence about the effectiveness of the precautions taken to protect the confidentiality of the former client’s information from the risk of disclosure and misuse. If there is clear and convincing evidence that the precautions taken will provide effective protection, there will be no real risk to justify the grant of an injunction.’1 1 GUS v Leboeuf Lamb Greene & Macrae [2006] EWCA Civ 683, [2006] PNLR 32 at [31].

6.64 The decided cases show that the following can be relied upon or will be relevant to the question of whether or not the burden of showing that there is no risk has been discharged by the firm of solicitors: (a) Undertakings (both by the potential discloser(s) and the potential disclosee(s)) not to communicate with each other. (b) The extent of physical separation between the potential discloser(s) and disclosee(s). (c)

Undertakings and evidence relating to non-attendance at social functions or partners’ meetings/lunches, etc.

(d) The extent to which files held on the firm’s database are unavailable to the potential disclosees. (e) The extent to which the potential discloser(s) have any documents in their possession. (f)

The professional standing of the potential discloser(s)/disclosee(s).

(g) The extent of the knowledge of the potential discloser(s) of the confidential information, and the period of time which has elapsed since they obtained it.1 1 See also paras 42–45 of the Guidance Notes to r 4 of the Solicitors’ Code of Conduct 2007 and the SRA 2019 Guidance.

(d)  Interim or final injunction 6.65 In the ordinary way any injunction will be sought swiftly. Usually the underlying facts will be agreed and the application for an injunction will 320

Remedies  6.66 be treated as the trial of the matter: of course the injunction will usually be dispositive of the case. American Cyanamid questions relating to the balance of convenience will not arise, although the decision whether or not to grant an injunction remains finally one of discretion.1 However it may not always be the case that American Cynamid issues do not arise. In Ball v Druces & Attlee2 the claimant was bringing proceedings against a defendant for whom the solicitors were acting and also against the solicitors themselves for negligence. An interlocutory injunction was granted preventing the solicitors from further acting in the underlying action against cross-undertakings given both to the underlying defendant (in relation to the additional cost it would have to incur in instructing new solicitors) and the solicitors themselves, for the potential loss of profit which they would have otherwise made in acting for the underlying defendant. Even where there are ongoing proceedings between the claimant and the solicitor’s new client the application for an injunction should be made by way of the issue of separate claim form naming the solicitor as the defendant. 1 Marks & Spencer v Freshfields [2004] EWHC 1337 (Ch), [2004] 1 WLR 2331 at [23]. See also Generics (UK) Ltd v Yeda Research & Development Co Ltd [2012] EWCA Civ 726, [2013] Bus LR 777 at [14]–[16] and Georgian American Alloys Inc v White and Case [2014] EWHC 94 (Comm), [2014] 1 CLC 86 at [78], where the judge reiterated the point that, notwithstanding that the remedy being sought was discretionary, the adverse impact on the new client of the solicitor of his or her choice being prevented from acting was not a material consideration. Theoretically inordinate delay on the claimant’s part could deprive him or her of an entitlement to relief. 2 [2002] PNLR 23 (Burton J).

(e)  Claim brought by an existing client 6.66 So far we have considered claims brought by claimants who were, but are no longer, clients of the solicitor. In such a case the retainer has ended and the fiduciary relationship has terminated. As noted earlier, in Bolkiah the House of Lords ruled that in such a case it was the protection of confidential information which constituted the basis of the jurisdiction to prevent a professional from undertaking a later engagement for a new client. However Lord Millett went on: ‘It is otherwise where the court’s intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.’1 1 At 234H. Of course in such a case the existing client may also found its objection upon the risk of disclosure of confidential information.

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6.67  Solicitors’ duties of confidentiality 6.67 Here Lord Millett is elaborating upon comments he had made, while sitting in the Court of Appeal, in the earlier case of Bristol & West Building Society v Mothew:1 ‘A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to another … This is sometimes described as “the double employment rule”.’ A question which remained unanswered was whether the double employment rule applied only to situations where the employment related to the same matter, or whether it was wider. It plainly could not apply without some form of restriction, for otherwise no solicitor could ever accept instructions for and against the same client at the same time, notwithstanding that the two instructions might be wholly unrelated.2 1 [1998] 1 Ch 1. For extended discussion of the double employment rule, see para 4.36ff, above. 2 See Hollander & Salzedo, Conflicts of Interest (5th edn, 2016), at para 3–011.

6.68 The first occasion when the Bolkiah principles were applied to a claim brought by an existing client, and the width of the double-employment rule considered, was Marks & Spencer plc v Freshfields.1 In 2004 Marks & Spencer sought an injunction to prevent Freshfields from acting for a company controlled by Mr Philip Green which had launched a take-over bid for M&S. Freshfields also acted for M&S on various matters and had charged about £1.5m for work done in recent years. Indeed Freshfields was then currently engaged in existing and ongoing retainers. It was alleged that as a result of those retainers Freshfields had acquired confidential information relating to all aspects of M&S’s business. The claim for an injunction was put on the two bases contemplated in Bolkiah: (a) M&S  were an existing client of Freshfields and there was a potential conflict between Freshfields’ duty of loyalty to M&S  and to its new client. A fiduciary could not at the same time act both for and against the same client. (b) Freshfields had acquired confidential information during the course of its retainers which was or might be relevant to the new client and there was a risk that Freshfields would use that information for the benefit of its new client. This second basis involved an application of the principles already considered in this section. 1 [2004]  EWHC  1227 (Ch), [2004] 1  WLR  2331 (Lawrence Collins J); and on appeal [2004] EWCA Civ 741, [2005] PNLR 4.

6.69 The court granted an injunction on both grounds. In relation to the first ground the judge held that the conflict did not need to arise out of the same transaction or matter: all that was necessary was that there should be ‘some reasonable relationship between the two matters’.1 Here there was a serious 322

Remedies  6.70 risk of conflict. In relation to the second ground the fact that a very large number of Freshfields solicitors were privy to M&S confidential information in practice made the erection of an effective information barrier impossible. The Marks & Spencer case demonstrates that where there is an existing retainer between the professional and the client then the existing client may, in seeking injunctive relief, rely not only upon the risk of disclosure of confidential information but also on the existence of a conflict of interest, a breach of the double employment rule. 1 At [16]. Contrast the decision in Re Baron Investments (Holding) Ltd [2000] 1  BCLC  272 (Pumfrey J). Notably, in Ecclesiastical Insurance Office Plc v Whitehouse-Grant-Christa [2017] CSIH 33, [2017] LT 697, the Inner House of the Court of Session followed English law in circumstances where the solicitors did not have any confidential information.

(f)  The Solicitors’ Code of Conduct 6.70 Section 6 of the SRA  Solicitors’ Code of Conduct 2019 contains provisions relating to the putting of confidentiality at risk by acting for another party. Paragraph 6.5 provides as follows: ‘You do not act for a client1 in a matter where that client has an interest adverse to the interest of another current or former client for whom you hold confidential information which is material to that matter, unless: (a)

effective measures have been taken which result in there being no real risk of disclosure of the confidential information; or2

(b)

the current or former client whose information you hold has given informed consent, given or evidenced in writing, to you acting, including to any measures taken to protect their information.’3

This is, broadly speaking, an attempt to reflect the law laid down in Bolkiah.4 1 Which means a former or current client. 2 The 2019 SRA Guidance provides that: ‘Examples of effective measures which result in no real risk of disclosure could include a combination of: • Systems that identify the potential confidentiality issue • Separate teams handling the matters, at all levels including non-fee-earning staff • Separate servers (and printers) so that information cannot be cross accessed • Information being encrypted, and password protected • Individuals in the firm being aware of who else in the organisation is working on the respective matters so that they know who they can and cannot discuss the matter with. • Appropriate organisational policies and training for staff. 3 The 2019 SRA Guidance provides that: ‘informed consent will include an understanding by the client of any possible prejudice that could occur if the information were inadvertently disclosed. The onus will be on you to ensure that the client has understood the issues.’

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6.71  Solicitors’ duties of confidentiality 4 At para 6.05, above the view is expressed that the Code of Conduct does not of itself create obligations enforceable by the client against the solicitor. See the discussion in Hollander & Salzedo, Conflicts of Interest (5th edn, 2016) at para  15–003. This rule replaces the relevant provisions of the 2011 Code of Conduct which in turn replaced rr 4.03–4.05 of the 2007 Code of Conduct which were rather more prescriptive. See the discussion in the second edition of this work at para 6.68ff. In the Guidance Notes to r 4 of the 2007 Code of Conduct there was substantial guidance to solicitors as to the proper interpretation of rr 4.03–4.05 as well as the solicitors’ legal and ethical obligations concerning the maintenance of client confidentiality (at para 32ff). In particular the notes provided detailed guidance concerning the adequacy of information barriers. It may be that in future cases the courts will have regard to the extent that that guidance has been complied with when considering whether or not the solicitor’s firm has discharged the burden upon it of showing that there is no real risk of disclosure.

2  Injunctions where confidential information learnt from ‘the other side’ (a)  Mistaken disclosure to the other side 6.71 The jurisdiction to protect confidentiality by an injunction may be invoked against solicitors where they acquire confidential information from parties on the other side of a transaction or a dispute, with whom they have no retainer, and so to whom they owe no fiduciary, contractual or tortious obligations.1 In such cases the claim is based simply on the receipt by the solicitor of confidential information ‘belonging’ to a third party.2 It is clear that under the general law of confidentiality mere receipt of information (even if it is involuntary and accidental) which is obviously confidential can be sufficient to impose duties upon the recipient to respect the confidentiality of that information, which duties are enforceable by injunction and orders for delivery up/destruction. The equitable right of the owner of confidential information applies as against a third party solicitor (as opposed to the client’s solicitor who has himself voluntarily undertaken a direct duty of confidentiality) where there has been an accidental escape of information to the third party.3 1 The exceptional circumstances in which a solicitor may assume a duty to a person not his or her client are discussed above. 2 Note that the court has a supervisory jurisdiction over solicitors which permits it, in a proper case, to take steps to ensure that a solicitor does not remain on the record for a party to litigation. That jurisdiction was stated by Pumfrey J in Re Recover Ltd [2003] 2 BCLC 186 at 191, to be exercised with caution, as in general parties to litigation are entitled to the advisers they have chosen. See further fn 1 to para 6.58, above 3 See Goddard v Nationwide Building Society [1987] QB 670, CA.

6.72 The usual situation will be where, during the course of litigation or dispute, confidential (and generally privileged) papers are mistakenly sent to the opposing party’s solicitors. A  barrister’s clerk may inadvertently return papers to the other side’s solicitors. In such a case the solicitor’s duty is immediately to return the papers unread.1 The solicitor has no duty to his or her own client to read the papers to promote the client’s interests in the litigation. The consequences if he or she does so can be dramatic and 324

Remedies  6.73 seriously interfere with conduct of the litigation on behalf of the solicitor’s client. In Ablitt v Mills & Reeve,2 the claimant’s counsel’s clerk mistakenly returned papers to the defendant’s solicitor, containing counsel’s advice, draft witness statements and a draft expert report, all of which were of course both confidential to the claimant and privileged. The defendant’s solicitors (who in turn became themselves defendants to the confidentiality action brought by the claimant) read those papers, on the express instructions of their client, and so became privy to matters of the utmost confidentiality to the claimant in relation to his claim. The court granted an injunction preventing the solicitors’ firm from continuing to act for the defendant in the litigation. This injunction was granted so as to protect the claimant against the misuse of his confidential (and privileged) information.3 1 An important distinction should be drawn with the mistaken disclosure of privileged documents. The law on this is complex and different principles apply to those discussed in this section: see generally Pizzey v Ford Motor Co Ltd [1994] PIQR P15, CA; IBM Corpn v Phoenix International (Computers) Ltd [1995] 1 All ER  413, Ch D; Al Fayed v Metropolitan Police Comr (No  1) [2002] EWCA Civ 780, Times, 17 June 2002. See also CPR r 31.20; Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] EWHC 3341 (Ch), [2016] 4 WLR 3 at [45]–[52]; and Atlantisrealm Ltd v Intelligent Land Investments (Renewable Energy) Ltd [2017] EWCA Civ 1029, [2018] 4 WLR 6. 2 (1995) Times, 24  October. Contrast Steidl v Enyo Law LLP  [2011]  EWHC  2649 (Comm), [2012]  PNLR  4, where a defendant to High Court proceedings unsuccessfully attempted to obtain an injunction preventing the claimant’s solicitors from continuing to act where they had been provided with documents privileged and confidential to the defendant by liquidators of a company in which the defendant had been involved. That case was notable in that counsel was instructed by the solicitors on the court-ordered basis that he could see the documents alleged to be privileged, but not communicate their contents to his client solicitors. 3 An injunction was granted to prevent solicitors acting for a party with an adverse interest to that of the claimant in Shlosberg v Avonwick Holdings Ltd [2016] EWHC 1001 (Ch), [2017] Ch 210, where the solicitors had come into possession of a substantial number of documents confidential and privileged to the claimant.

6.73 The appropriate remedy will however generally be less draconian. In the earlier case of English and American Insurance Co Ltd v Herbert Smith1 another careless barrister’s clerk again sent the papers of counsel (who was instructed for the defendant in Commercial Court proceedings) to the claimant’s solicitors who read them on the instructions of their client. The defendant in the Commercial Court proceedings (who was the claimant in the injunction proceedings against the solicitors) sought an order for delivery up of any notes taken of the papers and an injunction preventing the solicitors (or their client) from making any use of the information learnt. No claim was made requiring the solicitors’ firm to cease to act or preventing the particular solicitors who had read the papers from ceasing to have further conduct of the claim. The relief sought was granted but it seems that the judge may well have been entitled, had the claimant applied for wider relief, to at least prevent the individual solicitors from continuing to act. On the other hand the wider form of order in Mills & Reeve seems to have been made because the defendant solicitors did not propose to the court any workable form of information barrier (and indeed did not even suggest, until an advanced stage in the hearing, that 325

6.74  Solicitors’ duties of confidentiality the solicitors who had actually read the privileged documents could cease to have conduct of the case in favour of other solicitors within the firm), so that the information obtained by the individual solicitors who read the other side’s papers was isolated.2 1 [1988] FSR 232. 2 In Re a firm of solicitors [1997] Ch 1, at 13 Lightman J drew a distinction between the situation of solicitors who had previously acted for the old client who was seeking to protect its confidential information (ie a Bolkiah situation) and the case ‘where without any such previous relationship a party’s solicitor illegitimately becomes possessed of confidential information of the party to the suit or dispute’; in such a case ‘in the ordinary course the court will merely grant an injunction restraining the solicitor making use of that information; it will not prohibit him from continuing to act’. This analysis was adopted by Beatson J in Steidl v Enyo Law LLP [2011] EWHC 2649 (Comm), [2012] PNLR 4, although the judge refused to accept the submissions of the solicitors that, in a case where there was no previous relationship, it would only be where the applicant could demonstrate ‘unusually powerful factors in its favour’ that the court would depart from the ‘ordinary course’ and grant an injunction preventing the solicitors from continuing to act: see at [42] and [43]. See also Ford v Financial Services Authority [2012] EWHC 997 (Admin). After considering these authorities in Shlosberg v Avonwick Holdings Ltd [2016] EWHC 1001 (Ch), [2017] Ch 210 Arnold J nonetheless granted an injunction against solicitors who had not previously acted for the claimant.

6.74 In such cases the court has jurisdiction to fashion an injunction which is designed to prevent any use or leakage of confidential information. We have seen that this can even extend (albeit in limited cases) to an injunction preventing the firm acting at all. But the injunction can also contain orders that any notes or copies of documents taken shall be destroyed or delivered up, that the solicitor shall not disclose any information learnt to the client, or that the solicitor or client shall not make use of the information learnt.1 1 In respect of the situation where the supervising solicitor obtains privileged documents pursuant to a search order see Gee, Commercial Injunctions (6th edn, 2016), at paras 18.010ff.

(b) Mediations 6.75 The growth in confidential mediation as a means of attempting to resolve disputes has created further potential for solicitors to acquire confidential information from parties who are ‘on the other side’. All participants to such mediations, whether they are the parties to the dispute themselves or their legal advisors, are subject to obligations of confidentiality concerning information learnt during the mediation.1 Hence duties of confidentiality will arise which are owed to ‘the other side’. Typically the existence of such duties will give rise to no difficulty. But what if the claim which is mediated is one of many being brought against the same defendant arising out of the same or similar facts? Or if the claimant is bringing similar claims against more than one defendant? In such a case the solicitor who participated in the mediation on the other side may acquire valuable information as to the defendant’s (or, as the case may be, the claimant’s) negotiating tactics, views on the merits of the dispute, and settlement position. That information could be very useful for other claimants 326

Remedies  6.75 also proposing to claim against the same defendant, or other defendants being sued by the same claimant. In the New Zealand case of Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd2 this situation arose. The defendant to the underlying claim obtained an injunction3 preventing the solicitor who had participated in a mediation for a claimant from acting for another claimant who wished to bring claims of a similar nature against the same defendant. It was said: ’There is an inherent incompatibility between lawyers’ participation in a confidential mediation and their desire to act for other clients in parallel litigation. The dilemma cannot satisfactorily be resolved by means of an undertaking to observe the obligations of confidentiality … the lawyer cannot screen out what was gleaned from the mediation and what was acquired elsewhere … Therefore, if the relief sought is not granted, the party at risk may not receive the protection for which it stipulated. A  breach, particularly one which is not consciously committed, may go undetected …’4 In Carter Holt the court had applied the Bolkiah principles in a mediation case where, of course, the solicitor against whom an injunction had been sought had never acted for the applicant. However in the recent decision of the English Court of Appeal in Glencairn IP Holdings Ltd v Product Specialities Inc,5 the court decided that where solicitors had formerly acted for a defendant client in a mediation with the claimant and were now acting for another unrelated defendant who was being pursued by the same claimant (and so a situation broadly analogous to that in issue in Carter Holt) it was wrong to approach the case by applying the Bolkiah approach to the burden of proof (as to which see para 6.60, above). This was because it was wrong to equate a solicitor who had never been in a fiduciary relationship with the applicant with the solicitor who had been in such a relationship and who had received confidential information pursuant to that relationship. The court therefore refused to follow Carter Holt. Instead the court stated the legal position as requiring the claimant (without the assistance of any presumptions or shifts in the burden of proof) to establish a risk of misuse of confidential information. In such a case the usual remedial response, if such a risk is established, will be an injunction preventing the defendant making use of the confidential information rather than prohibiting the firm as a whole from continuing to act. This was the case whether or not the solicitor had expressly assumed a contractual obligation of confidentiality within the mediation or as part of the settlement agreement.6 In that case the court concluded that the claimant had not shown that the information barriers created within the solicitors’ firm were insufficient, the burden remaining on the claimant to establish the risk. The dicta of Lord Millett in Bolkiah about information barriers were not relevant. 1 These duties may be expressly undertaken by way of confidentiality agreements signed by the participating lawyers; or they may be implied. See Toulson & Phipps, Confidentiality (3rd edn, 2012), at para 17–016 and the Australian decision in Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009]  NSWCA  354 where although the solicitors had not signed a

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6.76  Solicitors’ duties of confidentiality confidentiality agreement they were bound by an implied duty of confidence in relation to matters disclosed at the mediation. 2 [2001] 3 NZLR 343. 3 From a Court of Appeal consisting of five judges. 4 At [30]–[31]. This decision is critically analysed in detail in Hollander & Salzedo, Conflicts of Interest (5th edn, 2016) at para 9–0012ff. However, although Carter Holt was referred to by the Court of Appeal in Virgin Media Communications Ltd v British Sky Broadcasting Group plc [2008] 1 WLR 2854, CA at [22] without disapproval (‘The approach of the Court of Appeal of New Zealand in the Carter Holt Harvey Forests case [2001] 3 NZLR 343 was adopted in a case involving an express confidentiality agreement in mediation. It is not an approach that can be generally applied whenever information has been obtained by lawyers in a case as a result of disclosure.’) it is clear now that its approach to the burden of the proof is wrong as a matter of English law. The Court in Virgin Media also referred with approval to an unreported county court decision, Adex International (Ireland) Ltd v IBM UK  Ltd (unreported) 17  November 2000. In that case Judge Hallgarten QC held that solicitors who had acted for one claimant in concluding a settlement on confidential terms could not properly act for another claimant, with a similar claim against the same defendant. This was because the solicitor would be unable to put out of his mind the terms to which the defendant had been prepared to agree in respect of the first claimant when advising the second claimant. The Carter Holt case has been followed at first instance in New Zealand: South Island Commercial (2004) Ltd v Kiwi Green Island Club Ltd [2008] NZSC 2032. 5 [2020] EWCA Civ 609. In that case the claimant, G, had brought proceedings against defendant A, represented by solicitors’ firm V. Those proceedings were settled at a mediation in respect of which all the participants, including V, signed a confidentiality agreement. In relation to confidential information disclosed at the mediation, G  then brought proceedings against defendant B which were very similar to the earlier proceedings. B retained V to act for it. V set up an information barrier between the team previously acting for A and those currently acting for B. G’s attempt to obtain an injunction against V from acting for B failed. 6 See at [77]–[79].

(c)  Documents disclosed to the other side pursuant to CPR Part 31 6.76 The final way in which a solicitor may obtain confidential documents from the other side is by the normal disclosure process. Confidentiality is of course not normally a ground for resisting disclosure or inspection, though, when considering an application for specific disclosure, the court will take into account the fact that disclosure might breach the confidentiality of the disclosing party or third parties.1 The standard protection offered to litigants in relation to documents produced on disclosure is provided by CPR r 31.22 which provides that a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed except in defined circumstances, being: ‘(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public; (b) the court gives permission (c)

the party who disclosed the document and the person to whom the document belongs agree.’ 328

Remedies  6.76 This is a formalisation of the old principle that a party to litigation gives an implied or collateral undertaking to the court that it will not, without the permission of the court, make use of documents disclosed by the other side for any purpose other than the proper conduct of the litigation in which the disclosure was given.2 This undertaking extends to solicitors engaged in that litigation. In Crest Homes plc v Marks3 Lord Oliver said: ‘a solicitor who, in the course of discovery in an action, obtains possession of copies of documents belonging to his client’s adversary gives an implied undertaking to the court not to use that material nor to allow it to be used for any purpose other than the proper conduct of that action on behalf of his client … It must not be used for any “collateral or ulterior” purpose.’ The extent to which the court will go to protect the beneficiary of that undertaking was explored in Virgin Media Communications Ltd v British Sky Broadcasting Group plc,4 where solicitors instructed by Virgin had obtained documents from BSB in the course of High Court proceedings through the usual disclosure process. These documents were therefore subject to CPR r 31.22. Further the parties agreed that certain of those documents which were commercially sensitive would be provided only to identified external legal advisors,5 including the solicitors, who themselves were to give undertakings not to disclose those documents to any third party, including their own client, and only to use them for the purpose of the High Court proceedings. Virgin retained the same solicitors in further related proceedings against BSB before the Competition Appeal Tribunal. BSB sought an order, the practical effect of which would be to prevent the solicitors who were acting in the High Court proceedings from acting in the Tribunal proceedings, on the grounds that those solicitors would be unable to avoid making use of the documents disclosed in the High Court proceedings in the Tribunal proceedings, in breach of r 31.22 and the express undertaking. The Court of Appeal refused to grant the injunction. It was particularly exercised by the fact that acceding to BSB’s application would effectively prevent Virgin from using lawyers of its own choice. Further the Court refused to accept that there was any analogy with the Bolkiah situation. The duty under CPR r 31.22 not to make ulterior use of disclosed documents was not identical in principle to the obligation of confidentiality which existed between a solicitor and his or her own client.6 By contrast were a solicitor, having obtained copies of documents through the disclosure process in one case, to utilise those documents for the benefit of another client in another case, he or she would be in breach of the undertaking7 and an injunction would be granted, if necessary against the other client, to prevent the breach of r 31.22. 1 For the relevant principles see Science Research Council v Nasse [1980] AC  1028, HL and Wallace Smith Trust v Deloitte Haskins & Sells [1996] 4 All ER 403, CA. For an exception see Naylor v Beard [2001] EWCA Civ 1201. 2 See Alterskye v Scott [1948] 1  All ER  469, CA and Riddick v Thames Board Mills Ltd [1977] QB 881, CA. 3 [1987] AC 829, HL at 853.

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6.77  Solicitors’ duties of confidentiality 4 [2008] 1 WLR 2854, CA. The rule applies to the contents of the disclosed documents just as much as the documents themselves: IG Index plc v Cloete [2013] EWHC 3789 (QB). For cases discussing the meaning of use of the documents within the proceedings, see Vitol SA v Capri Marine Ltd [2010]  EWHC  458 (Comm); and Grosvenor Chemicals Ltd v UPL  Europe Ltd [2017] EWHC 1893 (Ch). 5 As to which see generally para 6.77, below. 6 In Harman v Home Office [1983] 1 AC 280, HL, Lord Keith stated: ‘The implied obligation not to make improper use of discovered documents is, however, independent of any obligation existing under the general law relating to confidentiality. It affords a particular protection accorded in the interests of the proper administration of justice. It is owed not to the owner of the documents but to the court, and the function of the court in seeing that the obligation is observed is directed to the maintenance of those interests, and not to the enforcement of the law relating to confidentiality.’ 7 In Harman v Home Office [1983] 1 AC 280, HL the solicitor was held to be in contempt of court for having made what was held to be ulterior use of documents disclosed by the opposing party.

6.77 However, where documents are relevant to the litigation but there are legitimate grounds for the imposition of specific express restrictions on those persons on behalf of the receiving party who can have sight of them, the court can order the production for inspection of those documents subject to conditions as to their dissemination and distribution. Such orders are typically made in intellectual property claims or in litigation between competing businesses, categories of case where it may well be vitally important to the disclosing party for the confidentiality of certain documents to be protected.1 In such cases the normal rule, now encapsulated in CPR r 31.22, is not sufficient protection to the disclosing party. The order may involve restrictions on who can actually see the documents. In Church of Scientology v DHSS,2 where there was perceived to be a risk that the claimant would misuse confidential documents disclosed by the defendant for a purpose other than the pursuit of the action, it was ordered that disclosure of certain documents should be made by the defendant on condition that only the claimant’s solicitor and counsel could read them, and that they could not pass them on, or disclose their contents, to their client. In such a case the solicitor who breached the order would be liable to contempt proceedings, and any threatened breach would be capable of being restrained by an injunction, but it seems unlikely that he or she could be held civilly liable for breach to the owner of the documents on the basis of having assumed an equitable obligation of confidentiality.3 Similarly, the remedy for breach of the collateral undertaking imposed by CPR r 31.22 is the contempt jurisdiction: this is because the undertaking is deemed to have been given to the court.4 If, say, a solicitor were to utilise documents obtained on disclosure in an action (which remained subject to the collateral undertaking because none of the exceptions to CPR r 31.22 applied) to assist another client (or indeed the same client) in relation to another action it is suggested that the appropriate remedy would be an injunction to prevent further use of the documents5 but might also extend to preventing the solicitor from acting in the new litigation or even to striking out the new proceedings as an abuse of the process.6 1 See Warner-Lambert v Glaxo Laboratories Ltd [1975] RPC 354, CA and Cosmetic Warriors Ltd v Amazon.co.uk Ltd [2014] EWHC 1316 (Ch), [2014] IP & T 519, where the online retailer

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Remedies  6.78 Amazon failed to obtain an order on the basis that there was no sufficient justification for maintaining confidentiality. 2 [1979] 1 WLR 723, CA. 3 Alterskye v Scott [1948] 1 All ER 469 and Derby v Weldon (No 2) (19 October 1988, unreported). 4 See Bourns Inc v Raychem Corp [1999] 3 All ER  154, CA at 170, referring to Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756, CA at 764. 5 So in Bourns v Raychem Corp [1999] 3 All ER  154 A  and B  were engaged in litigation in England and the United States. During a taxation of costs in England (A having been successful in the English proceedings) documents were disclosed by A  to B  in support of the taxation. B and its American lawyers wished to use the documents in the US proceedings which were between the same parties. A obtained an injunction against both B and its lawyers preventing them doing so, because such use would breach the collateral undertaking. 6 As occurred in Riddick v Thames Board Mills Ltd [1977]  QB  881, CA. There is a line of authority which has developed in relation to the situation where the petitioning creditor’s solicitors subsequently act for the liquidator of the insolvent company or trustee of the bankrupt. These cases typically involve applications by the bankrupt or former directors of the company in liquidation inviting the court to exercise its supervisory jurisdiction so as to prevent the solicitors from acting for the trustee or liquidator on the grounds of a conflict of interest between their duties to the trustee/liquidator and their duties to the petitioning creditor or their own personal interests: see Re Schuppan [1996] 2 All ER 664; Re Baron Investments (Holdings) Ltd [2000] 1 BCLC 272; and Re Recover Ltd [2003] EWHC 536 (Ch), [2003] 2 BCLC 186 (Pumfrey J).

(d) Arbitrations 6.78 Documents disclosed in arbitrations are not subject to the CPR Part 31 regime. No analogous collateral undertaking is given by the parties to the arbitrator. Instead the parties to such arbitrations, and their legal representatives, are subject to implied mutual obligations of confidentiality enforceable as such. The classic statement of those obligations is contained in Dolling-Baker v Merrett:1 ‘As between parties to an arbitration, although the proceedings are consensual and may thus be regarded as wholly voluntary, their very nature is such that there must … be some implied obligation on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration or the award – and indeed not to disclose in any other way what evidence had been given by any witness in an arbitration – save with the consent of the other party, or pursuant to an order or leave of the court.’ The solicitor must equally be subject to such an implied obligation and accordingly owes the other side a duty of confidentiality which is enforceable as a private law right. In such a case the solicitor who makes use (or threatens to make use) of documents disclosed during the course of the arbitration by the other side will be liable to civil remedies for breach of confidence.2 1 [1990] 1 WLR 1205, CA at 1213. 2 See Ali Shipping Corpn v Shipyard Trogir [1999] 1  WLR  314, CA, where A, the party to an arbitration with B, applied successfully to obtain an injunction preventing B  from using documents disclosed by A during the course of that arbitration in a later arbitration with C. This was regardless of the fact that A and C were owned by the same parent.

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6.79  Solicitors’ duties of confidentiality

3  Other remedies 6.79 Claims for a financial remedy against a solicitor alleged to have misused confidential information are rare. Not only is the existing or former client’s concern likely to arise in the context of seeking a pre-emptive remedy to prevent the risk of any future breach but proving financial loss flowing from a breach of confidence will generally be difficult.1 Therefore there are few if any reported cases involving claims against solicitors for damages for breach of the implied contractual obligation of confidence. On the other hand a breach of the equitable duty of confidence or a breach of fiduciary duty can be the subject of an award of equitable compensation or of an account of profits. In relation to the first head, these will be assessed broadly in accordance with common law damages: the claimant will have to prove loss flowing from the breach. But in relation to the second, which is an alternative to the first, the claimant may claim disgorgement by the solicitor of the profits made as a result of the misuse of the confidential information. So, in Ratiu v Conway,2 if the solicitor had acquired the property and then subsequently sold at a profit, and if it had been proven that he had acquired the property as a result of a misuse of the claimant’s confidential information, then the claimant could have sought an account of the profit on the resale. The client might alternatively claim that any asset acquired by the solicitor as a result of a misuse of confidential information (in the broad sense discussed above) is held by the solicitor on constructive trust for the client.3 As we have seen, such a claim, albeit formulated as a claim for breach of fiduciary duty, succeeded in Boardman v Phipps.4 1 See for example National Westminster Bank plc v Bonas [2003] EWHC 1821 (Ch). 2 The facts of which are set out at para 6.29, above. 3 The leading modern authority is the Canadian case of International Corona Resources Ltd v LAC Minerals Ltd (1989) 61 DLR (4th) 14. In that case the claimant disclosed to the defendant in confidence information relating to mineral deposits in land belonging to the claimant. The defendant used that information to purchase adjoining land, knowing that that land was likely to be mineral-rich. It was held that the defendant owned the adjoining land subject to a constructive trust in favour of the claimant (provided of course that the claimant discharged the purchase price). 4 [1967] 2 AC  46. For a review of financial remedies for breach of confidence see Toulson & Phipps. Confidentiality (3rd edn, 2012), at Chapter 9 and, in the context of professional relationships, Pattenden, The Law of Professional-Client Confidentiality (2nd edn, 2016), at Chapter 8.

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Chapter 7

Limitation

A INTRODUCTION 7.01 Limitation issues often arise in claims against solicitors. As to the substantive law, it is necessary to distinguish between claims at common law, and those in equity. Sections B and C of this chapter consider claims at common law, including the statutory extensions to limitation periods contained in Limitation Act (‘LA’) 1980, ss 14A and 32. Section D looks at limitation in contribution claims. Limitation and lapse of time in equity are dealt with in section E of chapter 4. As long ago as July 2002 the then Lord Chancellor announced that the then Government had accepted the proposals for the reform of limitation law contained in the Law Commission’s Working Paper 270, but no government has as yet reformed the law. The Law Commission’s central proposal was that time should run for three years from the date when the claimant knew, or ought reasonably to have known, the facts giving rise to the cause of action, the identity of the defendant, and that the loss suffered was significant, with a longstop of 10 years from the date of the negligent act or omission relied upon. Thus, if the Bill were implemented, the existing authorities relating to when the cause of action arises would become obsolete so far as the law of limitation is concerned, and the courts would focus instead on principles which are similar to but not the same as the existing questions of actual and constructive knowledge, considered below in relation to s 14A of the Limitation Act 1980. In this chapter, however, the law is considered at the time of writing in 2020.

B  CLAIMS AT COMMON LAW 7.02 It is helpful to consider the courts’ approaches to the various issues which arise in relation to limitation in general terms before considering specific points. Solicitors owe their clients concurrent duties in both contract and the tort of negligence, and a client may rely upon either cause of action if it provides a more favourable regime as to limitation.1 Except where the claimant’s action includes a claim for damages for personal injuries,2 the limitation period in both contract and the tort of negligence is six years from the date on which the cause of action accrued, unless an extension applies 333

7.03 Limitation under the Limitation Act 1980.3 In contract the cause of action accrues at the date of the breach of duty and in the tort of negligence it accrues when the negligence first causes legally recoverable loss. The loss caused in solicitors’ negligence cases is almost always economic rather than physical loss. It may often be the case that the claimant is unaware that he or she has suffered economic loss due to the error of his or her solicitor until more than six years after the solicitor’s breach of duty. If the causes of action in both contract and negligence accrued at the date of the original breach of duty, this could lead to the potential unfairness that the claimant’s action would be statute-barred even though he or she could not reasonably have brought an action within the time limit.4 1 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 185F–H, 191C–D. 2 See para 7.06, below. 3 LA 1980, ss 5 and 2, respectively. 4 Bingham LJ adverted to this problem in D W Moore & Co Ltd v Ferrier [1988] 1 WLR 267 at 279.

7.03 Parliament’s current answer to this problem is contained in s 14A of the 1980 Act,1 which is headed ’special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual’. In theory at least, the question of when the cause of action accrues is one of principle which depends on the general rules of contract and negligence law, as they apply to solicitors. This must be kept distinct from the questions introduced by s 14A, which were designed by Parliament to deal with the potential unfairness mentioned in the last paragraph. Thus, even if a correct application of the principle determining whether a cause of action has accrued leads to a result which appears unfair to the claimant, it is, at least in negligence, still open to the claimant to rely upon s 14A. There is in theory no need for the court to strain the common law principles stating when a cause of action accrues, in order to deal with this potential injustice to claimants, because s 14A will deal with any unfairness caused by the cause of action accruing at a time when the claimant could not have known that s/he should consider suing.2 In practice, however, the courts have found the application of even s 14A far from easy, as we discuss below. 1 See para 7.50ff, below. 2 See the speech of Lord Nicholls of Birkenhead in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, HL, at 1630H–1631A.

7.04 In addition, where the defendant has been guilty of fraud or deliberate concealment, or the claimant has made a mistake, there is a further provision for extension of the limitation period, in s 32 of the Act. This is also discussed below.1 Section 32 will apply, inter alia, in all cases where the claimant is able to rely upon the tort of deceit. 1 See para 7.72ff.

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Claims at common law  7.07 7.05 The issues which will be considered in this part are, first, cases in which a limitation period of only three years applies; and secondly, the date on which the cause of action accrues in contract and the tort of negligence. In section C we look at the statutory extensions to the limitation period under ss 14A and 32 of the Act.

1  Personal injuries: claims in which a limitation period of only three years applies 7.06 The effect of s  11 of the Limitation Act 1980 is that, in relation to actions in either contract or tort to which s 11 applies, the limitation period is only three years. The three years is measured either from the date on which the cause of action accrued, or from the claimant’s ‘date of knowledge’, as defined in LA 1980, s 14, if that provides a later date. The effect of s 14 is similar to that of s 14A, which is considered below. Which claims fall within the scope of s 11? 7.07

Limitation Act 1980, s 11(1) provides:

‘This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision) where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to the plaintiff or any other person.’ The Court of Appeal considered this provision in Bennett v Greenland Houchen & Co.1 The claimant had left his employer and begun work for a rival employer in 1988. The former employer sought to enforce restrictive covenants against the claimant, who retained the defendant solicitors to act for him. The action was compromised. Nearly six years later, the claimant sued the solicitors alleging that their negligence and breach of contract had caused him both financial loss and clinical depression. The question was whether the action came within the scope of s  11, so that the limitation period was only three years rather than six. The Court of Appeal held that it did. Depression counted as personal injury for these purposes.2 Both Otton and Peter Gibson LJJ emphasised that s  11 applies to claims which ‘include’ claims for damages in respect of personal injury. One of the claimant’s pleaded claims was for damages for personal injury, in the form of depression. Thus the action did include a claim for damages for personal injury, and so it was statute-barred. 1 [1998] PNLR 458, CA. 2 By LA  1980, s  38, personal injury is defined to include ‘any disease and impairment of a person’s physical or mental condition’.

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7.08 Limitation 7.08 Thus the effect of pleading a claim for damages for depression was that the claimant’s whole claim was held to be statute-barred, including the claim for damages for financial loss alone. But if the claimant had simply claimed financial loss, then s  11 would not have applied and the limitation period would have been six years so that the claim would not have been statutebarred. In Shade v the Compton Partnership,1 the Court of Appeal held that, if the claimant applied to delete the claim for personal injury at a time when a new claim seeking economic loss only would, if brought, not be statutebarred, then permission should generally be granted for the amendment. This applied to cases where the principal claim was for economic loss, and there was only a relatively small claim for personal injury. It might be different if the claim was for personal injury which had led to economic loss.2 In Pounds v Eckford Rands3 the application to delete the personal injury claim was made at a time when a new professional negligence claim, seeking only damages for economic loss, would have been time-barred. Nevertheless, the court exercised its discretion to grant permission to delete the personal injury claim: there was a prima facie case of negligence against the solicitor defendants, the vast bulk of damages claimed was for economic loss rather than personal injury, both parties’ lawyers had failed to spot the personal injury limitation point, and the case which survived the amendment was one with which the defendants were able to deal. It therefore appears that, even after expiry of the limitation period for a claim purely for economic loss, it may be possible to save the claim for economic loss by applying for permission to delete a related claim for personal injury, at least if the factors present in Pounds can be shown.4 Further, it is unlikely that s 11 will apply in cases where the claim is based on a failure to advise as to legal entitlement to a category of benefits to which the claimant is entitled only if he suffers injury in the course of his work. This is a claim for damages for economic loss rather than for damages for personal injury, even though the claimant is entitled to damages only if he has suffered personal injury, because the entitlement to benefit would have been dependent upon such injury.5 1 [2000] Lloyd’s Rep PN 81, CA. 2 See p 86 col 1, and Walkin v South Manchester Health Authority [1995] 1 WLR 1543, CA. 3 [2003] Lloyd’s Rep PN 195, QBD. 4 It is conceivable that it might be possible to save the personal injury claim by making an application pursuant to Limitation Act 1980, s 33, though such an attempt failed in Kamar v Nightingale [2007] EWHC 2982 (QB), [2008] PNLR 15 (Eady J). Compare Rayner v Wolferstans [2015] EWHC 2957 (QB), in which, due to solicitors’ alleged negligence, the primary limitation period for the claimant’s clinical negligence claim against a NHS trust expired. The claimant sued the solicitors, within the limitation period for a professional negligence claim. The court, however, extended the claimant’s limitation period in which to sue the trust for clinical negligence, pursuant to s 33. This was partly because the claimant’s claim against the trust was a better claim for the claimant than the claim against the solicitors. It is possible that this may have enabled the solicitors to avoid having to pay damages even if they had been negligent. 5 Gaud v Leeds Health Authority (1999) Times, 14 May, CA. Compare McGahie v Union of Shop Distributive & Allied Workers (1966)  SLT  74, per Lord Fraser at 75, cited with approval by Aldous LJ in a different context in British & Commonwealth Holdings plc v Barclays Bank plc [1996] 1 WLR 1 at 8F–9C, CA.

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Claims at common law  7.10

2 Contract (a)  General rule 7.09 As stated above, in contract, the cause of action accrues on the date when the breach of contract occurred, and the claimant then has six years in which to commence proceedings. In most cases it will not be of great importance that the limitation period in contract has expired, because, as mentioned above, the claimant will be able to sue on a concurrent duty in tort, which may provide a later limitation period, and will also, unlike the claim in contract, allow the claimant a chance to rely upon s 14A.1 1 Société Commerciale de Réassurance v ERAS Ltd [1992] 2 All ER 82, CA.

(b)  Continuing obligations 7.10 There is, however, one point of potential interest in relation to the limitation period in contract. This was first raised in cases which arose before s 14A had come into force. The argument is, essentially, that, where solicitors have acted negligently, after their negligent act the solicitors are subject to a continuing duty to advise their client that they have acted negligently. This duty continues until the date when the client’s claim in respect of the original negligence becomes statute-barred, and breach of this further duty is itself actionable. If this argument were correct, then a solicitor who was negligent in 2010 would have a continuing duty to warn the client of his or her own negligence. That duty would be in force until 2016, whereupon the solicitor could presumably be sued in the following six years, until 2022, for failure to warn that he or she had previously acted negligently. In this way the limitation period would effectively run for 12 rather than six years, and possibly ad infinitum. Thus, it is unlikely that arguments of the type set out in this paragraph are correct in principle. In Ezekiel v Lehrer1 Jonathan Parker LJ approved the following passage from the judgment of Neuberger J in Gold v Mincoff Science & Gold:2 ‘[Counsel for the Defendants] rightly warns against the Court being too easily persuaded by the Claimant that he has a fresh cause of action against his solicitor on the basis that the solicitor failed to advise, at some point after his initial negligence, that he had been negligent. If such an argument were too readily accepted, it would have two unsatisfactory consequences. First, it would enable the provisions of the 1980 Act to be evaded in many cases in an artificial way. Secondly, it would effectively impose on a solicitor some sort of implied general retainer. Accordingly, I would accept that it would be a relatively exceptional case where the Court would be prepared to hold that a solicitor’s negligence claim that was otherwise statutebarred could, albeit in a slightly different guise, be resurrected on the 337

7.11 Limitation basis that, at a time within the limitation period and less than six years before the issue of proceedings, the solicitor failed to advise that he had been negligent. Only if the facts clearly warrant such a conclusion should the Court adopt it, in my view.’3 What are the solicitor’s regulatory obligations where, some time after the event but within the limitation period, the solicitor discovers his or her own negligence and fails to report it to the client? In the Solicitors Code of Conduct 2011, O 1.16, a mandatory requirement, stated that solicitors had to: ‘… inform current clients if you discover any act or omission which could give rise to a claim by them against you’. [Emphasis added]. It is appears from the word ‘current’ that, under the 2011 Code, there was no regulatory obligation to inform former clients if a solicitor discovered an act or omission which could give rise to a claim, the regulatory obligation applied only in relation to current clients. Under the new regulatory Codes introduced in November 2019, however, it appears that solicitors and firms have a regulatory duty, when they spot potential errors of theirs, to report them to either current or former clients.4 For the purposes of this chapter, however, we are concerned with the question of whether there is a continuing contractual duty on a solicitor to report errors to a former or current client. In light of the authorities discussed below, it is suggested that there is generally no contractual obligation to report possible errors to a former client, though there is a separate question as to whether a solicitor who is aware of a possible error and does not report it to a former client might be at risk of a finding of deliberate concealment pursuant to s  32(1)(b) of the Limitation Act.5 1 [2002] Lloyd’s Rep PN 260, CA at 271 col 1. 2 [2001] Lloyd’s Rep PN 423, Ch D at [98]. 3 Ward LJ also agreed with Neuberger J’s approach, at [24] in Ezekiel. See below, however, for the result in Gold. 4 See, in relation to individuals, para 7.11 of the SRA Code of Conduct for Solicitors, RELs and RFLs: ‘You are honest and open with clients if things go wrong, and if a client suffers loss or harm as a result you put matters right (if possible) and explain fully and promptly what has happened and the likely impact.’ The definition of ‘clients’ includes former clients ‘where the context permits’. This point is discussed further at para 16.74, below. 5 See Williams v Fanshaw Porter & Hazelhurst [2004]  EWCA  Civ 157, [2004] 1 WLR  3185, discussed at para 7.78, below.

7.11 The claimant succeeded on the basis of a continuing duty in Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp.1 In 1961 Mr Green’s father granted him an option to purchase a farm. Mr Green engaged the defendant solicitors, who negligently failed to register the option. In 1967 Mr Green’s father conveyed the farm to his wife. This had the effect of rendering the unregistered option worthless, so its value was lost due to the failure to register it. Mr Green’s executors commenced an action against the defendants in 1972. Oliver J held that a solicitor ‘who … has acted negligently [does not come] 338

Claims at common law  7.12 under a continuing duty to take care to remind himself of the negligence of which, ex hypothesi, he is unaware’.2 But the action in contract was not statutebarred: as the solicitors kept the option agreement and were consulted about it over the years, they had a continuing obligation to register it, which was terminated only after conveyance of the farm. Applying this case in Gold,3 Neuberger J said that: ‘… the court must be careful of imposing a duty on a solicitor which involves going beyond his specific instructions. Nonetheless, if the subsequent instruction was also negligently implemented by the solicitor, and this later negligence concealed the earlier negligence then, subject to normal questions such as causation and remoteness, if the earlier negligence only comes to light outside the limitation period, the loss of the right to sue in respect of it can properly be the subject of a claim based on the later negligence.’ Gold was such a case. The defendant solicitors acted for the claimant, negligently, in relation to various mortgages which he entered into prior to 1993. In 1993 they then acted for him in the restructuring of those mortgages. If they had acted non-negligently in 1993 they would have advised the claimant as to their own earlier negligence in drafting the earlier mortgages. Hence there was a fresh breach of duty in 1993. The claimant could sue within six years of 1993 in relation to this 1993 breach. The 1993 breach enabled the claimant to issue a writ in 1999 and obtain damages in respect of the pre-1993 defective mortgages, even though by 1999 claims based purely on the original negligent drafting of mortgages were statute-barred. 1 [1979] Ch 384 (Oliver J). 2 At 403C. Approved by Dyson J  in New Islington HA  v Pollard Thomas [2001] Lloyd’s Rep PN 243 at [17]. 3 Above, at [99].

7.12 The Court of Appeal reached a different result in Bell v Peter Browne & Co.1 In that case, the claimant contacted the defendant solicitors in 1977 following the breakdown of his marriage. Pursuant to the claimant’s instructions, the defendants prepared a transfer of the former matrimonial home to the claimant’s wife, which he executed in 1978. But the defendants negligently failed to protect the claimant’s continuing interest in the house, which was that he should receive one-sixth of the proceeds of sale. They should have prepared a trust deed to that effect, and registered a caution. In 1986 the claimant’s wife told him that she had sold the former matrimonial home and spent all the proceeds. Thus the effect of the defendants’ negligence was that the claimant had lost the one-sixth interest in the proceeds of sale which he ought to have had. He issued a writ against the solicitors in August 1987. 1 [1990] 2 QB 495, CA.

339

7.13 Limitation 7.13 The Court of Appeal held that the cause of action in contract had accrued at the date of the original failure, 1978, and rejected a continuing duty argument. Nicholls LJ accepted that there might be: ‘… exceptional cases where, on the true construction of the contract, the defaulting party’s obligation is a continuing contractual obligation. In such cases the obligation is not breached once and for all, but it is a contractual obligation which arises for performance day after day, so that on each successive day there is a fresh breach. A familiar example of this is the usual form of repairing clause in a tenancy agreement’. But he distinguished Hett, Stubbs and Kemp on the basis that, there, the solicitors continued to have dealings with their client in respect of the unregistered option, whereas in Bell there was no evidence that the defendants had had any further contact with the claimant after the conclusion of his divorce proceedings, so that there was no continuing contractual obligation.1 Beldam LJ too considered that there was only one breach of contract.2 Like Nicholls LJ, Mustill LJ considered it possible that a solicitor could have a continuing obligation, as part of his or her retainer, ‘to be constantly on watch for new sources of potential danger, and to take immediate steps to nip them in the bud’. But there was no express duty to that effect in Bell, and Mustill LJ thought it ‘impossible to imply such a strange obligation from the mundane facts of the present case’.3 Thus there was only one breach of contract.4 The Court of Appeal applied Bell in Nouri v Marvi,5 where Patten LJ said that there were no special factors to indicate that the defendant solicitors had assumed a continuing duty to the claimant following the completion of a conveyancing transaction. Further, the Privy Council was not keen to apply a ‘continuing duty’ analysis in Maharaj v Johnson.6 Most recently, the majority in the Court of Appeal rejected the existence of a continuing duty in Capita (Banstead 2011) Ltd v RFIB Group Ltd,7 and concluded that it was bound to follow Bell rather than Hett, Stubbs & Kemp. The defendant firm had been retained to give advice to the managers of an occupational pension scheme. Prior to 30 April 2004, the defendant had negligently failed to give advice to the claimants by failing to advise that various amendments to the pension plan be made. The trial judge held that, after 30 April 2004, the defendant had come under a continuing duty, which arose afresh each day, to give the correct advice about the amendments. Longmore LJ held that, even though the defendant had continued to be retained by the claimants after 30 April 2004, there was nevertheless no duty on the defendant, after 30 April 2004, to correct its earlier errors: ‘The obtaining and receiving of advice after a mistake has been made (even if the mistake can easily be rectified) cannot to my mind mean that an obligation to correct one’s mistake or negligence continues to accrue and give a fresh cause of action every day after the mistake has been made.’8 He concluded that there was no principled distinction between Hett, Stubbs & Kemp and Bell, and that the Court of Appeal’s obligation was therefore to 340

Claims at common law  7.15 follow Bell; there was no continuing duty on the defendant to advise about its prior errors.9 In light of Capita, it is suggested that, unless the matter is considered in the Supreme Court, the position is that future courts are most unlikely to hold that a solicitor has a continuing duty to revisit their earlier possible errors and put them right unless the facts compel a finding that the solicitor has expressly accepted such a duty. 1 See [1979] Ch 385 at 501D–H. 2 See [1990] 2 QB 495 at 509D–E. 3 See [1990] 2 QB 495 at 512G–513B. 4 See also Morfoot v WF Smith & Co [2001] Lloyd’s Rep PN 658 at [57], where Hett, Stubbs & Kemp was distinguished. The claimant’s case was that the defendant had negligently failed to secure a deed of release from a charge held by a bank. The claimant pleaded that the defendant should have obtained the deed of release ‘as soon as possible’. The court held that there must have a come a time when release was possible, so that there was a once and for all breach at that time, and not a continuing breach. 5 [2009] EWCA Civ 1107, [2011] PNLR 7. 6 [2015] UKPC 28, [2015] PNLR 553. 7 [2015] EWCA Civ 1310, [2016] PNLR 17. See also para 1.13, above. 8 At [19]. 9 At [20].

7.14 To conclude, while it is possible that a solicitor’s contract of retainer may contain a continuing obligation to check whether the solicitor has made errors and put them right, unless such a term of the retainer is express, the court is unlikely to hold that there is an implied term to this effect. On the other hand, if solicitors are negligent at time A, and are then later instructed at time B to do work which, if correctly done, would reveal their earlier errors at time A, then they may have a duty at time B  to report their own earlier negligence at time A. In those circumstances, a failure at time B to report the earlier negligence may give rise to a new cause of action at time B, which in practice will enable the claimant to recover damages in respect of the negligence at time A.

3  The tort of negligence 7.15 In the tort of negligence, the cause of action accrues when the defendant’s negligence first causes the claimant loss which is recoverable in law. Cases in relation to lenders’ claims, purchasers’ claims, the loss of litigation, and the loss of benefits under a will are considered separately below.1 In general, however, the relevant type of loss for these purposes is the loss for which the claimant claims compensation in the particulars of claim.2 In solicitors’ negligence cases the principal type of loss claimed is usually economic loss. In many cases it will be obvious when the economic loss was suffered. If I buy a house at a price assuming no major defects, and my solicitor negligently fails to tell me that there is a right of way running through the ground floor, then I suffer economic loss as soon as I exchange contracts to buy the house,3 since at that stage I become legally obliged to complete the 341

7.15 Limitation purchase of a house which is worth less than it would have been without the right of way. Problems, however, have arisen in cases where the solicitor’s negligence has exposed the claimant to a risk of loss, for example by failing to register an option which would prevent a third party from selling the property to persons other than the claimant, but where the event the subject of the risk does not actually take place for several years. In such a case, there are two principal candidates for the date when the loss is first suffered: (i)

the date when the risk initially arose, which is usually at around the time of the initial negligence; or

(ii) the date when the event, of which there was a risk, actually took place: in our example, the date when the third party sold the property to someone other than the claimant. An alternative might be the date when it becomes inevitable that that event will take place, even if it has not yet taken place. One argument in favour of (ii) is that, from the claimant or client’s point of view, it is (ii) rather than (i) which generally counts as the loss, so that it is not until (ii) occurs that the claimant will realise that there is a claim worth making. Another argument in favour of (ii) is that the event which is the subject of the risk might never occur. For instance, in Hett, Stubbs and Kemp4 Mr Green’s father might not have sold the farm to his wife, and so might not have deprived Mr Green of the opportunity to buy the farm. If the risk does not occur, the argument runs, the claimant has suffered no loss; so there is no loss unless and until the event of which there was a risk actually occurs. This approach has been adopted in relation to claims for negligence in relation to wills, and it may explain the result in Law Society v Sephton.5 Against those points is the argument that, as soon as there is a risk of an untoward event happening, the presence of the risk itself causes the claimant loss, because a risk of something untoward happening is in principle capable of being valued. The value of the risk equates to the likelihood of the event happening multiplied by the amount of damage which will be suffered if it does occur. Thus, at time (i), the claimant has suffered loss in the amount of the value of the risk. As Bingham LJ has observed, attaching a money value to a possible future contingency is something which judges do:6 ‘… every day in awarding claimants damages for the risk of epilepsy, the risk of osteoarthritis, the risk of possible future operations, the risk of losing a job and so on. The valuation exercise is [sc. in limitation cases], of course, different, but the difference is one of subject matter, not of kind.’ 1 See sections 4, 5 and 6, at paras 7.30, 7.38 and 7.42, below, respectively. 2 A  claimant cannot, however, improve the limitation position by simply neglecting to plead loss which occurred more than six years before the issue of the claim form, so as to escape the limitation period which would otherwise apply: see para 7.38, below, though the personal injuries cases referred to at para 7.6ff, above may constitute an exception. 3 See para 7.28, below. 4 See para 7.11, above.

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Claims at common law  7.17 5 Both wills claims, at para 7.48, and Sephton in the following pages, are discussed later in this chapter. 6 D W Moore & Co Ltd v Ferrier [1988] 1 WLR 267 at 280B–C, CA.

7.16 The leading case in this area is the House of Lords’ 2006 decision in the accountants’ negligence case of Law Society v Sephton & Co.1 In Sephton, Lord Hoffmann said that ‘a contingent liability is not as such damage until the contingency occurs’.2 Lord Walker of Gestingthorpe considered that, if a professional’s negligence caused the claimant to incur a ‘purely personal and wholly contingent liability, unsecured by a charge on any of the claimant’s assets’, then loss would not be suffered.3 In all the major cases following Sephton, however, it has been distinguished, most notably in Axa Insurance Ltd v Akther & Darby.4 In Axa, Arden and Longmore LJJ held that Sephton did not apply, though in addition Arden LJ stated that ‘at an appropriate time [Sephton] should be revisited by the Supreme Court. The cases in this area demonstrate the importance and difficulty of the relevant law.’5 Lloyd LJ concluded that the Court of Appeal was bound to hold that Sephton did apply, though he also considered that applying it produced a result which was ‘at odds with what one would anticipate, in terms of the commercial and economic reality of NIG’s position’.6 Most unusually, the Court of Appeal itself gave permission to appeal to the Supreme Court, thus indicating that the law required authoritative clarification. Unfortunately for our purposes, however, the case settled before the appeal had been heard. It is suggested that Patten LJ’s comment in a later case, with reference to Axa, that the application of Sephton ‘has not been without its difficulties’7 was an understatement. 1 [2006] UKHL 22, [2006] 2 AC 543. 2 [2006] UKHL 22, [2006] 2 AC 543 at [30]. 3 [2006] UKHL 22, [2006] 2 AC 543 at [48]. See also per Lord Mance at [77]. Lords Scott and Rodger agreed with Lords Hoffmann, Walker and Mance. 4 [2009] EWCA Civ 1166, [2010] 1 WLR 1662. 5 At [28]. 6 At [165]. NIG would have been the claimant had it not assigned its cause of action. 7 Nouri v Marvi [2009] EWCA Civ 1107, [2011] PNLR 7 at [28].

7.17 Where does this leave the law? The short answer appears to be that, in any case which is not on all fours with Sephton, the court is likely to attempt to distinguish Sephton and to hold that loss has been suffered when a client becomes subject to a risk of future harm.1 A more detailed answer requires an attempt to categorise the decided cases. In what follows we have attempted a categorisation of the leading cases based on Lord Hoffmann’s speech in Sephton, as interpreted by Rimer LJ in Pegasus Management Holdings SCA  v Ernst & Young.2 It is right to say, however, that no categorisation commands universal support in the case law.3 Further, in Axa at first instance a categorisation along these lines was advanced but rejected;4 it was not advanced on appeal, and the Court of Appeal did not have to consider whether it was correct. With those, admittedly considerable, caveats, it is suggested that the cases may be seen as falling into the following categories. First, where 343

7.18 Limitation a future contingency has damaged the value of an asset, loss is suffered when that value is reduced. Secondly, where the claimant’s case is that, absent negligence, s/he would not have entered into the impugned transaction at all, loss is assessed by weighing the benefits and burdens of the transaction to see when the burdens first outweighed the benefits. Thirdly, where the claimant’s case is that, absent negligence, s/he would have entered into the same transaction but on better terms, loss is first suffered when the claimant’s rights under the impugned transaction are worth less than they would have been if there had been no negligence; this is often at the outset of the transaction. Fourthly, if loss is dependent on a pure contingency, then loss is not suffered until the risk in question eventuates. These categories will be considered in turn. 1 Though in Evans v Pricewaterhousecoopers LLP [2019] EWHC [1505] (Ch), [2019] PNLR 28, a case relating to negligent tax advice, HHJ Elizabeth Cooke, sitting as a deputy High Court Judge, held that it was arguable that Sephton might apply. 2 [2010] EWCA Civ 181, [2010] PNLR 23. 3 In Axa Arden LJ suggested a division into ‘the damaged asset rule’ and ‘the package of rights rule’ though she emphasised that these were different attempts to express the central idea that there had to be measurable loss before time began to run, ‘that is to say, loss which is additional to the incurring of a purely contingent liability’. See [30]–[32]. Lloyd LJ was sceptical of the value of over-rigid categorisation: at [134]. 4 [2009] EWHC 635 (Comm), [2009] PNLR 25 at [20], [29].

(a)  Cases where a future contingency depresses the value of an asset 7.18 Lord Hoffmann saw Forster v Outred1 as falling into this category. The claimant’s son asked her to sign a mortgage, secured on her farm, to assist him in his business. The claimant believed that the mortgage would provide only temporary security for a bridging loan; that her son would soon obtain a permanent mortgage from elsewhere; and that, when this happened, the mortgage over her farm would be terminated. In fact, the mortgage covered all present and future liabilities of her son and was unlimited in time. The defendant solicitors failed to explain this to the claimant. If they had explained it, she would not have signed the mortgage. The court concluded that the claimant had suffered damage when she entered into the mortgage deed, rather than later when the mortgagee made a demand under the mortgage, because she had, at that stage, encumbered her interest in the farm and subjected it to a liability which might mature according to events wholly outside her control. The claimant’s farm was worth less when mortgaged than when unmortgaged. On this view, therefore, if the claimant had signed a personal guarantee for the son’s debts, unsecured on any other property, she would not have suffered loss until the guarantee was called on. In Axa,2 Arden LJ criticised this distinction and suggested that it should be revisited by the Supreme Court. 344

Claims at common law  7.20 1 [1982] 1 WLR 86, CA. See Sephton at [14], [17]–[18], [30]. 2 [2009] EWCA Civ 1166, [2010] 1 WLR 1662 at [28]. See also para 7.18 of the second edition of this book (2008).

7.19 In Axa, the defendant solicitors were required, by agreement with the claimant insurers, to vet the proposed personal injury claims of members of the public, and to accept them into the insurers’ scheme only if the claims had prospects of success of at least 51% and were likely to have a value of at least £1,000. It was alleged that the defendants had negligently vetted claims so that claims which did not meet those requirements were accepted into the scheme. As a result the claimants provided the members of the public with after-the-event legal expenses insurance for the proposed claims, even though, it was alleged, they would not have done if there had been no negligence. In Arden LJ’s view, if negligence were proved then the claimant’s property would have been damaged by entering into the policies, because security had been given over an intangible asset such as a debt.1 That suggests that Axa fell into the present category of claim. This part of her analysis was not, however, shared by Longmore LJ, so it appears that it is not part of the ratio of Axa. 1 At [57].

(b) Cases where, absent negligence, the claimant would not have entered into a transaction at all 7.20 In Sephton, Lord Hoffmann pointed out that the Nykredit1 decision fell into this category, of cases where, absent negligence, there would have been no transaction at all. He said:2 ‘in a transaction in which there are benefits … as well as burdens … and the measure of damages is the extent to which the lender is worse off than he would have been if he had not entered into the transaction, the lender suffers loss and damage only when it is possible to say on balance that he is worse off.’ For a fuller discussion of how this worked on the facts of Nykredit, see para 7.36, below. Further, note that, once it is accepted that a case falls into this category, it is more likely that the date when loss is suffered will become later than the date of the initial transaction, since that date will not automatically be the date on which the claimant entered into the transaction. As Rimer LJ pointed out in Pegasus,3 Lord Hoffmann drew a distinction between this category of case, ‘no transaction’ cases, and cases where the claimant alleges that, absent negligence, s/he would have entered into the same transaction but on better terms. The latter type of case might be called ‘flawed transaction’ cases. These will be discussed under the next heading, but note that the courts’ tendency 345

7.21 Limitation in flawed transaction cases is to find that loss was suffered when the claimant entered into the transaction. 1 Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, discussed at para 7.36, below. 2 Sephton at [20]. See also [19], [30]. 3 Pegasus Management Holdings SCA v Ernst & Young [2010] EWCA Civ 181, [2010] PNLR 23 at [60].

7.21 Shore v Sedgwick Financial Services Ltd,1 a post-Sephton case, was a ‘no transaction’ case. Due to the defendant’s financial advisor’s alleged negligence, in 1997 the claimant withdrew from his company (Avesta)’s occupational scheme and instead invested his pension with Scottish Equitable. At the date of the transfer, the policy which he bought from Scottish Equitable had the same monetary value as his pension rights under the Avesta scheme. At first instance, the judge applied the ‘benefits and burdens’ approach and held that the claimant had not suffered loss in 1997, but he had suffered it in 1999 when his pension rights under the Scottish Equitable policy were demonstrably less valuable, in financial terms, than they would have been under the Avesta scheme. The Court of Appeal, however, took a different view. Dyson LJ gave the only reasoned judgment. He held that loss had first been suffered when the claimant transferred out of the Avesta scheme:2 ‘It is Mr Shore’s case (assumed for present purposes to be established) that the [Scottish Equitable] scheme was inferior to the Avesta scheme because it was riskier. It was inferior because Mr Shore wanted a secure scheme: he did not want to take risks. In other words, from Mr Shore’s point of view, it was less advantageous and caused him detriment. If he had wanted a more insecure income than that provided by the Avesta scheme, then he would have got what he wanted and would have suffered no detriment. In the event, however, he made a risky investment with an uncertain income stream instead of a safe investment with a fixed and certain income stream which is what he wanted.’ Note the approach taken here: the claimant’s loss is characterised in a subjective rather than a purely objective way, albeit that the characterisation is derived from the particulars of claim. As a result, the definition of ‘loss’ does not depend purely on the market value of the pension fund at any given time, nor is loss assessed purely in a Nykredit fashion. The court does not look simply to monetary values as a measure of loss, but instead considers the desirability of the type of investment from the individual claimant’s point of view. As a further result, the date when loss was suffered is moved forwards. The Court of Appeal took a similar, somewhat subjective, approach to a ‘flawed transaction’ case in Pegasus,3 holding that although the claimant had not suffered financial loss it had suffered a loss of commercial flexibility which was sufficient to count as loss in tort. These developments appear to favour defendants as they advance the date on which time starts to run for limitation purposes. 346

Claims at common law  7.23 1 [2008] EWCA Civ 863, [2008] PNLR 37. 2 At [37]. 3 See para  7.27, below. Dr Janet O’Sullivan has suggested during a talk that this subjective approach to assessing loss may be inconsistent with Nykredit and should not apply to a tortious as opposed to a contractual claim. In the Irish case of O’Hara v ACC Bank plc [2011] IEHC 367, [2012] PNLR 3, Charleton J questioned the result of Shore, pointing out at [36] that it might be very difficult to value the claimant’s loss until he suffered financial loss.

7.22 Axa, the facts of which are summarised above at para 7.19, was also a ‘no transaction’ case: absent negligence, the insurers would not have entered into the ATE policies at all. Arden and Longmore LJJ held that loss was suffered at the inception of the policies because the insurers had entered into policies which they ought not to have entered into, and which were of lower value than they should have been, because of the defendants’ assumed negligent vetting of the policies.1 Lloyd LJ, dissenting, said that the consequence of the alleged negligence was that the insurers entered into policies which they would not otherwise have entered into, and that as a result they were exposed to contingent liabilities under the policies; ‘because of the solicitors’ negligence as regards vetting, those liabilities were more likely than not to materialise.’ In Lloyd LJ’s view, the reason the insurers were worse off was purely that they were exposed to contingent liabilities which they should not have been exposed to: ‘until a claim arose under each policy, [the insurers’] liability was contingent, and nothing but contingent’. But pure exposure to a contingency without more did not, according to Sephton, amount to recoverable damage, so in Lloyd LJ’s view there was no loss at the inception of the policies.2 He pointed out that the effect of Sephton was that an unsecured guarantee did not amount to loss until a claim was made on it, nor did the giving of a pure indemnity cause loss until a claim was made on it; it was impossible to distinguish the facts of Axa from such cases.3 To this commentator Lloyd LJ’s reasoning seems more persuasive, but the extent of the disagreement in Axa demonstrates the difficulty of applying the ratio of Sephton and, as indicated above, it appears that in general the courts are keen to avoid holding that cases fall within the principle of Sephton. 1 See [62], [82]. 2 At [153], [146]. 3 At [161], partly with reference to the House of Lords’ agreement with the result of Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 (High Court of Australia).

(c)  Cases where, absent negligence, the claimant would have entered into the same transaction but on better terms 7.23

Lord Hoffmann said in Sephton1 that:

‘If the liability is for the difference between what the [claimant] got and what he would have got if the defendant had done what he was 347

7.24 Limitation supposed to have done, it may be relatively easy … to infer that the [claimant] has suffered some immediate damage, simply because he did not get what he should have got.’ These cases, where the complaint is that the claimant ‘did not get what he should have got’, in other words where the claim is that, absent negligence, the claimant would have entered into a similar transaction but on better terms, might be called ‘flawed transaction’ cases. They tend to result in loss being held to have been caused at the outset of the flawed transaction. A  number of the leading authorities may be placed in this category. In DW  Moore & Co Ltd v Ferrier,2 on 1  July 1971 the claimant insurance brokers signed a contract with F, whereby he became a director and shareholder of the first claimant. The contract contained a restrictive covenant relating to F. The defendant solicitors prepared the agreement for the claimants and represented to them that it would take effect when F ceased to be a director of or employed by the first claimant. In fact, however, the restrictive covenant did not take effect when F  ceased to be an employee or director. The claimants did not discover this until 1980, when F  sought to change employment. The Court of Appeal held that the claimants had suffered loss in 1971 when they signed the agreement, because, at that date, they had a worthless restrictive covenant; thus, at that date, they were subjected to the risk that F would leave and do what the restrictive covenant was supposed to prevent him from doing. Neill LJ pointed out that:3 ‘a valid restrictive covenant, if it is not personal solely to the covenantee, can be assigned to the purchaser of the goodwill of a business. To my mind, it does not require evidence to establish that such a covenant has some value, particularly when it is given in the context of a broking business where personal contacts may be of particular importance.’ He added that it did not matter that, prior to the date of F’s departure, the assessment of damages would depend on his likely future attitude. Although this went to the assessment of damages, it did not mean that, before F’s departure, the claimants had suffered no damage at all. 1 Sephton at [21]. 2 [1988] 1 WLR 267, CA. 3 [1988] 1 WLR 267 at 277A–B.

7.24 Bingham LJ’s approach was similar. On the assumptions which the court had to make, it was: ‘clear beyond argument that from the moment of executing each agreement the claimants suffered damage because instead of receiving a potentially valuable chose in action they received one that was valueless.’ He dealt with the argument that, at the outset, the loss was minimal, as follows:1 348

Claims at common law  7.26 ‘If the quantification of the plaintiffs’ damage had fallen to be considered shortly after the execution of either agreement, problems of assessment would undoubtedly have arisen. It might have appeared that Mr Fenton was unlikely to leave, taking much of the first plaintiff’s business with him, to establish a competing business. If so, the plaintiffs’ damage would have been assessed at a modest figure. But the risk of his so doing could not have been eliminated altogether, and so long as there was any risk that one of the first plaintiff’s two directors might leave, taking much of the first plaintiff’s business with him, to establish a competing business, there must necessarily have been a depressive effect on the value of the first plaintiff’s business and on that of the second and third plaintiffs’ derivative interests.’ In Sephton, Lord Mance emphasised that the result of the solicitors’ negligence was that the claimant in Moore received less valuable legal rights than it ought to have received.2 Lord Walker also considered that Moore had been rightly decided.3 1 [1988] 1 WLR 267 at 279H–280B, CA. 2 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [67]. 3 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [46].

7.25 Lord Hoffmann also considered that the insurance brokers’ case of Knapp v Ecclesiastical Insurance Group plc1 fell into this category. Due to the brokers’ negligence, the claimant paid a premium for a fire insurance policy which the insurers could avoid at any time on account of non-disclosure of material facts. The Court of Appeal held that loss was suffered when the policy was entered into: at that time, the claimant had received a policy which would not bind the insurers, instead of a policy which would bind them. It did not matter that the actual avoidance did not take place until later. The result was approved in Sephton. Lord Hoffmann saw it as a case where the liability was for ‘the difference between what the plaintiff got and what he would have got if the defendant had done what he was supposed to have done … namely a policy binding on the insurers’.2 The claimant was left with fewer legal rights than he should have had. 1 [1998] PNLR 172. 2 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [21]. See also per Lord Walker at [45] and Lord Mance at [68].

7.26 The next case in this category is Bell v Peter Browne & Co, the facts of which were considered above in relation to contract.1 In 1978 the defendant solicitors negligently failed to ensure that the claimant’s interest in his former matrimonial home was protected when he transferred it to his wife. The Court of Appeal held that the claimant suffered loss in 1978 when the transfer took effect without him having the formal protection of his interest in the proceeds of sale which he ought to have had. Nicholls LJ reasoned that if the claimant had sued in 1980, before sale of the house, his damages might have been low, 349

7.27 Limitation but not nominal: ‘he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution’.2 Beldam LJ said that, due to the negligence, the claimant’s interest was clearly less valuable in 1978 than it would have been if there had been no negligence.3 In Sephton, Lord Hoffmann said that Bell was ‘readily explicable’ as a case in which it was ‘possible to infer that the plaintiff’s failure to get what he should have got from a bilateral transaction was quantifiable damage, even though further damage which might result from the flaw was still contingent’.4 Following Sephton, Bell was applied in Nouri v Marvi.5 It may be observed, however, that the distinction between a case leading to an unsecured guarantee, referred to above,6 and this explanation of Bell, is thin. In both cases, whether the claimant ultimately lost significant sums would depend on the conduct of third parties beyond his control. Whilst in Bell the wife made off with all the proceeds of sale, it might, in the case of a different third party, have been possible to predict with accuracy that the risk of such conduct was minimal, such that it might have been possible to say at the outset that in reality there was a minimal risk of the negligence causing loss. Yet it appears that in the House of Lords’ view in this type of case loss is suffered at the outset, whereas it is not suffered at the outset if negligence causes me to give a purely personal guarantee of my son’s debts, even if they are very considerable and his creditors have expressly stated that they will call on the guarantee as soon as they can have letters of demand produced. To some degree, an understanding of the reason for these puzzling distinctions may be assisted by considering the wider policy factors, which we do at para 7.32, below. 1 See para 7.12, above. 2 [1990] 2 QB 495 at 503G. 3 [1990] 2 QB 495 at 510F. 4 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [22]. 5 [2009] EWCA Civ 1107, [2011] PNLR 7, considered at para 7.35, below. 6 Paragraph 7.18, above.

7.27 A similar result was reached in Watkins v Jones Maidment Wilson.1 Solicitors negligently drafted a building contract. Time ran from the date of the agreement, not from when it became apparent that the claimants would lose out as a result of the defect in the agreement. Further, in Pegasus Management Holdings SCA  v Ernst & Young,2 the defendants were the claimant’s tax advisers. The claimant sold a business. He wanted to obtain roll over relief from capital gains tax. The defendants advised him how to do it. The claimant accepted the defendants’ advice. Part of the scheme which the defendants suggested involved investing in shares using a particular corporate structure. It later emerged that the defendants should have advised a different structure which would have given the claimant more commercial flexibility. It was held that the claimant suffered the loss of commercial flexibility at the outset, and that that was enough to constitute loss so as to start time running for limitation purposes, even though the claimant had not immediately suffered financial 350

Claims at common law  7.29 loss. It should be noted, however, that in flawed transaction cases it is not inevitably the case that the claimant will suffer actionable loss as soon as he or she enters into the transaction.3 1 [2008] EWCA Civ 134, [2008] PNLR 23. 2 [2010] EWCA Civ 181, [2010] PNLR 23. 3 Maharaj v Johnson [2015] UKPC 28, [2015] PNLR 27 at [26].

(d)  Cases where the claimant’s loss is purely dependent upon a contingency 7.28 We come finally to the category into which their Lordships held that Sephton itself fell, and thus to the facts of Sephton. Mr Payne was a solicitor practising on his own account. Between 1990 and 1996 he stole around £750,000 from his client account. These thefts exposed the Law Society to the risk that clients whose money had been stolen would apply for reimbursement to the Solicitors’ Compensation Fund, of which the Law Society was the trustee. No such claim was actually made until July 1996. Ultimately the Law Society paid out over £1m, including interest, to such claimants. Sephton & Co were a firm of accountants who, between 1989 and 1995, certified to the Law Society that they had examined Mr Payne’s accounts and were satisfied that he had complied with the requirements of the Solicitors Accounts Rules 1991. In 2000 the Court of Appeal held that accountants performing such work owed the Law Society a duty of care in the preparation of such certificates.1 The Law Society claimed from Sephtons the sums which it had paid out through the Compensation Fund, on the basis that Sephtons had owed the Society a duty of care and had negligently breached it in the completion of the accountants’ certificates for the relevant years. The Law Society did not, however, issue proceedings until 16  May 2002. It had threatened Sephtons with a claim in October 1996, so it could not rely upon s 14A of the Limitation Act (see below) as its three-year period had expired well before the issue of proceedings. The question was when the Society first suffered loss: was it when it was first exposed to the risk of a claim, in other words when Mr Payne stole the money, or later? 1 Law Society v KPMG Peat Marwick [2000] 1 WLR 1921, CA.

7.29 Sephtons’ case was that loss had been suffered when the Society was first exposed to the risk of having to make a payment. In the House of Lords’ view, this amounted to a claim that a pure contingency, or risk of having to make a payment, could constitute actionable damage. As indicated above, the House rejected that contention. The views of Lords Hoffmann and Walker on this issue have already been quoted above.1 Lord Mance considered that actionable loss was not suffered until the Society first received a claim on the Solicitors’ Compensation Fund. The effect of the making of a claim was that the Society was bound as a matter of public law to make a payment, even if 351

7.30 Limitation it did not decide to do so until later.2 Lord Mance gave various reasons for declining to hold that loss had occurred earlier: as a matter of law, the Society was not bound to make a payment until it received a claim; until a claim was made it was not possible to know which clients might suffer what loss; it was not appropriate to speak of the Fund as having suffered a loss until a claim was made.3 But one might equally say that the mother in Forster4 was not legally bound to make a payment until someone called on her guarantee: if her son did not default, there would be no payment to make; yet loss was held to have occurred as soon as she entered into the transaction. 1 At para 7.16. 2 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [83]. 3 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [76]. 4 At para 7.18, above.

7.30 A  further case to be considered in this category is Gordon v JB Wheatley & Co.1 As it was doubted in Sephton, its importance now lies less in what the Court of Appeal decided than in the reasons which the House of Lords gave in Sephton for indicating that it was or may have been wrongly decided. The claimant’s solicitor negligently advised him that a collective mortgage scheme did not require authorisation under the Financial Services Act 1986. As a result, he was obliged by the Securities and Investment Board to indemnify investors in the scheme against losses. He ultimately paid them £676,000. The Court of Appeal held that the claimant suffered loss when he took investments after having received the negligent advice, and not when the SIB subsequently required him to indemnify investors. Lord Hoffmann, however, considered that he suffered loss when he was required to indemnify by the SIB, because there was no inevitable connection between taking the investments and the SIB using its powers.2 In Lord Walker’s view the risk of enforcement action was not a fetter on the claimant’s assets and so did not constitute loss.3 Lord Mance’s analysis was that there was no liability, and no change in the claimant’s legal position, until the SIB intervened and the court ordered payment or the claimant agreed to pay.4 It followed that there was no loss until that date. Further, the claimant’s loss did not arise directly from the transaction which the defendant’s negligence caused the claimant to enter, but collaterally from the powers of the SIB. 1 [2000] Lloyd’s Rep PN 605, CA. 2 Sephton [2006] UKHL 22, [2006] 2 AC 543 at [25]. 3 At [51]. 4 At [82].

7.31 As to what counts as a ‘contingency’ for the purposes of applying Sephton, in Lane v Cullens Solicitors,1 it was held that ‘a fact which has already occurred is not contingent, and it makes no difference that it is in dispute so that it has to be proved (and therefore might not be proved, in the end)’. The claimant was the administrator of his sister’s will. He instructed the defendant solicitors to advise him in the administration of the will. It was alleged that the 352

Claims at common law  7.33 defendant had negligently allowed the claimant to pay £40,000 from the assets in the will, knowing that another family member had a potential claim to the whole of the estate; if that claim was made and succeeded then the claimant would have to repay the £40,000. The other family member’s claim duly succeeded. In the professional negligence action against the defendant it was held that, although it was not certain at the date of the £40,000 payment whether the other family member’s claim would succeed, unless it could be said that there was no real prospect of the claim succeeding, the claimant had suffered loss when paying away the £40,000. Part of the reasoning turned on the nature of the family member’s claim being close to a contractual or constructive trust claim, as opposed to a claim which would give rise to purely discretionary relief from the court; this perhaps took the claim closer to a ‘damaged asset’ or ‘depressed value of another asset’ type case, though, again, it shows the courts’ unwillingness to apply Sephton. 1 [2011] EWCA Civ 547, [2011] PNLR 25, per Lloyd LJ at [27], applying Spencer v Secretary of State for Work and Pensions [2008] EWCA Civ 750, [2009] QB 358.

7.32 As already indicated, it is beginning to look as if Sephton will not be followed unless a case arises which is indistinguishable from it, or alternatively perhaps a case where the potential loss is purely regulatory in nature and not based on a private law transaction. The potential injustice of a limitation period starting to run at an early point and expiring before the claimant ought to realise that s/he could sue is dealt with, at least in theory, by s 14A of the Limitation Act. But s 14A is not necessarily an answer, as Lord Hoffmann said,1 to the case where ‘a mere contingent liability is treated as damage and the [claimant], at the end of the three years, still does not know whether the contingency will eventuate or not’. There is a danger that time for bringing a claim may expire before the claimant knows whether it is worth the cost of making the claim. That may be the rationale of Sephton, and the explanation for its departure from the preceding case law. Below the highest level, however, the courts do not generally seem keen to embrace it. 1 Sephton, at [28].

(e)  Purchasers’ cases 7.33 In Byrne v Hall Pain & Foster,1 a case decided before Sephton, flatbuyers sued their surveyors for professional negligence in the provision of the valuation report on which they had relied to purchase the flat. The question arose as to whether the cause of action had accrued at the date when they exchanged contracts to purchase the flat, or when the transaction completed. The Court of Appeal held that the former was the correct date: on exchange, the claimants became irrevocably committed to purchasing the lease of the flat, which, due to the defendants’ negligence, was in a worse condition than they believed it to be. Thus, at the time of exchange of contracts, the claimants had 353

7.34 Limitation suffered some detriment capable of valuation in money terms, and so the cause of action accrued. Cases where the claimant is a lender, which are considered in the next section, were distinguished: there, as will be seen, the claimant’s loss depended in part on the borrower’s performance of his covenant, and so different principles applied. It might be added that, in lenders’ cases, the lender is not generally irrevocably committed to the transaction until completion, because its standard terms generally permit it to withdraw from the transaction at any time prior to completion. 1 [1999] 1 WLR 1849, CA.

7.34 Byrne was applied in Havenledge Ltd v Graeme John.1 The claimant purchased a derelict property in Wales with a view to turning it into a nursing home and running it as a business. It alleged that its solicitor had negligently failed to carry out a mining search, which would have revealed mine workings underneath the property. The claimant had purchased in 1987 but the presence of the mine workings became apparent only in 1990, and caused business disruption and consequent financial losses in 1990. By a majority, the Court of Appeal held that loss was suffered when the claimant purchased the defective nursing home, and declined to apply the analogy of the lenders’ cases (see below) to the effect that what was being purchased was an asset with incomeproducing potential, so that it was only when the business started to show losses on account of the mine that loss was suffered. After the decision in Sephton, in Green v Eadie2 the claimant purchased freehold property but contended that his solicitors had negligently failed to check the boundaries of the property. The deputy judge, applying Axa, held that time for limitation purposes ran from when the claimant exchanged contracts, even though he would have been entitled to rescind the contract for misrepresentation. 1 [2001] Lloyd’s Rep PN 223, CA. 2 [2011] EWHC B 24 (Ch), [2012] 2 WLR 510 (Mark Cawson QC).

(f) Identity fraud 7.35 Two strike out or summary judgment cases deal with limitation in the context of identity fraud, though they take a similar approach to that outlined above from the pre-Sephton cases. In Nouri v Marvi1 the claimant owned a flat but allowed Marvi to occupy it. Marvi, pretending to be the claimant, instructed the defendant solicitors to sell the flat. Purported exchange and completion took place on the same day. The Court of Appeal held that the claimant suffered loss on that day: the market value of the flat must have been diminished on the date of the forged transfer because, although the transfer was invalid, a potential purchaser knowing of the forgery would have paid less for the flat, partly due to the risk of litigation. It did not matter that the claimant did not know of the fraud at the time. In Edehomo v Bowling & Co2 the claimant and her husband Mr Edehomo jointly owned the property. Mr Edehomo instructed 354

Claims at common law  7.37 the defendant solicitors in the sale of the property without telling the claimant. Mr Edehomo forged the claimant’s signature on the contract and the transfer. Exchange and completion were on different days. Roth J held that the claimant suffered loss on the date of exchange: once the purported contracts had been exchanged, no intending purchaser would have entered a binding contract to buy the property at its open market value, because such a person would have been concerned as to problems likely to be caused by the purported exchange. Hence the value of the property was diminished when the purported contracts were exchanged. 1 [2010] EWCA Civ 1107, [2011] PNLR 7. As to duty of care, see para 9.08, below. 2 [2011] EWHC 393 Ch, [2011] 1 WLR 2217 (Roth J).

4  Lenders’ claims: Nykredit 7.36 The leading case in this category is the House of Lords’ decision in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2),1 which was approved in Sephton.2 This was the House’s judgment on interest payable in those cases which remained from the SAAMCo3 decision. Although in Nykredit the lenders were suing valuers rather than solicitors, the same principles will be applied to lenders’ claims against solicitors. The question before the House was what interest should be awarded on damages. As statutory interest could be awarded only from the date when the cause of action arose, this raised the question of when the lenders’ cause of action had arisen. The House acknowledged that its decision on this point would be relevant not only to claims for interest, but also to questions of limitation.4 It is submitted that Nykredit should be regarded as authoritative in relation to when the cause of action arises, as well as in relation to interest. 1 [1997] 1 WLR 1627. 2 See [2006] 2 AC 543 at [20], [43], [73]. 3 Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191, HL. See further Chapter 10. 4 [1997] 1  WLR  1627, per Lord Nicholls at 1630A–B  and Lord Hoffmann at 1638B. Lord Hoffmann said that although for purposes of interest the question under Supreme Court Act 1981, s 35A was when the cause of action ‘arose’, whereas for limitation under the Limitation Act 1980 it was when the cause of action ‘accrued’, in his view the two words had the same meaning.

(a)  The basic comparison 7.37 The principal speech was delivered by Lord Nicholls. He considered the question of when the cause of action accrued in a case where, as a result of negligent advice, property was acquired as security. The question was when the lender first sustained loss. The loss was economic rather than physical in character. At the moment after the lender had made the advance, it was not certain that it would suffer financial loss, because (i) the borrower might not 355

7.38 Limitation default, and, even if he did, (ii) the security might be sufficient to cover the amount of the borrower’s debt. 7.38 In assessing when loss was suffered, the court had to consider the appropriate measure of loss. In cases where, had there been no negligence, the lender would not have entered into the transaction:1 ‘… a professional negligence claim calls for a comparison between the plaintiff’s position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in a case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower’s covenant and the true value of the overvalued property.’ In the rest of his speech Lord Nicholls referred to this formula as ‘the basic comparison’. In order to determine when the lender first suffered a loss, it was necessary to apply the basic comparison to the facts of the case. 1 [1997] 1 WLR 1631E–F. Lord Nicholls did not deal with the position in cases where, had there been no negligence, the lender would still have entered into the transaction. Normally these are cases where, in the absence of negligence, the lender would have lent less. Thus it might be said that the cause of action accrues as at the date of completion, because the lender had, at that date, lent more than it would have done. But the logic of Nykredit probably means that this approach is wrong: even if the lender is caused to lend more than it should have done, it may suffer no loss, because the borrower may repay all s/he owes. So, even in this type of case, it is probably necessary to assess the date when the cause of action accrues by reference to the basic comparison.

7.39 How should the basic comparison be applied? Lord Nicholls accepted that this might raise difficulties in obtaining evidence, but these difficulties were not difficulties in principle.1 In other words, the type of evidence required was clear; the problem might be in actually obtaining it. As to this evidence, at any given time, it should be possible to obtain figures for part (a) of the basic comparison, namely, the amount of the advance plus interest at a proper rate. As to the appropriate rate of interest, see the discussion of basic loss in Chapter 10.2 Similarly, it should be possible to obtain a retrospective valuation of the security. It might be more difficult to value the borrower’s covenant. On this, Lord Nicholls said:3 ‘Ascribing a value to the borrower’s covenant should not be unduly troublesome. A comparable exercise regarding lessees’ covenants is a routine matter when valuing property. Sometimes the comparison will reveal a loss from the inception of the loan transaction. The borrower may be a company with no other assets, its sole business may comprise redeveloping and reselling the property, and for repayment the lender may be looking solely to his security. In such a case, if the property is 356

Claims at common law  7.42 worth less than the amount of the loan, relevant and measurable loss will be sustained at once. In other cases the borrower’s covenant may have value, and until there is default the lender may presently sustain no loss even though the security is worth less than the amount of the loan. Conversely, in some cases there may be no loss even when the borrower defaults. A borrower may default after a while but when he does so, despite the overvaluation, the security may still be adequate.’ 1 [1997] 1 WLR 1627 at 1632B–C. 2 See para 10.105ff, below. 3 [1997] 1 WLR 1627 at 1632C–E.

7.40 Lord Nicholls went on to reject the notion that the cause of action could not arise until the property had been sold. It was wrong to suggest that loss could not be suffered until then:1 ‘no accountant or prospective buyer, viewing the loan book of a commercial lender, would say that the shortfall in security against outstanding loans to defaulting borrowers did not represent a loss to the lender merely because the securities had yet to be sold.’ On the facts of Nykredit, the borrower defaulted at once and its covenant was worthless. The amount lent always exceeded the value of the security. Thus the cause of action accrued at or about the time of the transaction.2 1 [1997] 1 WLR 1627 at 1633B. 2 [1997] 1 WLR 1627 at 1635A–B.

7.41 The effect of this is that, where the borrower defaults and disappears without assets at once and the security was always worth less than the advance, the cause of action accrues almost immediately. On the other hand, where the borrower defaults but the value of the security is sufficient to cover the amount of the advance plus interest and costs of repossession, no loss is suffered and so the cause of action does not accrue, unless perhaps there is a delay in sale during which time the amount of the advance plus interest comes to exceed the value of the security.

(b)  Cause of action accruing before the borrower has defaulted 7.42 Lord Nicholls indicated that there may be circumstances in which the cause of action accrues before the borrower has defaulted:1 ‘An alternative … possibility is that the cause of action does not arise until the lender becomes entitled to have recourse to the security. I  am not attracted by this, as a proposition of law. This suggestion involves the proposition that, until then, as a matter of law, the lender can never suffer loss, and the lender can never issue 357

7.43 Limitation his writ, whatever the circumstances. That does not seem right to me. This proposition, like the date of realisation submission, loses sight of the starting point: that the lender would not have entered into the transaction had the valuer given proper advice. If the basic comparison shows a loss at an earlier stage, why should the lender have to wait until the borrower defaults before issuing his writ against the negligent valuer?’2 Lord Nicholls had already observed that there might be cases where the borrower’s covenant had value so that until there was default there would be no loss even though the security was worth less than the amount of the advance. But by rejecting the notion that no cause of action could accrue until the borrower defaulted, he implicitly accepted that there could be circumstances in which, although the borrower had not defaulted, the basic comparison showed a loss. 1 [1997] 1 WLR 1627 at 1633E–G. 2 Compare Mummery LJ’s obiter remarks in UCB Bank plc v Halifax (SW) Ltd [1999] Lloyd’s Rep PN 154 at 158.

7.43 DnB  Mortgages Ltd v Bullock & Lees1 is an example of this. Due to the defendant’s negligence, the claimant lender entered into a remortgage which was completed in February 1990. The borrowers continued to make mortgage repayments until January 1991. It was nevertheless held that the lender had suffered actionable loss in May 1990. At that time the lender’s security was worth £130,000 and the total sum owing pursuant to the mortgage was £140,000. The trial judge held that the borrowers’ covenant in May 1990 was worth less than £10,000, so that the lender had suffered loss by that date. Upholding his decision, the Court of Appeal held that the borrowers’ covenant had to be valued objectively, on the basis of all evidence available to the court at the date of trial, and not simply by reference to information which might have been available to the market in May 1990. For an example of how to apply the basic comparison in a case where the borrower made sporadic mortgage payments, see Canada Square Operations Ltd v Kinleigh Folkard v Hayward Ltd.2 The Recorder’s starting point was ‘to compare the value of the security with the amount outstanding from time to time and to ask, wherever there is a shortfall, whether the value of the borrowers’ personal covenant was sufficient to cover such shortfall from time to time’.3 In valuing the borrowers’ covenant, he applied the test of asking ‘(i) whether the covenant appears good and (ii) interest payments are being duly made’.4 1 [2000] Lloyd’s Rep PN 290, CA. 2 [2016] PNLR 3 (Mr Recorder Halpern QC). 3 At [35]. 4 At [43].

358

Claims at common law  7.45

5  Negligent conduct of litigation 7.44 If solicitors or counsel fail to analyse the nature of a potential claim correctly, and to see that it is doomed, then loss is suffered at latest when the claim form is issued.1 The principal issue of difficulty in relation the negligent conduct of litigation, however, arises when a claim is struck out due to a solicitor’s negligence. Does the cause of action in tort accrue only when the claim is actually struck out, or earlier, and, if earlier, when? In Hopkins v Mackenzie2 the Court of Appeal held that the cause of action in tort accrued only when the claim was struck out, and not earlier, but a subsequent line of cases has introduced a different approach. In Khan v RM Falvey,3 Chadwick LJ distinguished between two types of loss for which a claimant might seek compensation from a negligent solicitor. Suppose that a claim is worth £100,000. The claimant’s solicitor delays the conduct of the action to such an extent that the defendant applies to strike out for want of prosecution. The day before the application is heard, there is a 70% chance that the claim will be struck out. Hence it can be argued that, on that date, the claim is worth only £30,000, since its £100,000 value must be discounted by 70% to reflect the risk of the claim being struck out. That damage, the reduction in value from £100,000 to £30,000, has already occurred before the striking out. On the other hand, suppose then that the application to strike out proceeds and the claim is struck out the next day. In that case, on the date of the striking out the claimant suffers loss of the residual £30,000 value of the claim. On Chadwick LJ’s analysis, it is only the £30,000 loss which occurs on the date of the striking out; the £70,000 loss occurs earlier. Hence, on Chadwick LJ’s approach, if the claimant seeks compensation only for the £30,000 loss then the damage may be said to occur on the date of the striking out. Generally, however, claimants will seek compensation for both types of loss, so that at least some of the damage claimed will be caused before the date of the striking out. Further, in Polley v Warner Goodman & Street,4 Clarke LJ stated that a claimant: ‘cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period if he has suffered damage from the same wrongful act outside that period.’ This would suggest that even limiting the claim to Chadwick LJ’s second type of loss might not succeed in saving a claim which was otherwise statute-barred. 1 West Wallasey Car Hire Ltd v Berkson & Berkson [2009] EWHC 3454 (Admin), [2010] PNLR 14 (HHJ Simon Brown QC). 2 [1995] 6 Med LR 26. 3 [2002] Lloyd’s Rep PN 369, and see esp [57]. 4 [2003] EWCA Crim 1013, [2003] PNLR 40 at [15].

7.45 Hatton v Chafes1 was another case where the claimant’s original claim was struck out for want of prosecution; he sued his solicitors for loss of the original claim. Clarke LJ said that: 359

7.46 Limitation ‘It seems to me that there are three possibilities as to when damage is caused by negligence in such a case so that the claimant’s cause of action has accrued and time begins to run against him. The first is when the claimant has no arguable basis for avoiding the claim being struck out, the second is when it is more probable than not that the claim will be struck out and the third is when there is a real (as opposed to a minimal or fanciful) risk of the claim being struck out.’ He and the Court of Appeal held that it was unnecessary, on the facts of Hatton, to decide which of these three possibilities represented the correct test, because Hatton was a case in the first category, and the effect of Khan was that in such a case damage was suffered when the first test was satisfied. Similarly, in Polley v Warner Goodman & Street,2 Clarke LJ stated that: ‘In Hatton v Chafes it was held that where, in a striking-out for want of prosecution case, a claimant has no arguable basis for avoiding the claim being struck out because of the defendant’s solicitors’ negligent delay, he has suffered loss as a result of the defendant’s negligence and his cause of action has accrued.’ The Court of Appeal held that Polley was also a case in which, more than six years before issue of the claim form, an application to strike out was bound to succeed, so that it was unnecessary to decide whether Clarke LJ’s second or third categories represented the correct test. 1 [2003] EWCA Civ 341, [2003] PNLR 24 at [17]. 2 [2003] EWCA Civ 1013, [2003] PNLR 40 at [20].

7.46 In Workman v Pannone & Partners,1 Davis J read Khan v Falvey to hold that ‘damage can in this kind of situation occur when the value of an action is appreciably diminishing as its vulnerability to strike out increases’. That interpretation was, however, based on a concession, and appears inconsistent with Clarke LJ’s view of the extent to which the authorities go (above). It is doubted whether it is authoritative. In Cohen v Kingsley Napley2 Pill LJ took the test to be whether the action ‘would have been struck out had the application been made’. In Sephton, Lord Walker3 took Hatton to establish that a solicitor was liable if he carelessly allowed the client’s claim to become either statute-barred or ‘“doomed to failure” because a striking-out application would be bound to succeed’. Lord Mance’s formulation4 was that the cause of action accrued when the claim became time-barred ‘or liable to be struck out for want of prosecution’. It seems likely that Lord Mance approved the results and reasoning in Hatton and Polley, since he cited them, apparently with approval.5 1 [2002] EWHC 2366 (QB) at [34]–[35]. 2 [2006] EWCA Civ 66, [2006] PNLR 22. 3 Above, at [47]. 4 At [69]. 5 See also Jessup v Wetherell [2006] EWHC 2582 (QB), [2007] PNLR 10, where Silber J held that the action was doomed to failure before the order striking out was made. In Berney v Saul [2013] EWCA Civ 640, [2013] PNLR 26, the Court of Appeal did not find it necessary to resolve

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Claims at common law  7.48 possible inconsistencies in the authorities. It held that a claimant who, on the date which was crucial for limitation purposes, was late in serving her particulars of claim would undoubtedly have been granted permission to do so late, and had therefore suffered no loss due to solicitors’ negligence at that date. Berney was applied in Holt v Holley & Steer Solicitors [2020] EWCA Civ 851. The claimant wife made a claim against her solicitors in divorce proceedings. Her case was that, in preparing her financial relief hearing, the solicitors had negligently failed to obtain expert valuations of her property portfolio and jewellery. The Court of Appeal held that she suffered loss ‘at a time when the chance of introducing further valuation evidence [sc. at the hearing] became in reality impossible’ (per McCombe LJ at [33]).

7.47 The net result of these cases is that the cause of action accrues, at latest, when the underlying action is ‘doomed to failure’. It is possible that it runs from an earlier time, as set out in Clarke LJ’s second or third classes of case, though this is not yet established, and courts do not appear keen to grapple with the complexities to which such arguments give rise. Further, Cohen (above) introduced a further hurdle from the defendant’s point of view. It is not enough, to start time running for limitation purposes, for a defendant to show that an action was doomed to failure by a particular date on the basis that, at that date, if the negligent solicitor had suddenly reactivated the claim it would nevertheless have been struck out for want of prosecution: the defendant must also prove that, if the claimant had re-started prosecuting the action, the defendant to the underlying action would have made an application to strike it out. If this cannot be proved, then it cannot be said that the claimant suffered loss on the ‘doomed to failure’ basis, because if the former defendant would not have applied to strike out then the action would presumably have continued in existence and not been lost until later.

6  Wills and inheritance planning 7.48 In Bacon v Howard Kennedy,1 the defendant solicitors had negligently failed to carry out X’s instructions to draft a will by which he would have left his estate to the claimant. The claimant sued the defendants for negligence. The question was whether the claimant’s cause of action accrued when the defendants ought to have drafted the will, in which case the claim was statutebarred, or when X died, in which case it was not. The judge opted for the latter date. It was argued that, in accordance with cases such as Forster v Outred,2 the claimant suffered a loss in the sense of a risk that he would receive nothing, as soon as the defendants had negligently failed to draft the will. The judge’s rejection of this may be justified on the basis that it is an essential part of the cause of action that the testator has died,3 because, until that time, the defendant’s negligence will not have caused the claimant any loss. This is because, had there been no negligence, the testator could have revoked the part of the will leaving property to the claimant at any time until his or her death. Thus, until the testator has died, it will always be an open question whether, before death, the testator might have removed the claimant from the will. Further, until the testator has died, if the defect in the will is discovered, it can be remedied.4 The decision would appear to be consistent with the approach 361

7.49 Limitation to claims based on pure contingencies set out in Sephton (above).5 Reference should also be made to Lane v Cullens Solicitors, discussed at para  7.31, above. 1 [1999] PNLR 1, HHJ Bromley QC sitting as a Deputy High Court Judge. 2 [1982] 1 WLR 86, CA: see para 7.18, above. 3 Evans, Lawyers’ Liabilities (2nd edn) 2002, at 15-03. 4 The negligent solicitor might be liable for the cost of doing this, but this would be principally liability to the testator not potential beneficiaries under the will. 5 Limitation was also discussed in Daniels v Thompson [2004] PNLR 33, though ultimately the case turned on who, if anyone, was the correct claimant. It is considered in Chapter 11. In Rind v Theodore Goddard [2008] EWHC 459 (Ch), [2008] PNLR 24, Morgan J considered that it was arguable that, in a claim where solicitors had negligently caused extra inheritance tax to be payable on the death of the claimant’s mother, loss was suffered only on the death and not earlier. The decision in Cotterell v Leeds Day (QBD, unreported, 21 December 1999, Buckley J), may be in doubt in light of Sephton.

C  STATUTORY EXTENSIONS TO THE LIMITATION PERIOD 7.49 Sections 14A and 32 of the Limitation Act 1980 contain statutory extensions of the normal limitation period, in cases to which they apply. These are complicated provisions and we have concentrated upon those issues which are of particular concern in solicitors’ cases.

1  Limitation Act 1980, s 14A 7.50 Section 14A was added to the Limitation Act 1980 to deal with negligence claims in which the defendant did not know the facts relevant to the cause of action at the time when it accrued. As mentioned at the start of this chapter, given that loss in solicitors’ negligence cases is usually economic, it is quite possible that claimants, through no fault of their own, may not realise that they have suffered loss until more than six years after the accrual of the cause of action. A number of the cases considered above demonstrate this.1 Under normal principles, such claims would be statute-barred. The purpose of s 14A is to remedy that injustice.2 1 See paras 7.15–7.29. 2 See the Twenty-Fourth Report of the Law Reform Committee (Latent Damage) (1984). It appears, however, that the existing provisions of s 14A may have been drafted with inadequate consideration of their impact on solicitors’ negligence cases: see O’Sullivan ‘Limitation, latent damage and solicitors’ negligence’ (2004) 20 PN 218.

7.51 The effect of s 14A of the Act is that, in cases to which it applies, if six years have passed since the accrual of the cause of action, the claimant has an alternative possible limitation period in which to sue. The alternative period is three years from the ‘starting date’, as defined in s 14A, but subject to 362

Statutory extensions to the limitation period  7.53 a longstop of 15 years from the act or omission which is alleged to constitute negligence.1 1 Limitation Act 1980, s  14B. The longstop may not operate if the defendant becomes insolvent before the 15 years have expired: FSCS v Larnell (Insurances) Ltd (in liquidation) [2005] EWCA Civ 1408, [2006] QB 808.

(a)  Scope of s 14A 7.52 Section 14A applies only to claims where the cause of action is the tort of negligence, and not to breaches of contract, even if the breach alleged is a failure to act with reasonable skill or care.1 This means that, where it is alleged that a solicitor has failed to act with reasonable skill and care, which is actionable in either contract or tort, a claimant wishing to take advantage of s 14A should rely principally on the claim in tort. Section 14A does not apply to cases to which s 32(1)(b) of the Act applies,2 that is, cases of fraud, deliberate concealment or mistake. A different extension to the limitation period applies in those cases.3 1 Société Commerciale de Reassurance v ERAS (International) Ltd [1992] 2 All ER 82, CA. 2 Limitation Act 1980, s 32(5). 3 See para 7.72ff, below.

(b)  The ‘starting date’ 7.53 The provisions defining what counts as the starting date, from which the claimant has three years in which to issue a claim form, are complex and require to be quoted in full: ‘(5)  For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the claimant or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. (6) In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both– (a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below. (7)  For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it 363

7.53 Limitation sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment. (8)  The other facts referred to in subsection (6)(b) are– (a)

that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b) the identity of the defendant; and (c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant. (9)  Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above. (10)  For the purposes of this section a person’s knowledge includes knowledge which he might reasonably have been expected to acquire– (a)

from facts observable or ascertainable by him; or

(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek; but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.’ We comment below on various aspects of the starting date defined in s 14A(5). In particular we focus on two issues raised by s 14A(8)(a): (1) the degree of certainty of knowledge which a claimant must have, and (2) the content of the knowledge which a claimant must have, in order to fall within that provision. It is submitted that a helpful starting point is the following dictum of Lord Nicholls in Haward v Fawcetts:1 ‘For time to start running, there needs to have been something which would reasonably cause [the claimant] to start asking questions about the advice he was given.’ Further, the types of knowledge which are relevant under s 14A may be seen as falling into three categories: ‘(1) knowledge of the material facts about the damage in respect of which damages are claimed (“material facts knowledge”); (2) knowledge that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence (“causation knowledge”); and (3) knowledge of the identity of the defendant (“identity knowledge”).’ 364

Statutory extensions to the limitation period  7.55 In order for time to start running, the claimant must have each of these three kinds of knowledge.2 Causation knowledge is considered at section (e) below, and material facts knowledge at section (f). 1 [2006] UKHL 9, [2006] 1 WLR 682, at [21]. 2 Trainer v Cramer Pelmont [2019] EWHC 2501 (QB), [2020] PNLR 3, per Walker J at [6].

(c)  Burden of proof 7.54 If the claim form is not issued within six years of the date when the cause of action accrued, the onus is on the claimant to plead and prove that the starting date is a date within the three years preceding issue of the claim form. We suggest that claimants should take great care in considering the precise nature of the evidence which should be adduced on this issue: in Haward v Fawcetts,1 Lords Nicholls and Mance held that the claimant’s case failed simply because he had failed to satisfy the burden of proof; it appeared that his evidence failed even to address the correct issues. As to defendants, if the defendant wishes to allege that the starting date is a date prior to the three years immediately preceding issue of the claim form, then the onus is on the defendant to prove this.2 1 [2006] UKHL 9, [2006] 1 WLR 682 at [24] and [138]. 2 Nash v Eli Lilly & Co [1993] 1 WLR 782 at 796H, CA. That case concerned the provisions of Limitation Act 1980, s 14 but that provision is analogous to s 14A and cases on s 14 are helpful in construing s 14A: see the Court of Appeal’s judgment in Hallam-Eames v Merrett Syndicates Ltd [1996] 7 Med LR  122. See also Glaister v Greenwood [2001] Lloyd’s Rep PN 412 (Lawrence Collins J). For further discussion of the burden of proof in the context of s 14 of the Limitation Act 1980, see the judgment of Mance J in Crocker v British Coal Corpn (1995) 29 BMLR 159 at 169–173, a passage which Lord Walker approved in AB v Ministry of Defence [2012] UKSC 9, [2012] 2 WLR 643 at [48], also a case on s 14.

(d)  Degree of certainty required 7.55 Leaving aside for the moment the content of the knowledge which a claimant must have, what degree of certainty in the claimant’s mind counts as actual knowledge for the purposes of s 14A(6)? In Halford v Brookes1 Lord Donaldson of Lymington MR said that: ‘The word has to be construed in the context of the purpose of the section, which is to determine a period of time within which a plaintiff can be required to start any proceedings. In this context “knowledge” clearly does not mean “know for certain and beyond possibility of contradiction”. It does, however, mean “know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.” Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.’ 365

7.56 Limitation Although Halford was a personal injury case relating to s 14 of the Limitation Act, Lord Nicholls approved this passage as applying also to s 14A in Haward, which concerned accountants’ negligence. He summarised the position by saying that ‘the claimant must know enough for it to be reasonable to begin to investigate further’.2 Lord Mance emphasised that, in relation to subs (8)(a), the knowledge in question must be ‘of the attributability in whole or in part of the damage suffered to the act or omission alleged to constitute negligence’. Note that knowledge ‘in part’ will be sufficient. 1 [1991] 1 WLR 428, CA at 443E . He also quoted a passage from Nash v Eli Lilly & Co to similar effect. 2 Above, at [9]. See also per Lord Mance at [112]. In AB v Ministry of Defence [2012] UKSC 9, [2012] 2 WLR 643 at [68], Lord Walker said that paras [8]–[15] of Lord Nicholls’s opinion in Haward contained the most authoritative judicial exposition of s 14, and thus, by implication, s 14A too.

(e)  Causation knowledge 7.56 Causation knowledge refers to knowledge ‘that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence’ (s  14A(8)). The meaning of this phrase is the most difficult aspect of interpreting s  14A, not least because of the use in subs (8) of the word ‘attributable’. The basic question is: what facts, or kinds of facts, must the claimant know in order for time to start running under s 14A? Constructive knowledge is dealt with below;1 for the moment we shall consider only actual knowledge. On one view, to say, as s 14A(8) does, that time will not start running until the claimant knows enough to appreciate that his damage was ‘attributable’ to the defendant’s act or omission, tends to suggest that, for time to start running, the claimant needs to know that the defendant’s act or omission was responsible in law for the injury caused to him. Yet s  14A(9) expressly provides that ‘knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, is irrelevant’ for the purposes of establishing knowledge for the purposes of s  14A. Problems arise in cases where the defendant argues that the claimant knew all the material facts at the time when the cause of action accrued, and that the reason the claimant did not commence proceedings within the limitation period was simply due to ignorance of the law, namely the law of negligence showing that there was a cause of action, which has to be ignored. On the face of it this could give rise to the same injustice which the enactment of s 14A was intended to prevent, namely, claimants finding that their claims have become statute-barred before they could reasonably have brought proceedings to enforce them. There is a particular danger of this where, as in many solicitors’ negligence cases, the claimants could not have realised that it was worth suing for negligence until they realised that the legal advice which the defendant gave them at the outset was wrong in law. One might argue that such knowledge is irrelevant, by s 14A(9), so that the claim becomes statute-barred before the claimant is able to sue. It is submitted that the best solution to this problem would be to reform 366

Statutory extensions to the limitation period  7.57 s  14A, but, pending that happening, the courts have attempted to mitigate this problem themselves. The result, however, has been a large number of authorities, not always easy to reconcile, on the meaning of s 14A. 1 See para 7.67, below.

7.57 The Court of Appeal dealt with the issue in Hallam-Eames v Merrett Syndicates Ltd.1 Various Names at Lloyd’s sued their active underwriter, managing agents and members’ agents on the basis that the writing of various policies had been negligent because the liability to which members of the relevant syndicates were thereby exposed was potentially enormous, and that the defendant underwriter did not have the material on which he could have formed any reasonable view of what that liability was likely to be. Delivering the judgment of the court, Hoffmann LJ referred to a previous Court of Appeal decision in relation to s  14, Dobbie v Medway Health Authority,2 which he summarised as follows:3 ‘In Dobbie the plaintiff was admitted to hospital for the removal of a lump in her breast. The surgeon who excised the lump formed the view that it was cancerous and removed the breast. Afterwards on microscopic examination the lump turned out to be benign. She knew shortly after the operation that the breast had been removed before the microscopic examination but was not advised until 17 years later that it might have been negligent to do so. Again this court held that she knew enough at the earlier stage to satisfy s 14(1)(b).’ In relation to s 14A(8), Hoffmann LJ said that it was not sufficient simply that the claimant knew that there was a causal connection between his damage and an act or omission of the defendant. In addition, in order to start time running the claimant had to know the facts which were ‘causally relevant’:4 ‘It is this idea of causal relevance which various judges of this court have tried to express by saying … that one should “… look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based.” (Hoffmann LJ in Broadley [1994] 4 All ER 439).

If one asks on common sense principles what Mrs Dobbie was complaining about, the answer is that the surgeon had removed a healthy breast. It would in our view be a seriously incomplete statement of her case to say that it was simply that the surgeon had removed her breast. This is not a matter of elaborating detail by requiring knowledge of precisely how he had come to the act complained of, such as this court rejected in Broadley. It was part of the essence of her complaint. Nor is it requiring knowledge of fault or negligence. The court’s emphatic rejection of such a requirement is entirely consistent with characterising the act complained of (and of 367

7.58 Limitation which knowledge was therefore required) as the removal of a healthy breast. If one asks what is the principle of common sense on which one would identify Mrs Dobbie’s complaint as the removal of a healthy breast rather than simply the removal of a breast, it is that the additional fact is necessary to make the act something of which she would prima facie seem entitled to complain. She was suspected of having a cancerous lump and if this had been the case, the removal of her breast would not have been a matter for complaint.’ 1 [1996] 7 Med LR 122. 2 [1994] 1 WLR 1234. 3 [1996] 7 Med LR 122 at 125. 4 [1996] 7 Med LR 122 at 126.

7.58 The court went on to consider what, on the facts of Hallam-Eames, should be regarded as the facts which fairly constituted the negligence of which the Names complained. Those facts were not simply the writing of the relevant policies or certification of accounts, because:1 ‘these facts in themselves do not amount to acts of which the Names would even prima facie be entitled to complain. It is necessary to add the allegation that the run off policies and RTCs exposed the names to potentially huge liabilities and that the certified accounts attributed values to IBNRS, none of which were in fact capable of reasonable quantification.’ One might question whether, in ordinary speech, one would describe the proposition that values contained in certified accounts ‘were not capable of reasonable quantification’ as being purely a statement of a fact, as opposed to a statement which includes an evaluative element. It is submitted that the difficulty here arises because, if one looks strictly at the words of s  14A, it is only knowledge of facts which triggers knowledge within s  14A; yet the courts’ interpretation of this section has given an extended definition to ‘facts’ so as to mean ‘facts of which the claimant would reasonably be entitled to complain’,2 and once one includes the element of complaint one includes evaluative elements which are not, strictly speaking, mere facts. The reason the courts have done this is to prevent injustice to claimants, the basic idea being that the three-year limitation period introduced by s 14A should not start to run until the claimant knows, or has constructive knowledge, of matters which ought to start the claimant considering or investigating a complaint about the defendant’s conduct. It is submitted that the effect of Haward, discussed below, is that if the claimant is not in a position where s/he ought to be considering a complaint against the defendant, time does not start to run under s 14A; see in particular para 7.62, below. 1 [1996] 7 Med LR 122 at 126. 2 See further para 7.62, below.

368

Statutory extensions to the limitation period  7.60 7.59 The question of actual knowledge under s 14A reached the House of Lords in Haward v Fawcetts.1 Mr Haward had invested money in a business in reliance upon advice as to its future profitability from his accountants, Fawcetts. The transaction was disastrous, but Mr Haward kept investing larger and larger sums in the business. Each of their Lordships favoured an approach derived from Hallam-Eames, of distilling the essence of what the claimant was complaining about. Each of the five law lords gave a reasoned speech, though they each reached the same result. Lords Nicholls and Mance considered that the claimant had failed to satisfy the burden of proof; Lords Scott, Walker and Brown considered that the claimant had had the requisite knowledge more than three years before issue of the claim form. The case is unusual in that the defendants did not argue in the alternative that the claimant had had constructive knowledge (see below), so that the speeches are almost exclusively concerned with actual as opposed to constructive knowledge. In future cases, defendants will generally wish to assert both actual and constructive knowledge. 1 [2006] UKHL 9, [2006] 1 WLR 682.

7.60 It is clear from Haward that the knowledge which the claimant needs to have in order to start time running is not knowledge of all the facts which may later appear in the particulars of claim: rather, it is knowledge of the broad nature of the claim.1 After all, the claimant has three years from the starting date in which to make further enquiries and prepare the particulars of claim. As to what the claimant must know, their lordships employed various slightly differing formulations. Nevertheless, it is submitted that it is in summary whether the claimant knows enough to put him or her on enquiry as to whether they might have a claim against the defendant in relation to the matters which ultimately form the subject matter of the claim. This is based on a number of passages from the speeches, set out below. Lord Nicholls said that time did not begin to run until the claimant knew that there was a ‘a real possibility that his damage was caused by the act or omission in question …’. He added that: ‘… for time to run, something more was needed to put Mr Haward on enquiry. For time to start running there needs to have been something which would reasonably cause Mr Haward to start asking questions about the advice he was given.’2 In Lord Scott’s view, following Hallam-Eames, the requisite knowledge was ‘knowledge of the facts constituting the essence of the complaint of negligence’.3 He assessed these, from the particulars of claim, as being: ‘… that Fawcetts, their financial advisers, did not give them the advice that the true state of the company’s affairs warranted and that, if given, would have warned them against a disastrous investment of their money.’4 369

7.60 Limitation Lord Walker considered that Mr Haward had to know ‘“something of which he would prima facie be entitled to complain”’.5 Applying Hallam-Eames, the court was concerned with the identification of the facts which distilled what the complaint was about. Further, Lord Walker emphasised that in areas which called for technical expertise, such as reinsurance at Lloyd’s or occupational pensions, ‘a claimant may know the basic facts, but not know what, to an expert, they add up to’.6 In such cases therefore, a claimant might require expert advice before he had the knowledge required to set time running. But Haward was not such a case, because it concerned ‘a mature businessman’s understanding of financial advice on the trading activities of a small company carrying on a fairly straightforward sort of business’.7 In Lord Brown’s view, the claimant had actual knowledge, so as to set time running, when s/he knew enough: ‘to realise that there is a real possibility of his damage having been caused by some flaw or inadequacy in his advisers’ investment advice, and enough therefore to start an investigation into that possibility, which s 14A gives him 3 years to complete.’8 Lord Mance said that, as to actual knowledge, the question was whether the claimant had: ‘actual knowledge of the material facts about the damage and other facts relevant to the action (including therefore knowledge that the loss was capable of being attributed to an act or omission alleged to constitute negligence).’ He held that actual knowledge for these purposes: ‘involves knowing enough to make it reasonable to investigate whether or not there is a claim against a particular potential defendant.’9 Dyson LJ considered these dicta in Shore v Sedgwick Financial Services Ltd,10 where he applied the test of asking whether the claimant had ‘sufficient knowledge to make it reasonable to investigate whether there was a claim’ against the defendant for the matters which were ultimately the subject of the claim. More recently, in Halsall v Champion Consulting Ltd,11 HHJ Moulder framed the question as being ‘whether there was something which would reasonably cause the claimants to start asking questions about the advice they had been given, not when they first knew they might have a claim for damages but when each of them first knew enough to justify setting about investigating the possibility that [the defendant]’s advice was defective.’   1 Per Lord Nicholls [2006] UKHL 9, [2006] 1 WLR 682 at [10], Lord Walker at [57], and Lord Mance at [119].   2 At [11], [21].   3 At [49].   4 At [50].   5 At [72]. Quoting from Hoffmann LJ in Hallam-Eames (referred to at para 7.57, above).

370

Statutory extensions to the limitation period  7.62   6 At [64]. This is discussed further below. A further example in the pensions sphere is Glaister v Greenwood [2001] Lloyd’s Rep PN 412.   7 At [74].   8 At [90].   9 At [126]. 10 [2008] EWCA Civ 863, [2009] PNLR 37 at [61]. 11 [2017] EWHC 1079 (QB), [2017] PNLR 32 at [245].

7.61 While these formulations are relatively similar, it is doubtful whether their application to the facts of any given case will necessarily be straightforward. This is because, on the facts of Haward itself, three judges, Lords Scott, Walker and Brown, held that the test was satisfied more than three years before issue of the claim form, whereas the remaining two, Lords Nicholls and Mance, decided the case purely on the basis that Mr Haward had failed to satisfy the burden of proof. So even if each judge was applying essentially the same test, they split three to two as to the application of that test. But this is unsurprising: judges often differ about the application of tests which depend on what a party should ‘reasonably’ have done, given their state of knowledge, since different people differ about what constitutes reasonable behaviour. For post-Haward applications of s  14A see Williams v Lishman, Sidwell, Campbell & Price Ltd,1 and Boycott v Perrins Guy Williams.2 In Boycott, the claimant was a famous cricketer who, using a company, bought a house for himself and his then girlfriend. He relied upon the advice of the defendant solicitors, who failed to advise him that the girlfriend could at any time sever the joint tenancy on which title was held. The claimant alleged that this failure had been negligent. Vos J  held that the claimant had had actual knowledge for the purposes of s  14A when he learnt that the girlfriend had served a notice severing the joint tenancy, and that there was nothing that could be done about it. By that stage he knew enough to start investigating a claim against the solicitors, even though he did not know that they had had a legal duty to give him different advice. 1 [2009] EWHC 1322 (QB), [2009] PNLR 34, and [2010] EWCA Civ 418, [2010] PNLR 25. 2 [2011] EWHC 2969 (Ch), [2012] PNLR 25 (Vos J).

7.62 Further, there is support in Haward for the proposition that, although it is ‘facts’ which the claimant must know to start time running, these ‘facts’ may include propositions which are partly judgmental. Lord Nicholls said:1 ‘Sometimes the essence of a claimant’s case cannot easily be described, at least in general terms, without recourse to language suggestive of fault: for instance, that ‘something had gone wrong’ in the conduct of the claimant’s medical operation, or that the accountant’s advice was ‘flawed’. Use of such language does not mean the facts thus compendiously described have necessarily stepped outside the scope of s 14A(8)(a). In this context there can be no objection to the use of language of this character so long as this does not lead to any blurring of the boundary between the essential and the irrelevant.’ 371

7.63 Limitation Lord Walker expressly agreed with this approach.2 It is doubtful whether a philosopher, or a lexicologist, would describe the proposition that ‘something had gone wrong’ as a fact. The phrase ‘something had gone wrong’ implies that something ought to have been done differently, and, on one view, ‘ought’ statements are not purely factual: they include not merely descriptions of how things are, but also exhortations as to how life ought to be.3 1 [2006] UKHL 9, [2006] 1 WLR 682 at [13]. As indicated above, in AB v Ministry of Defence [2012]  UKSC  9, [2012] 2  WLR  643, Lord Walker said at [68] that paras [8]–[15] of Lord Nicholls’s speech in Haward provided the ‘most authoritative’ guidance. 2 At [67]. 3 See the philosopher JL Mackie’s discussion of ‘is’ and ‘ought’ in Ethics: Inventing Right and Wrong (1977) at 64.

7.63 It is submitted that the reason for this expansive construction of ‘facts’ within s 14A may lie in a problem with regard to the drafting of s 14A, and its application to professional and particularly solicitors’ negligence cases. Section 14A(9) provides that ‘knowledge that any acts or omissions did or did not, as a matter of law, involve negligence1 is irrelevant’ for the purposes of s  14A. This gives rise to a danger of which HF  Pension Trustees Ltd v Ellison2 provides an extreme example. The danger is that it may be said that the solicitors’ negligence lay in advice which was negligently given to the claimant because the solicitors made an error of law. The client does not realise that the error of law has been made and therefore does not know that s/he should bring a claim. More than six years later, the client learns of the error of law and seeks to rely upon s 14A. The defendants respond that s 14A will not assist: the client knew all the facts at the outset; all that s/he did not know was that the solicitor’s advice had been negligent, but that is a matter which s 14A(9) deems irrelevant. The difficulty with such an argument is that, if correct, it means that, in this type of case, s 14A fails to satisfy its purpose of ensuring that time does not expire before claimants could reasonably start proceedings. 1 The negligence referred to here is the negligence of the defendant to the professional negligence action, not the negligence of a third party such as the defendant in previous litigation: Schumann v Veale Wasbrough [2015] EWCA Civ 441, [2015] PNLR 25. 2 [1999] Lloyd’s Rep PN 489 (Jonathan Parker J). The defendant solicitors advised trustees of an occupational pension scheme that they could make transfers of funds out of the scheme. It later transpired that that advice had been negligent. The judge held that s 14A did not assist the claimants. The material facts for the purposes of s 14A were that the solicitor had advised that the transfers be made, and that they had been made in reliance upon his advice. The claimants had known these facts from the outset. They had not known that the solicitor’s advice was negligent, but that was a matter of law which had to be ignored by virtue of s 14A(9).

7.64 One solution to this problem is to hold that it demonstrates a flaw in the drafting of s  14A, which should be reformed.1 The Law Commission has proposed reform but unfortunately no government has so far introduced the proposed reform. In the meantime, their Lordships in Haward made clear that they considered HF Pension Trustees to have been wrongly decided. Lord Walker said that, until the pensions trustees in that case knew that they had 372

Statutory extensions to the limitation period  7.65 received ‘seriously incorrect’ advice, they did not know that they had suffered any damage at all. ‘They knew the bare facts, but were ignorant of their significance’.2 He considered that, in areas requiring considerable technical expertise such as the law of occupational pensions, it was unlikely that claimants would have the necessary knowledge to start time running until they had technical advice pointing out what had gone wrong.3 1 See O’Sullivan, ‘Limitation, latent damage and solicitors’ negligence’ (2004) 20 PN 218. 2 At [61]. 3 Per Lord Walker at [64]. Lord Brown agreed with this analysis, at [88].

7.65 Lord Mance provided the most detailed discussion of this problem.1 He too disapproved of the result in HF Pension Trustees. His solution was to adhere to the distinction, criticised by O’Sullivan,2 between knowledge that a transaction was unsound from the outset, and knowledge that the adviser was negligent at the outset. Regardless of whether one is convinced by this distinction, it is submitted that for practical purposes the message appears to be as follows: the courts appreciate the potential injustice of decisions such as HF Pension Trustees and, in the absence of reform by Parliament, are prepared to read s  14A in such a way as to narrow down the scope of s  14A(9), so that knowledge that there may have been an error of law may, in reality, be necessary before time starts to run.3 On the other hand, the Court of Appeal’s obiter dicta on limitation in Schumann v Veale Wasbrough4 might be seen as being inconsistent with the interpretation set out in this paragraph. Parents of a disabled child received advice from solicitors and counsel that they had no claim for negligence against the hospital in which the child had been born. Many years later, a different lawyer suggested that that advice might have been wrong, and one parent tried to make a claim. The Court of Appeal held that it was barred by limitation and s 14A did not assist the claimant. Jackson LJ said that, because the claimants knew all the relevant facts, time started to run against them under s 14A when they were advised that they had no claim, on the basis that they had constructive knowledge under s  14A(10) and should at that time have sought a second opinion on the legal claim. One member of the court, Roth J, said that the decision was ‘harsh’. It is submitted that he was right. The court made only the briefest of references to the authorities on s 14A. 1 [2006] UKHL 9, [2006] 1 WLR 682 at [115]–[117]. 2 Above. 3 On this basis, the result in Gold v Mincoff [2001] Lloyd’s Rep PN 423 might be supported, though the value of referring to pre-Haward cases must be in doubt. It is doubtful whether Fennon v Hodari [2001] Lloyd’s Rep PN 183 and Bowie v Southorns [2002] EWHC 1389 (QB), [2002] Lloyd’s Rep PN 564 can survive Haward, though note that Vos J applied Fennon in Boycott v Perrins Guy Williams [2011] EWHC 2969 (Ch), [2012] PNLR 25. For another solution to the HF Pensions problem, see Judge Jack QC’s decision in Perry v Moysey [1998] PNLR 657. The claimant was considering entering into contracts of employment with two companies. His accountant, the defendant, advised him that it would be acceptable if the contracts provided for him to receive net salaries of £ 1,080 per month, index-linked. In reliance upon that advice, he entered into contracts on that basis in 1989. In September 1994 the companies were advised that the contracts were in breach of Companies Act 1985, s 311 in that it was unlawful for a director to be paid remuneration

373

7.66 Limitation net of income tax. The claimant discovered that he was liable to substantial sums in tax. He issued a writ in 1997, after expiry of the primary limitation period. HHJ Jack QC held that the claimant was entitled to rely upon s 14A. As to the argument that the only matter of which the claimant had been unaware was a matter of law, namely the effect of s 311, which could not assist him for the purposes of s 14A, he said ‘The damage which Mr Perry has suffered is a liability to account for tax either to the revenue or the companies in respect of payments received by him up to September 1994, and the reduction of his payments thereafter. Both situations, namely that relating to the period up to September 1994 and that thereafter, are matters of fact: he owes more money; he is receiving less. They come about by the operation of s 311, which is a matter of law; but the effect of the section’s operation is to give rise to factual situations. Subsection (9) is not relevant to these considerations because it relates on the present facts to whether or not Mr Perry knew or did not know that an omission by Mr Moysey to consider s 311 would be negligent.’ 4 [2015] EWCA Civ 441, [2015] PNLR 25.

(f)  Material facts knowledge 7.66 Section 14A(6), which sets out the knowledge required to start time running, has two limbs. The second limb, at s 14A(6)(b), is knowledge of the facts set out in s 14A(8); this may be described as ‘causation knowledge’. We have just considered that. The first limb, however, is knowledge ‘of the material facts about the damage in respect of which damages are claimed’, or ‘material facts knowledge’. Material facts knowledge, unlike ‘causation knowledge’, does not involve a claimant having knowledge of the acts or omissions of the defendant solicitor which constituted negligence: ‘once a claimant knows that a better outcome, from the claimant’s point of view, was possible and that something had gone wrong, the claimant will at that point have material facts knowledge’.1 Further, material fact knowledge is defined in s 14A(7) as being: ‘… such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.’ So this proviso does apply to the facts referred to in s  14A(6)(a) (material facts knowledge) and does not apply to the facts referred to in s  14A(6)(b) (causation knowledge). This led Lord Mance to state in Haward2 that: ‘To maintain a coherent scheme, the better view therefore appears to be to treat the first aspect of knowledge [sc: s.14A(6)(a), material facts knowledge] as relating solely to matters of quantum and all questions regarding the evaluation or classification of damage as such as falling within the second aspect of the knowledge required [sc: s14A(6)(b) and (8),causation knowledge].’ [References in square brackets added]. The Court of Appeal had to consider this passage in 3M United Kingdom plc v Linklaters & Paines.3 In 1989 a company owned by the claimant assigned 374

Statutory extensions to the limitation period  7.67 three leases to another company in its group, thereby losing the right, for either company, to terminate the leases under break clauses. The claimant’s solicitors, the defendants, negligently failed to spot the problem or advise in relation to it. The question was whether on 30 August 1995 the claimant had sufficient knowledge to start time running under s 14A. At that date, the claimant was aware of the problem but it appeared that the landlord might not take a point on the loss of the right to exercise the break clauses. The Court of Appeal held that this did not prevent the claimant from having the knowledge required by s  14A(7). The claimant knew that the break clauses could not be exercised unless the difficulty could be overcome. A reasonable person, faced with that problem, would have considered it sufficiently serious to justify instituting proceedings against an acquiescent and creditworthy defendant. Moore-Bick LJ said that there was no doubt that the damage had been suffered; the only doubt was as to the possibility that it might be made good. He added that in the commercial context the damage did not have to be very substantial to satisfy the requirements of s 14A(7) in view of the limited cost of issuing proceedings, which was clearly lower than the loss suffered by the claimant.4 1 Trainer v Cramer Pelmont [2019] EWHC 2501 (QB), [2020] PNLR 3, per Walker J at [147]. 2 [2006] UKHL 9, [2006] 1 WLR 682 at [107]. 3 [2006] EWCA Civ 530, [2006] PNLR 30. 4 NB that the cost of issuing proceedings has since gone up, though possibly not by enough to invalidate the reasoning. See also Babicki v Rowlands [2001] EWCA Civ 1720, [2002] Lloyd’s Rep PN 121, CA: the judge must reach a conclusion as to the reaction of a reasonable person to instituting proceedings.

(g)  Constructive knowledge 7.67 It is clear from s 14A(10) that constructive knowledge of the claimant of the relevant facts, whether those comprise material facts knowledge, causation knowledge or identity knowledge, will suffice, if the claimant does not have actual knowledge. In AB v Ministry of Defence,1 Lord Walker said, in the context of s 14 which is the counterpart of s  14A in personal injury cases, that in a complex case the issue of constructive knowledge was ‘an essential part of the statutory scheme, not an occasional add-on’. It is suggested that defendants will always wish to consider whether they can rely on constructive knowledge to increase the scope of the claimant’s knowledge which might trigger s  14A. Haward indicates which facts are in issue so far as s 14A(8) is concerned. Lord Mance said in Haward2 that constructive knowledge applied where the claimant ‘knows sufficient to make it reasonable for him (by himself or with advice) to acquire further knowledge’ of the kinds specified by s 14A(8). It thus appears that, in considering whether the claimant had sufficient knowledge to trigger s 14A, one has to ask both what knowledge the claimant in fact had, and what knowledge the claimant is to be treated as having had by virtue of s 14A(10). Further, it is at least arguable that constructive knowledge may include knowledge which a claimant ought to have had before the cause of action accrued.3 1 [2012] UKSC 9, [2012] 2 WLR 643 at [68].

375

7.68 Limitation 2 [2006] UKHL 9, [2006] 1 WLR 682 at [126]. 3 Trainer v Cramer Pelmont [2019] EWHC 2501 (QB), [2020] PNLR 3, per Walker J at [159]– [167].

7.68 Although the question of what it was reasonable for the claimant to have done is essentially one which will depend on the facts in each case, Henderson v Temple Pier Co Ltd,1 another case on s 14 rather than s 14A, is a further example of the court taking a fairly firm view to the effect that a claimant ought to have acted earlier to obtain the relevant knowledge. The claimant claimed to have slipped and fallen when walking down a gangway leading to a ship which was moored at Temple Pier in London. She was intending to visit a bar on the ship. The accident occurred in January 1993. She instructed solicitors in February 1993 but they did not commence proceedings until April 1997.2 The Court of Appeal held that it was no defence to a plea of limitation that the claimant had entrusted her action to solicitors. Insofar as they provided legal advice as to whether the facts in issue constituted negligence, this was irrelevant (cf s 14A(9)). Insofar as they provided factual advice which assisted the claim, such as helping to identify the owner of the ship on which the claimant had sustained injury, this was information which was ascertainable by the claimant herself without the need for legal expertise. Thus she was unable to rely upon her appointment of solicitors. In the context of s 14A, the effect of this would be that the facts which the solicitors had delayed in finding out were facts which came under s 14A(10)(a): the facts were not facts ‘ascertainable only with the help of expert advice’, so the claimant could not rely on having taken reasonable steps to obtain expert advice, within the meaning of the tailpiece to s 14A(10). 1 [1998] 1 WLR 1540, CA. 2 The claimant may have had an action against her solicitors for loss of the litigation.

7.69 In Gravgaard v Aldridge & Brownlee,1 Arden LJ considered that, in considering the issue of constructive knowledge, the court must in general have regard ‘to the characteristics of a person in the position of the claimant, but not to characteristics peculiar to the claimant …’ This led her to take into account views which the actual claimant had, to the effect that she should complain to a bank about its behaviour in forcing her to sign a second charge over her property. Further, in Arden LJ’s view, if a person in the position of the claimant should reasonably have sought expert advice about a claim against A, and this would have revealed that there was also a claim against B, then time started to run for the purposes of the claimant’s claim against B as well as A.2 The facts of Webster v Cooper & Burnett3 were similar: it involved a claim that solicitors had negligently failed to advise the claimant on the terms of a charge over her home. The mortgage which she signed was an all moneys charge. Her case was that she had thought that it was limited to the £28,000 which she and her husband were borrowing at the time, and that her solicitor had not advised her as to the true effect of what she was signing. Four years after signing the original document, the claimant received from the bank a form of acknowledgement 376

Statutory extensions to the limitation period  7.70 which set out in clear terms that the mortgage secured not only the £28,000 but other sums. The claimant’s evidence was that she signed this and returned it to the bank without reading it. The Court of Appeal agreed with the trial judge that the claimant, being a person of normal intelligence, should have read the acknowledgement before signing it; if she had done that, she would have been put on enquiry, so that time ran from the date when she signed the acknowledgement. It is submitted that, in considering whether a claimant has acted reasonably to obtain additional knowledge, the court is likely to have in mind that, in fairness to defendants, claimants should not be permitted to extend the limitation period ad infinitum on the basis that they should never have got round to obtaining the knowledge which would have triggered s 14A. 1 [2004]  EWCA  Civ 1529, [2005]  PNLR  19, CA. Reference was made in this context to the House of Lords’ decision in Adams v Bracknell Forest BC [2004] UKHL 29, [2005] 1 AC 76, though it should be noted that (i) that case related to a personal injury claim to which s  14 rather than s  14A of the Limitation Act applied, and (ii) their Lordships were influenced by the existence of the discretion under s 33 of the Limitation Act. That discretion does apply to personal injury cases but does not apply to professional negligence cases to which s 14A applies, so the analogy with s 14A is not perfect. 2 It is arguable that s 14A(10)(a) places no limit on the kind of advice observable or ascertainable by the claimant: Trainer v Cramer Pelmont [2019]  EWHC  2501 (QB), [2020]  PNLR  3, per Walker J at [174]. 3 [2000] Lloyd’s Rep PN 167, CA.

7.70 Turning to lenders’ claims, HHJ  Fox-Andrews QC considered the provisions of s 14A in the context of a claim against solicitors in Abbey National plc v Forsyths.1 The claimant operated various departments with different functions. In the judge’s view:2 ‘… it is unreasonable and therefore unrealistic to consider that in the absence of special circumstances the knowledge of a person in one department can be regarded as the knowledge of a person in another department or that the totality of that knowledge is to be regarded as the knowledge of the society.’ On the facts of the case, however, he went on to hold that, on receipt of a letter which indicated unusual circumstances surrounding the transaction, the claimant should then have acted to gather together all its knowledge, whereupon it would have had the relevant knowledge for the starting date to be reached.3 See also Finance for Mortgages Ltd v Farley,4 where Kay J considered when the starting date occurred in a claim by a lender against a valuer in relation to a negligent overvaluation. If the lender had acted prudently, it would have repossessed the property by 31 January 1991 and obtained valuations which revealed the overvaluation by March 1991. Thus the lender ought to have known the relevant facts to start time running by the end of March 1991.5 1 (11 June 1997, unreported) (Official Referees’ Business). 2 At p 26 of the transcript. 3 HHJ Bowsher QC reached a similar conclusion in Birmingham Midshires Building Society v Infields [1999] Lloyd’s Rep PN 874.

377

7.71 Limitation 4 [1998] PNLR 145. 5 Further lenders’ cases on constructive knowledge, which tend to turn on their facts, are Abbey National plc v Sayer Moore & Co [1999] EGCS 114 (lender held to have constructive knowledge of mortgage fraud), Mortgage Corpn v Lamberts [2000] Lloyd’s Rep PN 624 (defendant had insufficient evidence of how a reasonable lender would have behaved to prove constructive knowledge), Lloyds Bank plc v Burd Pearse [2001] EWCA Civ 366, [2001] Lloyd’s Rep PN 452 (lender not fixed with knowledge of its solicitors acting on a limited retainer), and Swansea Building Society v Bradford & Bingley [2003] PNLR 38 (surveyors).

(h)  Knowledge in relation to separate causes of action 7.71 Where a claimant has sufficient knowledge to start time running under s 14A in relation to one cause of action against a solicitor, this does not start time running in relation to separate causes of action, even if they arise out of the same defendant’s handling of the same transaction on behalf of the same claimant. Thus, in Birmingham Midshires Building Society v J D Wretham1 the claimant, a lender, had known sufficient facts to start time running in relation to a claim that the defendant solicitors had failed to report to it the true purchase price of the property. The claimant also claimed that, in breach of duty, the solicitors had failed to report to the lender that the property was subject to a demolition order. The judge held that this gave rise to a separate cause of action, so that the claimant’s knowledge, for s 14A purposes, of the claim in relation to the purchase price did not start time running in relation to the claim concerning the demolition order. 1 [1999] Lloyd’s Rep PN 133 (TCC).

2  Limitation Act 1980, s 32 7.72 Section 32 of the Limitation Act 1980 extends the limitation period in cases of fraud, deliberate concealment, or mistake. The relevant parts for present purposes provide: ‘(1)  Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either– (a)

the action is based upon the fraud of the defendant; or

(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or (c)

the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. References in this subsection to the defendant include references to the defendant’s agent and to any person through whom the defendant claims and his agent. 378

Statutory extensions to the limitation period  7.76 (2)  For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty. (5)  Sections 14A and 14B of this Act shall not apply to any action to which subsection (1)(b) above applies (and accordingly the period of limitation referred to in that subsection, in any case to which either of those sections would otherwise apply, is the period applicable under section 2 of this Act).’ 7.73 It is submitted that it is helpful to consider the possible bases on which a claimant may show that s 32 applies under four headings: fraud (s 32(1)(a)); deliberate concealment (s 32(1)(b)); deliberate commission of breach of duty (s 32(2)); and mistake. Finally, the issue of constructive knowledge arises.

(a) Fraud 7.74 The claimant has to show that the action ‘is based upon the fraud of the defendant’. In order to show this, s/he has to be relying upon a cause of action which is based upon fraud, such as an action in deceit, or an action claiming the rescission of a transaction brought about by fraud; conversion, for example, was not such an action, because the defendant’s fraud was not an essential element of the cause of action.1 A claim for dishonest assistance in breach of trust is probably also a claim based upon the fraud of the defendant.2 1 Beaman v ARTS  Ltd [1949] 1  KB  550, CA. This case considered identical wording in the Limitation Act 1939. It was treated as applying also to s 32(1)(a) of the 1980 Act in Barnstaple Boat Co Ltd v Jones [2007] EWCA Civ 727, [2008] 1 All ER 1124. 2 See dicta in Brent LBC v Davies [2018] EWHC 2214 (Ch), per Zacaroli J at [572]–[574].

(b)  Deliberate concealment (s 32(1)(b)) 7.75 For the purposes of exposition, we have distinguished s 32(1)(b) from s  32(2), even though, if a case falls within s  32(2), it is deemed to amount to deliberate concealment within s  32(1)(b). Since the two provisions have different ingredients, it is helpful to consider them separately. It should, however, be noted that the 15-year longstop on bringing claims provided for by s 14B of the Act does not apply to cases in either category.1 1 See Limitation Act 1980, s 32(5).

7.76 As to s 32(1)(b), the first point is that ‘any fact relevant to the plaintiff’s right of action’ is to be construed narrowly, as meaning a fact which is essential to the pleading of the cause of action. ‘The court therefore has to look for the gist of the cause of action that is asserted, to see if that was available to the claimant without knowledge of the concealed material.’1 Further, the words 379

7.77 Limitation refer to ‘“any fact which the plaintiff has to prove to establish a prima facie case”’.2 1 AIC Ltd v ITS Testing Services (UK) Ltd [2006] EWCA Civ 1601, [2007] 1 Lloyd’s Rep 555 per Buxton LJ at [453]. 2 Quoted with approval by Rix LJ at [323] of AIC, from Johnson v Chief Constable of Surrey (unreported, 19 October 1992), CA. See also C v Mirror Group Newspapers [1997] 1 WLR 131, CA, and Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883, [2015] Bus LR 1362.

7.77 Cave v Robinson Jarvis v Rolf1 was a case concerning s 32(2), which we consider below, but two judges made comments, obiter, as to the effect of s 32(1)(b). It appears that Lord Millett’s view was that s 32(1)(b) applied only where the defendant ‘takes active steps to conceal his own breach of duty after he has become aware of it …’.2 Lords Mackay and Hobhouse concurred. Lord Scott, on the other hand, said that: ‘A  claimant who proposes to invoke s  32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring his case within the paragraph. He can do so if he can show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information, but, in either case, with the intention of concealing the fact or facts in question.’3 Lords Slynn, Mackay and Hobhouse agreed with Lord Scott. Whilst Lord Millett appears to have thought that nothing short of active steps to conceal would satisfy the requirements of s 32(1)(b), in Lord Scott’s view a withholding of relevant information might be sufficient, albeit that the defendant must also intend to conceal the facts in question. 1 [2002] UKHL 18, [2003] 1 AC 384, HL. 2 At [25]. 3 At [60].

7.78 The Court of Appeal considered this issue in Williams v Fanshaw Porter & Hazelhurst.1 This case demonstrates the potential complexities of s  32(1)(b). The claimant engaged the defendant solicitors to act for her in a medical negligence claim against a Dr Salahuddin. The litigation was handled by a Mr Brown, who was qualifying as a legal executive. Proceedings were commenced against Dr Salahuddin but in August 1994 Mr Brown, without consulting the claimant, consented to an order dismissing the claim against Dr Salahuddin. Mr Brown did not tell the claimant about this. In December 1994, the defendant applied to rejoin Dr Salahuddin to the proceedings but the application was refused on the basis that he had been the only defendant, and he had been removed from the proceedings, so that the action no longer existed. Mr Brown did not tell the claimant about this either. She did not discover the position until July 1995 at earliest; she sued the defendants in December 2000. The question was whether s 32(1)(b) applied in order to prevent her claim from being statute-barred. The Court of Appeal held that, as the defendants were the claimant’s litigation solicitors, they had a general duty to report to her on the 380

Statutory extensions to the limitation period  7.79 progress of the litigation. This included a duty to report to her that the consent order had been made.2 That the consent order had been made was a ‘fact relevant to the [claimant]’s right of action’, pursuant to s 32(1)(b). This was presumably because she had to plead it in any negligence action against the defendants. After the December 1994 hearing, Mr Brown must have chosen not to report the result, or the making of the earlier consent order, to the claimant. He therefore acted deliberately. Further, this amounted to concealment, since it was a failure to report the information even though Mr Brown had a clear professional duty to report it. It did not matter that Mr Brown’s motive for not reporting the matter was that he thought it could be remedied later, or that he was embarrassed. The claimant did not have to show that Mr Brown’s reason for not reporting the matter to the claimant was to prevent her suing the defendants for negligence. 1 [2004] EWCA Civ 157, [2004] 1 WLR 3185. There were separate judgments, with different emphases, from Park J, Mance and Brooke LJJ. 2 If the same facts were to arise today, the disciplinary obligation to report to clients, referred to at para 7.10, above, might also be relevant.

7.79 It seems likely that many solicitors’ negligence cases may fall into the same category as Williams: the solicitors will have a duty to report to the client matters which go wrong; if they fail to do so, they will be acting in breach of professional duty; and a failure to report such matters, in breach of professional duty, may amount to concealment for the purposes of s 32(1) (b).1 Whether it is found that the solicitor has deliberately engaged in the concealment will be a question of fact in each case, though the judgments in Williams demonstrate that the court may take a robust view of arguments from solicitors that they did not suppress the information, in circumstances where they must have known that they had a duty to report it. Williams does not decide the question of whether, in the absence of a positive duty on solicitors to report, mere withholding of information, as opposed to active concealment, amounts to deliberate concealment.2 This is an issue on which further authority would be helpful. Williams also raises various issues as to the mental element, or state of mind of the defendant, required if the subsection is to apply. Mance LJ said3 that, on a narrow reading of the subsection, the defendant had deliberately to conceal a fact ‘in circumstances where the defendant realises that the fact has some relevance to an actual or potential claim against him’. But he added that on a wider reading the subsection would apply to any deliberate concealment, ‘even though the defendant did not (and it may be could not) realise that the fact concealed had any relevance to any actual or potential wrongdoing.’ Concentrating on the narrower reading, Mance LJ said4 that recklessness on the part of the defendant would be sufficient to trigger the subsection.5 Further, it would be sufficient that the defendant realised that the fact was relevant to a potential claim against him; he need not believe that the claim would necessarily succeed. 1 A further issue may arise where a solicitor realises, after the termination of the retainer, that he or she has previously acted in breach of duty. For discussion of the regulatory position see para 7.10 above.

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7.80 Limitation 2 Though in AIC Ltd v ITS Testing Services (UK) Ltd [2006] EWCA Civ 1601, [2007] 1 Lloyd’s Rep 555, Rix LJ observed at [321] that ‘there is no decision that anything less than a duty to disclose will suffice in the absence of active concealment’. In Parkin v Alba Proteins Ltd [2013] EWHC 2036 (QB) s 32(1)(b) was held to apply, but there had been positive misleading as opposed to a mere withholding of information. 3 At [37]. 4 At [38]. 5 For a contrary view, prior to Williams, see Davidson (2002) Solicitors Journal 430.

7.80 A further important point, which relates also to s 32(2), is that, where the concealment on which the claimant relies occurs after the accrual of the claimant’s cause of action, s 32(1)(b) nevertheless applies to that subsequent concealment. The result is that time starts to run only after the claimant has, or could with reasonable diligence have, discovered the deliberate concealment which occurred after the cause of action had accrued.1 Thus, if a solicitor acts negligently in 1990, and at that time does not deliberately conceal the negligence from the client, but then re-considers the issue in 1999 and does deliberately conceal it from the client,2 the six year limitation period starts to run from the date when the claimant either does discover, or could with reasonable diligence have discovered, the 1999 concealment. On the other hand, if the claimant was aware of the relevant facts before the concealment, s 32(1)(b) will not apply to assist him or her.3 Finally, it appears from obiter dicta in Williams v Lishman, Sidwell, Campbell & Price Ltd4 that if a claimant suing in negligence suffers two separate losses, each arising from the same cause of action, the effect of deliberate concealment may be to revive a statutebarred claim. Thus, if the defendant deliberately conceals the first loss from the claimant but not the second loss and the claimant allows time to expire in relation to the second loss, the claimant may be able to rely on s 32(1)(b) to sue in relation to both losses once s/he discovers the first loss.5 1 Sheldon v R H M Outhwaite (Underwriting Agencies) Ltd [1996] AC 102, HL. This was a 3–2 decision of the House. 2 If the solicitor were still acting for the client in 1999 on the same matter then it might be argued that s/he had a professional duty, in 1999, to reveal the negligence and, by failing to do so, deliberately concealed it. 3 Ezekiel v Lehrer [2002] EWCA Civ 16, [2002] Lloyd’s Rep PN 260, CA at [32]. 4 [2010] EWCA Civ 418, [2010] PNLR 25. 5 See further McGee (2010) 26 PN 232.

(c)  Deliberate commission of a breach of duty (s 32(2)) 7.81 Section 32(2) applies to ‘deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time’. This has two elements. The second is whether it is unlikely that the deliberate breach of duty will be discovered ‘for some time’. There is an unresolved debate as to whether, if a breach of duty is unlikely to be discovered ‘immediately’, then it counts as a breach of duty which is unlikely to be discovered ‘for some time’.1 As to the first of the two elements, ‘deliberate commission of a breach of duty’,2 382

Statutory extensions to the limitation period  7.83 this was for a time subject to an extremely broad interpretation which has now been overruled.3 As to this element, in Cave (above), the House of Lords held that s 32(2) would apply only where the defendant ‘knew he was committing a breach of duty, or intended to commit a breach of duty’.4 Lord Millett said that the defendant had to be guilty of ‘deliberate wrongdoing’, and that s 32(2) did not apply to a defendant ‘if, being unaware of his error or that he has failed to take proper care, there has been nothing for him to disclose’.5 In the specific context of claims for breach of fiduciary duty, in Mortgage Express v Abensons6 it was held that (i) a breach of the ‘duty of good faith’ referred to in Mothew7 required intentional conduct on the part of the defendant and (ii) if such intentional conduct was proved, the claimant would also have proved that the defendant knew that he was committing a breach of duty. As a result, a claimant who was able to prove this type of breach of fiduciary duty would also be able to prove deliberate commission of breach of duty for the purposes of s 32(2); but this did not necessarily apply to a breach of the ‘actual conflict rule’.8 1 See Burnden Holdings (UK) Ltd v Fielding [2018] UKSC 14, [2018] AC 857, per Lord Briggs JSC at [25]–[26]. 2 ‘Duty’ in this context has a wide meaning: Giles v Rhind (No 2) [2008] EWCA Civ 118, [2009] Ch 191. 3 The overruled view appeared in Brocklesby v Armitage & Guest (Note) [2002] 1 WLR 598, CA, and Liverpool Roman Catholic Archdiocese Trustees Inc v Goldberg [2001] 1 All ER 812. 4 Per Lord Scott at [60]. Lords Slynn, Mackay and Hobhouse concurred. 5 At [25]. Lords Mackay and Hobhouse concurred. 6 [2012] EWHC 1000 (Ch) (HHJ David Cooke). 7 Bristol & West BS v Mothew [1998] Ch 1, per Millett LJ, discussed in Chapter 4. 8 Also discussed in Chapter 4.

(d) Mistake 7.82 Under the previous Limitation Act, the position was that extension of the limitation period on the basis that the action was ‘for relief from the consequences of a mistake’ would be granted only if the mistake in question was an essential element of the cause of action, in which case it had to be pleaded in the statement of claim.1 In Test Claimants in the FII Group Litigation v Revenue & Customs Comrs2 the Supreme Court confirmed that this is the position under the 1980 Act. A mistake in the sense of a solicitor’s negligent mistake is unlikely to bring a claim within this provision.3 1 Phillips-Higgins v Harper [1954] 1 QB 411 (Pearson J). The case was decided in relation to the equivalent provision of the Limitation Act 1939, but the wording of that provision was identical to s 32(1)(c). 2 [2012] UKSC 19, [2012] 2 AC 337, per Lord Walker at [62] and Lord Sumption at [184]. 3 Cf Kearns v McCann Fitzgerald [2008] IEHC 85, [2008] PNLR 28.

(e)  Constructive knowledge 7.83 In the types of case to which s 32 applies, time begins to run from the date on which the claimant either has actual knowledge of the fraud, deliberate 383

7.83 Limitation concealment or mistake,1 or ‘could with reasonable diligence have discovered it’. In Paragon Finance plc v D  B  Thakerar & Co,2 the Court of Appeal considered the meaning of the words just quoted. Millett LJ, with whom the other judges agreed, said:3 ‘The question is not whether the plaintiffs should have discovered the fraud sooner, but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.’ In Biggs v Sotnicks,4 Robert Walker LJ rejected the suggestion5 that the word ‘exceptional’ should be removed from this formulation. The approach of Arden LJ, who gave the principal judgment, was to look at the claimants’ particulars of claim, and ask when the claimants knew or should have known the elements of the claim which they later pleaded. A similar point was made in Imperio v REBX.6 Langley J  held that, in cases of fraud, the question was when the claimant, with reasonable diligence, could have discovered ‘the facts which are necessarily relied upon to justify the allegation of fraud’ which was pleaded, as opposed to when the claimant could reasonably have concluded that he or she had been a victim of fraud. Similarly, in relation to deliberate concealment, the question was when the claimant, acting with reasonable diligence, could have discovered ‘those facts sufficient to constitute or complete the particular cause of action … the acid test cannot be wider than those facts which were relied upon to support the pleas made in the Points of Claim’. In Law Society v Sephton7 in the Court of Appeal, Neuberger LJ said that: ‘it is inherent in section 32(1) of the 1980 Act … that there must be an assumption that the claimant desires to discover whether or not there has been a fraud. Not making any such assumption would rob the effect of the word “could”, as emphasised by Millett LJ, of much of its significance. Further, the concept of “reasonable diligence” carries with it, as the judge said, the notion of a desire to know, and, indeed, to investigate.’ 1 The phrase ‘the plaintiff has discovered the fraud’ in s 32(1) refers to knowledge of the precise deceit which the claimant alleges had been perpetrated on him/her. It follows that knowledge of a fraud in a more general sense is not enough to start the limitation period running under s 32(1): Barnstaple Boat Co Ltd v Jones [2008] EWCA Civ 727, [2008] 1 All ER 1124. 2 [1999] 1 All ER 400, CA. 3 [1999] 1 All ER 400 at 418b–d.

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Contribution claims  7.85 4 [2002] EWCA Civ 272, [2002] Lloyd’s Rep PN 331, per Robert Walker and Aldous LJJ. 5 Made by Crane J in UCB Home Loans v Carr [2000] Lloyd’s Rep PN 754. 6 Companhia de Seguros Imperio v Heath (REBX) Ltd [1999] Lloyd’s Rep PN 571 at 590, col.1. This aspect of the case was not the subject of the appeal reported at [2000] Lloyd’s Rep PN 795. See also Barnstaple Boat Company Ltd v Jones [2007] EWCA Civ 727, [2008] 1 All ER 1124. 7 [2004] EWCA Civ 1627, [2005] QB 1013 at [116]. Carnwath and Maurice Kay LJJ did not disagree on this point. Applied: Seaton v Seddon [2012] EWHC 735 (Ch) (Roth J), at [81].

7.84 The issues in relation to constructive knowledge under s 32 can be similar to those in relation to constructive knowledge under s 14A, considered above. In particular, a number of authorities deal with fraud-based lenders’ claims. They tend to turn on their own particular facts.1 1 In addition to UCB Home Loans v Carr (above), see Abbey National Mortgages plc v Leftley Goodwin (19 April 2000, Silber J), Halifax plc v Ringrose [2000] Lloyd’s Rep PN 309, and cases cited at [21] in Carr.

D  CONTRIBUTION CLAIMS 7.85 By s 10 of the Limitation Act, the time limit for bringing a claim for contribution under the Civil Liability (Contribution) Act is two years from the date of settlement, arbitration or judgment. For these purposes, ‘judgment’ or ‘arbitration’ means a judgment or arbitral award which ascertains the amount of the damages, and not simply a judgment for damages to be assessed.1 Where a firm agreement is reached in a settlement which does not require to be embodied in a consent order, time runs from the date of the agreement.2 In relation to a settlement, what is required is a bona fide settlement of the underlying claim; although s  10(4) speaks of the settlement comprising an agreement to make a ‘payment’, this may include a payment in kind as long as it is capable of valuation in monetary terms.3 1 Aer Lingus plc v Gildacroft Ltd [2006] EWCA Civ 4, [2006] 1 WLR 1173, CA. The existence of ‘subject to contract’ negotiations is not enough to start time running: RG Carter Building Ltd v Kier Business Services Ltd [2018] EWHC 729 (TCC), [2018 ]1 WLR 4598. 2 Knight v Rochdale Healthcare NHS Trust [2003] EWHC 1831, [2004] 1 WLR 371. 3 Baker & Davies plc v Leslie Wilks Associates [2005] EWHC 1179 (TCC), [2006] PNLR 3.

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Chapter 8

Contributory negligence and contribution

A  CONTRIBUTORY NEGLIGENCE 1 Introduction 8.01 There is no doubt that contributory negligence is available as a defence to claims brought in negligence. In this section we consider, first, in which other types of claim a defendant may rely upon the defence of contributory negligence. Having done that, we then look at the principles on which, in cases in which contributory negligence is available as a defence, the court will make reductions from a claimant’s damages by reason of contributory negligence.

2  Scope: in what sort of claim is a defence of contributory negligence open to defendants? (a)  The 1945 Act, and claims in negligence 8.02 Reductions in damages for contributory negligence arise in claims to which the Law Reform (Contributory Negligence) Act 1945, s  1(1) applies. This provides that: ‘where any person suffers damage as a result partly of his own fault and partly of the fault of any other person or persons … a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage but the damages recoverable in respect thereof shall be reduced to such an extent as the court thinks just and equitable having regard to the claimant’s share in responsibility for the damage.’ Before the Act, at common law contributory negligence was a complete defence, so that a contributorily negligent claimant recovered nothing; the Act abolished that rule, and instead allows for reductions of a claimant’s damages by reason of contributory negligence. ‘Fault’ is an important concept in s 1(1). By s 4 of the Act, it is defined as: 386

Contributory negligence  8.05 ‘negligence, breach of statutory duty or other act or omission which gives rise to liability in tort or would, apart from this Act, give rise to the defence of contributory negligence’. Section 4 has been interpreted to mean that there are two pre-conditions for the application of the 1945 Act.1 The first pre-condition applies to the claimant’s position and the second to the defendant’s position. 1 Standard Chartered Bank v Pakistan National Shipping Corporation (Nos 2 and 4) [2002] UKHL 43, [2003] 1 AC 959, per Lord Hoffmann at [11]–[12].

8.03 As to the claimant, the trigger for the application of s  1(1) is that there has been ‘negligence, breach of statutory duty or other act or omission’ which gives rise at common law to a defence of contributory negligence. If a claimant’s claim is based on the tort of negligence, the question is whether the claimant took less care for his/her own safety or interests than the reasonable person in the claimant’s position would have taken.1 If claimants deliberately harm themselves, that may nevertheless amount to contributory negligence even though it comprises deliberate rather than negligent behaviour.2 On the other hand, if a claimant acts negligently but the claimant’s claim is based on fraudulent misrepresentation, such conduct does not give rise at common law to a defence of contributory negligence.3 This appears to be based on the law’s policy of imposing more stringent liability on intentional wrongdoers than on merely careless defendants,4 though Goudkamp and Nolan criticise that interpretation of the law.5 1 Goudkamp & Nolan, Contributory Negligence, Principles and Practice (2018), para 2.07. 2 Reeves v Commissioner of Police of the Metropolis [2000] 1 AC 360. 3 Standard Chartered Bank v Pakistan National Shipping Corporation (Nos 2 and 4) [2002] UKHL 43, [2003] 1 AC 959. 4 See Nationwide BS v Thimbleby & Co [1999] Lloyd’s Rep PN 359 per Blackburne J at 375 col.2. Compare Pritchard v Co-Operative Group Ltd [2011] EWCA Civ 329, [2012] QB 320. 5 Goudkamp & Nolan, para 2.05.

8.04 As to the defendant, the trigger for the application of s 1(1) is that there has been ‘negligence, breach of statutory duty or other act or omission’ which gives rise to a liability in tort.1 Thus, if a defendant is liable to a claimant for negligence, the second pre-condition will be satisfied. In what other types of claim may a solicitor defendant rely upon a defence of contributory negligence? 1 Standard Chartered, above.

(b)  Contract claims in general 8.05 In Forsikringsaktieselskapet Vesta v Butcher the Court of Appeal held that the 1945 Act applied to claims in contract as well as tort, but on a particular basis.1 The court approved Hobhouse J’s analysis, which was that, in 387

8.05  Contributory negligence and contribution considering the application of the Act to contractual claims, it was necessary to divide such claims into three categories:2 ‘(1) Where the defendant’s liability arises from some contractual provision which does not depend on negligence on the part of the defendant. (2)  Where the defendant’s liability arises from a contractual obligation which is expressed in terms of taking care (or its equivalent) but does not correspond to a common law duty to take care which would exist in the given case independently of contract. (3) Where the defendant’s liability in contract is the same as his liability in the tort of negligence independently of the existence of any contract.’ The Court of Appeal held that the Act did apply to category 3 cases, such as Vesta itself, but not to category 1 or 2 cases. O’Connor LJ cited with approval the dictum of Prichard J in the New Zealand case of Rowe v Turner, Hopkins & Partners3 that ‘the Contributory Negligence Act cannot apply unless the cause of action is founded on some act or omission on the part of the defendant which gives rise to liability in tort’.4 The rationale for this approach is that, in a case where defendants’ liability to the claimant is the same in tort as in contract, as for example in an employer’s liability case, defendants may take advantage of arguments as to contributory negligence if they are sued in tort, and it would be unfair if they could not do the same if sued in contract.5 This would suggest that the defence of contributory negligence generally will be available to defendants in cases based on the negligence of solicitors, since a solicitor will normally owe concurrently a duty in contract to take reasonable skill and care and a duty of care in tort. On the other hand, the terms of the contract may, exceptionally, provide for the exclusion of liability for contributory negligence, in which case the Act will not apply.6 Further, even in category 1 and 2 cases, it may be possible to argue that there should be a reduction in damages on the ground that the defendant caused only part of the loss.7 But where the duty which has been broken is solely contractual, that is, would not have existed independently of the contract, or where there is breach of a strict contractual duty, contributory negligence has no application. 1 [1989]  AC  852, [1988] 2  All ER  43, approving Hobhouse J’s decision at first instance, [1986] All ER  488. The Court of Appeal’s decision was affirmed without discussion of the contributory negligence point by the House of Lords, [1989] AC 852. See also Barclays Bank plc v Fairclough Building Ltd [1995] QB 214, CA. 2 [1986] 2 All ER 488 at 508f–g. 3 [1980] 2 NZLR 550. 4 [1989] AC 852 at 866C. 5 See [1986] 2 All ER 488 at 509d–e (Hobhouse J) and [1989] AC 852 at 860H–861A (O’Connor LJ). 6 Cf [1986] 2 All ER 488 at 510j. 7 See Tennant Radiant Heat Ltd v Warrington Development Corpn [1988] 1 EGLR 41, CA.

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Contributory negligence  8.06

(c)  Lenders’ claims, and SAAMCo 8.06 Allegations of contributory negligence are often made in lenders’ claims. It is suggested that contributory negligence will generally be available as a defence in such claims, subject to the question of whether it applies to the basic or attributable loss, which is considered below. First, as to the position in relation to cases which are not covered by the UK Finance Mortgage Lenders’ Handbook, see the discussion of the case law at para 8.04 of the third edition of this book. The Lenders’ Handbook, which is discussed below in Chapter 10, introduced standard terms for solicitors acting for lender and borrower in relation to most residential mortgages. Secondly, the position in cases which are covered by the Lenders’ Handbook was considered in Mortgage Express v Iqbal Hafeez Solicitors,1 although the deputy judge did not have the benefit of submissions from counsel acting for the defendant solicitor, as the defendant appeared in person. The three relevant terms, derived from the Handbook, were: •

a clause which stated that, if the solicitor was not familiar with the seller’s solicitor or licensed conveyancers, s/he must verify that they appeared in a legal directory or were currently on record with the Law Society or Council for Licensed Conveyancers as practising at the address shown on their letterhead ([45]);

•

‘“You must ask the borrower how the balance of the purchase price is being provided…”’ ([57]);

•

‘“You must report to us … if you will not have control over the payment of all of the purchase money. (For example if it is proposed that the borrower pays the money to the seller direct) …”’.

The deputy judge held that all three breaches of duty clearly fell within Vesta category (1), in other words that the defendant’s liability arose from contractual provisions which did not depend on negligence on the part of the defendant, so that contributory negligence was not available as a defence to any of them. It appears, however, that he was not referred to cl 1.4 of Part 1 of the Lenders’ Handbook which provides: ‘The standard of care which we expect of you is that of a reasonably competent solicitor or licensed conveyancer acting on behalf of a mortgagee’. It is suggested that the precise obligations set out in the rest of Part 1 of the Handbook must be construed in light of cl 1.4. If that is correct, then the precise obligations set out in the rest of Part 1 of the Handbook state what the solicitor must attempt to do, but cl 1.4 sets out the standard of care which will be applied in order to determine whether the solicitor has acted in breach of those precise obligations: the solicitor must take reasonable care to take the precise steps set out in the rest of Part 1 of the Handbook, but does not warrant that s/he 389

8.07  Contributory negligence and contribution will comply with them. This construction is consistent with the terms of the Handbook being the result of a negotiation between the Council of Mortgage Lenders and the Law Society. If this is correct, then all breaches of terms of Part 1 of the Handbook fall within Vesta category (3) so that contributory negligence is available as a defence. As yet, this question has not been finally determined by the courts, though it gains some support from obiter dicta in Nationwide BS v Davisons Solicitors,2 in which the Court of Appeal declined to follow the Iqbal Hafeez decision. In Davisons, a term of the Lenders’ Handbook which appeared to impose a strict obligation on solicitors was construed as imposing only a duty to take reasonable skill and care. 1 [2011] EWHC 3037 (Ch) (John Randall QC). 2 [2012] EWCA Civ 1626, [2013] PNLR 12.

8.07 A further question, which is likely to arise most frequently in lenders’ claims, concerns the interaction of contributory negligence with the limit on damages imposed by SAAMCo.1 The House of Lords considered this issue in Platform Home Loans Ltd v Oyston Shipways Ltd,2 which was a lender’s claim against a valuer. In order to understand the decision, it is necessary to understand the distinction between basic and attributable loss, which is discussed in chapter 10.3 In summary, the basic loss in a lender’s claim is normally the amount of the claimant’s loss calculated by taking the amount of the advance, plus the cost, in interest payments, to the lender of funding that advance, but less the amount of any payments made by the borrower and the net proceeds of sale of the property if it has been repossessed and sold.4 The attributable loss, in a valuer’s case,5 is normally the difference between the valuation of the property that the valuer in fact gave, and the correct valuation at the time. The notion of attributable loss was introduced by the House of Lords’ decision in SAAMCo. In a claim by a lender against a valuer, if the basic loss exceeds the attributable loss then damages are limited to the amount of the attributable loss, plus statutory interest; if the basic loss is less than the amount of the attributable loss, then the claimant recovers damages in the amount of the basic loss. 1 Reported sub nom. Banque Bruxelles Lambert SA  v Eagle Star Insurance Co Ltd [1997] AC 191, HL. 2 [2000] 2 AC 190, HL. 3 See para 10.100ff, below. 4 See Swingcastle Ltd v Alastair Gibson [1991] 2 AC  223, HL and Nykredit Mortgage Bank plc v Edward Erdman (No  2) [1997] 1 WLR  1627, HL, per Lord Nicholls of Birkenhead at 1631–1632. 5 In a claim against solicitors the attributable loss may be different: see 10.115ff, below.

8.08 In Platform the basic loss was £611,000 and the attributable loss £500,000. Thus, leaving aside deductions for contributory negligence, the effect of SAAMCo was that damages were limited to £500,000 plus interest. The trial judge assessed contributory negligence at 20%. The first question was whether s 1(1) of the 1945 Act applied at all. This depended on whether 390

Contributory negligence  8.10 the claimant had suffered ‘damage partly as a result of its own fault and partly as a result of the fault of’ the defendant.1 The lenders argued that ‘damage’ for these purposes meant only the attributable loss; only the defendant and not the lender had caused this part of the damage; thus this damage was not suffered ‘partly due to the fault of the claimant’, and so s 1(1) did not apply at all. The House of Lords rejected this argument. The ‘damage’ to which s 1(1) referred was the basic loss and not simply the attributable loss. The fault of both parties had contributed to this damage. Thus, the Act applied, but on the basis set out in the next paragraph. 1 See the wording of s 1(1) at para 8.02, above.

8.09 The second issue which the House of Lords considered in Platform Home Loans1 was whether the 20% reduction in damages for contributory negligence should be made from the basic or the attributable loss. As the basic loss was £611,000 and the attributable loss £500,000, if the reduction was made from the basic loss it would give a figure of £489,000 in damages and if it was made from the attributable loss it would give £400,000. The House held, by a majority of 4 to 1, that the reduction should be made from the basic loss, reversing the Court of Appeal, which had deducted it from the attributable loss. Lords Lloyd of Berwick and Hope of Craighead each agreed with the speeches of both Lords Millett and Hobhouse of Woodborough. In Lord Hobhouse’s view, in cases where damages were reduced due to the SAAMCo measure, the reduction to the amount of the attributable loss was a reduction in damages that was made for reasons similar to those justifying a reduction for contributory negligence.2 Hence to make a deduction of 20% from the attributable loss on account of contributory negligence:3 ‘… in effect makes the same deduction twice over. The [SAAMCo] principle already involves an exercise of attribution in relation to the extent of the defendants’ responsibility for the plaintiffs’ actual loss.’ 1 [2000] 2 AC 190, HL. 2 [2000] 2 AC 190 at 211F. 3 [2000] 2 AC 190 at 211H–212A.

8.10 Lord Millett reached the same conclusion. He added, obiter, that a different result might be appropriate in cases where the claimant lender’s negligence had contributed directly to the overvaluation. In cases of that type, it might be appropriate to apply the reduction for contributory negligence to the attributable loss as well as the basic loss.1 Lord Hobhouse did not make this distinction. Further, it is not strictly binding, but it must be of considerable persuasive weight.2 1 [2000] 2 AC 190 at 215B–C. 2 Lords Lloyd of Berwick and Hope of Craighead both agreed with Lord Millett’s speech, but they also agreed with the speech of Lord Hobhouse, who did not make this distinction, so it is unclear whether they supported the existence of the exception to which Lord Millett adverted.

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8.11  Contributory negligence and contribution 8.11 One reason for considering that Platform was correctly decided is Lord Hobhouse’s view that the SAAMCo reduction in damages performs essentially the same function as reductions on account of contributory negligence. If the two devices perform the same function then plainly it amounts to doublecounting to make the same reduction twice. It is thought, however, that these two mechanisms in truth perform different roles. The question of whether the court should make a reduction in damages on account of contributory negligence depends principally upon whether the claimant has behaved in a way which was negligent and contributed to the basic loss. It is easy to imagine cases where either there is say a 50% reduction for contributory negligence of the claimant but no reduction on account of SAAMCo, or reduction on account of SAAMCo but no reduction for contributory negligence. That is because the kinds of facts required to give rise to the two types of reduction are different. Once this proposition is accepted, it is submitted that to make separate reductions on account of both contributory negligence and SAAMCo is, in general, the right approach, as Lord Cooke of Thorndon held. It does not involve double-counting, because the rationales of the two different types of reduction are different. Imagine a case where the basic loss is £200,000, the attributable loss £100,000, there is contributory negligence of 50% and the claimant’s negligence did not contribute to the overvaluation. On the House of Lords’ principle, the deduction for contributory negligence must be made from the basic and not the attributable loss. Thus damages are £100,000 (50% of £200,000). But this is exactly the same as they would have been, on the SAAMCo measure, even if there had been no contributory negligence at all. So the effect of the House of Lords’ decision is that there may be cases where a claimant lender recovers the same amount whether its contributory negligence was 0 or 50%. This seems unfair. 8.12 On the other hand, Lord Millett criticised the result of the Court of Appeal’s approach in the following terms:1 ‘Instead of awarding the appellant damages of £489,398, representing the 80% of the overall loss of £611,748 which was not attributable to its own fault, as the judge had done, it reduced the award to £400,000, being 80% of the respondents’ overvaluation of £500,000. The remarkable consequence is that, if the award stands, the appellant will bear more than one third of a loss for which it was only 20% to blame.’ It is submitted, however, that what this amounts to is a criticism of the decision in SAAMCo itself. If, on the facts of Platform, there had been no contributory negligence at all, the effect of SAAMCo would have been that the lender would itself have had to bear the difference between the basic and the attributable loss: thus the lender would have borne 18% of the basic loss2 in a case where it was not to blame at all, or at least not in a way that sounded in contributory negligence. Having said that, it does appear that there could be cases in which making deductions for both the SAAMCo principle and contributory negligence 392

Contributory negligence  8.14 might involve excessive reductions from a claimant’s damages. It is submitted that the answer to that would be as follows: first, to calculate the attributable loss, and then to apply principles of contributory negligence to the attributable loss but bearing in mind that there had already been a reduction in damages from the basic to the attributable loss. It would then be necessary to ask how much should be deducted on account of, for example, causative potency of the claimant’s negligence in circumstances in which the difference between the basic and attributable loss had already been deducted. This would allow for a flexible approach which would apply the separate rationales of both the SAAMCo and contributory negligence principles, but avoid double-counting. Pending any further case law, however, the position is as set out in SAAMCo and Platform. 1 [2000] 2 AC 190 at 213D–E. 2 £111,000 divided by £611,000.

(d)  Fraudulent and negligent misrepresentation; breach of warranty of authority 8.13 As mentioned above, in Standard Chartered Bank v Pakistan National Shipping Corpn (Nos 2 and 4)1 the House of Lords held that damages for fraudulent misrepresentation could not be reduced on account of the claimant’s contributory negligence. By contrast, in Gran Gelato Ltd v Richcliff (Group) Ltd2 it was held that the 1945 Act did apply to claims for negligent misrepresentation under the Misrepresentation Act 1967, s 2(1), even though the wording of the section expressly equated liability under the section to that which would result ‘had the misrepresentation been made fraudulently’. Thirdly, contributory negligence is not a defence to claims for breach of warranty of authority, because liability for breach of warranty of authority is strict and ‘is not dependent on establishing fault’.3 Hence it does not fall within category 3 defined in Vesta v Butcher.4 1 [2002] UKHL 43, [2003] 1 AC 959. 2 [1992] Ch 560, CA. 3 Bristol & West Building Society v Fancy & Jackson, transcript of 22 July 1997 (Chadwick J), at p 14. This passage was edited out of the report in the All England Law Reports. For breach of warranty of authority generally, see Chapter 5, above. 4 See para 8.05, above.

(e)  Fiduciary duty and breach of trust 8.14 The position is discussed at para 4.58, above. In summary, in English law, contributory negligence is not a defence to a claim based on a deliberate or conscious breach of fiduciary duty; the reason is that equity should adopt just as rigorous an approach as the common law, and at common law, as we have seen, contributory negligence is not a defence in relation to torts of intention such as fraudulent misrepresentation.1 What is the position in relation to breaches of fiduciary duty which do not require proof of deliberate or conscious misconduct 393

8.15  Contributory negligence and contribution on the part of the claimant, or breach of trust? The High Court of Australia has held that there is no defence of contributory negligence in relation to any type of breach of fiduciary duty.2 In Scotland, however, the Court of Session has held that it is arguable that contributory negligence might be available as a defence in cases of breach of fiduciary duty which do not require proof of deliberate misconduct.3 It may be argued that, in a case such as a lender’s claim, where fiduciary and trust obligations arise in a contractual context, and ‘the trust was part of the machinery for the performance of a contract’, then ‘the extent of equitable compensation should be the same as if damages for breach of contract were sought at common law.’4 In Various Claimants v Giambrone & Law5 the Court of Appeal accepted an argument that, in a case where lawyers’ obligations in equity arose from a contract, the extent of the lawyers’ liability should be the same in equity as in contract, albeit the issue in that case did not relate to contributory negligence. It is suggested that it is therefore at least arguable that, in a case where a lawyer’s liability arises principally from contract and tort, if contributory negligence is available as a defence in contract and tort then it should also be available as a defence to equitable claims.6 1 Nationwide BS v Balmer Radmore [1999] Lloyd’s Rep PN 241, per Blackburne J at 281. 2 Pilmer v Duke Group Ltd (in liqu) (2001) 207 CLR 165, [2001] HCA 31, per the majority at [86]. 3 Kidd v Paull & Williamson LLP [2017] CSOH 16, 2018 SC 193, per Lord Tyre at [68]. 4 The quotations are from Lord Toulson in AIB Group (UK) plc v Mark Redler & Co Solicitors [2014] UKSC 58; [2015] AC 1503, at [71]. The case did not concern contributory negligence, however. 5 [2017] EWCA Civ 1193, [2018] PNLR 2, per Jackson LJ at [63]. 6 As to breach of trust, in De Beer v Kanaar & Co (No 2) [2002] EWHC 688 (Ch), Patten J stated at [92] that contributory negligence was not available as a defence to breach of trust claims, but it appears that this point had not been the subject of argument, and the case pre-dated Redler. See also paras 4.45–4.47 of the third edition of this book.

3  Application: making reductions in cases in which the defence of contributory negligence is available (a)  General principles 8.15 In cases in which a defence of contributory negligence is available, the court considers whether to make a reduction in the claimant’s damages on account of the claimant’s own negligence. The reduction, if made, is almost always expressed as a percentage of the claimant’s damages. The basis for the reduction is again s  1(1) of the 1945 Act: in cases in which a defence of contributory negligence is available in principle, the ‘damages recoverable’ for the defendant’s breach of duty ‘shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage’ [emphasis added]. 8.16 Various points of general principle arise. First, the focus under the Act is on the claimant’s share of responsibility for the damage which the claimant has 394

Contributory negligence  8.16 suffered, rather than on the claimant’s share of responsibility for the occurrence which caused the damage.1 For example, if a claimant passenger in a car fails to wear a seat belt and is injured in an accident due to the defendant driver’s negligence, the claimant’s negligence contributes to the damage but not to the accident. Secondly, the burden of proof is on the defendant.2 Thirdly, the factors which the court takes into account in assessing whether it is just and equitable to reduce the claimant’s damages are (a) the respective causative potency of the claimant and defendant’s conduct and (b) the respective blameworthiness of that conduct.3 If the claimant’s conduct had no causal influence on the damage at all, then no reduction for contributory negligence should be made.4 The Court of Appeal recently rejected an argument that only causative potency is relevant; the court confirmed that blameworthiness is also to be taken into account.5 Fourthly, contributory negligence on the part of a claimant requires foreseeability, for a reasonable person in the position of the claimant, of harm to the claimant.6 Fifthly, the exercise which the court must undertake is difficult. This is because, as a result of the different meanings of ‘fault’ in s 1(1) which is referred to above at paras 8.02–8.04, above, in comparing the claimant’s position with that of the defendant, the court ‘is not comparing like with like’: ‘… the blameworthiness of the [claimant] and the [defendant] are incommensurable. The [defendant] has acted in breach of a duty (not necessarily a duty of care) which was owed to the [claimant]; the [claimant], on the other hand, has acted with a want of regard for her own interests.’7 As a result, the court’s task of determining by how much a claimant’s damages should be reduced on account of contributory negligence is ‘inevitably a somewhat rough and ready exercise’ as to which different judges may form different views,8 which is to be dealt with ‘in a broad, jury-like and common sense way’.9 It would appear to follow that a court is not necessarily required to provide lengthy or detailed reasons to support its conclusion as to any particular figure for a percentage reduction on account of contributory negligence. 1 Jackson v Murray [2015] UKSC 5, [2015] 2 All ER 805, per Lord Reed at [20]; Assetco plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), per Bryan J at [1095]. 2 Assetco, at [1098]. 3 Jackson, per Lord Reed at [40]. 4 Assetco, at [1096]. See also UCB Corporate Services Ltd v Clyde & Co [2000] Lloyd’s Rep PN 653, CA, where the defendant was unable to obtain any reduction on account of contributory negligence because it could not show that the alleged negligent conduct had caused any of the claimant’s loss. 5 Blackmore v Dept for Communities and Local Government [2017]  EWCA  Civ 1136, [2018] QB 471. 6 Assetco, at [1099]. As suggested at para 8.03, above, the question in relation to a claimant is likely to be whether the claimant took less care for his/her own safety or interests than the reasonable person in the claimant’s position would have done. 7 Jackson, per Lord Reed at [27]. 8 Jackson, per Lord Reed at [28]. 9 Badger v Ministry of Defence [2005] EWHC 2941, [2006] 3 All ER 173, per Stanley Burnton J at [16], cited with approval in Blackmore at [38].

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8.17  Contributory negligence and contribution

(b)  Contributory negligence in claims against solicitors 8.17 It is suggested that allegations of contributory negligence in claims against solicitors may be placed into two broad categories. The first category contains claims in which: ‘the alleged carelessness comprises a failure by the claimant client to detect an error committed by the defendant professional or to remember to do something which it was the responsibility of the defendant to remind the claimant to do.’1 In this category of claim, it tends to be very difficult for a defendant solicitor to establish contributory negligence. Thus, in Football League Ltd v Edge Ellison,2 Rimer J said, obiter: ‘It is only in rare cases that a solicitor is able to advance a plea of contributory negligence with any real prospect of success, and for obvious reasons. This is because his breach of duty will usually be in relation to a matter within his special expertise as a solicitor, being a duty which is not usually one relating to a purely commercial matter of judgment falling squarely within the client’s own competence. It will usually relate to a matter upon which the client is depending upon the solicitor’s own special expertise.’ In Feakins v Burstow,3 Jack J said that, in cases where solicitors negligently conducted litigation, findings of contributory negligence would be rare. This was because the solicitor would have the conduct of the proceedings on behalf of the client. The implication is that the client did not have to check the solicitor’s work. In relation to the drafting of documents, in Harding Homes (East Street) Ltd v Bircham Dyson Bell,4 Proudman J said that: ‘As a general rule, applicable here in my judgment, clients are not held to be contributorily negligent for failing to notice clauses that a solicitor has failed to bring to the client’s attention.’ In Newline Corporate Name Ltd v Morgan Cole5 underwriters instructed the defendant solicitors to advise them on their liability under an insurance policy. The solicitors negligently failed to advise them that they were not liable at all. The solicitors alleged that the underwriters should have realised that the solicitors’ advice was wrong, and were thus contributorily negligent. Simon J said: ‘The defendant was specifically instructed to consider the issue of coverage and it is difficult to see why the client, who has paid the solicitor to do the work, should check that the solicitor has done the task for which he has been employed … To put the matter more proverbially: if you hire a dog you do not expect to have to bark.’ 1 Goudkamp & Nolan, at 21. 2 [2006] EWHC 1462 (Ch), [2007] PNLR 2, at [330].

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Contribution  8.19 3 [2005] EWHC 1931 (QB), [2006] PNLR 6. See [109]. 4 [2015] EWHC 3329 (Ch), at [191]. See also the result in relation to contributory negligence in Wellesley Partners LLP v Withers LLP [2014] EWHC 566 (Ch), [2014] PNLR 22, per Nugee J at 151–-157, albeit the judge there did not express a general principle. This issue did not feature in the appeal to the Court of Appeal. 5 [2007] EWHC (Comm) 1628, [2008] PNLR 2 at [69].

8.18 The second category of case comprises claims in which the alleged contributory negligence arises out of a matter which was only, or principally, the responsibility of the claimant. Failures of lenders to make checks as to the borrower’s creditworthiness, or similar checks which are carried out only by lenders in relation to borrowers, are the paradigm examples. In this category of case, which is discussed in more detail below at paras 10.131ff, it tends to be less difficult for defendant solicitors to establish contributory negligence, sometimes at high percentages. Solicitors may, for example, be able to show breaches by claimant lenders of the lenders’ own lending criteria; in such a case, it can be said that the error fell within the area of expertise of the claimant rather than that of the solicitor. Similarly, in the Football League1 case, the Football League had granted a licence of the television rights to its matches to a company without seeking guarantees from that company’s parent companies. The company went into liquidation and the Football League did not receive the sums due under the licence. Rimer J said that the issue of obtaining parent company guarantees was primarily one for the Football League itself, so that, had the solicitors been liable, there would have been a reduction in damages of 75% on account of contributory negligence. Further, at first instance in the auditors’ negligence case of Manchester BS v Grant Thornton UK LLP,2 the negligence of the claimant lender in taking out interest rate swaps which lasted 50 years led to a reduction in damages of 25% on account of contributory negligence. 1 Above, at [330]–[331]. 2 [2018] EWHC 963 (Comm), per Teare J at [236]–[256]. This issue did not feature in the appeal.

B CONTRIBUTION1 1 Scope (a)  General principles, including ‘same damage’ 8.19 Statutory contribution claims are governed by the Civil Liability (Contribution) Act 1978, the key provisions of which are: ‘1(1) Subject to the following provisions of this Act, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise). 6(1) A  person is liable in respect of any damage for the purposes of this Act if the person who suffered it … is entitled to recover 397

8.20  Contributory negligence and contribution compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust, or otherwise).’ The provisions of the Act were the subject of detailed consideration in the House of Lords in Royal Brompton Hospital NHS  Trust v Hammond2 and Co-operative Retail Services Ltd v Taylor Young Partnership Ltd.3 In Royal Brompton, the House of Lords indicated that a relatively restrictive interpretation should be given to the phrase whose application is generally the key question in contribution claims, though subsequent authority is less restrictive in relation to one aspect of the test.4 The crucial issue is generally whether B and C are both liable to A, the claimant, for ‘the same damage’ within the meaning of s 1(1). The effect of a restrictive interpretation of this phrase is to reduce the number of cases in which one party is entitled to claim contribution from another. In order to decide whether a party is entitled to seek contribution, a close analysis of the decision in Royal Brompton is necessary. Further, in Co-Operative Retail Services, the House considered what counted as ‘liability’ for the same damage. The issues raised in both cases are considered below. 1 See generally Mitchell The Law of Contribution and Reimbursement (2003). 2 [2002] UKHL 14, [2002] 1 WLR 1397. 3 [2002] UKHL 17, [2002] 1 WLR 1419. 4 See para 8.30, below.

8.20 In Royal Brompton,1 Lord Bingham of Cornhill provided a helpful starting point: ‘When any claim for contribution falls to be decided the following questions in my opinion arise. (1) What damage has A suffered? (2) Is B liable to A in respect of that damage? (3) Is C also liable to A in respect of that damage or some of it?’ In the example, A is the claimant, B could be the defendant and C a third party from whom B wishes to seek contribution for A’s claim against B. If the answers to questions (2) and (3) are both in the affirmative, then B  is entitled to seek contribution from C. It will be seen that, before B  may do so, B  must show that B and C are both liable to the same party, A.2 In Birse Construction Ltd v Haiste Ltd3 a water authority appointed a contractor to undertake the design and construction of a storage reservoir and C, one of its own employees, to act as supervising engineer. The contractor appointed B  as consulting engineers for the design. When the reservoir proved defective, the contractor settled the claim of the water authority and claimed an indemnity from B who, in turn, claimed contribution from C. The Court of Appeal held that the contribution claim could proceed only if both B and C owed a duty to the contractor. If C owed its duty only to its employer, the water authority, and not to the contractor, the claim must fail as the parties would not have been liable for the same damage. 1 [2002] UKHL 14, [2002] 1 WLR 1397 at [6]. The leading speeches in Royal Brompton were those of Lords Steyn and Bingham of Cornhill.

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Contribution  8.22 2 It appears that it is sufficient if B is liable because B mistakenly consented to A being granted judgment against B: BRB (Residuary) Ltd v Connex South Eastern Ltd [2008]  EWHC  1172 (QB), [2008] 1 WLR 2867 (Cranston J). 3 [1996] 1 WLR 675, CA. Although this case pre-dates Royal Brompton (above), a dictum in it was approved in that case, and the rest of the decision was not disapproved. It was cited and not referred to in CRS (above). It is thought that it survives the House of Lords’ decisions in those cases and is consistent with them.

8.21 Further, in Co-Operative Retail Services1 the House of Lords held that, subject to statutory exceptions, it was open to parties to enter contracts whose effect would be that a party, C, would not be liable to the main contractor A for matters for which C would normally be liable in breach of contract or negligence. If such a contractual provision was effective then it prevented C from being liable to A for such matters. If A sued another party, B, for the same damage as C had caused, B would not be able to claim contribution from C for such damage because the effect of the parties’ contractual arrangements was that C  was not liable to A. B  could not show that C  was liable to A  in respect of the same damage as B  was, and so B  was not entitled to claim contribution from C in respect of A’s claim against B. CRS was a building case involving many contractors. Under the various contracts, C owed A a duty to restore work damaged by fire, but not at C’s expense; the contracts excluded any duty of C  to compensate A  for A’s loss caused by the fire. The House of Lords held that in those circumstances it could not be shown that C  was liable to A for the damaged work, and so contribution could not be claimed against C. 1 [2002] UKHL 17, [2002] 1 WLR 1419. See also Gard Marine & Energy Ltd v China National Chartering Co Ltd [2017] UKSC 35, [2017] 1 WLR 1793.

8.22 The central question in many difficult contribution cases is not whether B and C are both liable to A, but whether the damage for which they are both liable to A is ‘the same damage’ within the meaning of the Act. If it is not, then neither B nor C may claim contribution from the other. The House of Lords considered this issue in detail in Royal Brompton.1 The first point is that the question under the Act is whether B and C are liable in respect of the same damage; the question is not whether B and C are liable in respect of the same ‘damages’.2 Hence the mere fact that A claims the same sum in damages from both B and C is not sufficient to show that contribution is available. Secondly, the Act does not apply to debts, as opposed to claims for damages.3 It follows that a solicitor sued by a lender cannot claim contribution from the borrower, who is a debtor, though he or she may be able to claim back any overpayment from the lender by reference to principles of restitution and subrogation.4 1 [2002] UKHL 14, [2002] 1 WLR 1397. 2 See [27] (Lord Steyn) and [6] (Lord Bingham of Cornhill). 3 See [37] in Royal Brompton (Lord Hope); Howkins & Harrison v Tyler [2001] Lloyd’s Rep PN 1; Hampton v Minns [2002] 1 WLR 1 (Kevin Garnett QC sitting as a deputy High Court Judge). This part of the decision in Howkins was not disapproved in Royal Brompton. 4 Howkins, at [20]–[21] (Sir Richard Scott V-C).

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8.23  Contributory negligence and contribution 8.23 Lord Steyn, who delivered the leading speech, considered the background to the Act and said that:1 ‘The context does not therefore justify an expansive interpretation of the words “the same damage” so as to mean substantially or materially similar damage … no glosses, extensive or restrictive, are warranted. The natural and ordinary meaning of “the same damage” is controlling.’ Before their Lordships’ decision, the Court of Appeal had suggested a ‘mutual discharge’ test which was intended to indicate when damage would amount to the same damage for the purposes of the Act.2 Lord Steyn said that the usefulness of this test might vary according to the circumstances of individual cases and that ‘ultimately, the safest course is to apply the statutory test’.3 It would therefore appear that it is no longer safe to rely on the mutual discharge test. The most helpful course may be to consider the House of Lords’ decision on the facts of Royal Brompton itself, and the indications which Lord Steyn gave as to the correctness or otherwise of earlier decisions, though one subsequent decision suggests that obiter statements in Royal Brompton will not necessarily be followed.4 1 [2002] UKHL 14, [2002] 1 WLR 1397 at [27]. 2 For the mutual discharge test, which is now probably the wrong test, see Howkins & Harrison v Tyler [2001] Lloyd’s Rep PN 1, at [17]. 3 [2002] UKHL 14, [2002] 1 WLR 1397 at [28]. 4 See the discussion of Charter plc v City Index Ltd [2007] EWCA 1382 (Ch), [2008] Ch 313, at para 8.30, below.

8.24 Royal Brompton was a construction law case which concerned a tri-partite relationship between an employer, a contractor and an architect. The parties entered into a standard form JCT contract. Under the contract, the architect could certify that the contractor was entitled to an extension of time for completing the building work. A certificate by the architect had three effects: first, the time until the employer was entitled to take possession of the works was extended; secondly, the contractor was relieved of the liability to pay liquidated damages in respect of the delay; and thirdly the contractor might be entitled to claim compensation from the employer for extra expense which the delay had caused him. The contract overran by 43 weeks but the architect certified that the contractor was entitled to an extension of 43 weeks. For the purposes of the appeal, it had to be assumed that the contractor was liable to the employer for some or all of the delay, and that the architect was liable to the employer for negligently having certified that the contractor was entitled to an extension. The question was whether, in those circumstances, the contractor was liable to the employer for ‘the same damage’ as the architect. 8.25 The House of Lords held that the contractor was not liable for the same damage as the architect. The employer’s claim against the contractor was simply for ‘the late delivery of the building’.1 In theory there could have been 400

Contribution  8.27 a claim that the architect was also liable for the late delivery of the building, for example if the architect had failed to chivvy the contractor. In that case the architect would have been liable for the same damage as the contractor. But that was not alleged in Royal Brompton. Instead, the essence of the contractor’s claim against the architect was that the architect’s negligent issuing of certificates ‘changed the employer’s contractual position detrimentally as against the contractor’.2 It was changed in the three ways set out in the last paragraph. In particular, the employer lost the right under the contract to claim or deduct liquidated damages for the delayed delivery of the building. It was possible for the employer to seek to reverse the position by arbitration proceedings: the arbitrator had power to reverse the effect of the architect’s certificate. But the employer had the burden of proof and faced the uncertainties of a potentially complex arbitration. The employer would not have faced these problems if there had been no breach of duty by the architect. 1 [2002] UKHL 14, [2002] 1 WLR 1397 at [22] (Lord Steyn). 2 At [23] (Lord Steyn).

8.26 Viewed in this way, the facts are similar to loss of litigation claims against negligent solicitors. A is driving his car when he is hit by B, a negligent driver. A engages solicitors, C, who negligently fail to issue proceedings against B in time. A then sues C for damages for professional negligence, namely, the loss of A’s litigation against B. Can C seek contribution from B, the negligent driver? Lord Steyn indicated1 that he agreed with Canadian authority2 to the effect that, in such a case, B and C would not be liable for ‘the same damage’. B is liable for causing personal injury, while C is liable for professional negligence causing the loss of litigation. Although strictly obiter, this view is likely to be followed in professional negligence claims against barristers and solicitors. On the facts of Royal Brompton, the analogy is that the contractor caused delay in delivery of the building while the architect weakened the employer’s position in the potential arbitration between the employer and the contractor. 1 [2002] UKHL 14, [2002] 1 WLR 1397 at [29]. 2 Wallace v Litwiniuk (2001) 92 Alta LR (3d) 249, Alberta Court of Appeal.

8.27 Lord Steyn went on to deal with the correctness of various previous decisions. In Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services Ltd1 the Court of Appeal had held that a claim by an employer against a contractor for negligent site investigation services and a claim by the employer against an insurance broker for failing to provide insurance cover in respect of the development the subject of the site investigation were claims for the same damage. It followed that the insurance broker could claim compensation from the contractor. Lord Steyn disapproved this decision: the insurance broker had no liability for the remedial work to the site, so it was not responsible for ‘the same damage’.2 Similarly, Lord Steyn indicated that a claim against a builder for defective work was not the ‘same damage’ as a claim against an insurance company which had provided insurance cover for 401

8.28  Contributory negligence and contribution such a contingency.3 Lord Steyn’s next example concerned accountants.4 A is buying the shares in a company. A’s accountant, B, negligently values the shares at £7.5m. The vendor, C, warrants that the shares are worth £10m. A buys them for £10m but in fact they were worth only £5m. A thus has claims against the accountant B in negligence for £2.5m (extent of the over-valuation, £7.5m – £5m) and against the vendor C for £5m (breach of warranty, £10m – £5m). It appears that Lord Steyn agreed with both counsel that the first £2.5m of the loss was damage for which both B  and C  were liable, so that there could be contribution in relation to that as they were both liable for the same damage. In relation to the second tranche of £2.5m, however, for which only the vendor C was liable, there could be no contribution because the accountant was not liable at all. Further, in Co-Operative Retail Services,5 the House of Lords indicated, obiter, that the liability of an architect for negligently causing a fire would not be liability for causing the same damage as the liability of a contractor for failing adequately to make good the damage caused by the fire. Also in CRS, and again obiter, Lords Bingham of Cornhill and Hope of Craighead said that the time at which liability for the same damage had to be shown, in order to claim contribution, was the time at which contribution was claimed, rather than the time at which the damage occurred.6 1 [2002] Lloyd’s Rep PN 195, CA. 2 Royal Brompton [2002] UKHL 14, [2002] 1 WLR 1397 at [33]. Note, however, that the result of Howkins & Harrison, above, probably still stands: in a lender’s claim against negligent surveyors, there can probably be no contribution between the surveyors and the borrowers. 3 At [34]. 4 At [29]. 5 [2002] UKHL 17, [2002] 1 WLR 1419. See [8] (Lord Bingham of Cornhill) and [49] (Lord Hope of Craighead). 6 See [9] and [52]–[60] respectively.

8.28 Following Royal Brompton, in Dingles Building (NI) Ltd v Brooks,1 the Northern Ireland Court of Appeal considered a developer’s claim against a clergyman. The developer had signed a contract to buy some land from a charitable trust. The trustees were seven clergymen. Only one of them, the defendant, had signed the contract, but the defendant did not have the authority of the other six trustees to sign. The other six trustees declined to sign, so that the deal could not go ahead. The developer sued the clergyman who had signed, for breach of warranty of authority. That clergyman wished to claim contribution from the developers’ solicitors. He contended that the developers’ solicitors had negligently failed to insist that all seven trustees of the charitable trust sign the contract, and that, but for that negligence, all seven would have signed so that the developer’s loss would have been avoided. It was held that he was not entitled to claim contribution. The damage caused by the single clergyman was that the developers were left with an unenforceable contract. The damage caused by the developer’s solicitors was that the developer had lost the opportunity to try to persuade the other clergyman trustees to sign. These types of damage were not the same damage for the purposes of the Act. 1 [2003] PNLR 8 (CA Northern Ireland).

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Contribution  8.30 8.29 In Luke v Kingsley Smith & Co,1 the claimant, a former soldier, sued the Ministry of Defence for malicious falsehood. He engaged the defendant solicitors to act for him. After some years of delay in the litigation on the part of the defendant solicitors, the claimant dismissed the defendants and engaged new solicitors. The claim was for £240,000. The new solicitors, and counsel, settled the claim for £10,000; the low figure in respect of quantum was said to reflect the risk that the claim was likely to be struck out for want of prosecution if there were no settlement. The claimant sued the defendant solicitors on the basis that their delay had forced him to settle the claim for such a low sum. The defendant solicitors sought contribution from the new solicitors, and counsel, on the basis that they should have advised settlement at a much higher figure than £10,000. The new solicitors, and counsel, applied for summary judgment in the contribution proceedings on the basis that, even if they had been negligent, the damage that they had caused the claimant had not been ‘the same damage’ as the damage that the defendant solicitors had caused him. Davis J rejected the application. It was arguable that the loss suffered would not have occurred but for the negligence of both the defendant solicitors and the new solicitors/counsel, in other words that no loss would have been suffered if the new solicitors/counsel had not been negligent. Hence it was arguable that the defendant solicitors and the new solicitors/counsel were concurrent tortfeasors2 who could therefore seek contribution from each other. Davis J thought it likely that if one firm of solicitors delayed the conduct of litigation for four years, and then another firm delayed it for a further four years, leading to the action being struck out, each firm would have contributed to the same damage, namely the striking out of the action, and each could claim contribution from the other. Further he referred to Webb v Barclays Bank plc.3 The bank employed the claimant. Due to the claimant’s negligence, the claimant tripped over and injured her knee. She was taken to a hospital which then treated her negligently. The Court of Appeal held that the hospital’s negligence did not break the chain of causation. It followed that the bank was liable for all the claimant’s loss, including that caused by the hospital’s negligence; hence the bank could claim contribution from the hospital. In other words, the first tortfeasor could claim contribution from the second tortfeasor. Although only a decision declining to give summary judgment, Luke suggests that, where different lawyers contribute to the loss of one piece of litigation, each lawyer may be able to claim contribution from the other.4 1 [2003] EWHC 1559 (QB), [2004] PNLR 12. 2 See Rahman v Arearose Ltd [2001]  QB  351, CA, Wright v Cambridge Medical Group [2011] EWCA Civ 669, [2011] Med LR 496. 3 [2001] Lloyd’s Rep Med 500, CA. 4 See also Vision Golf Ltd v Weightmans [2005]  EWHC  1675 (Ch), [2006] 1  P  & CR DG  13 (Lewison J), which is to similar effect.

(b)  Restitution and knowing assistance in breach of trust 8.30 Section 6(1) of the Act is quoted above at para  8.19. Referring to the passage in brackets in that sub-section, in Friends Provident Life Office v 403

8.31  Contributory negligence and contribution Hillier Parker May & Rowden1 the Court of Appeal held that if A had a claim in damages against B, negligent surveyors, and a claim for restitution against C, a developer, then C could recover contribution from B, because a claim for restitution could be a claim for the same damage as a claim for damages for negligence. In Royal Brompton, however, Lord Steyn said that the view that a claim for restitution could be a claim for ‘damage suffered’ was not a correct statement of the law, but that view was obiter.2 But in Charter plc v City Index Ltd3 the Court of Appeal held that a claim for knowing receipt of trust property was a claim ‘to recover compensation … in respect of damage’ within the meaning of s 6(1) of the Act, so that a defendant to such a claim had a right to claim contribution from a third party also liable to the claimant. 1 [1997] QB 85 (CA). 2 At [33]. See also Niru Battery Manufacturing Co v Milestone Trading Ltd (No  2) [2004]  EWCA  Civ 487, [2004] 2 Lloyd’s Rep 391, in which at [78] Clarke LJ declined to express a view on the conflict between Friends Provident and Royal Brompton. 3 [2007] EWCA Civ 1382, [2008] Ch 313.

(c) Settlements 8.31 Where B and C are both liable to A in respect of the same damage, A may sue B and reach a settlement in full and final satisfaction of A’s claims against B. A may then sue C. Is C entitled to respond by seeking contribution from B, thereby causing B to have pay out more money, essentially in relation to A’s claim, even though B had reached a full and final settlement with A? This may be seen as two questions: (i) may A sue C even though A’s settlement with B is said to be in full and final satisfaction of A’s claim? (ii) If A is entitled to sue C, may C seek contribution from B? So far as question (ii) is concerned, and focusing on the position of B, s 1(3) of the Act provides: ‘A person shall be liable to make contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based.’ As Lord Rodger of Earlsferry pointed out in Heaton v AXA Equity & Law:1 ‘… the key to solving such problems lies not in legal logic but in legal policy … By enacting s 1(3) of the Civil Liability (Contribution) Act 1978, however, Parliament has resolved the policy issue for English law in cases of tort and breach of contract by coming down in favour of allowing contribution proceedings to be taken against a party who has settled and therefore “ceased to be liable in respect of the damage in question since the time when the damage occurred”.’ It follows that the answer to question (ii) is yes: the mere fact that A has settled his or her claim with B does not prevent B from being liable to C in contribution 404

Contribution  8.32 proceedings, if C has subsequently been sued by A. That leaves question (i). The answer to question (i) is a matter of construing the settlement agreement between A and B. The court seeks to determine whether the agreement was intended to settle only A’s claims against B, in which case A may still proceed against C, or alternatively whether the payment which B made was intended to compensate A fully for all A’s losses including those caused by C so that there is no further loss left for A to claim from C. Another possibility is that, in the settlement agreement with B, A undertook not to pursue C. This too might prevent A suing C, and thus prevent B being exposed to a contribution claim from C. Finally, B might seek an indemnity from A against any contribution claims by C. The basis on which the court approaches the task of construction appears in Heaton and the House of Lords’ further decision, given on the same day, in Cape & Dalgleish v Fitzgerald.2 1 [2002] UKHL 15, [2002] 2 AC 329 at [85]. 2 [2002] UKHL 16, [2002] CP Rep 51.

8.32 Section 1(4) of the Act provides that, where B  has reached a bona fide settlement with A, there is no need for B to prove his own liability to A in order to claim contribution from C, provided that ‘he would have been liable assuming that the factual basis of the claim against him could be established’.1 To come within this provision, B must first allege that his/her settlement with A was made in good faith. As to that: ‘It will no doubt be open to [C] to argue in any contribution proceedings that the settlement or compromise was not a bona fide one, for example that it was a collusive, corrupt or dishonest one …’2 Assuming that B  can show that the settlement was made in good faith, in order to obtain contribution from C, B does not need to prove the facts which A alleged against B, but does have to show that A’s claim against him or her was good in law. Dubai Aluminium Co Ltd v Salaam,3 discussed in Chapter 5 in relation to vicarious liability, is an example of a case in which, following a settlement, factual assumptions had to be made, and the principal question was one of law as to whether the parties who had settled had in fact been liable to the claimant. The factual assumptions, however, were those which the claimant had pleaded against the party seeking contribution. The question was whether that party, who had settled with the claimant, was in fact liable to the claimant. The claimant’s pleaded case against that party was meagre, but the House of Lords declined to look at material that went beyond it.4 Lord Hobhouse suggested that, in future cases, a party wishing to settle with a claimant and seek contribution against another party might wish to suggest that the claimant first amend his or her case ‘so as to make express the basis of claim which justifies the settlement’.5 Further, all that B needs to show following a bona fide settlement with A is that the factual basis of the claim which A made against B ‘would have disclosed a reasonable case of action against [B] such as to make him liable in law to [A] in respect of the damage’.6 405

8.33  Contributory negligence and contribution It is not open to C to argue that, even if the facts which A pleaded against B had been true, B would nevertheless not have been liable to A because of different facts which B could have pleaded against A in B’s defence, for example based on limitation. For the purposes of deciding whether B may claim contribution from C  pursuant to s  1(4), the focus is only on whether, if the facts which A alleged against B were true, B would have been liable to A; the court ignores the question of whether, if B had been able to prove additional facts, B would have escaped liability to A. This may be harsh to C, but it is due to a policy of encouraging settlement.7 1 Civil Liability (Contribution) Act 1978, s 1(4). Note that s 1(2) also provides that a person who ‘has ceased to be liable in respect of the damage in question’ may claim a contribution provided he was liable ‘immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought’. In order to claim contribution, B does, of course, need to show that C is or would have been liable to A. 2 IMI v Delta Ltd [2016] EWCA Civ 773, [2017] Ch 27, per Sir Colin Rimer at [56]. 3 [2002] UKHL 48, [2003] 2 AC 366; see para 5.12ff, above. 4 See [2002] UKHL 48 at [38] (Lord Nicholls) and [16] (Lord Millett). Lords Slynn and Hutton agreed with Lord Nicholls’s speech. 5 At [70]. 6 IMI, above, per Sir Colin Rimer at [59]. 7 See IMI.

8.33 If B  settles with the claimant A, then, in contribution proceedings against C, B  must prove that the quantum of the settlement with A  was reasonable. Section 1 of the Act:1 ‘… does not affect the right of the person from whom contribution is being sought [C] to assert that the person claiming contribution [B] paid too much or that in assessing contribution the party liable to contribute [C] should not be required to pay compensation for elements of the payment for which that person [C] could never have been held liable had he been sued directly.’ Payments of interest in B’s settlement with A do count as damages in respect of which there may be contribution under the Act.2 As to payments which B makes to A relating to A’s costs, B may seek an order that C pay a proportion of those either pursuant to s  51(3) of the Senior Courts Act 1981 or as contribution under the 1978 Act.3 1 J Sainsbury plc v Broadway Malyan [1999] PNLR 286, per HHJ Humphrey Lloyd QC at 321A– B. See also IMI, above, at [59]. 2 J Sainsbury plc v Broadway Malyan [1999] PNLR 286. 3 As to s 51(3), see BICC Ltd v Cumbrian Industrial Ltd [2002] Lloyd’s Rep PN 526, CA and Mouchel Ltd v Van Oord Ltd (No 2) [2011] EWHC 1516 (TCC), [2011] PNLR 26 (Ramsey J); as to the 1978 Act, see those cases and Nationwide BS v Dunlop Haywards (DHL) Ltd [2009] EWHC 254 (Comm), [2010] 1 WLR 258 (Christopher Clarke J) and Bank of Ireland v Faithful & Gould Ltd [2014] EWHC 2217 (TCC), [2014] PNLR 28, per Edwards-Stuart J at [258]–[260].

8.34 Where a judgment on the merits between A  and C  has held C  not liable to A, that judgment is conclusive against B, and C is protected from a 406

Contribution  8.35 contribution claim by B.1 Where there are joint debtors, if A settles against one (B), without expressly reserving the right to pursue the others (C and D), then A is likely to find that the doctrine of accord and satisfaction prevents him or her from pursuing C and D.2 Although in general a settlement between A and B provides B with no protection from a claim for contribution from C, A will be prevented from proceeding against C and there will be no loss in respect of which C can claim contribution from B. Where C has been held not liable or has ceased to be liable to A because of the expiry of the limitation period relating to A’s claim, C is not protected against a contribution claim. B may bring a contribution claim against C within two years from the date when B’s own liability to A was determined by settlement or judgment.3 1 Civil Liability (Contribution) Act 1978, s 1(5). 2 Morris v Wentworth-Stanley [1999] QB 1004, CA. The position is similar in relation to joint tortfeasors: Gladman Commercial Properties v Fisher Hargreaves & Proctor [2013] EWCA Civ 1466, [2014] PNLR 11. 3 Limitation Act 1980, s 10. See further para 7.90, above.

8.35 A settlement which leaves it unclear how much B must pay to A is likely to be insufficient to enable B  to seek contribution from C. In Abbey National plc v Gouldman,1 the claimant (‘A’) sued, separately, a solicitor (‘B’) and a firm of valuers (‘C’), for losses incurred in consequence of the same lending transaction. The claim against C was discontinued as it was statutebarred. B then joined C as Part 20 defendants to A’s claim against B, seeking contribution. B’s claim against C was not statute-barred. A then settled its claim against B. The terms of the settlement agreement were that, upon B submitting to final judgment in A’s favour in a specified amount, and upon B assigning to A  his (B’s) rights in the Part 20 claim against C, A  would undertake not to execute its judgment against B beyond the sum which A might recover, as B’s assignee, in B’s Part 20 claim against C. The Part 20 claim was then assigned to A and the court made a consent order that B pay A the specified amount. The court subsequently granted C summary judgment in the Part 20 proceedings. It held that a decision as to what was just and equitable, for the purposes of making an award of contribution, could not be made until it was first known what the quantum of liability in the primary claim of A against B was to be. The essential substance of the agreement between A and B was that B would pay A no more than C was required to pay to B. The court could not determine how much it was just and equitable that C  should pay B  until it first knew what B was to pay A. But, because of the terms of the settlement agreement between A  and B, the amount which, in reality, B  was to pay A  could not be determined until it had first been determined what C  should pay B. The agreement was circular and it was impossible for the court to assess what it was just and equitable that C should pay B, hence no contribution could be awarded. 1 [2003] EWHC 925 (Ch), [2003] 1 WLR 2042 (Simon Berry QC sitting as a deputy High Court judge).

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8.36  Contributory negligence and contribution

2  Application – assessment of the amount of contribution (a) What figure is to be apportioned? 8.36 Assuming that B has a right to seek contribution from C, how much in contribution should C be ordered to pay B? Section 2(1) of the Act provides: ‘(1) Subject to subsection (3) below, in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.’ [Emphasis added] The basic question is how much it is just and equitable that C should pay in contribution. Before that stage is reached, however, it is necessary to ask what is the amount in damages which is to be divided according to whatever the just and equitable shares are. In Nationwide Building Society v Dunlop Haywards (DHL) Ltd,1 Christopher Clarke J had to consider various possible deductions which should be made from the total damages figure before arriving at the sum which was to be divided according to what was just and equitable. As he indicated at [29], differences in the correct starting figure could make very large differences to the amount of contribution which was ordered. 1 [2009]  EWHC  254 (Comm), [2010] 1  WLR  258 (Christopher Clarke J). See also Bank of Ireland v Faithful & Gould Ltd [2014] EWHC 2217 (TCC), [2014] PNLR 28 (Edwards-Stuart J).

8.37 In Nationwide, the claimant lender, ‘A’ for present purposes, had sued its former solicitors (‘B’) and valuers (‘C’) in relation to large losses which it had made on two loans to the same company in respect of the same property. The company defaulted. A sued B for negligence and C for deceit. Using round numbers, B settled with A by paying £5.5m in respect of damages and £555,000 in respect of A’s costs against B. As to C, A was granted summary judgment for deceit. Christopher Clarke J assessed the quantum of C’s liability to A at £21m; taking account of the £5.5m which B had paid A, that left £15.5m which C was ordered to pay A. B sought contribution from C. (i)  ‘The damage in question’ 8.38 Pursuant to s 2(1), the court had to consider how much contribution it was just and equitable that C pay B in light of C’s responsibility for ‘the damage in question’ referred to in s 2(1). The first question was what was the ‘damage in question’, which was the figure to be divided up according to what was just and equitable. B  contended that it was the amount of B’s liability to A  after reductions had been made for (i) contributory negligence, which was a defence available to B but not to the fraudulent C,1 and (ii) a contractual limitation of liability which applied to A’s retainer of B but not to A’s retainer of C; hence 408

Contribution  8.40 B contended that the starting point was the £5.5m in settlement which B had paid to A. Christopher Clarke J held that ‘the damage in question’ for the purposes of s 2(1) was the same figure as ‘the same damage’ referred to in s 1(1). As a result, in deciding how much ‘the damage in question’ was, it was necessary to consider authorities on what counted as ‘the same damage,’ such as Royal Brompton.2 1 We have seen above that contributory negligence is available to reduce damages in a claim in negligence but not in a claim in deceit. 2 Above.

(ii)  Impact of remoteness 8.39 On the facts of Nationwide, C was liable to A in deceit, for £21m. But the figure of £21m included various heads of loss which the judge considered that A  could not have recovered from B. This was because, as B  was liable in negligence, B was not liable for heads of loss which were not reasonably foreseeable and were therefore too remote to be recoverable; but there was no such limit on C’s liability in deceit. The judge considered that the maximum loss which A could have recovered against B was £13m. Thus, of the £21m for which C was liable to A, only £13m of it was a figure for which B was also liable. Bearing in mind the need, applying Royal Brompton, for both B and C to be liable for ‘the same damage’, the judge held that the sum which counted as ‘the damage in question’ for the purposes of s 2(1) was the £13m for which, before reductions for contributory negligence or the contractual limitation clause, B and C were both liable to A. (iii)  Impact of contributory negligence 8.40 In a case where both B  and C  are liable only in negligence, and A has been contributorily negligent, ‘the damage in question’ for the purposes of contribution will be the claimant’s loss figure after reduction on account of contributory negligence.1 In Nationwide, however, since B  was liable in negligence, had B not settled with A it would have been entitled to a reduction in damages on account of contributory negligence, but, as C  was liable in deceit, C was not entitled to such a reduction. In settling, B had taken a figure of 50% as the likely amount of A’s contributory negligence. The judge accepted that figure.2 It followed that the maximum amount for which B could have been liable to A was not £13m but 50% of the figure, and thus £6.5m. The effect of s 2(3)(b) of the 1978 Act was that, where a party, if sued, would have been entitled to rely on a contributory negligence defence, then that party could not, as contribution, be ordered to pay a sum greater than the figure which it would have paid after the claimant’s damages had been reduced on account of contributory negligence. That did not apply to B, since B  was claiming contribution rather than defending a contribution claim, though it would have applied to B if C had sought contribution from B. Based on construction of the Act and the Law Commission report which led to it, Christopher Clarke 409

8.41  Contributory negligence and contribution J rejected B’s submission that, in calculating ‘the damage in question’ referred to in s  2(1), he should make the reduction for contributory negligence and thus reduce the figure from £13m to £6.5m. Thus he held that ‘the damage in question’ for the purposes of s 2(1) was £13m. 1 Fitzgerald v Lane [1989] AC 328 (HL). 2 Though note that in Bank of Ireland, above, Edwards-Stuart J  considered that the correct deduction for contributory negligence, in A’s claim against B, would have led to a higher payment of damages to A than the figure which B agreed, in settlement, to pay A. The judge took the higher figure as the sum which was to be apportioned according to what was just and equitable: see [2014] PNLR 28 at [239]–[242].

8.41 Christopher Clarke J then, however, had to ask how much of that figure of £13m it was ‘just and equitable’ that C should have to pay as contribution. He held that it was just and equitable to reduce the £13m figure to £6.5m on account of contributory negligence at this stage of the assessment. He pointed out that, if C had been merely negligent as opposed to fraudulent, the figure to be shared out between B and C would have been £6.6m because in that case a reduction would have been made on account of contributory negligence;1 it would be unfair to B if B were placed in a worse position because its co-defendant C was fraudulent rather than merely negligent. He therefore took the figure to be apportioned, according to what was just and equitable as between B and C, as £6.6m.2 Below, we consider how he apportioned that figure. 1 Per Fitzgerald v Lane, above. 2 This was also the approach of Edwards-Stuart J in the Bank of Ireland case (above).

(iv)  Impact of SAAMCo 8.42 Christopher Clarke J  did not have to consider directly whether any reduction in damages should be made on account of SAAMCo. That question had arisen in Ball v Banner.1 The party seeking contribution was a firm of solicitors; the party from whom it sought contribution was a firm of valuers. The valuers, if sued by the claimant, would have been entitled to cap the loss claimed on SAAMCo grounds; the solicitors would not. Hart J  held that ‘the damage in question’ for the purposes of s 2(1) was the basic loss figure, that is, without any SAAMCo reduction. Christopher Clarke J said that the result of Ball might be in doubt bearing in mind Lord Steyn’s example as to accountants in the later case of Royal Brompton.2 Further, in Bank of Ireland v Faithful & Gould Ltd,3 EdwardsStuart J considered that, in a case where B was liable for the full basic loss but the liability of C, a firm of surveyors, was subject to a SAAMCo cap, the sum for which both B and C were jointly liable, and which should be apportioned, should be the figure after deduction of the cap, unless that figure was greater than the amount reached after deductions for contributory negligence. 1 [2000] Lloyd’s Rep PN 569 (Hart J). 2 See para 8.27, above. 3 [2014] EWHC 2217, [2014] PNLR 28, per Edwards-Stuart J at [230], [236].

410

Contribution  8.45 (v)  Impact of contractual limitation clause 8.43 The final issue in Nationwide before apportionment was whether ‘the damage in question’ should be reduced on account of the contractual limitation of liability clause on which B was entitled to rely but C was not, as C’s retainer did not include one. The effect of s  2(3)(a) is that, where a party is subject to a claim for contribution, but that party’s liability to the claimant is limited by a contractual limitation of liability clause, that party does not have to pay in contribution more than it would have had to pay to the claimant, bearing in mind the contractual limitation clause. In Nationwide, the effect of B’s limitation of liability clause, taken with its contributory negligence defence, was that it would not have been liable to pay A more than £5.5m. Christopher Clarke J rejected the argument that the contractual limitation clause should be applied before reaching the figure for ‘the damage in question’ in s 2(1). He also declined to make a reduction according to what was ‘just and equitable’ on account of the contractual limitation clause. In his view it was clear that Parliament had intended that such clauses would result only in the cap on the total amount of contribution which a party should pay pursuant to s 2(3), mentioned at the start of this paragraph. They had no other impact on the figure to be divided up according to what was just and equitable. (vi)  Costs figure to be apportioned 8.44 Having held that B was entitled to contribution in relation to costs, the judge had to assess what figure in costs should be divided up according to what was just and equitable. B had paid A £555,000 in respect of costs. The judge had assessed C’s costs liability to A at £700,000. The judge declined to take the simple course of adding the two figures together. That might be appropriate in a case where two innocent defendants reasonably defended the claim to the same stage. But in Nationwide B had settled at an earlier stage, whereas C had not settled and had contested a summary judgment application which it lost. The judge reduced the £700,000 for C’s costs to the same figure which B had paid in costs, £555,000. He therefore took £1,110,000, being £555,000 for the costs which B owed A and a further £555,000 as the costs which C owed A, as the sum to be apportioned in respect of costs. That left the question of how, as between B and C, liability for costs should be apportioned (see below).

(b) How should the resulting figure be apportioned between the parties? 8.45 As indicated above, s 2(1) provides that the amount of contribution recoverable shall be ‘such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question’. The test involves a consideration not only of the causative potency 411

8.46  Contributory negligence and contribution of a factor, but also of its blameworthiness.1 In Downs v Chappell,2 the trial judge had indicated that, if he had held the two defendants liable, he would have held them equally responsible for the claimant’s damage. The Court of Appeal allowed the claimant’s appeal and held that the defendants were liable for the loss. Thus it was necessary to consider the appeal in relation to contribution. The second defendants contended that the trial judge had erred as he had given too little weight to his finding that the first defendants had been fraudulent whereas they, the second defendants, had been only negligent. Hobhouse LJ, with whom the other judges agreed, rejected this. The extent of a person’s ‘responsibility’, within the meaning of the Act, depended upon both causative potency and moral blameworthiness. The judge was entitled to find that, although the first defendants were fraudulent and therefore more blameworthy, the second defendants’ conduct had more causative effect, so that each had equal responsibility overall. Further, in Brian Warwicker Partnership plc v HOK International Ltd,3 the Court of Appeal accepted that non-causative factors, such as the blameworthiness of a party’s conduct which did not cause damage, could be taken into account, though two judges felt that such material should be given less weight in the exercise of the court’s discretion than conduct which was causative of the claimant’s loss. An example of an apportionment between counsel and solicitors in the negligent conduct of litigation is Hickman v Blake Lapthorn.4 Further, in Nationwide BS v Dunlop Haywards (DHL) Ltd,5 the defendant surveyors were guilty of ‘bare-faced fraud’, to such an extent that summary judgment in fraud was granted, and the fraud was the prime reason why the claimant lender had made the loss-making advances; the defendant solicitors had negligently failed to spot and warn the lender of the indicia of fraud. The judge assessed contribution at 20% for the solicitors and 80% for the valuers. He applied those percentages to both the damages and costs figures in deciding how much contribution should be ordered. 1 Madden v Quirk [1989] 1 WLR 702 at 707. 2 [1997] 1 WLR 426 at 445B–H, CA. 3 [2005] EWCA Civ 962, [2006] PNLR 5. 4 [2005] EWHC 2714 (QB), [2006] PNLR 20, (Jack J), at [60] (two-thirds to counsel, one-third to solicitors). 5 Above, at [77].

8.46 Whereas, in relation to contributory negligence, apportionment between claimant and defendant may not be made if the defendant has been guilty of fraudulent misrepresentation,1 a dishonest defendant may claim contribution from a fellow tortfeasor under the Civil Liability (Contribution) Act 1978.2 In K  v P,3 Ferris J  held that, even if its elements were made out, the maxim ex turpi causa non oritur actio could be no bar to a claim for contribution by an allegedly dishonest defendant. It is thought, however, that if the defendant to a contribution claim (C) is not liable to the main claimant (A) because the ex turpi doctrine bars A’s claim against C, then no contribution may be sought from C since C would not be liable to the claimant, A. Where there is a claim for contribution by parties who are themselves innocent, and 412

Contribution  8.46 liable only vicariously for the wrongs of another, should the court take account of their innocence? In Dubai Aluminium Co Ltd v Salaam,4 the House of Lords held that it could not: because of their vicarious liability, the innocent parties stood in the shoes of the other, and had to be judged as if they were the other, thus ignoring their innocence. Further, in assessing the amount of contribution payable by one group of wrongdoers to another, the House was prepared to take into account that, after conclusion of the claimant’s action, one group of wrongdoers still held significant proceeds of the fraud the subject of the claim, whereas the other group did not.5 In addition, in Charter plc v City Index,6 the Court of Appeal held that there was no general rule that a party liable for knowing receipt of trust property, but who had paid the money away in bad faith, could never recover contribution from another party liable to the claimant. Finally, in Bank of Ireland v Faithful & Gould Ltd,7 Edwards-Stuart J  rejected an argument that B  should receive no contribution in relation to its payment of costs to A. B  had settled with A  for £3.35m plus A’s costs. C contended that, if B had offered £3.35m at the outset of A’s claim against B, A would have incurred no costs, so that C should not be liable to contribute to A’s costs. Edwards-Stuart J was impressed, however, by the argument that, in order to obtain a good settlement from A, it had probably been necessary for B not to start negotiations with A by offering £3.35m immediately: that would simply have increased the damages figure which A eventually agreed to accept from B. He therefore rejected C’s argument. 1 See para 8.13, above. 2 See for example Downs v Chappell [1997] 1 WLR 426, CA. 3 [1993] Ch 140. 4 [2002] UKHL 48, [2003] 2 AC 366. See para 5.11 above. 5 See [59] (Lord Nicholls), [76] (Lord Hobhouse) and [163]–164] (Lord Millett). 6 Above. 7 [2014] EWHC 2217 (TCC), [2014] PNLR 28, per Edwards-Stuart J at [256]–[267].

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Part 2

Specific Claims

Chapter 9

Real estate

A INTRODUCTION 9.01 Solicitors’ negligence claims associated with real estate are among the most frequent.1 Although there are occasions where real estate claims involve difficult questions about the existence or breach of a duty of care,2 it is more frequently the case that the most difficult aspect of bringing or defending claims against solicitors arise from the assessment of damages. 1 In the policy year 2010–2011 residential real estate accounted for almost half of notifications made to Aon Ltd retaining first place in its annual list of top contributors to claims: aww Insurance Matters, Issue 5 (June 2011) published by the Law Society. More recently, market claims statistics gathered by Chancery Pii (reflecting 14.81% of the profession from 2004– 2011) showed that 43 % of claims notifications and 70% of financial claims payments at an average incurred cost of £41,000, were generated from conveyancing: see Carter (Law Society blog dated 21 August 2015). 2 See Hoffmann, ‘The Reasonableness of Lawyers’ Lapses’ (1994) 10 PN 6 who suggested that the courts approach real estate claims rather differently from, say, litigation treating any slip as a breach of duty. There has been no noticeable change in the courts’ approach to liability questions in the intervening period.

B  ACTING FOR MORE THAN ONE PARTY 1  Acting for buyer and seller (a) Conduct 9.02 The rules of professional conduct have always prohibited a solicitor from acting where there is a significant risk of a client conflict. There is an obvious risk of conflict where a solicitor is instructed to act for both buyer and seller on the sale of land. The SRA’s new Standards and Regulations came into effect on 25 November 2019 and replaced the SRA Code of Conduct 2011.1 The new Standards and Regulations introduce two separate Codes of Conduct, one for firms (Code of Conduct for Firms, which sets out the standards for managers, Compliance Officers for Legal Practice (COLPs) and for Finance and Administration (COFAs)) and one for solicitors (Code of Conduct for Solicitors). Solicitors who are both owners and managers are bound by both new Codes from 25  November 2019. The following is a summary of the 417

9.03  Real estate position both before and after the new Standards and Regulations came into force: (1)

The 2011 Code contained no specific prohibition on acting for both seller and buyer but O(3.5) (which was mandatory) prohibited solicitors from acting where there was a significant risk of client conflict unless one of the exceptions contained in O(3.6) or O(3.7) applied.2

(2) However, the 2011 Code also suggested that acting for both seller and buyer in a purchase of land was likely to indicate that a solicitor had failed to achieve O(3.4) and that acting for a buyer (including a lessee) and a seller (including lessor) on a transfer of land or an interest in land for value was indicative of non-compliance with that outcome.3 (3) Neither of the 2019 codes expressly prohibits a solicitor or firm from acting for buyer and seller or provides guidance in the form of ‘indicative behaviours’. But in most cases it will be a breach of Regulation 6.2 of each code for a solicitor to act for both buyer and seller.4 1 The 21st version was in force from 6 December 2018 until 24 November 2019. 2 O(3.5) and O(3.6) are set out in full at para 4.36, fn 1, above. 3 See also IB(3.3) (declining to act where the solicitor may have to negotiate matters of substance on the clients’ behalf, for example on price between the buyer and seller of a property is indicative of compliance). 4 ‘You do not act in relation to a matter or particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it, unless: (a) the clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or (b) the clients are competing for the same objective, and the conditions below are met, namely that: (i) all the clients have given informed consent, given or evidenced in writing, to you acting; (ii) where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and (iii) you are satisfied it is reasonable for you to act for all the clients.’

(b)  Equity: the double employment rule 9.03 The conduct provisions considered above reflect the ‘double employment’ rule, which provides that a fiduciary may not act for two clients with potentially conflicting interests without the informed consent of each client1 (and a failure to comply with the relevant conduct rules may provide evidence of a breach of fiduciary duty). There are differences in language between the rules of professional conduct and the way in which the authorities formulate the double employment rule but it is suggested that the risk of conflict which engages both the equitable duty and the conduct rule are in practice the same.2 Nevertheless, the fact that a solicitor has committed a breach of the conduct rules in force at the relevant time or the double employment rule will not make him or her liable for compensation in equity because the claimant will have to show that the breach of duty was truly causative of loss.3 Clients who realise that their solicitor has committed a breach of the rule are more likely to seek an injunction to restrain the solicitor from continuing to act for both parties.4 A breach of the double employment rule may also provide evidence to 418

Acting for more than one party  9.04 support a claim for breach of fiduciary duty once an actual conflict has arisen. If the solicitor had complied with the rule at the outset of the retainer it is far less likely that an actual conflict would have arisen and that the solicitor would have been placed in a position where he or she was forced to choose between the interests of each client.5 Finally, it is important to distinguish between cases in which there is a potential conflict or a significant risk of conflict (which require the informed consent of each client before the solicitor can act) and cases in which there is an actual conflict from the outset. Where there is an actual conflict the solicitor should decline to act for one or both parties6 and where the solicitor is a party to the transaction the solicitor should decline to act or the transaction is likely to be set aside.7 1 See Chapter 4, paras 4.36–4.38, above. 2 The consent of both parties needs to be evidenced in writing under Regulation 6.2(i) of each code: see Chapter 4, para 4.37, above. 3 See para 4.49, above. 4 See Chapter 6, Section D. 5 See paras 4.39–4.42, above. 6 See the analysis of Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567 at para 4.40. See also Haira v Burbery Mortgage Finance & Savings Ltd [1995] 4 LRC 387 where the Court of Appeal of New Zealand reached a similar conclusion. 7 See paras 4.28–4.31, above.

(c) Contract 9.04 A breach of the relevant conduct rule does not give the party affected by the breach a cause of action. Each code was made pursuant to authority delegated to the Council of the Law Society and the Master of the Rolls by s 31 of the Solicitors’ Act 1974 and s 9 of the Administration of Justice Act 1985.1 In Jenmain Builders Ltd v Steed & Steed2 the Court of Appeal expressly left open the question whether a breach of Practice Rule 6A of the Solicitors Practice Rules 1990 could found a cause of action in tort and in Thames Trains v Adams3 Nelson J held that breach of the Solicitors Practice Rules 1990 would not as a general rule found a cause of action. We suggest that Hilton v Barker Booth & Eastwood4 is not authority to the contrary. In that case the issue was whether a solicitor owed a duty to the buyer to report information confidential to the seller or whether the conflicting duty which he owed to the seller prevented such a duty from arising. But it was common ground that the solicitor had a conflict and that he could not act for both buyer and seller and both parties were content for this issue to be argued as a matter of contract.5 The House of Lords held that the existence of a conflicting duty to the seller did not prevent an irreconcilable duty to the buyer arising. But it was not necessary to consider the status of the relevant conduct rule and whether it was an implied term of the contract of retainer.6 In any event, the same factual questions will often arise in determining whether a solicitor was negligent.7 1 See Swain v Law Society [1983] 1 AC 598, Mohamed v Alaga & Co [2000] 1 WLR 815, CA and Awwad v Geraghty [2001] QB 570, CA. See also para 1.01, above. The SRA Code of Conduct

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9.05  Real estate 2011 and the SRA Standards and Regulations were all made under the same statutory power (by delegation from the Council of the Law Society). 2 [2000] Lloyd’s Rep PN 549, CA at [21] and [37]. 3 [2006] EWHC 3291 at [41] (Nelson J). 4 [2005] UKHL 8, [2005] 1 WLR 567. 5 See [30] and [32]. 6 For further discussion of the contractual issue in the context of contract terms and breach of duty: see paras 1.01 and 2.13, above. For detailed treatment see Chapter 15, paras 15.22–15.32, below. 7 For examples of cases in which solicitors have been held to be negligent when acting for both buyer and seller see Goody v Baring [1956] 1 WLR 448, CA, Smith v Mansi [1963] 1 WLR 26, CA and Nash v Phillips (1974) 232 Estates Gazette 1219 (where Foster J held that there was an actual conflict). For an example where a solicitor was not held liable for negligence although acting for both parties see Kenyon-Brown v Banks & Co (5 June 1998, unreported) (Peter Leaver QC).

2  Obtaining the authority of the client or clients (a)  Conduct rules 9.05 Chapter 1 of the 2011 Code contained a number of mandatory Outcomes relating to client care supplemented by the following, non-mandatory Indicative Behaviours of non-compliance: ‘acting for a client when instructions are given by someone else or by only one client when you act jointly for others unless you are satisfied that the person providing the instructions has the authority to do so on behalf of all of the clients‘1 and ‘acting for a client when there are reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client’s wishes’.2 Paragraph 8.1 of the 2019 Code of Conduct for Solicitors now imposes a mandatory client identification obligation: ‘you identify who you are acting for in relation to any matter’. Paragraph 3.1 also imposes obligations to verify the client’s instructions3 and para 3.4 imposes a requirement to take into account the client’s attributes, needs and circumstances.4 1 IB(1.25) 2 IB(1.28) 3 ‘You only act for clients on instructions from the client, or from someone properly authorised to provide instructions on their behalf. If you have reason to suspect that the instructions do not represent your client’s wishes, you do not act unless you have satisfied yourself that they do. However, in circumstances where you have legal authority to act notwithstanding that it is not possible to obtain or ascertain the instructions of your client, then you are subject to the overriding obligation to protect your client’s best interests.’ This is replicated by Regulation 4.1 of the Code of Conduct for Firms. 4 ‘You consider and take account of your client’s attributes, needs and circumstances.’

(b) Contract 9.06 Where a solicitor acts for a number of individual clients in the same real estate transaction, the solicitor is retained by each of the clients and must take instructions from all of them unless one or more of them have obtained 420

Acting for more than one party  9.07 actual authority from the others to give instructions on their behalf.1 Where a solicitor acts for a partnership, he or she is entitled to assume that the partner giving the instructions has authority to act for the purpose of the business of the partnership.2 It is suggested that the business of the partnership will ordinarily include real estate transactions3 although this will depend on the facts.4 It is also suggested that the position should be the same for a solicitor taking instructions from a member of a limited liability partnership.5 Where a solicitor has been instructed to act by a director or employee of a limited company, he or she has no duty to check that the instructions have been approved by the company’s board of directors where they fall within the usual scope of the director or employee’s authority.6 Where the partner or director has a personal interest which conflicts (or may conflict) with the interests of the partnership or company, the solicitor may be under a duty to take reasonable steps to ensure that the other partners or members of the board fully understand the nature of the transaction.7 1 See Farrer v Copley Singletons [1998] PNLR 22, CA (solicitors failed to take instructions from all of the clients) and Berlevy v Blyth Dutton [1997] 10 WLUK  23, [1997]  EGCS  133, CA (where Peter Gibson LJ distinguished Farrer on the basis that a father had given his son actual authority to give instructions). 2 See s 5 of the Partnership Act 1890: ‘Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority, or does not know or believe him to be a partner.’ For detailed discussion of each limb of the section (as they apply to a solicitors partnership) see Chapter 5, paras 5.03–5.09, above. 3 See Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113, CA at 124B–D (Harman LJ), 126D–E (Salmon LJ) and 130F–G (Karminski LJ). The partnership was a firm of architects taking an underlease of office premises. 4 See Madley v Cousins Coombe [1997]  EGCS  63, however, where two partners had agreed to mortgage certain property to a limited extent but the mortgagee proposed an ‘all monies’ charge. The solicitors dealt with one partner and sent the charge to him for signature. It was held that they failed to take adequate instructions or give adequate advice to the other partner. It is suggested that the charge did not fall within the business of the partnership because it secured the debts of each partner personally. 5 See s 6 of the Limited Liability Partnerships Act 2000 (which is in similar terms to s 5 (note 2 above)): ‘(1) Every member of a limited liability partnership is the agent of the limited liability partnership. (2) But a limited liability partnership is not bound by anything done by a member in dealing with a person if – (a) the member in fact has no authority to act for the limited liability partnership by doing that thing, and (b) the person knows that he has no authority or does not know or believe him to be a member of the limited liability partnership.’ Again, for detailed discussion of the section (as it applies to a solicitors LLP) see paras 5.13–5.16, above. 6 See Newcastle International Airport Ltd v Eversheds LLP  [2013]  EWCA  Civ 1514, [2014] 1 WLR 3073 at [74] and [75] (Rimer LJ). 7 See Newcastle International Airport Ltd v Eversheds LLP (above) at [77]–[84]. It is clear that this was not a question of the authority of the executives in question but the nature of the duty owed by the solicitors: see, in particular, [77].

9.07 The consequences of a breach of duty by a solicitor who acts without the authority of one or more of the clients may depend on whether the solicitor’s actions or words are binding on the client. A  solicitor may have ostensible 421

9.07  Real estate authority to act on behalf of the clients in relation to a real estate transaction even if he or she has no actual authority.1 The consequences of the solicitor’s actions may also depend on the effect of the transaction under the Land Registration Act 2002. For example, in AI-Sabah v Ali2 two properties were transferred under a forged power of attorney and charged to third party mortgagees. The judge held that it was not appropriate to exercise the discretion to rectify the register against the innocent mortgagees. As a consequence, the claimant was bound by the transfers and lost the properties. But even if the client is not bound by the solicitor’s conduct, the solicitor may be liable to third parties for breach of warranty of authority. A solicitor who acts on the instructions of one co-owner without the authority of the others warrants to a buyer or lender that he or she has authority to act on behalf of all of the co-owners and is liable to them for breach of that warranty in the event that the transaction is not genuinely authorised.3 Likewise, a solicitor who executes and exchanges a contract for the sale of land on the instructions of an impostor warrants that he or she has the authority of the property owner whom the impostor was impersonating.4 It is also useful to have in mind the additional duties which a solicitor owes to clients who are joint buyers of land. It is the solicitor’s duty to convey the property into their joint names, to explain the consequences of the different forms of ownership and to take on which form is suitable or appropriate.5 A solicitor who fails to take the clients’ instructions on the form of ownership or fails to record them accurately is almost certainly negligent.6 Mistakes of this kind will not vitiate the solicitor’s authority but will expose the solicitor to a claim for damages for negligence.7 1 See Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No  2) (2010) HKCFAR 479 at [52] (Lord Neuberger) (cited with approval by Gross LJ in Paul Quinn v CC Automotive Group Ltd t/a Carecraft [2010] EWCA Civ 1412). For a recent restatement of the principles applicable to an agent of a company see East Asia Company Ltd v PT Satria Tirtatama Energindo (Bermuda) [2019] UKPC 30 at [41]–[43] emphasising the importance of reliance. For further discussion see Chapter 5, para 5.24. 2 [1999] EGCS 11 (Ferris J). 3 See Penn v Bristol & West BS [1997] 1 WLR 1356, CA. 4 See P & P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 273 at [29]–[56] (Patten LJ). The claim for breach of warranty of authority failed because of the absence of reliance. For more detailed discussion of breach of warranty of authority see Chapter 5, paras 5.24 and 5.31–5.34, above. For alternative causes of action for negligence and breach of trust see Chapters 1 and 4. See also paras 9.08, 9.26 and 9.31, below. 5 See Webber v Gasquet, Metcalfe and Watson (1982) 132 NLJ 665 (HHJ Judge Finlay QC) and Tee-Hillman v Heppenstalls (26 June 2001, unreported, HHJ Bradbury) [2001] 6 WLUK 550 (where it was held that solicitors should have included a declaration of trust after 1993). See also Taylor v Warners (21 July 1987, unreported, Warner J) and Walker v Hall [1984] FLR 126 CA, at 129C–E  (Dillon LJ). The reasonably competent solicitor should explain the right of survivorship, the need for severance and that if the parties chose a joint tenancy over a tenancy in common their contributions to the purchase price would not necessarily be reflected in their beneficial ownership of the property. 6 See Carlton v Goodman [2002] EWCA Civ 545, [2002] 2 FLR 259 at [44] (Ward LJ) followed in Kliers v Schmerler [2018] EWHC 1350 (Ch) and Wood v Watkin [2019] EWHC 1311 (Ch), [2019] BPIR 1265, [2019] 2 P&CR DG15. 7 The requirement to record this information on the standard form transfer now makes this mistake less likely to occur: see Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 at [52] (Baroness Hale).

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Acting for more than one party  9.08

(c) Tort 9.08 In both Linaker v Keith Turner & Ashton1 and Penn v Bristol and West Building Society2 it was also held that a solicitor instructed by one co-owner assumed a duty of care in tort to the other. In the first case the wife claimed to be acting on behalf of the husband and in the second case the husband claimed to be acting on behalf of the wife. But in both cases the other co-owner was completely ignorant of the entire transaction and there was no contractual retainer between them and the solicitors. In Al-Sabah v Ali3 it was conceded that the solicitors owed a duty of care to the registered proprietor of a property when they acted on the instructions of an agent who relied on a forged power of attorney. In similar circumstances it has also been held arguable that a duty of care arises.4 The relationship between one co-owner and the other or between a principal and an agent acting under a forged power of attorney may well provide sufficient proximity to give rise to a duty of care. But there are problems in extending such a duty of care to circumstances in which solicitors are instructed by an imposter posing as the registered proprietor of a property. If the Land Registry registers the impostor as the proprietor of the property or any buyer or subsequent mortgagee, the solicitor may face either a claim by the true owner or a claim by the Land Registry under the statutory subrogation provisions in the Land Registration Act 2002.5 In Chief Land Registrar v Caffrey & Co6 a firm of solicitors submitted a forged DS1 and a forged power of attorney to the Land Registry which discharged a charge over the relevant property. The court held that the solicitor owed no duty of care to the mortgagee (which would support a subrogated claim). But it also held that the solicitor owed a direct duty of care to the Land Registry for the accuracy of the representations which it had made that the documents were genuine. It remains to be seen whether this decision will be followed in other cases.7 1 (5  November 1998, unreported, but available on Lawtel) (Garland J). The judge placed reliance on the fact that the solicitors had not complied with Principle 12.04 of the Guide to the Professional Conduct of Solicitors (the predecessor of the conduct rules considered above) because they had not obtained the claimant’s written instructions or seen him in person. See also Umeweni v J B Wheatley & Co [1990] EGCS 57, CA (Bar Library Transcript 1990/272). 2 [1995] 2 FLR 938 (HHJ Kolbert) at 947H–949G. (This point did not arise on the appeal in Penn: see [1997] 1 WLR 1356, CA at 1360F–G.) 3 [1999] EGCS 11 (Ferris J). 4 See Nouri v Marvi [2009] EWHC 2725 (Ch); [2010] PNLR 7 and Bowling & Co Solicitors v Edehomo [2011] EWHC 393 (Ch), [2011] 1 WLR 2217 (Roth J). 5 See s 103 and Sch 8, para 10. 6 [2016] EWHC 161 (Ch), [2016] PNLR 23 (Master Matthews). 7 The solicitors were not represented and the Master was at pains to point out that he was only narrowly persuaded on this point on the particular facts of the case. In P  & P  Property Ltd v Owen White & Catlin LLP  [2018]  EWCA  Civ 1082, [2019] Ch  273 the Court of Appeal held that a solicitor purporting to act for the vendor of a property (but in fact instructed by an impostor) owed no duty of care to the purchaser (or the purported purchaser) following an established line of authority on the duties owed to third parties: see Chapter 1, paras 1.19 to 1.33 and para 9.26, below. They did not deal with any duty of care owed to the true owner or the Land Registry (although it is difficult to see why there would be closer proximity in those

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9.09  Real estate situations). See also Burmeister v O’Brien [2009] NZHC 2154, a decision of the High Court of New Zealand, where the judge held that no duty of care arose on orthodox principles.

3  Acting for mortgagors, mortgagees and sureties 9.09 In this section we consider claims arising out the execution of guarantees and mortgages following the decision of the House of Lords in Royal Bank of Scotland v Etridge (No 2) (‘Etridge’).1 A common situation in which a solicitor will face a claim is where one partner (‘G’) is persuaded by improper pressure or coercion to guarantee the debts of his or her partner (‘B’) to a bank or lender (‘L’) usually secured by a charge over the family home. If L does not have notice of the undue influence it will be entitled to enforce the guarantee or charge against G but if it does have notice the charge will not be enforceable against G. If the charge is enforceable G may have a claim against the solicitor (‘S’) engaged to provide the necessary advice. If the charge is unenforceable L may have a claim against S. Claims of this kind often overlap and it is not possible to understand them fully without a knowledge of the underlying legal principles. 1 [2001] UKHL 44, [2002] 2 AC 773, [2001] 4 All ER 449, [2002] 1 Lloyd’s Rep 343 and [2001] 2 FLR 1364.

(a)  Non est factum 9.10 A party may rely on the defence of non est factum to resist enforcement of a transfer or legal charge if there is a radical or fundamental difference between the document which he or she has signed and the document which he or she understood or believed they were signing.1 The effect of the defence and its advantage in defending a claim brought by a lender is that the document will be void and the lender will be unable to enforce it even if had no notice of the circumstances in which it was executed (including notice of any fraud by a third party). A party will not be able to rely on the doctrine, however, if he or she fails to read the document through before signing it or signs it but leaves it to be completed by a third party, unless he or she made a fundamental mistake about the nature or terms of the document.2 Moreover, the court will not normally grant relief if the person executing the document was negligent.3 For this reason it is rare for the defence to succeed.4 1 Saunders v Anglia Building Society [1971]  AC  1004, HL, [1970] 3  WLR  1078 (1971) 22 P&CR 300. 2 United Dominions Trust v Western [1976] QB 513, CA. 3 This may turn on capability and education. See Lord Wilberforce in Saunders at 1027E–F: ‘The law ought, in my opinion, to give relief if satisfied that consent was truly lacking but will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents.’ 4 For a case in which the defence of non est factum failed but the defence of undue influence succeeded see Hackett v Crown Prosecution Service [2011] EWHC 1170 (Admin) (Silber J) (involving a claim by the Crown to a property on the basis that it was the proceeds of crime).

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Acting for more than one party  9.11

(b)  Undue influence 9.11 Etridge1 is the leading case on the law of undue influence and reference to the key passages which deal with the duties of a solicitor are set out below. However, in a passage in his judgment in Thompson v Foy,2 Lewison J helpfully distilled the general principles which can be derived from Etridge which the court will apply in deciding whether G has been induced to enter into the guarantee or charge by the exercise of undue influence. The references in the text below are to the relevant paragraphs in the speeches in Etridge: ‘i)  The objective of the doctrine of undue influence is to ensure that the influence of one person (“the donee”) over another (“the donor”) is not abused (§6); ii)  If the donor intends to enter into a transaction, but the intention was produced by means which lead to the conclusion that the intention thus procured ought not fairly to be treated as the expression of the donor’s free will, the law will not permit the transaction to stand (§7); iii) Broadly, there are two forms of unacceptable conduct. The first comprises overt acts of improper pressure or coercion such as unlawful threats. The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage. (§8); iv)  The principle is not confined to abuse of trust or confidence. It also extends to the exploitation of the vulnerable (§11); v)  Disadvantage to the donor is not a necessary ingredient of undue influence (§12). However, it may have an evidential value, because it is relevant to the questions whether any allegation of abuse of confidence can properly be made, and whether any abuse actually occurred (§104); vi)  Whether a transaction has been brought about by undue influence is a question of fact (§13); vii)  The legal burden of proving undue influence rests on the person alleging it. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case (§13); viii) If the claimant proves (a) that the donor placed trust and confidence in the donee or that the donee acquired ascendancy over the donor, and (b) that the transaction calls out for explanation, the 425

9.11  Real estate claimant has discharged an evidential burden, which will also enable an inference of undue influence to be drawn, and thus satisfy the legal burden, unless the donee produces evidence to counter the inference which would otherwise be drawn (§§14, 21 and 156); ix)  This is simply a question of evidence and proof. At the end of the day, after trial, there will either be proof of undue influence or that proof will fail and it will be found that there is no undue influence. In the former case, whatever the relationship between the parties and however the influence was exerted, there will have been found to have been an actual case of undue influence. In the latter there will be none (§93). x) Proof that the donor received advice from a third party before entering into the impugned transaction is one of the matters a court takes into account when weighing all the evidence. The weight, or importance, to be attached to such advice depends on all the circumstances. In the normal course, advice from a solicitor or other outside adviser can be expected to bring home to a donor a proper understanding of what he or she is about to do. But a person may understand fully the implications of a proposed transaction, for instance, a substantial gift, and yet still be acting under the undue influence of another. Proof of outside advice does not, of itself, necessarily show that the subsequent completion of the transaction was free from the exercise of undue influence. Whether it will be proper to infer that outside advice had an emancipating effect, so that the transaction was not brought about by the exercise of undue influence, is a question of fact to be decided having regard to all the evidence in the case (§20); xi)  The nature of the advice required is that someone free from the taint of undue influence should put before the donor the nature and consequences of the proposed transaction. It is not necessary for the adviser to recommend the transaction. An adult of competent mind is entitled to enter into a financially unwise transaction if he or she wants to (§§60 and 61).’ There are therefore two classes of undue influence: actual undue influence (‘Class 1’) which depends on proof of coercion or pressure which the court regards as improper, and presumed undue influence (‘Class 2’) where the nature of the relationship and the nature of the transaction give rise to a presumption of undue influence. Some relationships (including solicitor and client) give rise to a Class 2 presumption automatically. In other cases it is for the party alleging undue influence to establish that the relationship was one of influence and involved the necessary trust and confidence or ascendancy and vulnerability to justify the Class 2 presumption. The relationship between spouses or partners is not a Class 2 relationship although ‘the court will nevertheless note, as a 426

Acting for more than one party  9.13 matter of fact, the opportunities for abuse which flow from a wife’s confidence in her husband’.3 1 [2001]  UKHL  44, [2002] 2 AC  773. For a full citation see para  9.09, note 1, above. Etridge comprised the hearing of eight appeals. There were five speeches, of which those of Lords Nicholls, Hobhouse and Scott are the longest. Lords Bingham, Clyde, Hobhouse and Scott all expressly agreed with Lord Nicholls, who did not refer to any of the other speeches save insofar as they concerned the individual cases. Lord Nicholls’s speech is accepted here as the leading speech. 2 [2009]  EWHC  1076 (Ch), [2010]  P&CR  16 at [99]. He also added a number of additional observations at [100] and [101] which are of value in assessing any case of undue influence. 3 Etridge at [19] (Lord Nicholls). In Royal Bank of Scotland plc v Chandra [2010] EWHC 105 (Ch) David Richards J held that an inadvertent failure by H to reveal information to W was not undue influence. His decision was upheld by the Court of Appeal: see [2011] EWCA Civ 192. In Hewett v First Plus Financial Group plc [2010]  EWCA  Civ 312, [2010] 2  EGLR  51 the Court of Appeal held that H’s failure to disclose to W that he was having an affair with another woman (which would have been relevant to her decision to re-mortgage the family home) amounted to actual undue influence. Compare Destine Estates Ltd v Muir [2013] EWHC 4191 (Ch), [2014] PLSCS (where it was held that no sufficient relationship of trust or confidence or ascendancy arose) and Hart v Burbidge [2014]  EWCA  Civ 992, [2014]  PLSCS  222 (where it was held that there was a relationship of confidence between mother and daughter and no reasonable explanation for gifts of assets, which included the proceeds of the sale of two properties, with the result that the presumption of undue influence was not rebutted).

(i)  The importance of legal advice 9.12 Although advice from S  can be expected to bring home to G  a proper understanding of what he or she is about to do and the court will attach significant weight to it, the presence or absence of legal advice is not determinative.1 All of the authorities stress the importance of ensuring that the advice which G receives is truly independent and properly addresses the relevant issues.2 1 See proposition (x) (in para 9.11, above). See also Niersmans v Pesticcio [2004] EWCA Civ 372, [2004] WTLR 699 at [23] (Mummery LJ). 2 See proposition (xi) and the criticisms of the advice given to the donor in Niersmans v Pesticcio (above) and UCB Corporate Services Ltd v Williams [2002] EWCA Civ 555.

(ii) Notice 9.13 The threshold before L is put on enquiry that one spouse or partner is acting under the undue influence of the other is not a high one. Where the loan is made to both partners jointly and for their joint benefit, L will not be put on enquiry. But L is put on enquiry where G offers to guarantee the debts of a spouse or partner or a company in which the spouse or partner holds shares. In Etridge Lord Nicholls left open the question whether L was put on inquiry when G agreed to guarantee the debts of a company or business in which both she and her husband held shares.1 But in both Mahon v FBN Bank (UK) Ltd2 and Royal Bank of Scotland plc v Chandra3 L was put on enquiry even though G was a director or shareholder in her husband’s company. L was not entitled to assume that G’s interest was any more than formal (in the absence of evidence 427

9.14  Real estate of her participation in the management of the company or in the negotiations themselves). However, in The Mortgage Business Plc v Green4 L did not have notice of the son’s abuse of his relationship with his mother (where they were both co-owners of the charged property). There was no requirement for the bank to ‘play detective’ or to adopt ‘a high level of prudence and scepticism’. The court also found that although S (who was acting for both B and L) had additional information, that knowledge did not give rise to concerns which would have put L on notice of undue influence. 1 [2001] UKHL 44, [2002] 2 AC 773 at [49]. 2 [2011] EWHC 1432 (Ch), [2011] 2 BCLC 83 at [50]–[51] (HHJ Barker QC) cited in Bank of India v Riat [2014] EWHC 1775 (Ch). 3 [2010] EWHC 105 (Ch) at [166] (David Richards J). There was no appeal against this finding: see [2011] EWCA Civ 192. 4 [2013] EWHC 4243 (Ch), [2014] PLSCS 19. The court considered separately the actual and constructive knowledge of L and knowledge to be imputed to L through S.

(iii)  The lender’s duty: pre-Etridge cases 9.14 Very few cases will now involve transactions which took place before the decision in Etridge.1 However, it is still valuable to compare the standard for L to discharge its obligations both before and after Etridge when considering the modern practice of banks and lenders. This is because the standard required in transactions before Etridge is less exacting than in transactions which took place after it (or within a reasonable time after it).2 The speeches in Etridge were handed down on 19  October 2001 and Lord Nicholls explained the position in relation to pre-Etridge transactions as follows:3 ‘In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety.’ The guidance in Etridge was less clear, however, about whether it was permissible for L to rely on a certificate given by S if he or she was also acting for the bank. The position appears to be that L was not fixed with notice even if S was also acting on its behalf.4 1 See Davies v AIB  Group (UK) plc [2012]  EWHC  2178 (Ch), [2012] 2  P&CR  19 (Norris J) (which involved a pre-Etridge transaction). 2 See Royal Bank of Scotland plc v Chandra [2010] EWHC 105 (Ch) at [175] (David Richards J). There was no appeal against this finding either: see [2011] EWCA Civ 192. 3 See [2001] UKHL 44, [2002] 2 AC 773 at [80]. In Barclays Bank plc v Coleman (which was one of the cases in the conjoined appeals heard by the House of Lords with Etridge) L was able to rely on a standard form certificate provided by a qualified legal executive. In Bank of Scotland plc v Hill [2002]  EWCA  Civ 1081 (decided after Etridge but on pre-Etridge principles) the Court of Appeal also held that a certificate contained in a report on title prevented L from being fixed with constructive notice. 4 See [76]–[79] (Lord Nicholls) and [176]–[179] (Lord Scott). In Coleman S was acting for Mr and Mrs Coleman although L was not separately represented and simply sent the charge to S for execution. In Chandra (where a similar form of certificate was used) the facts were the same.

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Acting for more than one party  9.15 (iv)  The lender’s duty after Etridge 9.15 In cases involving securities executed after Etridge it was also held to be permissible for S to give the necessary advice to one spouse or partner who was providing a guarantee even if they were acting for the lender or the other spouse or partner. It follows, therefore, that L will not be fixed with constructive notice simply because G instructs the same solicitor as L or B (whatever the relevant relationship between G and B might be). However, Lord Nicholls also provided the following words of caution:1 ‘The advantages attendant upon the employment of a solicitor acting solely for the wife do not justify the additional expense this would involve for the husband. When accepting instructions to advise the wife the solicitor assumes responsibilities directly to her, both at law and professionally. These duties, and this is central to the reasoning on this point, are owed to the wife alone. In advising the wife the solicitor is acting for the wife alone. He is concerned only with her interests. I emphasise, therefore, that in every case the solicitor must consider carefully whether there is any conflict of duty or interest and, more widely, whether it would be in the best interests of the wife for him to accept instructions from her. If he decides to accept instructions, his assumption of legal and professional responsibilities to her ought, in the ordinary course of things, to provide sufficient assurance that he will give the requisite advice fully, carefully and conscientiously. Especially so, now that the nature of the advice called for has been clarified. If at any stage the solicitor becomes concerned that there is a real risk that other interests or duties may inhibit his advice to the wife he must cease to act for her.’ Nevertheless, it is not sufficient for L simply to give instructions to S to ensure that G receives adequate advice. In Barclays Bank plc v O’Brien2 the House of Lords had held that L could reasonably be expected to take steps to bring home to G the relevant risks and advise him or her to take independent advice. In Etridge the House of Lords accepted that this burden would be discharged if L held a private meeting with G at which this advice was given. However, because it had not been banking practice after O’Brien to hold meetings because of the potential evidential risks involved,3 the House considered what other safeguards might be sufficient to discharge the burden on L. They accepted that L  could discharge its duty to G  by taking the following steps (original emphasis):4 ‘(1)  … Since the bank is looking for its protection to legal advice given to the wife by a solicitor who, in this respect, is acting solely for her, I consider the bank should take steps to check directly with the wife the name of the solicitor she wishes to act for her. To this end, in future the bank should communicate directly with the wife, informing her that for its own protection it will require written 429

9.15  Real estate confirmation from a solicitor, acting for her, to the effect that the solicitor has fully explained to her the nature of the documents and the practical implications they will have for her. She should be told that the purpose of this requirement is that thereafter she should not be able to dispute she is legally bound by the documents once she has signed them. She should be asked to nominate a solicitor whom she is willing to instruct to advise her, separately from her husband, and act for her in giving the necessary confirmation to the bank. She should be told that, if she wishes, the solicitor may be the same solicitor as is acting for her husband in the transaction. If a solicitor is already acting for the husband and the wife, she should be asked whether she would prefer that a different solicitor should act for her regarding the bank’s requirement for confirmation from a solicitor. The bank should not proceed with the transaction until it has received an appropriate response directly from the wife. (2) Representatives of the bank are likely to have a much better picture of the husband’s financial affairs than the solicitor. If the bank is not willing to undertake the task of explanation itself, the bank must provide the solicitor with the financial information he needs for this purpose. Accordingly it should become routine practice for banks, if relying on confirmation from a solicitor for their protection, to send to the solicitor the necessary financial information. What is required must depend on the facts of the case. Ordinarily this will include information on the purpose for which the proposed new facility has been requested, the current amount of the husband’s indebtedness, the amount of his current overdraft facility, and the amount and terms of any new facility. If the bank’s request for security arose from a written application by the husband for a facility, a copy of the application should be sent to the solicitor. The bank will, of course, need first to obtain the consent of its customer to this circulation of confidential information. If this consent is not forthcoming the transaction will not be able to proceed. (3) Exceptionally there may be a case where the bank believes or suspects that the wife has been misled by her husband or is not entering into the transaction of her own free will. If such a case occurs the bank must inform the wife’s solicitors of the facts giving rise to its belief or suspicion. (4)  The bank should in every case obtain from the wife’s solicitor a written confirmation to the effect mentioned above.’ If L complied (and still complies) with this guidance, it can safely rely on a certificate provided by S. But if L  failed (and still fails) to follow it, it will remain at risk of an adverse finding on notice. For example, in HSBC Bank Plc v. Brown5 L was unable to enforce its charge because it failed to follow 430

Acting for more than one party  9.16 this guidance. G’s signature on the charge was witnessed by S who signed the standard form certificate. But there was no evidence that L wrote to G asking her to nominate her own solicitor or that she replied. There was no evidence either that L explained the purpose of her taking independent advice or that it provided S with the information which would have enabled him to explain the financial risks to be assumed by her.6 1 [2001] UKHL 44, [2002] 2 AC 773 at [74] 2 [1994] 1 AC 180. 3 In Chandra, for instance, W attended a meeting with H and L. 4 [2001] UKHL 44, [2002] 2 AC 773 at [79]. 5 [2015] EWHC 359 (Ch) (HHJ Simon Barker QC). 6 See [61]–[69]. S did not give evidence and the judge accepted G’s evidence that she did not sign it in his presence.

9.16 As for the content or substance of the advice which S was required to give to G, the House of Lords also gave detailed guidance on the minimum or core advice which would be acceptable:1 ‘When an instruction to this effect is forthcoming, the content of the advice required from a solicitor before giving the confirmation sought by the bank will, inevitably, depend upon the circumstances of the case. Typically, the advice a solicitor can be expected to give should cover the following matters as the core minimum. (1) He will need to explain the nature of the documents and the practical consequences these will have for the wife if she signs them. She could lose her home if her husband’s business does not prosper. Her home may be her only substantial asset, as well as the family’s home. She could be made bankrupt. (2) He will need to point out the seriousness of the risks involved. The wife should be told the purpose of the proposed new facility, the amount and principal terms of the new facility, and that the bank might increase the amount of the facility, or change its terms, or grant a new facility, without reference to her. She should be told the amount of her liability under her guarantee. The solicitor should discuss the wife’s financial means, including her understanding of the value of the property being charged. The solicitor should discuss whether the wife or her husband has any other assets out of which repayment could be made if the husband’s business should fail. These matters are relevant to the seriousness of the risks involved. (3) The solicitor will need to state clearly that the wife has a choice. The decision is hers and hers alone. Explanation of the choice facing the wife will call for some discussion of the present financial position, including the amount of the husband’s present indebtedness, and the amount of his current overdraft facility. (4) The solicitor should check whether the wife wishes to proceed. She should be asked whether she is content that the solicitor should write to the bank confirming he has explained to her the nature of the documents and the practical implications they may have for her, or whether, for instance, she 431

9.17  Real estate would prefer him to negotiate with the bank on the terms of the transaction. Matters for negotiation could include the sequence in which the various securities will be called upon or a specific or lower limit to her liabilities. The solicitor should not give any confirmation to the bank without the wife’s authority. The solicitor’s discussion with the wife should take place at a face-toface meeting, in the absence of the husband. It goes without saying that the solicitor’s explanations should be couched in suitably nontechnical language. It also goes without saying that the solicitor’s task is an important one. It is not a formality. The solicitor should obtain from the bank any information he needs. If the bank fails for any reason to provide information requested by the solicitor, the solicitor should decline to provide the confirmation sought by the bank.’ The Law Society has also issued additional guidance to solicitors derived from Etridge and provided a draft standard form of letter for S to send to G after giving advice.2 If S fails to give the core advice but provides a standard form certificate to L there are two potential consequences: first, G may execute the guarantee and mortgage whilst acting under the undue influence of B. Secondly, L may rely on the certificate in deciding to make the loan. Whether the certificate will be sufficient to protect L against a finding of notice or expose S to a substantial liability will turn on a range of different factors which are now considered. 1 [2001] UKHL 44, [2002] 2 AC 773 at [65]–[66], see also [64] and [67]. In Padden v Bevan Ashford [2011] EWCA Civ 1616, [2011] 1 WLR 1759 at [28] (prior to remission of the case) Lord Neuberger MR described this passage as ‘a very good guide to the appropriate approach’. It should not therefore be regarded as prescriptive. See para 9.17, below as regards the findings on remission of the case and the subsequent appeal. 2 ‘Undue Influence – solicitors’ duties post Etridge’ issued by the Law Society’s Conveyancing and Land Law Committee in May 2002 and reproduced at App VI.5 of the Conveyancing Handbook. For the model letter, see App VI.6, and B7.16, ‘Fiduciary relationships and undue influence’, which sets out when a fiduciary duty exists, and the obligations on solicitors when one does.

(c)  Acting for the guarantor alone (i)  Liability to the guarantor 9.17 In Padden v Bevan Ashford1 G, a wife, brought a claim against S who had advised her in relation to a charge which she had executed over the family home to secure the repayment of a debt of £200,000 which B, her husband and a financial adviser, had stolen from a client. At a short free interview S, a junior solicitor, had advised her not to proceed and at a later meeting another solicitor had witnessed her signature but given her no advice. However, he had also signed a certificate stating that he was satisfied that she understood the nature of the deed and its meaning and effect and that to the best of his knowledge she had freely consented to it without undue influence or in reliance upon any misrepresentation. The trial judge dismissed the claim against S but the Court of Appeal upheld G’s appeal and remitted the claim for retrial. It held that by 432

Acting for more than one party  9.18 providing the certificate to L, S assumed a duty to G to give the advice which would enable them to provide that certificate. They also held that the advice which G received was inadequate. Lord Neuberger MR stated that S should have ‘told her the importance of finding out all the relevant facts’ and that the obvious course was to meet or telephone B’s solicitor in order to establish the full extent of B’s defalcations. He also stated that S ‘should have explored and tested her reasons for entering into the transaction, or at last advised her as to the importance of doing so’.2 After remission for retrial the solicitors were again found liable and the Court of Appeal dismissed a second appeal.3 Although the facts of this case are very strong and G was being asked to commit herself to a sale of the family home in circumstances where this was unlikely to prevent B going to prison, the decision demonstrates the burden on a solicitor who is asked to provide independent advice and provide the necessary certificate. If L has not complied with its obligations and contacted W directly or provided the necessary information which will enable S to provide that advice, S must obtain it directly or at the very least warn G  of its significance and caution G not to enter into the transaction until L or B has provided that information. It also demonstrates that it may not be enough for S simply to caution B against the transaction. The function of S’s advice is to enable G to understand whether the transaction has any real prospect of assisting B to get out of commercial or personal trouble.4 1 [2011] EWCA Civ 1616, [2012] 1 WLR 1759. 2 See [39], [47] and [48]. 3 [2013] EWCA Civ 824, [2013] PNLR 34. See, in particular, [41] where McCombe LJ concluded: ‘Mrs Padden gave the clearest possible evidence that she would not have signed the documents if she had been advised, as she clearly should have been by any competent lawyer, that the completion of the proposed transactions would have been very unlikely to prevent a prosecution.’ 4 See also Etridge [2001] UKHL 44, [2002] 2 AC 773 at [170]: The critical point is that S should be in a position ‘to remedy any misapprehensions and cure any misrepresentations’. For a less extreme case in which the solicitor was held to have given advice of this nature see Davies v AIB Group (UK) plc [2012] EWHC 2178 (Ch) (Norris J) at [112].

9.18 If G  demonstrates that the advice which S  gave was insufficient to free them from the effect of any undue influence, S’s negligent advice will only have a causative effect if L did not have notice of any undue influence.1 Where S has provided a letter in the form contemplated by Lord Nicholls either to L directly or to L’s solicitors then L will be able to rely on the assurance that S has explained the nature of the documents and the practical implications to G.2 However, L will only be able to rely on such an assurance if it has made sure that S was acting independently and that the retainer extended to giving advice of this nature.3 Moreover, L  may not be protected if it was aware of information which made it unreasonable for L  to rely on S’s confirmation.4 Whether L’s failure to communicate with L directly or to provide the necessary information to S will make it unreasonable for L to rely on the certificate will depend on the circumstances. 1 Even if S has been negligent, it will be in the interests of S and insurers to demonstrate that L had actual or constructive notice of the charge to limit the damages recoverable.

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9.19  Real estate 2 See Etridge [2001] UKHL 44, [2002] 2 AC 773 at [119]–[122] (Lord Scott). 3 See Etridge at [116] (Lord Scott), National Westminster Bank plc v Breeds [2001] Lloyd’s Rep Bank 98, (Lawrence Collins J) at [75] and Yorkshire Bank plc v Tinsley [2004]  EWCA  Civ 816, [2004] 3 All ER 463 at [35] (Peter Gibson LJ). What is required is ‘confirmation that the solicitor’s instructions do extend to advising her about the nature and effect of the transaction’. 4 For cases where L was fixed with notice despite a certificate from S see National Westminster Bank plc v Amin [2002] UKHL 9, [2002] 1 FLR 735 where S (who did not speak Urdu) advised B2 (who did not speak English). Lord Hoffmann stated (at [25]): ‘In ordinary cases I  think that understanding, once the explanation had been given, could be assumed. But it is arguable that with Mr and Mrs Amin such an assumption would not be a safe one. I think the bank, if they indeed knew as much about Mr and Mrs Amin and their background as they are alleged to have known, might reasonably have asked for confirmation of Mr and Mrs Amin’s apparent understanding of the transaction.’ See also National Westminster Bank plc v Breeds [2001] Lloyd’s Rep Bank 98 (Lawrence Collins J), Lloyds TSB Bank plc v Gravell (1 February 2000, unreported) and UCB Corporate Services Ltd v Williams [2002] EWCA Civ 555 (all of which preceded Etridge in the House of Lords).

9.19 If G is unable to prove that L has notice of the undue influence, he or she will be left with a claim over S. G will have to prove on a balance of probabilities that he or she would not have proceeded with the transaction (if properly advised).1 If G  is able to do so the claim against S  will be for the value of G’s interest in the property on the assumption that G had not entered into the charge, together with the consequential costs of resisting possession proceedings (provided that G acted reasonably in doing so).2 Where G seeks to demonstrate that the outcome would have been different and that he or she would have been able negotiate better terms with L (or any existing lender) the Court will apply ‘loss of a chance’ principles.3 1 See Etridge v Pritchard Englefield [1999] PNLR 839, CA where Mrs Etridge’s claim against her solicitors was dismissed despite her having failed in her defence against the Royal Bank of Scotland. 2 See Harris v Nantes and Wilde [1997] NPC 7 where substantial damages were awarded at first instance. In related proceedings G appears to have obtained both a declaration that a transfer forged by G was not binding on him and an order that B account to him for the proceeds of sale. The loss alleged against S appears to have been based on the fact that G could not recover this sum from B. 3 See Dayman v Lawrence Graham [2008]  EWHC  2036 (Ch), [2008] Lloyd’s Rep PN  21 (HHJ Hodge QC) at [76]–[89] for consideration of the personal and commercial issues which will arise in this situation. In that case S’s firm was found vicariously liable for the failure of S (who was the senior partner) to give advice to his wife about the effect of an all monies charge. The action was also dismissed. The loss of a chance approach was applied in the Scottish case McCrindle Group Ltd v Maclay Murray & Spens [2013] CSOH 72 (where Dayman was cited with approval and a complex sequence of potential outcomes and bargaining positions were broken down to achieve the final awarded figure for damages).

(ii)  Liability to the lender 9.20 In the first Court of Appeal hearing in Padden v Bevan Ashford1 Lord Neuberger MR stated that the purpose of S’s advice and certificate is ‘protecting such other parties against a subsequent claim by the client to set aside the transaction’. There is no English authority which addresses the question 434

Acting for more than one party  9.21 whether S assumes a duty of care to L where he or she is instructed solely by G. But it is suggested that S must assume a duty to L in those circumstances for the accuracy of the statements made in the letter or certificate. In Connell v Odlum2 a husband engaged a solicitor to advise his wife on a pre-nuptial agreement whilst he himself was advised by other solicitors. His wife was later successful in having the prenuptial agreement set aside for undue influence. It was held that the solicitor owed a duty to the husband to ensure that he gave adequate advice to the wife. If S certifies that he or she has fully explained the nature and consequences of the document to G in the knowledge that L will rely on the certificate in granting credit facilities to B, S must assume a duty of care to L for its accuracy.3 1 [2011]  EWCA  Civ 1616, [2012] 1  WLR  1759 at [38]. This point was unaffected by the subsequent Court of Appeal decision: see para  9.17, above. In Mercantile Credit Co Ltd v Fenwick [1999] Lloyd’s Rep PN 408, [1999] 2 FLR 110, CA Chadwick stated: ‘A certificate signed in that form without qualification seems to me to acknowledge that the lender’s solicitor has made such enquiries as he has thought necessary to satisfy himself that there is no reason to think that there will be a challenge to the security which the lender is taking; and that, having made those enquiries or taken those steps, he is so satisfied.’ 2 [1993] 2 NZLR 257. 3 For consideration of the measure of damages which will be the same whether S is instructed by L or not see para 9.22, below.

(d)  Acting for the lender and borrower (i)  Liability to the lender 9.21 The wider obligations which S owes to L are discussed in Chapter 10. In this section we are concerned only with the common situation where S is initially instructed by B and then jointly instructed by L. There are a number of points to note about this situation: (1)

If the loan involves a standard residential mortgage (even if it is made for business purposes), S’s obligations will be governed by the UK Finance Mortgage Lenders’ Handbook.1

(2) Even though Lord Nicholls was prepared to accept in Etridge that S could give advice to G even if he or she had accepted instructions from both L and B, the Lenders’ Handbook prohibits this.2 (3) The assumption made by the Lenders’ Handbook is that S  will know the background and whether the loan involves a business debt or any of the parties require independent advice.3 Once S appreciates that G is not benefiting personally from the loan or guaranteeing the debts of B, then S must advise G to take independent advice.4 (4) Neither the Lenders’ Handbook nor the standard form Certificate of Title impose an obligation upon S to obtain or provide the confirmation in paragraph  (4) of the guidance given by Lord Nicholls in Etridge even where S  provides such advice to G  directly.5 There is, therefore, 435

9.22  Real estate the potential for a number of breaches of duty. If it is obvious to S that B and G should be separately advised and S fails to advise G to obtain independent advice this failure will be a breach of duty. If G refuses to take independent advice S must then ask L for instructions and if S fails to take instructions or to consider whether there is a conflict and goes on to give advice to G, this will also be a breach of duty. (5) Finally, if L’s instructions to S are to provide advice to G, then S will have to decide whether it is appropriate to accept those instructions. If S agrees to give advice to G but fails to do so with reasonable care he or she will not only be in breach of duty to G (see above) but also in breach of duty to L. This will include the obligation to explain the purpose underlying the requirement to take legal advice.6 1 The 2011 Code remained in force until 25 November 2019 and governs the standard of behaviour of solicitors until that date for the purposes of future cases. IB(3.7) provided that adoption of the Law Society and Council of Mortgage Lenders Approved Certificate of Title will tend to show compliance with O(3.6). See para  9.02, above as regards the position on conflicts generally under the new 2019 Standards and Regulations. The SRA Standards and Regulations 2019 do not contain any prescriptive guidance. 2 See §8.1: ‘Unless we otherwise state you must not advise any borrower who does not personally benefit from the loan or any guarantor’. 3 See §8.1 :’If we do allow you to advise any of these people, you must only do so after recommending in the absence of any other person interested in the transaction that such person obtains independent legal advice. Any advice that you give any of these people must also be given in the absence of any other person interested in the transaction. You should be particularly careful if the matrimonial home or family home is being charged to secure a business debt …’ 4 §8.1 does not require S to make arrangements for G to take independent advice as it does for any person who is required to sign a consent form. For discussion of what the obligation to ‘arrange’ might involve see para 10.60, below. If G refuses to take independent advice S can do no more than report to L that G will not agree to see an independent solicitor, and ask for L’s (and possibly B’s) instructions. 5 See para  9.16, above. In Mercantile Credit Co Ltd v Fenwick [1999] Lloyd’s Rep PN  408, [1999] 2 FLR 110, CA it was held that L’s solicitors were not liable in negligence for failing to obtain a certificate from B’s solicitors confirming that they had given G independent advice. The decision also turned on the construction of the standard form instructions. In the light of the authorities considered in para 9.18, above it is suggested that Fenwick will not be followed today and that S will be liable if he or she fails to take reasonable steps to ensure (a) that G instructs an independent firm of solicitors who have no personal or client conflict and (b) that the solicitors provide a letter or certificate. It is also suggested that S will be liable for completing the transaction without a certificate unless he or she has taken further instructions from L. 6 See para  9.15, above. Further, S  may come under an obligation to disclose non-confidential information to L  acquired in the course of giving this advice: see E-Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4 WLR 44.

9.22 Because the Lenders’ Handbook does not require S to provide a letter or certificate, L will have little or no protection against a claim by G to set aside the charge. If S fails to ensure that G takes independent advice and to obtain a certificate from an independent solicitor L will be fixed with notice of any undue influence.1 The position will be the same where S undertakes to give advice to G but fails to do so adequately. In those circumstances L will have a claim over against S for the difference between (a) the amount which it would have realised 436

Acting for more than one party  9.23 on the sale of the property if it had obtained a first legal charge and been able to enforce it and (b) the amount which it is now able to realise by enforcing its security interest against B2 and any equitable rights of subrogation in relation to any earlier charges.3 L will also be able to recover damages for the cost of funding the advance between the date of (a) and (b) (above) together with any consequential legal costs which L has incurred in seeking to enforce its charge (provided that those costs have been incurred reasonably). However, S  may well have a substantial defence of contributory negligence if L has proceeded without contacting G directly to nominate his or her own solicitor or providing the necessary information to enable that solicitor to advise G adequately. 1 See Etridge [2001]  UKHL  44, [2002] 2  AC  773 at [125] where Lord Scott dealt with the appeal in Midland Bank plc v Wallace. He stated that the lender could not rely on the fact that G  had received legal advice in the absence of a certificate. Contrast Bank of Scotland plc v Hill [2002] EWCA Civ 1081 (decided after Etridge but on pre-Etridge principles) where the Court of Appeal held that the following certificate in a report on title was sufficient to discharge L’s duty: ‘We confirm that, where necessary, in accordance with the Instructions to Solicitors provided to us by the Bank, all joint borrowers, joint owners and occupiers aged 18 or over have received legal advice independent from the Bank and from any other person who signed the Legal Charge. We hold a letter in the form prescribed by the Bank signed by an independent solicitor confirming that such advice has been given.’ 2 Where B is guilty of undue influence B’s own signature on the charge will be taken as evidence of severance by B of any joint tenancy, and B’s beneficial interest in the subject property will be charged in equity to L: see Ahmed v Kendrick [1988] 2 FLR 22, CA and First National Bank plc v Achampong [2003] EWCA Civ 487, [2004] 1 FCR 18 (applied by Lewison J in Thompson v Foy [2009] EWHC 1076 (Ch), [2010] P&CR 16 at [145] and also by Birss J in Santander UK Plc v Fletcher [2018] EWHC 2778 (Ch), [2019] 2 P&CR 4). 3 See Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291 at [32]–[43] (Neuberger LJ). See also Anfield (UK) Ltd v Bank of Scotland plc [2010]  EWHC  2374 (Ch), [2011] 1 WLR 2414.

9.23 There are two final issues worth considering. First, it may not be obvious to S that the loan involves a business debt or that G is not benefiting personally from the loan (particularly where the loan involves the re-mortgage of the family home).1 Secondly, even if S ensures that G sees an independent solicitor, L may be fixed with notice of any undue influence because of its own failure to comply with the Etridge guidelines and to provide the necessary information or obtain the necessary certificate.2 We consider that S  can be under no liability in those circumstances. The terms of S’s retainer under the Lenders’ Handbook are expressly limited3 and it is suggested that those terms will not be construed as imposing an implied duty to investigate the underlying nature of each transaction with B and G or to give advice to L more generally in the absence of express instructions to do so.4 S cannot be expected to check with L to establish the underlying commercial nature of each transaction or to advise L to comply with its Etridge duty by providing adequate information to the independent solicitor. In our view, S  is entitled to assume that L  will be aware of the risks of failing to comply with Lord Nicholls’ guidance or to provide the necessary information.5 1 See para 9.13, above.

437

9.24  Real estate 2 See para 9.15, above. 3 The Law Society and Council of Mortgage Lenders Approved Certificate of Title limits S’s instructions to: ‘advising any other person required to sign any document on the terms of that document or, if there is a conflict of interests between that person and the borrower or the lender, advising that person on the need for separate legal advice and arranging for them to see an independent conveyancer.’ It also contains an express statement that S’s duties are limited to the matters set out in the certificate and that payment of the mortgage advance constitutes acceptance of those limitations: see further discussion in Chapter 10 at para 10.29, below. 4 See National Home Loans Corporation plc v Giffen, Couch & Archer [1998] 1 WLR 207, CA. 5 It is suggested that this conclusion (which was set out in the third edition) is unaffected by the decision of the Court of Appeal in E-Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4  WLR  44. See, in particular, [42] (Burnton LJ): ‘This does not mean that a solicitor instructed to act for both lender and borrower must act as a detective or bloodhound. The solicitor instructed on the terms of the CML Handbook was not required to carry out any work that was outside the scope of his instructions. It was only if, while carrying out that work, he came into possession of non-confidential information that a reasonably competent solicitor would realise adversely affected the title to the mortgage property or the value of the security that he was under a duty to report it to the lender.’

(ii)  Liability to the guarantor 9.24 If G refuses to take independent advice it is possible that L may instruct S to give the necessary advice. In Etridge the House of Lords indicated that there is nothing improper in S acting for L and B but also advising G provided that there is no conflict between the interests of each client.1 It will not always be easy for S to decide whether he or she can continue to represent both parties and in Etridge, Lord Nicholls has given detailed guidance about when S could properly accept instructions.2 But once S agrees to give advice to G, S acts for G and for G alone (in giving that advice). If S fails to give adequate advice, he or she will be liable to G in exactly the same way as if he or she had been instructed by G directly.3 1 [2001] UKHL 44, [2002] 2 AC 773. 2 See [74] set out at para 9.15, above. 3 See paras 9.17 to 9.19, above.

(e)  Acting for the lender alone 9.25 Where S  is instructed to act by L  alone, L  is free to adopt its own instructions and is not limited by the 2011 Code nor the 2019 Standards and Regulations. However, most lenders are likely to adopt the Lenders’ Handbook where the transaction involves a residential charge and the transaction involves a guarantee of business debts by one spouse or partner for the other.1 Where, therefore, L adopts Part 3 or similar standard terms a number of similar issues will arise. One important issue will be whether S should make contact with G directly in order to arrange for G to take independent advice or whether it is permissible for S  to rely on the solicitor acting for B. Another important issue is whether it is reasonable for S to rely on a certificate provided by B’s solicitor. A third important issue is whether S owes any obligation to ensure 438

Acting for more than one party  9.26 that B’s solicitor has the relevant information from L and B to enable him or her to provide advice to the Etridge standard. Given the guidance in Etridge we take the view that it is permissible for S to rely on B’s solicitors to ensure that G  takes independent advice provided that S  can be satisfied that there is no obvious conflict of interest and that B’s solicitors have confirmed that they are retained to give fully independent advice to G  on the nature of the relevant documents and their practical consequences.2 Finally, it is also our view that S is entitled to assume that there is no reason why L should not be entitled to rely on a certificate or letter given by B’s solicitor unless L has given instructions to the contrary. S cannot be responsible if it is unreasonable for L to rely on a certificate given by B’s solicitors because L has failed to comply with its own Etridge duty to provide adequate financial information to B’s solicitor.3 1 Part 3 of the Handbook also incorporates the relevant provisions of Part 1. For the introduction of Part 3 see para 10.32, below. Part 3 §8 provides as follows: ‘You should refer to our instructions in Part 2, paragraph 8.1 of the Handbook or in our letter of instruction with regard to obtaining a signed deed or form of consent where part of the loan is not for the benefit of all joint Borrowers. You should also refer to paragraph 8 of Part 1 of the Handbook.’ 2 See para 9.18, note 2, above. 3 See para 9.23, above.

4  Duties to third parties (a)  Pre-contract inquiries 9.26 When the seller’s solicitor answers pre-contract enquiries he or she does so as agent for the seller client. If the seller has given the solicitor misleading information, which the solicitor repeats in pre-contract inquiries, the seller may be liable to the buyer. The seller will also be liable if he or she gives accurate information to the solicitor but the solicitor gives an inaccurate answer to pre-contract enquiries. If the solicitor is negligent either by failing to correct the client’s error or by making an error of their own, he or she will also be liable to the seller for having exposed them to that loss.1 The more difficult question is whether the solicitor should be personally liable to the buyer in the event of the seller’s inability to meet an award of damages. In Gran Gelato Ltd v Richcliff (Group) Ltd2 Sir Donald Nicholls V-C. held that the seller’s solicitor was not personally liable to the buyer for errors in answering pre-contract inquiries.2 In the light of the Court of Appeal’s analysis in P&P Property Ltd v Owen White & Catlin LLP3 it is suggested that the court will only find a solicitor personally liable for errors in pre-contract inquiries where he or she could genuinely be said to have assumed a personal responsibility to the buyer. It is also suggested that this is only likely to arise where (a) it is clear that the solicitor is not merely repeating information provided by the seller and the answer relates to information which the seller had no means of acquiring except through the solicitor, (b) the context is such that the solicitor either knew or ought to have known that the answer would be relied on by the buyer 439

9.27  Real estate for its accuracy4 and (c) the solicitor has not lawfully excluded liability by an appropriate disclaimer.5 1 For an example see Schyde Investments Ltd v Cleaver [2011] EWCA Civ 929, [2011] P&CR 336. 2 [1992] Ch  560. The decision was followed by Andrew Baker J  in relation to pre-contract inquiries in Francis v Knapper [2016]  EWHC  3093 (QB), [2017]  PNLR  3. It has also been followed in a number of cases relating to the duty of care owed to third parties more generally: see Chapter 1, para 1.22, note 2. For an earlier decision in which Morritt J reached the same conclusion: see Cemp Properties (UK) Ltd v Dentsply Research and Development Corpn Ltd [1989] 2 EGLR 205, esp at 207 col 1. There are two other cases, however, in which the Court of Appeal has held it arguable that a solicitor may be liable to third parties for similar errors: see Wilson v Bloomfield (1979) 123 Sol Jo 860, CA and First National Commercial Bank plc v Loxleys [1997] PNLR 211, CA. 3 [2018] EWCA Civ 1082, [2019] Ch 273 (Patten LJ). See paras 1.19 to 1.24, above. 4 See Midland Bank v Cameron, Thom Peterkin and Duncans [1988] SLT 611 where Lord Jauncey identified four factors in deciding whether a duty of care was owed: ‘(1) the solicitor must assume responsibility for the advice or information furnished to the third party. (2) the solicitor must let it be known to the third party expressly or impliedly that he claims, by reason of his calling, to have the requisite skill or knowledge to give the advice or furnish the information; (3) the third party must have relied upon that advice or information as a matter for which the solicitor has assumed personal responsibility; and (4) the solicitor must have been aware that the third party was likely so to rely’. In that case the claim failed. This reasoning was approved by Lord Wilson in Steel v NRAM Ltd [2018] UKSC 13, [2018] 1 WLR 1190: see para 1.21, above. See also the Republic of Ireland Supreme Court decision Doran v Delaney [1998] 2 IR 61 where Keane J stated: ‘Similarly, there are many circumstances in which the vendor’s solicitor in drafting a reply could be described as transmitting information but could not reasonably be regarded as assuming any particular responsibility for that information.’ In that case the claim succeeded. 5 In Francis v Knapper [2016] EWHC 3093 (QB), [2017] PNLR 3 (above) the disclaimer ‘The replies are given without liability on the part of the Seller’s solicitors’ was held to negative a duty of care: see [17] and [18].

9.27 In the event that a solicitor is held to have owed a duty of care in respect of a statement of fact contained in the reply to an inquiry, the nature and effect of any representation contained in the reply will normally turn on the question and answer in issue. It is common for a seller to answer questions about the existence of adverse rights and encumbrances ‘not so far as the seller is aware’, leaving buyers to make their own inquiries of third parties or to rely upon the documents of title with which they have been provided. It has been held that this reply: ‘[R]epresents not merely that the vendor and his solicitor had no actual knowledge of a defect but also that they have made such investigations as could reasonably be expected to be made by or under the guidance of a prudent conveyancer.’1 It is also common for contracts of sale to contain clauses seeking to exclude the duty to make reasonable investigations by confirming that: ‘the replies to Enquiries before Contract or information supplied in any Property Information Form are given to the best knowledge, information and belief of the Seller but neither the Seller nor his or her solicitors have made any further enquiries into such matters and the replies are therefore given on this basis.’ 440

Acting for more than one party  9.29 A clause of this nature purports to exclude not only the seller’s duty to make reasonable investigations, but also the solicitor’s duty to make reasonable investigations in order to answer the relevant questions. In Morgan v Pooley2 Edwards-Stuart J held that such a provision prevented an implied representation that the sellers and their solicitors had carried out reasonable investigations from arising. He also held that the clause satisfied the requirement of reasonableness in s 3 of the Misrepresentation Act 1967.3 1 William Sindall plc v Cambridgeshire County Council [1994] 3  All ER  932, CA at 942e (Hoffmann LJ). 2 [2010] EWHC 2447 (QB) at [100]–[118]. He distinguished Walker v Boyle [1982] 1 All ER 634 on the basis that the term was drawn to the purchasers’ attention and was not ‘tucked away’. Compare Schyde Investments Ltd v Cleaver [2011] EWCA Civ 929, [2011] P&CR 336 where the Court of Appeal held that a Standard Conditions which excluded the right to rescind failed to satisfy s 3. 3 For a case in which the seller was held liable for misrepresentation after providing replies to inquiries on the Commercial Property Standard Enquiries form see First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396, [2019] 1 WLR 637. The relevant three paragraphs of the interpretation section are set out in the judgment of Lewison LJ at [6]. A  ‘no reliance’ clause was held to be an exclusion clause for the purposes of s  3 of the Misrepresentation Act 1967 and s 11 of the Unfair Contracts Terms Act 1977 and unreasonable.

9.28 In 2008 the Home Information Pack was introduced and the Law Society introduced new forms: the Property Information Form (TA6) and the Leasehold Information Form (TA7). There are currently no standard procedures recommended for their use by the Law Society. Where they are used (including transactions where the parties’ solicitors have agreed to use the Law Society Conveyancing Protocol), they are to be completed and signed by the seller and there is no longer any requirement for the solicitor to verify the information contained in the form. It is unlikely now therefore that a solicitor who acts for a seller will be liable to a buyer for inaccurate pre-contract inquiries. But even though solicitors are not required to verify the replies, they may still be liable to their own clients if the answers are inaccurate. The Conveyancing Handbook continues to state that when acting for the seller, ‘checking the answers given is part of the solicitor’s duty as a prudent conveyancer. Failure to do this may amount to inadequate professional service and may be professional negligence’.1 Liability may also arise, of course, if inaccurate statements are made in separate correspondence and there is no exclusion clause in the contract. 1 See the Conveyancing Handbook, §10.5.4 (p 337).

(b)  Certificates of title 9.29 In commercial property transactions title matters are often certified by the seller’s solicitors to the buyer rather than by the buyer’s solicitors producing a report on title for their own client. A  certificate may also be addressed to a lender or syndicate of lenders. Certification by the seller’s solicitors may have advantages where the seller and its solicitors already have a good understanding of the title matters or the same solicitors have acted 441

9.30  Real estate on the earlier acquisition of the property. The intended timetable between the property being put on the market and the desired sale date may also be short and the seller may wish to have a certificate of title ready within that timescale. Where the seller’s solicitors address their certificate to the buyer without any disclaimer of liability, the available authorities suggest that a duty of care will arise. In Allied Finance v Haddow & Co1 the solicitors of the buyer of a yacht provided a certificate to a third-party insurance company that the proposed mortgage of the yacht would be binding on the buyer and that there were no other charges over the vessel. In fact, a company was acquiring the yacht and the seller had a lien over it for a part of the purchase price. The solicitor was held to have assumed a duty of care to the finance company. In N M Rothschild & Sons Ltd v Berensons2 the Court of Appeal reached a similar result. In that case a solicitor was found liable both to the lead bank to whom the certificate was addressed and also to an individual bank in the syndicate which had agreed to provide funds to his client. The question whether a duty of care arises may be more problematic, however, where the buyer or lender has instructed its own solicitors but nevertheless relies upon a certificate given by the solicitor acting for the borrower or lender. It is suggested that the instruction of the second firm will not necessarily negative a duty of care. That firm may be instructed to review the certificate to identify any particular ‘red flag’ issues. It may be instructed to give specific advice, eg whether a conclusion of law included in the seller’s certificate is correct. It may also be instructed to carry out additional searches to obtain and examine underlying documents (eg leases and licences) which are identified in the seller’s certificate. It is suggested that the question whether a duty of care will arise will depend on the use to which the firm of solicitors instructed by the buyer or lender puts the certificate and the extent to which they were expected to verify its contents independently.3 1 [1983] NZLR 22 (Cooke J) at 24–25: ‘That is a classic duty of care situation … The proximity is almost as close as it could be, short of contract. Nor are there any sufficient negativing considerations. Far from disclaiming responsibility, the solicitor has virtually in terms accepted it. It would be strange if the law failed to impose a duty.’ See Richardson J to similar effect at 30. The decision was cited with approval in Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 (Sir Donald Nicholls V-C), Doran v Delaney [1998] 2 IR 61 (Keane J), Connolly-Martin v Davies [1999] Lloyd’s Rep PN  790, CA and Steel v NRAM  Ltd [2018]  UKSC  13, [2018] 1 WLR 1190 at [26] (Lord Wilson JSC). 2 [1997] NPC 107, CA. Haddow was relied upon by Knox J at first instance [1995] NPC 107. 3 See also Chapter 1, paras 1.22 to 1.27, above.

9.30 There is no reported authority on the question whether a disclaimer given by a solicitor to a third party would either negative the existence of a duty of care or, if it were necessary to do so, satisfy the test of reasonableness in s  11(3) of the Unfair Contract Terms Act 1977. It is likely that the court would uphold as reasonable a limited disclaimer such as a ‘for your eyes only’ certificate limited to named or identified parties. The court is likely to follow Omega Trust Co Ltd v Wright Son & Pepper1 and limit the solicitor’s liability to the named parties unless express consent had been sought from the solicitor to circulate the certificate to other recipients.2 It is less likely that the court would 442

Acting for more than one party  9.32 uphold a blanket exclusion of liability since the function of the certificate is to provide the necessary level of comfort to the identified third parties. 1 [1997] 18 EG 120 considered further in para 1.33, above. 2 Consider the City of London Law Society Certificate of Title (7th edn, 2012) (updated in 2016) in which it is stated that the Certificate may be disclosed to a third party but it cannot be relied on by that party.

(c)  Requisitions on title 9.31 In a standard sale of residential property the buyer’s solicitor will send the seller’s solicitor Requisitions on Title either electronically or in paper form. Section 4 is headed ‘Completion’ and raises two requisitions: ‘4.1 Will completion take place at your office? If not, where will it take place? 4.2 If we wish to complete through the post please confirm that the Law Society’s Code for Completion by Post will apply’. If the parties agree to adopt the Code it imposes a series of personal undertakings on the seller’s solicitors. In P&P Property Ltd v Owen White and Catlin LLP1 the Court of Appeal held that the seller’s solicitors held the completion funds on a bare trust for the buyer and their authority to release the funds depended upon their compliance with those undertakings. The court also held that the reference to ‘the seller’s authority’ in the code2 was a reference to the true owner of the property named in the contract for sale and not the impostor who was giving the solicitors their instructions. As a consequence, they held the sellers’ solicitors liable in both cases for both breach of trust and a breach of their undertakings.3 1 [2018]  EWCA  Civ 1082, [2019] Ch  273. See [91]–[102] for Patten LJ’s analysis of the completion arrangements. The decision is analysed in detail in Chapter 4, paras 4.07 and 4.08, above. 2 See para  7: ‘The seller’s solicitor undertakes: (i) to have the seller’s authority to receive the purchase money on completion; and (ii) on completion, to have the authority of the proprietor of each mortgage, charge or other financial incumbrance which was specified under paragraph 6 but has not then been redeemed or discharged, to receive the sum intended to repay it; …’. 3 See [98] and [112]–[119] (Patten LJ). The most recent version of the code published by the Law Society became effective on 1 May 2019 and after taking into account the decision. References below are to that edition. It now contains a warning which emphasises the significance of undertakings. The previous edition (2011) and earlier editions were in similar although not identical form: see Lloyds TSB Bank plc v Markandan & Uddin [2011] EWCA Civ 65, [2012] 2 All ER 884 at [23] (where the relevant provisions are set out).

(d)  Miscellaneous cases 9.32 The general rule is that a solicitor owes a duty of care to the person for whom he is acting but not to the opposing party in an arm’s length transaction.1 Apart from those important cases discussed above there are very few exceptions. A solicitor who provides a reference in relation to the financial standing or honesty of a client to a lender or third party may assume a duty of care for its accuracy in the absence of a disclaimer (in the same way as an accountant).2 A duty of care has also been extended to third parties in some 443

9.33  Real estate cases where they are very closely connected to the client.3 A solicitor may also assume a duty of care to an arm’s-length party if that party is not represented by a solicitor. In Dean v Allin & Watts4 a solicitor was found liable to an individual who made a private loan to his client for failing to ensure that he obtained good title to the mortgaged property. Because the solicitor knew that the lender had not obtained any legal advice and was relying on him the solicitor assumed a duty to take reasonable steps to ensure that the lender obtained a valuable security.5 1 See Steel v NRAM Ltd [2018] UKSC 13, [2018] 1 WLR 1190 at [25] (Lord Wilson JSC). 2 See Midland Bank v Cameron, Thom, Peterkin & Duncans [1988] SLT 611. On the facts the solicitor was not held to have assumed responsibility for the accuracy of the statements. 3 For an example see Woodward v Wolferstans [1997] NPC 51 (Martin Mann QC) and for further discussion see Chapter 1, paras 1.09 and 1.10 (implied retainer) and 1.19 to 1.28 (duty of care to third parties), above. 4 [2001] Lloyd’s Rep PN 605, CA considered in para 1.23, above. 5 In Jenmain Builders v Steed & Steed [2000] Lloyd’s Rep PN 549, CA a solicitor who acted for a seller was found liable in tort to disappointed buyers for failing to inform them that they were in a contract race. However, he was acting for both parties and it is doubtful whether the duty would be imposed in the absence of a contractual retainer: see the remarks made by Chadwick LJ at [21].

(e) Damages 9.33 In Haddow the lender recovered from the borrower’s solicitors the balance of the loan outstanding after the boat had been sold. In lenders’ cases where reliance is laid on a certificate of title to a security the lender will recover damages by reference to the principles discussed in Chapter 10 depending on the nature of the loss.1 Where the claimant acquires a defective property in reliance on inaccurate pre-contract enquiries or representations for which the defendant has assumed responsibility the purchaser will recover damages by reference to the principles set out in section C (below).2 1 See paras 10.98 to 10.128, below. 2 See paras 9.58 to 9.74, below.

C  ACTING FOR THE PURCHASER 1  Duties before contract (a)  Commercial advice 9.34 In general a solicitor has no duty to inform the client that the purchase of property which he or she is about to make will be unwise or commercially imprudent.1 A solicitor may be obliged to give some advice with commercial implications if the nature and experience of the client requires it.2 The advice which will be required by a first-time buyer with no legal experience whatsoever may differ from that required by a client who is an experienced businessman 444

Acting for the purchaser  9.35 and is moving house for the second or third time. But if the client falls into the latter category the solicitor is under no duty to give commercial advice or even to point out the obvious.3 However, even if the client is sophisticated and well aware of the commercial realities it is still the solicitor’s duty to explore and understand the commercial elements of the transaction in order to give adequate legal advice on the terms.4 As Donaldson LJ put it in Carradine Properties Ltd v DJ Freeman5 if a solicitor is instructed to prepare the documentation for the sale or purchase of a house it is no part of the solicitor’s duty to pursue a claim by the client for unfair dismissal. But if the solicitor finds unusual covenants or planning restrictions it may be his or her duty to warn of the risks and dangers of buying the house at all notwithstanding that the client has made up his mind and is not seeking advice about that decision.6 1 See para 2.37, above. 2 See para 2.35, above. 3 See Aslan v Clintons (1983) 134 NLJ 584 (businessman well aware that if he failed to comply with his obligations under a contract he might be sued by the other party); Haigh v Wright Hassall & Co [1994] EGCS 54, CA (solicitor owed no duty to advise clients not to exchange contracts until they had raised the funds for the deposit as the clients understood the legally binding nature of an exchange of contracts); and Stone Heritage Developments Ltd v Davis Blank Furniss [2007] EWCA Civ 765 (solicitors’ retainer limited by the nature of the instructions given and no duty to give commercial advice). 4 See Clarke v Iliffes Booth Bennett [2004] EWHC 1731 (Ch) (seller’s solicitors failed to equip themselves with sufficient knowledge to correct the claimant’s misunderstanding regarding the trigger for a purchaser to exercise an option to purchase granted by the seller because the trigger involved a complex question of planning law). 5 [1999] Lloyd’s Rep PN  483. See also Credit Lyonnais SA  v Russell Jones & Walker [2002] EWHC 1310 (Ch), [2003] PNLR 2 (Laddie J) at [21]. For further citations see paras 2.31 and 2.32 above. 6 For a similar approach see Kandola v Mirza Solicitors LLP  [2015]  EWHC  460 (Ch), [2015] PNLR 19 (where HHJ Cooke held that there was no duty to ensure that a bankruptcy or Land Registry priority search were carried out shortly before exchange of contracts; the buyer was a sophisticated businessman and had appreciated the risks associated with paying a deposit to the seller’s solicitors to hold as the seller’s agent).

(b)  General advice 9.35 The Conveyancing Handbook1 contains a checklist of questions for the solicitor acting for a buyer.2 The Law Society expects practitioners to advise buyers in relation to the amount of stamp duty land tax payable given the purchase price, the effect of the timing of completion on the timing of the first mortgage payment, any VAT considerations relating to the transaction, possible sources of finance (including bridging finance), insurance,3 the ways in which the property might be held by co-owners and the affordability of the transaction. The buyer’s solicitor should also ensure as soon as a firm offer has been accepted by the seller (and in any case before exchange of contracts) that the buyer has been advised to obtain a survey and to consider its results.4 The solicitor should also ensure that the buyer is aware of any potential capital gains tax liability, especially in circumstances where a purchaser is not acquiring property to be used as his principal private dwelling.5 Where the 445

9.35  Real estate client is proposing to acquire a special property, such as a newly constructed property6 or a property subject to a draft local development plan,7 there will be additional matters upon which the client is likely to require advice.8 A solicitor may also have to give additional advice where the client is buying the reversion to a statutory tenancy or the lease of a public house or where the property to be acquired is subject to one or more leases having rights to extend, enfranchise or manage under the Commonhold and Leasehold Reform Act 2002 or where the property is a long residential lease which will have the same or similar rights. A  purchaser acquiring a property subject to business or agricultural tenancies should give advice on the consequences of any security of tenure and right for the tenants to claim statutory compensation upon termination. The buyer’s solicitor must also advise the client fully about the terms of the contract which he or she is about to enter9 and to incorporate all of the terms agreed by the client.10 Finally, the solicitor may have to advise the client about the consequences of taking possession without entering into a binding contract.11   1 References to the Conveyancing Handbook in this chapter are to the 26th edition of the Law Society’s Conveyancing Handbook.   2 See A1.8. See also A1.7 (‘using checklists’), A1.9 (where acting for buyer at taking instructions stage) and A1.10 (instructions in special cases). It is an open question whether the court would accept a failure to comply with the Conveyancing Handbook as evidence of negligence or compliance as discharge of the duty of care. It will doubtless be influential in setting a general standard but its evidential value will depend on the circumstances. See Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591 at 600, col 1 where Rimer J did not accept that the Conveyancing Handbook was accurate (although this is the only criticism of the Conveyancing Handbook of which we are aware). Note also that solicitors acting in residential conveyancing may use the Law Society Conveyancing Protocol. The Protocol represents the Law Society’s ‘preferred practice’ but it is not exhaustive and is only fully effective if both parties’ solicitors agree to adopt it.  3 See Knight v Tuberville Woodbridge (18 March 1999, unreported) where the buyer’s solicitors were found in breach of duty in failing to confirm that life insurance was in place before exchange of contracts.   4 See A13.3.2. As we suggested in the first edition of this work it would seem that general practice has moved on considerably since Buckland v Mackesy (1968) 208  EG  968, CA (a decision to the contrary which now seems unlikely to be followed).   5 See A16.1.1. It should ordinarily be the solicitor’s duty to point out any tax issues arising from the proposed transaction: Hurlingham Estates Ltd v Wilde [1997] 1 Lloyd’s Rep 525.  6 See Rickards v Jones [2002] EWCA Civ 1344, [2003] PNLR 13 (where the solicitor was held to have been negligent in failing to confirm that a builder was duly registered with the NHBC or to appreciate that the certificate offered by the builder was valueless).  7 See Motor Crown Petroleum Ltd v SJ Berwin, CA [2000] Lloyd’s Rep PN 438, [2000] NPC 26 (where the solicitors were held to have been in breach of duty in failing to advise the claimant developer that a local development plan could be challenged).  8 See Orientfield Holdings Ltd v Bird & Bird LLP [2017] EWCA Civ 348, [2017] 1 EGLR 26 (where it was held that the solicitors were liable for a failure to bring the contents of a Plansearch Plus report to the attention of the buyers which revealed that a nearby school site had been granted planning permission for redevelopment).  9 See Boateng v Hughmans [2002] EWCA Civ 593, [2002] PNLR 40, CA (where the solicitor failed to draw the client’s attention to a term in the contract for sale). In Walker v Boyle [1982] 1 WLR 495 at 507F–H Dillon J suggested that it was unnecessary for the solicitor to take a client through all of the provisions of the standard conditions. In Schyde Investments Ltd v Cleaver [2011] EWCA Civ 929, [2011] P&CR 336, however, Etherton LJ doubted that this was correct: see [43].

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Acting for the purchaser  9.36 10 See Joyce v Bowman Law Ltd [2010] EWHC 251 (Ch), [2010] 1 EGLR 129 (where Vos J held that solicitors were liable for failing to include an option in a contract although the scope of the advice depended on the sophistication of the client in question). In Procter v Raleys [2015]  EWCA  Civ 400 (where there had been indications that the claimant had not fully understood the points being made) this was held to mean more than providing tailored advisory letters. In Mansion Estates Ltd v Hayre & Co [2016] EWHC 96 (Ch), [2016] PLSCS 32 it was held that the solicitor’s duty extended to advising on matters that could blight the purchaser’s foreseeable use and enjoyment of the land (including incidental matters associated with the transaction). For further discussion on the quality and scope of the advice required: see Chapter 2, Section B, paras 2.25 to 2.32, above. 11 See also Attard v Samson (1966) 110 Sol Jo 249 (Phillimore J) where the client took possession and carried out extensive repairs in the expectation that a contract would be made. Breach of duty was admitted.

(c)  Searches and inquiries 9.36 It is the duty of the buyer’s solicitor to verify that the particulars of the property being sold correspond with the buyer’s understanding, that the seller has good title and to make all necessary inquiries to be satisfied that the property is free from any charges, encumbrances or adverse interests (other than those disclosed by the seller and agreed by the buyer).1 The buyer’s solicitor does not guarantee the title of the property but this duty is not discharged by submitting standard form enquiries to the seller or reading the answers to the Seller’s Property Information Form. The buyer’s solicitor is bound to ask additional inquiries where they are necessary.2 If the replies given by the seller’s solicitor are inconsistent with the information which the solicitor has obtained from the buyer or estate agents or the replies raise doubts about the accuracy of information provided by any of them (or give rise to additional concerns) the solicitor has a duty to follow them up and inform the client of any inconsistency.3 If the seller has made factual statements it may be necessary to make further investigations with third parties or the local authority to check their accuracy.4 English solicitors who act for buyers to buy property abroad also owe a duty to take care to ensure that searches carried out by a foreign lawyer have been satisfactorily completed unless their retainer clearly excludes this duty.5 1 For examples of failure to carry out proper searches see Greymalkin v Copleys [2004] EWCA Civ 1155, [2004]  PNLR  44 (failure to identify three existing charges), Bacciottini v Gotelee & Goldsmith [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22 (failure to identify a planning restriction limiting residential use) and Robinson v Ness and Co [2017] EWHC 2305 (Ch) (failure to advise that a building lacked planning consent for the five flats). 2 Goody v Baring [1956] 1 WLR 448 esp at 453–48, CA. 3 See Computastaff Ltd v Ingledew Brown Bennison and Garrett (1983) 268 Estates Gazette 906 (McNeill J) and Roiter Zucker v Khadijeh Minai [2005] EWHC 2672 (QB) at [69]–[72] (where Field J held that a solicitor was negligent in failing to point out an inconsistency, although the breach of duty did not result in loss). 4 See Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591 (where Rimer J held that the purchaser’s solicitors were negligent because they neither obtained a copy of a building regulation consent from the sellers or the local authority nor advised the buyers of the risks associated with part of the property being in breach of the regulations). See also Kelleher v Don O’Connor & Co [2010] IEHC 313, [2010] 4 IR 380 (failure to check restaurant’s status under food hygiene regulations). 5 See Gregory v Shepherds [2000] PNLR 769, CA.

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9.37  Real estate (i)  Boundaries and dimensions 9.37 The responsibility for identifying the precise line of boundaries and the ownership of boundary markers usually lies with the buyer under the Standard Conditions.1 The buyer’s solicitor has a duty to check the boundaries shown on the title deeds against those shown on any estate agent’s particulars. If there are no particulars or there is doubt about the precise extent of the land being acquired the solicitor must draw the uncertainty regarding boundaries to the client’s attention and recommend that the buyer instruct a surveyor or, if necessary, require the seller to agree the boundaries with his or her neighbours.2 Examples of cases where solicitors have been found in breach of duty in this context include: Mercantile Building Society v J W Mitchell Dodds & Co (where part of house not included in registered title and the solicitors were found liable for failure to check the filed plan against the estate agent’s plan); Wapshott v Davies Donovan & Co (where an extension was built over land owned by neighbour and the solicitors were found liable for failure to investigate title); McManus Developments Ltd v Barbridge Properties Ltd (where a fence had been built three feet north of the boundary shown on the filed plan and the solicitors were found liable for failing to identify and point out the discrepancy after the neighbouring owner moved the fence); BarclayWhite v Guillaume & Sons (where a solicitor who physically inspected the property was found liable for failure to inspect one of the boundaries); Nielsen v Watson (a Canadian case in which a driveway and garage were excluded from property shown on the plan prepared by client’s surveyor and the solicitor was found liable for failing to take instructions from client about the discrepancy); and Hondon Developments Ltd v Powerise Investments Ltd (a Hong Kong case where the solicitor was liable for failing to spot the discrepancy between the plan attached to the draft and final agreements).3 1 The seller must prove his or her title to the property, but need not identify its exact boundaries (‘further than it may be able to do so from information in its possession’) as provided in the Standard Conditions of Sale 5th edn, 2018 revision, clauses 4.1 and 4.4. See also and similarly the Standard Commercial Property Conditions of Sale 3rd edn, clause 7.4.1. 2 See the Conveyancing Handbook at B26.1. Note also that the buyer’s solicitor may also owe the buyer’s mortgagee a duty to ensure that the boundaries of the security are properly defined: see the Lenders’ Handbook §6.2.1. 3 See [1993]  NPC  99; [1996]  PNLR  361; [1996]  PNLR  431; [1996]  EGCS  123; (1981) 125  DLR  (3d) 326; [2006]  PNLR  1 (Hong Kong Court of Appeal). Compare Anderson Properties Ltd v Blyth Liggins [2017] EWHC 244 (Ch) (where solicitors were held not liable for failure to identify the land adequately on the plan because the contract was conditional on obtaining planning permission and there was significant potential for modification of the building dimensions).

(ii)  Local authority searches 9.38 The buyer’s solicitor should ordinarily make enquiries of the local authority using the standard form CON 29. The first part deals with standard enquiries and the second with optional enquiries.1 Local authorities do not owe 448

Acting for the purchaser  9.39 a duty of care for the answers given to the questions raised on form CON 29 save in limited cases2 and the solicitor must therefore consider the answers given carefully. Where local authority searches give rise to doubts or additional concerns the solicitor has a duty to follow them up.3 A solicitor who fails to take reasonable steps to identify any breach by the seller of planning regulations will be in breach of duty. The solicitor should also take steps to establish whether the buyer’s intended use of the property will involve any development or change of use which might be prohibited by local planning regulations or point out to the buyer if the property is Green Belt land.4 A solicitor need not always make a commons search in a densely built-up area but should do so if the property is vacant land or land which has not been developed.5 If inquiries reveal the existence of potential encumbrances, restrictions or adverse interests, the solicitor is bound to communicate that information to the client.6 1 See the Conveyancing Handbook, Appendix V.1. 2 For an example of a case involving a local authority’s response to standard form enquiries: see Sydney Gooden v Northamptonshire County Council [2001] EWCA Civ 1744, [2002] PNLR 18. Note, however, that the limits on the private law liability of public bodies has recently been confirmed in Schubert Murphy v Law Society [2017] EWCA Civ 1295, [2017] 4 WLR 400. 3 See Faragher v Gerber [1994] EGCS 122 (HHJ Lachs), Scott v Kennedys [2011] EWHC 3808 (Ch) (Vos J) (where negligence was admitted for failure to check the conditions of a planning permission), Orientfield Holdings v Bird & Bird [2017] EWCA Civ 348, [2017] EGLR 26 (where solicitors were held negligent for failing to provide a summary of a Plansearch report which would have revealed a prospective development to repurpose two small existing schools into an academy for 1,400 pupils) and Taray Investments Ltd v Gateley Heritage LLP [2020] EWHC 716 (QB) (Tipples J) (where negligence was admitted for failure to advise that a stopping up order would be required before a site could be developed). In G P & P Ltd v Bulcraig and Davies [1986] 2 EGLR 148 (John Gorman QC) (appeal on damages at [1988] 1 EGLR 138) the judge held (at 151A) that a surveyor who made an oral inquiry as to the contents of the register might be obliged to follow it up depending on the answer. The search was negative but as it happened the reply to the solicitor’s search in writing revealed the existence of planning consent which turned out to be restrictive of user. 4 See the Conveyancing Handbook, B24.3.1–B24.3.3. See also Raintree v Holmes (1984) 1 WLUK 628; 134 NLJ 522 per Hobhouse J: ‘just as any solicitor would check and consider the effect and significance of an easement or restrictive covenant so also he should clearly check and consider any planning permission’. 5 See G  & K  Ladenbau (UK) Ltd v Crawley & de Reya [1978] 1  WLR  266 (Mocatta J) at 278F–H and 289A–C. 6 See Strover v Harrington [1988] Ch  390 at 409H–410A (Sir Nicolas Browne-Wilkinson V-C) which is authority for the proposition that a solicitor has authority to receive all relevant information on the client’s behalf and a positive duty to pass it on. The decision was applied in Edwards v Ashik [2014] EWHC 2454 where the knowledge of the solicitor was treated as the knowledge of the client for the purposes of a real estate transaction.

9.39 Cases which illustrate the scope of the buyer’s solicitor’s duty include the following: Lake v Bushby (solicitor held liable for failure to advise that no planning permission had been granted); G & K Ladenbau (UK) Ltd v Crawley & de Reya (solicitor held liable for failure to make commons search); GP & P Ltd v Bulcraig and Davies (solicitor held liable for failure to notice planning restrictions); Raintree Ltd v Homes (solicitor held liable for failure to check currency of planning permission which was due to expire between exchange 449

9.40  Real estate and completion); Oates v Pittman & Co (solicitor held liable for failure to find out that there was no planning permission for use as holiday lets and to identify building regulation and fire prevention requirements if the buyer was to make an application for a retrospective planning permission); Faragher v Gerber (solicitor held liable for failure to follow up a reply to a local authority search which suggested that the buyer should consult the LDDC); Owen v Fielding (solicitor held liable for failure to make adequate commons search); Cygnet Health Care v Elletson & Co (solicitor held liable for failing to obtain full planning history of property being purchased with a view to development); Fashion Brokers v Clarke Hayes (solicitor held liable for relying on oral answers from local authority in relation to planning permission); Foreman v O’Driscoll (solicitor held in breach of duty for failure to discover that the property was subject to a public right of way); Gerrard v Read Hind Stewart (solicitor held in breach of duty for not discovering the presence of a planning restriction); Dent v Davis Blank Furniss (solicitors held liable for failing to discover that much of the property was registered as common land); Harwood v Taylor Vintners (solicitor held in breach of duty for failing to assess local search results and to advise the buyers that there was no formal grant of rights to use a drain); Grosvenor 52 International Ltd v Holy (solicitor held liable for failing to advise generally on the planning position affecting property being purchased by a developer); Asiansky Television plc v Bayer Rosin (solicitor held liable for failure to appreciate the effect of implementation of compulsory purchase orders which affected land to be acquired by a developer); D Morgan plc v Mace & Jones (solicitor held not liable for failure to give advice in relation to detailed planning issues); AW Group Ltd v Taylor Walton (solicitors held negligent for failure to point out the unsuitability of a planning permission for the purchaser’s business); and Redstone Mortgages Limited v B  Legal Ltd (solicitors held liable for failure to explain the restrictions under a local authority shared ownership lease).1 1 [1949] 2 All ER 964; [1978] 1 WLR 266; [1986] 2 EGLR 148 (appeal on damages at [1988] 1  EGLR  138); (1984) 134  NLJ  453, CA; (1998) 76  P  & CR  490, CA; [1994]  EGCS  122; [1998]  EGCS  110; 18  May 1999 (unreported); [2000]  PNLR  473, CA; [2000] Lloyd’s Rep PN 720; CA, 29 November 2000 (unreported); [2001] Lloyd’s Rep PN 534; [2003] EWHC 471 (Ch), (2003) The Times, 1  April; [2003]  EWHC  2413 (Ch); [2004]  EWHC  1362 (QB); [2010]  EWHC  3375 (TCC); [2014]  EWCA  Civ 592; and [2014]  EWHC  3398 (Ch), [2014] PLSCS 285. In Mace & Jones Coulson J upheld one allegation that the solicitor had failed to appreciate that counsel’s advice was wrong. In AW Group Ltd v Taylor Walton the CA upheld the trial judge’s finding that the buyer would have proceeded with the acquisition in any event.

(iii)  Rates and tenancies 9.40 Where the property to be acquired is the reversion to a lease, the seller’s statement of the rent roll should be checked by the solicitor. In Goody v Baring1 the solicitor was held liable for failure to establish whether rents of the property were liable to be reduced on certification under the Rent Acts. Similarly, where statements have been made regarding the rateable value 450

Acting for the purchaser  9.41 of a property, the solicitor should take care to check the accuracy of such statements.2 1 [1956] 1 WLR 448. The facts of Goody v Baring were specific to rent control, examples of which are now far less common. But the point remains critical for purchasing landlord’s solicitors to satisfy themselves about the terms of tenancies for example so as to establish whether a tenancy falls within the rent limits for it to be an assured shorthold tenancy (or not). 2 See Computastaff Ltd v Ingledew, Brown Bennison and Garrett (1983) 268 Estates Gazette 906.

(iv)  Easements and restrictive covenants 9.41 The Standard Conditions provide that the buyer takes the property subject to all encumbrances including those which would have been discoverable by inspection of the property.1 The buyer’s solicitor must check not only that the buyer will have the benefit of the easements which are necessary for the enjoyment of the property but also that the property is not subject to easements or restrictive covenants which might adversely affect its enjoyment. The following cases illustrate these duties: Ford v White (solicitor held liable for failure to advise on terms of restrictive covenant against building); Piper v Daybell Court-Cooper & Co (solicitor held liable for failure to establish and advise on the existence of a right of way); King v Hawkins & Co (solicitor held liable for failure to discover that the property was subject to a public highway); Strover v Harrington (solicitor failed to advise that he had been told that the property had no mains drainage); Walker v Giffen Couch & Archer (solicitor held liable for failure to discover the existence of public footpath); Hayes v Dodd (solicitor held liable for failing to establish that a workshop and maisonette was subject to a right of way for two way traffic); Reeves v Thrings & Long (solicitor held not liable for failing to explain that there was no secure right of way to a hotel car park); Bittlestone v Keegan (solicitor held liable for failure to point out a covenant which prevented the owner from carrying out alterations); Carvin v Dunham Brindley & Linn (solicitor held not liable for failure to advise the buyer not to accept a licence to use an unadopted drain but purchase the freehold or an easement); Carter v TG Baynes & Sons (solicitor held liable for failure to notice a covenant restrictive of development); Tucker v MB Allen & Co (solicitor held liable for failing to advise that a right of way from one part of the property to the other was not the subject of documentary title and would have to be established by user); Queen Elizabeth’s Grammar School Blackburn Ltd v Banks Wilson (solicitor held liable for failing to advise that the interpretation of a restrictive covenant was open to dispute); and Herrmann v Withers LLP (solicitors held liable for failure to advise the buyers that they would not have a right to use a communal garden).2 Further, in cases of doubt it may not be enough for the solicitor to form a view about the validity or enforceability of the relevant rights and the solicitor may have to advise the buyer of the risk that the court might take a contrary view.3 1 See Standard Conditions of Sale (5th edn, 2018 revision), cl 3.1.2(b) and Standard Commercial Property Conditions of Sale (2nd edn, 2004), cl 3.1.2(b).

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9.42  Real estate 2 [1964] 1 WLR 885 (subsequently doubted on quantum but not on liability issues); (1969) 210 Estates Gazette 1047; (1982) The Times, 28 January; [1988] Ch 390; [1988] EGCS 64; [1990] 2 All ER  815, [1988]  EG  107 (CS); [1996]  PNLR  265; [1997]  EGCS  8; [1997]  EGCS  90, CA; [1998]  EGCS  109; [2001]  PNLR  37; [2001]  EWCA  Civ 1360, [2002]  PNLR  14; and [2012] EWHC 1492 (Ch). In Bittlestone v Keegan [1997] EGCS 8 Sir John Vinelott stated that it was the solicitor’s duty to point out the nature and effect of every restrictive covenant unless unenforceable. 3 For a useful statement of principle see Herrmann v Withers LLP  [2012]  EWHC  1492 (Ch) (Newey J) at [74]. See also Queen Elizabeth’s Grammar School Blackburn v Banks Wilson [2001] EWCA Civ 1360, [2002] PNLR 14, Balogun v Boyes Sutton and Perry [2017] EWCA Civ 75, [2017] PNLR 30 (Michael Boyes QC). For consideration of this issue outside the real estate context see Barker v Baxendale Walker Solicitors [2017] EWCA Civ 2056, [2018] 1 WLR 1905 considered in Chapter 2, para 2.30, above.

(d)  Leasehold purchasers 9.42 When the buyer proposes to take the grant or assignment of a lease one of the key functions of the solicitor will be to explain to the client the terms of the lease which the landlord proposes to grant or the assignor to assign. Leasehold purchases often involve consideration of more complex contractual terms than a freehold sale because of the wider provisions contained in a typical lease. Leasehold interests are also at risk of forfeiture for breach (subject to various protections, particularly, in the case of residential leases). There is no equivalent risk in freehold transactions. Nevertheless, the solicitor will not be required to recite or explain mechanically every term of the lease and those which should be mentioned and which ignored will inevitably be a question of judgment.1 Without attempting to identify exhaustively the clauses upon which a solicitor should concentrate solicitors have been found liable or escaped liability in the following cases concerned with the contractual terms of leases. A number of these cases are concerned with the failure to appreciate the terms of a headlease and their operation on an underlease. 1 See County Personnel Ltd v Alan R Pulver & Co [1987] 1 WLR 916, CA at 923 (Bingham LJ).

(i)  User clauses 9.43 See Hill v Harris (solicitor held liable for failure to establish that a headlease prohibited the use permitted by the underlease without the head landlord’s consent); Sykes v Midland Bank Executor and Trustee Co Ltd (solicitor held liable for failure to advise that a user clause contained a prohibition qualified not only by the lessor’s consent (such consent not to be unreasonably withheld) but also by the head landlord’s consent and to discover that the headlease contained an absolute prohibition on change of use); Transportation Agency Ltd v Jenkins (solicitor held liable for failure to advise an investor in a snack bar business that cooking was prohibited by the user clause); Simple Simon Catering Ltd v Binstock Miller & Co (solicitor held liable for failure to advise a buyer who was proposing to use premises as a restaurant that there was a covenant to permit the landlord to share use of the 452

Acting for the purchaser  9.45 kitchen); Carter v Gamlens (solicitor held not liable for failing to advise on the meaning of a particular definition used in a lease); and Citibase plc v Memery Crystal (solicitor in breach of duty in failing to draw adverse redevelopment clause to the buyer’s attention).1 1 [1965] 2 QB 601 at 618B–C; [1971] 1 QB 113; (1972) 223 Estates Gazette 1101; (1973) 228 Estates Gazette 527; CA (19 April 2000, unreported); [2003] EWHC 2673 (Ch) (Sir Donald Rattee).

(ii)  Rent review 9.44 See County Personnel Ltd v Alan R Pulver & Co (solicitor held liable for failure to advise about a clause which required a subtenant of part to pay a rent increased by the same percentage differential as under the headlease); Forbouys v Gadhavi (solicitor held not liable for failing to advise against a sub-sale until a rent review had been determined); Sonardyne Ltd v Firth & Co (solicitor held liable for failure to point out that the new rent would take into account improvements carried out by the tenant); Halifax Building Society v Grosse (solicitor held liable for failure to advise that a rent review was linked to the headlease and that he could not obtain a copy of that lease); Inter-leisure Ltd v Lamberts and Theodore Goddard v Fletcher King Services Ltd (solicitors liable for failure to ensure that there was an upwards only rent review clause on the purchase of reversion); and Funnell v Adams & Remer (breach of duty admitted for failure to advise on effect of tenant’s works on rent review).1 1 [1987] 1 WLR 916; [1993] NPC 122; [1997] EGCS 84; [1997] EGCS 111; [1997] NPC 49; [1997] 32 EG 90; 19 October 2000 (unreported); [2007] EWHC 2166 (QB) (Wilkie J). In Pulver it was accepted that the client was advised that the original rent would be increased in step with increases in the headlease but this was held to be inadequate.

(iii)  Break clauses 9.45 A  break clause in a lease can confer a valuable right upon either landlord or tenant. A tenant with no further use for the premises may wish to bring to an end what would otherwise be a substantial ongoing liability and to do so without paying a premium to an assignee or landlord to take the lease on or back. For a landlord a break clause may be necessary in order to obtain vacant possession for redevelopment. Either party may incur a substantial liability where it is unable to terminate the lease. A break clause is treated as a form of option and its provisions are therefore strictly construed.1 For this reason break clauses have the potential to generate negligence claims both in relation to the drafting of the clause2 and the operation of the break. In Secretary of State for the Environment Transport and the Regions v Unicorn Consultancy Services3 solicitors were found liable for failing to remind the tenant to make a payment upon which the exercise of the break clause was conditional by the due date. Some break clauses also require payment of all rents on the break date as a condition of their operation and the break date may coincide with the 453

9.46  Real estate quarter day so that an additional full quarter’s rent may fall due on the break date itself. If the relevant sum is not paid in full, then the tenant will be unable to exercise the option. A failure to pay contractual interest due on an earlier payment of rent may even be sufficient to prevent the operation of the break.4 It is suggested, therefore, that a failure to give detailed advice spelling out the conditions to be satisfied before the client can exercise a break option is likely to amount to a breach of duty. 1 See the comments at paras 9.92 to 9.94, below which apply equally to break clauses. 2 If the tenant’s solicitor drafts or agrees a clause which requires strict compliance with all of the covenants in the lease, it may be impossible in practical terms for the tenant to exercise the break option at all. 3 [2000]  NPC  108. Rimer J  found that the managing agents were jointly liable and that the claimant was 50% liable for contributory negligence. 4 See Avocet Industrial Estates LLP v Merol Ltd [2011] EWHC 3422 (Ch).

(iv)  Alienation clauses 9.46 Alienation clauses have also proved to be a significant source of negligence claims. See Murray v Lloyd (solicitor held liable for failure to advise that if an assignment of a residential lease was taken in the name of the company the landlord could refuse consent to assign to an individual and prevent enfranchisement); Kennedy v Van Emden (solicitor held liable for failure to advise that it was illegal to charge a premium on assignment); Siasati v Bottoms & Webb (solicitor held liable for failure to advise that a full repairing lease of a shop and residential premises contained a covenant to charge the residential premises to the landlord and not to create any other mortgage or charge without the landlord’s consent); Shaw v Fraser Southwell (solicitor held liable for failure to advise that the alienation clause in the lease of a flat restricted assignment, transfer, subletting and parting with possession except to a limited company and only for the purposes of use as a high class residence for the occupation of one family only); Grosvenor 52 International Ltd v Secretary of State for Local Government, Transport and the Regions (solicitor held liable for failing to advise a developer in relation to the restricted freedom to assign a lease); Lloyds Bank plc v Parker Bullen (solicitor held liable to a lender for failing to report that a lease contained a covenant against alienation); and Powell v Whitman Breed Abbott & Morgan (solicitors held liable for advising a tenant to take an assignment of a lease in the name of a limited company without appreciating the impact that this would have on any future assignment of the lease).1 1 [1989] 1 WLR 1060; [1996] PNLR 409; [1997] EGCS 22; [1999] Lloyd’s Rep PN 633; [2000] Lloyd’s Rep PN 51; [2003] EWHC 1169 (QB) and [2003] EWHC 1279 (QB) (Tugendhat J) (the judgment is in two parts).

2  Duties on exchange of contracts 9.47 The Conveyancing Handbook contains a checklist of matters which solicitors must consider before exchanging contracts.1 When the 454

Acting for the purchaser  9.47 solicitor has received instructions to enter a contract it follows that he or she is then under an obligation to do so in a binding form2 on behalf of the client3 with a person of full capacity4 containing the terms agreed by the client5 within the time limit agreed between the parties6 and where possible simultaneously with the client’s own sale.7 The solicitor must be familiar with the provisions of s  2 of the Law of Property (Miscellaneous Provisions) Act 1989 and the requirement that contracts of sale be signed by both parties and contain all of the terms which have been agreed.8 The solicitor must also explain the consequences of exchange.9 Where, for instance, the buyer needs a mortgage the solicitor must not permit contracts to be exchanged without ensuring that any mortgage conditions that must be met before completion have been or can be satisfied.10 If the seller requires the deposit to be paid to his or her solicitor as an agent rather than as stakeholder the solicitor should explain the difference between the two arrangements and the associated risks.11 The solicitor should also remind the client of the need to ensure that buildings insurance is in place from the time of exchange. Where the parties agree to adopt one of the Law Society’s formulae for exchange a failure to comply will be a breach of duty if as a consequence there is no binding contract.12   1 See the Conveyancing Handbook, C1.2 (‘Preparing to exchange’) and C6 (‘Exchange’).  2 See Parker v Rolls (1854) 14 CB 691 (Jervis CJ).  3 See Summit Property Ltd v Pitmans (2  October 2000, unreported) where Rimer J  held that solicitors were in breach of duty in failing to take proper instructions and agreeing to exchange contracts to purchase the property in the name of a company rather than the client. Nevertheless, the buyer suffered no loss.  4 See Clarke v Milford (1987) 38 DLR (4th) 139.  5 See Costa v Georghiou (1983) 1 PN 201 (where the solicitor failed to insert the rent review clause in a lease).  6 See Simpson v Grove Tompkins & Co (1982) 126 Sol Jo 347, CA.  7 See Buckley v Lane Herdman & Co [1977] CLY 3143 (HHJ Faye).  8 See Youlton v Charles Russell [2010] EWHC 1032 (Ch), [2010] Lloyd’s Rep PN 227 (Warren J) at [308] (also considered in Chapter 2, para 2.09, note 2, above). For an earlier example see Harrison v Bttuye [1975] 1 WLR 58, CA where the contracts signed by each party were not in identical terms and the seller’s solicitor returned the buyer’s part rather than the part signed by the seller.  9 See Stoll v Wacks Caller [2009]  EWHC  2299 (Ch), [2010]  PNLR  4 (Judge Hodge QC) where the buyers entered into a contract conditional upon planning consent for development. Planning permission was granted but was quashed after an application for judicial review when completion had already taken place. The solicitors were in breach of duty because they failed to alert the buyers to the risk that the planning permission might be overturned and ought to have advised them that a ‘call-in’ clause should be included in the contract extending the long stop date for completion. The claim failed on causation. 10 See Bate v Mishcon de Reya [2006] EWCA Civ 597. Again the claim failed on causation. 11 See Condition 2.2.6 of the Standard Conditions 5th edn (2018 revision) which provides for payment to the seller’s solicitor as stakeholder. Some forms of contract also purport to exclude the effect of s 49 of the Law of Property Act 1925. 12 See the Conveyancing Handbook, C4 and Appendices III.2 and III.3 for copies of the formula and discussion of their application.

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9.48  Real estate

3  Duties post-contract (a)  Searches and investigation of title 9.48 Traditionally, it was the practice for the buyer’s solicitor to examine the seller’s title after exchange of contracts. Today, it would be a breach of duty for a solicitor not to investigate the seller’s title before exchange (especially if the contract prevents the buyer from raising requisitions on title between exchange and completion).1 The only search usually made by a solicitor after exchange is a priority search pending completion. Moreover, it is not usual to repeat inquiries or searches that have been carried out prior to exchange. However, in Goody v Baring2 Danckwerts J  stated that it was necessary for a solicitor to repeat the inquiries or request the seller to confirm that the replies remain correct after contract and prior to completion. This seems good practice even now (if there is to be a significant delay between contract and completion). Where local authority searches (or other searches) are out of date a solicitor may be negligent if he or she fails to make a further search before completion. Where the solicitor is instructed after exchange (eg because the property is purchased at auction) it would be negligent not to carry out standard searches (especially if they might give grounds for rescission). Unregistered conveyancing is now rare but a solicitor may still be called upon to check title to land which is unregistered and then to make an application for first registration. This process traditionally took place after exchange but it is suggested that in the modern age a solicitor should require the vendor to deduce title in advance of exchange. If the title has not been registered it is likely to be complex and there is no reason why a solicitor should not investigate it fully before the client becomes bound.3 1 The Conveyancing Handbook, D1.1.2 states that deduction of title should be delayed until after contracts have been exchanged ‘only in exceptional cases’. D1.1.3 points out that Standard Condition 4.3.1 and Standard Commercial Property Condition 7.3.1 both reflect the traditional practice and require evidence of title to be supplied ‘immediately after making the contract’. The Law Society Conveyancing Protocol sets out preferred practice for residential conveyancing and provides that evidence of title is to be provided by seller to buyer at pre-exchange stage together with a list of other documentation (see point 24 in the Protocol table). Provided that the buyer’s solicitors ensure that the purchaser is adequately protected in the event that the seller’s solicitors are unable to make title, a solicitor could not be criticised for adopting the traditional practice (although it might result in some inconvenience). 2 [1956] 1 WLR 448 at 456. Compare Kotowich v Petursson [1994] 3 WWR 669 (where a solicitor was held not liable for failure to establish the planning position after exchange). 3 See Pilkington v Wood [1953] Ch 770 for an example of the difficulties which may arise.

(b) Encumbrances 9.49 One important duty of the solicitor after exchange is to ensure that any encumbrances to which the sale is not intended to be subject are discharged and no further encumbrances are registered pending completion. In Holmes v H Kennard & Son1 the defendants were found liable for a failure to ensure 456

Acting for the purchaser  9.51 that notice of a charge registered under the Matrimonial Homes Act 1967 was removed from the register of the subject property prior to completion. In the case of a typical residential house purchase it is usual for the buyer’s interest to be protected between exchange and completion solely by a priority search. In more complex cases (as for example where there is a relatively long period between exchange and completion2) it will be negligent if the solicitor fails to protect the client’s priority either by registering a unilateral notice or insisting that it is a term of the contract that a notice or restriction be entered in the proprietorship register of the relevant title.3 1 (1984) 49 P & CR 202. 2 See the Conveyancing Handbook, C5.3.4 and C5.3.5 where it is suggested that a period of two months between exchange and completion would make registration advisable. That paragraph also gives other examples of situations where registration would be advisable: where there is reason to doubt the vendor’s good faith; where a dispute arises between purchaser and vendor; where the vendor delays completion beyond the agreed completion date; where the purchase price is to be paid by instalments; and where the transaction is a sub-sale. C5.3.6 then states that if the solicitor is any doubt, the solicitor should err on the side of caution and register the contract. 3 See Bell v Peter Browne & Co [1990] 2  QB  495, CA (failure to register caution to protect agreement to receive part of the proceeds of sale).

(c) Conditions 9.50 A  solicitor must ensure that any conditions specified under the contract for sale are satisfied before the purchase is completed. In Creech v Mayorcas1 the solicitor failed to ensure that the landlord’s licence to assign was obtained before completing the assignment. A failure to comply with the specified conditions will entitle the innocent party to assert that the defaulting party is not ready, willing and able to complete and either to claim specific performance or to serve a notice to complete. 1 (1966) 198 EG 1091 (Pennycuick J).

(d) Occupiers 9.51 On 13  October 2003 the Land Registration Act 2002 came into force. It provides that certain interests override first registration and registered dispositions even if they are not registered.1 These include leases for a term of less than seven years, easements and profits, customary rights and local land charges. But most important is the interest of a person in actual occupation of the land (except for an interest under the Settled Land Act 1925). In the case of a registered disposition the interest of a person in actual occupation will bind a buyer unless it is an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so2 or it belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of disposition and of which the person to whom the disposition is made 457

9.52  Real estate does not have actual notice.3 The kind of interests to which these provisions apply are informal equitable or beneficial interests in the property or rights of occupation.4 Moreover, it is important to note that the right is protected by occupation (even if occupation by itself does not reveal the nature or quality of the right). If the buyer’s solicitor fails to make inquiry of any occupiers and their occupation would have been obvious on a reasonable inspection it will bind the buyer. The standard form inquiries before contract ask about occupiers and under both the Land Registration Acts 1925 and 2002. A solicitor will be in breach of duty if he or she does not follow up any replies or advise the buyer to carry out a reasonably careful inspection before completion. 1 See Schs 1 and 3. 2 See Sch 3, para 2(b). 3 See Sch 3, para 2(c). 4 For examples of an overriding interest arising by proprietary estoppel see Henry v Henry [2010] UKPC 3, [2010] 1 All ER 988.

(e)  Further advice 9.52 A  solicitor has no duty to repeat advice given prior to exchange of contracts once the client is bound.1 Two cases explore the way in which the solicitor’s duties may differ before contract and between contract and completion. In Neighbour v Barker2 solicitors were held not liable for failing to advise the buyers to explore ways of escaping from the contract. They had advised the buyers to have a survey before contract which would have brought the relevant defects to light. However, in Peyman v Lanjani3 a solicitor was found liable for failure to advise a buyer that he had grounds for rescission. Where for instance time is of the essence it is incumbent on the solicitor to remind the client.4 1 See Elland Developments Ltd v Smith [1995]  EGCS  141 (Rattee J). Solicitors are generally obliged to give their advice once and not to revisit it unless information comes to their attention which suggests their earlier advice might need to be revisited: see Bell v Peter Brown & Co [1990] 2 QB 495, CA and New Islington HA v Pollard Thomas [2001] Lloyd’s Rep PN 243 CA at [18] (Dyson J) (architect’s negligence but of general application). 2 [1992] 40 EG 140, CA. The buyers did not take their advice to obtain a survey before contract. But after exchange they engaged a surveyor who reported that the property suffered from substantial defects. The solicitors advised the buyers to complete because they were bound (although it later became apparent that they might have had grounds for rescission). 3 [1985] Ch 457, CA at 478D–G. 4 See Stinchcombe and Cooper Ltd v Addison, Cooper, Jesson & Co (1971) 115 Sol Jo 368 (Brightman J).

4  Duties on completion 9.53 It is the buyer’s solicitor’s duty to complete the purchase by tendering the purchase price in return for title to the property.1 Completion used to take place physically when the buyer’s solicitor would go to the seller’s solicitor’s 458

Acting for the purchaser  9.53 office to hand over a banker’s draft in return for the documents of title and a conveyance or transfer. It is still open to solicitors to use this method in complex or high value transactions. In most cases, however, solicitors complete by using the Law Society’s Code for Completion by Post.2 The seller’s solicitor acts as the buyer’s solicitor’s agent performing those actions which the latter would do if he or she were physically present at the seller’s solicitor’s offices.3 The principal confirmations which the seller’s solicitor gives are as follows:4 (1) to specify in writing to the buyer’s solicitor the mortgages, charges or other financial encumbrances secured on the property which are to be redeemed or discharged on or before completion (to the extent that they relate to the property) and also the method by which they are to be redeemed or discharged (paragraph 7); (2)

to have the seller’s authority to receive the purchase money on completion and on completion to have the authority of each mortgagee to receive the sum intended to repay it (paragraph 8);5

(3) to redeem or obtain discharges for every specified mortgage, charge or other financial incumbrance so far as it relates to the property which has not already been redeemed or discharged (paragraph 12(ii)); and (4) if the discharge of any specified mortgage, charge or other financial incumbrance takes place by electronic means, to notify the buyer’s solicitor as soon as confirmation is received that the discharge has taken place or is taking place (paragraph 13(iv)).6 The Code for Completion by Post does not eliminate the risk that the seller’s solicitor will fail to use the purchase monies to discharge the existing charges over the property or account to the seller either through inadvertence or fraud and in Wong (Edward) Finance Ltd v Johnson, Stokes and Master7 Lord Brightman suggested that it would be advisable either to make the mortgagee a party to the conveyance or for the buyer’s solicitor to make two separate payments: one directly to the vendor’s mortgagee and the other directly to the vendor’s solicitor. However, it remains the predominant practice of English real estate practitioners to use the code and to rely on undertakings given by the seller’s solicitors.8 1 See Dogma Properties Ltd v Gale (1984) 136 NLJ 453 (Kilner Brown J). 2 See the Conveyancing Handbook, III.3. The notes to the Code remind the reader that it embodies professional undertakings. 3 The effect of agreeing to use the code where the solicitor was acting for an impostor in an identity fraud was considered by the Court of Appeal in P&P Property Limited v Owen White & Catlin LLP [2018] EWCA Civ 1082, [2019] Ch 293: see para 9.31, above. The code has now been amended to reflect that decision and that the seller’s solicitor holds the completion funds on bare trust for the purchaser. See also Chapter 4, paras 4.07 and 4.08, above. 4 Paragraphs 8, 12 and 13 contain express undertakings. Paragraph 10 of the notes to the Code also states that the information given in reply to completion information may also amount to an undertaking. 5 The paragraph also contains alternative provisions for the situation in which the seller’s solicitors do not have the necessary authorities.

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9.54  Real estate 6 The Land Registry has a secure form of electronic discharge (‘ED’) and an ‘e-DS1’ which may be submitted by corporate lenders and their agents only: see Land Registry Practice Guide 31. The Conveyancing Handbook, VI.4 points out that there is a particular problem with Electronic Notifications of Discharge or ‘ENDs’ because the buyer’s solicitor is always reliant upon the seller’s solicitor’s undertaking. 7 [1984] AC 296, PC at 303 and 307–308. See also Chapter 2, para 2.16, above. 8 See paras 9.54 and 9.55, below.

9.54 In Patel v Daybells1 this practice was challenged and the Court of Appeal had to decide whether to follow Wong v Johnson Stokes and Master and to find that the use of undertakings by English solicitors was an unreasonable practice. After initial reluctance the court held that the system of a buyer’s solicitor relying on undertakings given by the seller’s solicitors to discharge subsisting charges is acceptable.2 Following the judgment in Patel v Daybells the Law Society issued a guidance note to conveyancers which identified two possible exceptions to the general rule.3 First, where the purchase price of the property exceeds the minimum amount of professional indemnity insurance required to be carried by solicitors, the buyer’s solicitor should either (a) take steps to ensure that the amount secured by the mortgage is less than the minimum level of cover or (b) ensure that the seller’s solicitor’s insurance cover exceeds that sum or (c) make other arrangements to ensure that the mortgage will be discharged (such as sending the funds required for redemption directly to the lender).4 Secondly, the buyer’s solicitors must not accept undertakings if the lender is not a member of the Council of Mortgage Lenders. This is because the CML’s members have agreed to discharge a mortgage even where insufficient funds are remitted if the reason that insufficient funds were remitted was an error on the lender’s part in preparing the redemption statement. A  solicitor who fails to follow this guidance is likely to be held negligent. In the first situation the risk to the buyer is an obvious one. In the second situation the buyer’s solicitor may be unable to enforce the seller’s solicitors’ undertaking if the lender refuses to provide a form of discharge or may be unable to do so quickly. 1 [2001] EWCA Civ 1229, [2001] Lloyd’s Rep PN 738. For further discussion of the relevance of this standard practice see Chapter 2, paras 2.16 and 2.17, above. 2 See [64] and [65] (Robert Walker LJ). Although the judgment refers only to undertakings given by solicitors it seems to have been implicitly accepted that there was no difference between an undertaking given by a solicitor and one given by a licensed conveyancer: see [61]. The Law Society also draws no distinction between solicitors and licensed conveyancers in this connection: see the Conveyancing Handbook at F4.2.14. 3 The note ‘Accepting undertakings on completion following the Court of Appeal decision in Patel v Daybells’ is reproduced in the Conveyancing Handbook, VI.4. 4 For the statutory obligations to obtain cover and the limits of cover: see Chapter 17, paras 17.01 and 17.20, below.

9.55 The guidance note also points out that there may be other potential exceptions to the general rule that undertakings may be accepted without giving rise to a breach of duty. The most obvious example is where the vendor’s solicitor is a sole practitioner who dishonestly misappropriates the purchase 460

Acting for the purchaser  9.56 moneys. As a result of the dishonesty there is unlikely to be professional indemnity insurance available1 and although the SRA’s Compensation Fund may provide compensation to the buyer, compensation is discretionary and the claimant must prove hardship.2 However, the solicitor in Patel v Daybells3 was a sole practitioner and the Court of Appeal rejected this as a reason for finding the solicitor negligent. In that case, however, there was no suggestion of dishonesty on the part of the seller’s solicitor and his insurers had finally paid to comply with the undertaking. It remains to be seen whether the court would distinguish the decision where the seller’s solicitor is guilty of dishonesty and no cover is available. 1 For the exclusion for dishonesty see Chapter 17, paras 17.18 and 17.19, below. 2 See the SRA’s Guidance on the current arrangements ‘Making payments from the SRA Compensation Fund’ issued on 8 August 2016 and updated on 25 November 2019. 3 [2001] EWCA Civ 1229, [2001] Lloyd’s Rep PN 738 at [67] (Robert Walker LJ).

9.56 Where there is more than one charge on a property the buyer’s solicitor should take care to ensure that he or she has obtained an undertaking from the vendor’s solicitor in relation to each charge. Failure to do so will amount to a breach of duty.1 Where the seller delays completion beyond the agreed date the buyer’s solicitor must advise the client of the legal options and, if necessary, enforce the undertakings given by the seller’s solicitor promptly.2 The buyer may be entitled to damages or to rescind if the seller has failed to comply with a notice to complete.3 A  solicitor is also at risk of a claim for negligence if he or she fails to have the relevant transfer or instrument stamped.4 Section 27(1) of the Land Registration Act 2002 provides that a disposition of a registered estate is required to be completed by registration and the disposition does not operate at law until the registration requirements are met. A  solicitor who fails to apply to register the buyer’s purchase (or a lender’s charge) will be in breach of duty and exposes the client to the risk that another person will register another disposition which will then take priority.5 1 See Dogma Properties Ltd v Gale (1984) 136 NLJ 453 (Kilner Brown J). See also Gregory v Shepherd [2000]  PNLR  769, CA (seller’s charge not discharged) and Greymalkin v Copleys [2004]  EWHC  1155, [2004]  PNLR  44 (seller purchased in ignorance of three subsisting charges). 2 See Patel v Daybells [2001]  EWCA  Civ 1229, [2001] Lloyd’s Rep PN  738 at [66] (Robert Walker LJ). 3 See clause 7.5 of the Standard Conditions of Sale 5th edn (2018 Revision) and clause 10.6 of the Standard Commercial Property Conditions of Sale 3rd edn (2018 Revision). For a case where solicitors were held liable for failure to advise the purchaser in relation to his remedies: see Douglas Williams v Glyn Owen & Co [2003] EWCA Civ 750, [2004] PNLR 20 (where damages were awarded for the loss of the chance to earn profits if the purchaser had served a notice to complete earlier). 4 Compare Parker v Rolls (1854) 14 CB 691 (Jervis CJ). 5 See the Conveyancing Handbook, G2 2.2.1, D2 13.5, D2 13.6 and D2 13.7. See also Hartle v Laceys [1999] Lloyd’s Rep PN 315, CA (where solicitors were found negligent for failing to take advantage of this kind of error because the buyer lost the opportunity to sell on before a restrictive covenant was registered).

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9.57  Real estate

5 Illegality 9.57 The Supreme Court decision in Patel v Mirza1 broadened the potential for claims against solicitors arising out of real estate transactions where the underlying transaction was tainted with fraud or illegality. Instead of looking simply at whether the claimant was relying upon an illegal action in support of the claim, the court must now consider whether to permit the claim to succeed would be harmful to the integrity of the legal system. In Stoffel & Co v Grondona2 the Court of Appeal had to consider how the new test applied to a solicitor’s negligence claim arising out of the purchase of property. In that case, the solicitor failed to register the transfer of a property into the buyer’s name where the underlying transaction had been tainted by a mortgage fraud.3 The Court of Appeal held that in general where title or an interest in property has passed to the illegal transferee, he or she has all the remedies available as the valid holder of the title or interest. Crucially, they also held that this principle applied to the claimant even though she had not been registered and only had an equitable interest in the property.4 Having reached this conclusion, they therefore had to consider the broader question whether to refuse the claimant relief because of the illegal purpose of the transaction. They held that there was no public interest in permitting the solicitors to escape liability and that it would be disproportionate to deny the claim. Two features of the transaction are worth noting: first, the mortgagee raised no complaint and adopted the transaction and, secondly, the claimant was not seeking to avoid her obligations under the mortgage.5 1 [2016] UKSC 42, [2017] AC 467. 2 [2018] EWCA Civ 2031, [2018] PNLR 36. At the time of writing, an appeal to the Supreme Court has been heard and a decision is awaited. 3 The judge at first instance found that the claimant had made three misrepresentations: (i) that the sale was not a private sale, (ii) that she was paying the deposit from her own resources and (iii) that she was managing the property herself. She also found that the sale was a nominee arrangement and a sham: see [16]–[18]. The Court of Appeal reversed the finding that the sale was a sham as a matter of law: see [30]. 4 See [31]–[36]. 5 See [37]–[39].

6 Damages (a) Introduction 9.58 The primary function of an award of damages is so far as possible to put the claimant in the position in which he or she would have been but for the solicitor’s negligence. However, where the application of this principle or the individual rules derived from it would either over-compensate or undercompensate a claimant then the overriding principle in Livingstone v Raywards Coal will operate to displace the particular rule. For instance, if the damage which the claimant has suffered has been put right by the date of trial the claimant will not recover damages even if he or she might have been entitled to 462

Acting for the purchaser  9.58 them by a rigid application of those rules. As Schiemann LJ put it in Kennedy v Van Emden (original emphasis):1 ‘… the task of the judge on the date of judgment was to award to each plaintiff that sum of money which would on that date put him in as near as a money award could do so into the position he would have been in on that date had there been no negligence on the part of his solicitor’. Because the court assesses damages at the date of judgment it is entitled to look at events which have happened since the wrong or breach of contract took place (sometimes known as the Bwllfa principle2). In Kennedy v Van Emden C had paid a premium to take an assignment of the lease of a rent-controlled flat in 1983 in reliance on her solicitor’s negligent advice. At the date of the assignment this premium was unlawful. But the law had changed by the date of judgment. C  brought a claim against the solicitor for damages assessed by reference to the premium she had paid in 1983. The Court of Appeal upheld the trial judge in denying her claim to this type of loss.3 Again, if a particular rule appears to preclude recovery where there is an obvious entitlement to damages, the relevant rule will be displaced. A number of real estate cases have emphasised that the assessment of damages is essentially a factual exercise in cases of this kind. In Dodd Properties v Canterbury City Council4 Megaw LJ observed: ‘In any case of doubt, it is desirable that the judge, having decided provisionally as to the amount of damages, should, before finally deciding, consider whether the amount conforms with the requirement of Lord Blackburn’s fundamental principle. If it appears not to conform, the judge should examine the question again to see whether the particular case falls within one of the exceptions of which Lord Blackburn gave examples, or whether he is obliged by some binding authority to arrive at a result which is inconsistent with the fundamental principle.’ In Reeves v Thrings & Long5 Sir Thomas Bingham MR made a similar point: ‘The assessment of damages is ultimately a factual exercise, designed to compensate but not over-compensate the plaintiff for a civil wrong he has suffered. While this is not an area free from legal rules, it is an area in which legal rules have to bow to the peculiar facts of the case.’ In McElroy Milne v Commercial Electronics Ltd6 Cooke P  made the same point. He stated that: ‘in the end assessment of damages is a question of fact … there is no such thing as a rule, applicable to all cases … the ultimate question as to compensatory damages is whether the particular damage claimed is sufficiently linked to the breach of the particular duty to merit recovery in all the circumstances.’ 1 [1996] PNLR 409, CA. See also Nourse LJ at 414: ‘the damages are to be assessed in the real world. Compensation is a reward for real, not hypothetical, loss. It is not to be made an occasion

463

9.59  Real estate for recovery in respect of a loss which might have been, but has not been, suffered’. This passage was cited by Davis LJ in Bacciottini v Gotelee & Goldsmith [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22 at [40]. 2 After Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903]  AC  426, HL. See also Golden Strait Corpn v Nippon Yusen Kubishka Kaisha (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353 at [12] (Lord Bingham). 3 [1996]  PNLR  409 at 418G. For further real estate examples see Barclay-White v Guillaume [1996]  EGCS  123 (HHJ  Crawford QC) (out of pocket expenses recovered only), McKinnon v E-Surv Ltd [2003] EWHC 475 (Ch), [2003] Lloyd’s Rep PN 174 (Jonathan Gaunt QC) and Bacciottini v Gotelee & Goldsmith [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22 (above). These can be seen either as an application of the Bwllfa principle or an application of the mitigation principle (where the claimant is not entitled to recover losses which he or she has later avoided). In Edwards v Hugh James Ford Simey [2019] UKSC 54, [2019] 1 WLR 6549 the Supreme Court held that the Bwlllfa principle was not relevant to the assessment of damages for lost litigation on the loss of a chance basis: see [19] (Lord Lloyd-Jones JSC). It is suggested, therefore, that the discussion in that case is not relevant to the principles stated in this part of the text. For detailed discussion of the case see Chapter 12, para 12.67, below. 4 [1980] 1 WLR 433, CA at 451. 5 [1996] 1 PNLR 265, CA at 278. 6 [1993] 1 NZLR 39 at 41.

(b)  Date of assessment 9.59 Where the loss in question is the fall in the value of an asset, the date of breach or the date of transaction may be the obvious starting point for the assessment of damage.1 Moreover, where damages are assessed at the date of breach or date of transaction this is likely to be because the valuation method is the most appropriate way to assess the loss.2 The date of breach or transaction has the obvious advantage that it does not involve a detailed factual inquiry into the events which have taken place after that date or fluctuations in value which may have been caused by external events. But if the claimant has suffered continuing losses referable to the solicitor’s breach of duty then there is no reason in principle why these losses should not be recoverable.3 In earlier editions of this book we attempted to group cases where the court had applied the valuation method but departed from assessment at the date of breach by reference to the principle that losses cease to be recoverable at the date on which the negligence ceased to have any causative effect. But there appears to be no prima facie rule of law any longer that damages fall to be assessed at the date of breach.4 We have therefore grouped the relevant cases by timescale measured from the point in time when the loss was suffered with the aim of providing a similar fact pattern or suitable analogy in other cases: (1) cases where damages were assessed at the moment loss was first sustained using the valuation method;5 (2) damages assessed three months after loss began to be suffered;6 (3) damages assessed 18 months after loss began to be suffered;7 (4) damages assessed three years after loss began to be suffered;8 464

Acting for the purchaser  9.60 (5) damages assessed five years after loss began to be suffered;9 and (6) damages assessed as at date of trial.10   1 For more on assessment of the appropriate date, see paras 3.84 to 3.88, above.   2 For the valuation method see paras 3.85 and 3.86, above.  3 See Watts v Morrow [1991] 1 WLR 1421, CA at 1444D–F (Ralph Gibson LJ).  4 See Hirstenstein v Hill Dickinson LLP [2014] EWHC 2711 (Comm) at [153]–[161] (Leggatt LJ) and Dyson and Kramer, ‘There is No “Breach Date Rule”: Mitigation, Difference in Value and Date of Assessment’ (2014) 130 LQR 259. See also Bacciottini v Gotelee & Goldsmith [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22 at [56]–[68] (Davis LJ) stating that there is no particular date for assessment in relation to ‘capital loss’ cases.  5 Pilkington v Wood [1953] Ch  770; Ford v White [1964] 1  WLR  885; Piper v Daybell, Court-Cooper & Co (1969) 210 Estates Gazette 1047; Collard v Saunders (1972) Estates Gazette 795; Faragher v Gerber [1994]  EGCS  122; Wapshott v Davis Donovan & Co [1996] PNLR 361; Owen v Fielding [1998] EGCS 110; Stanley K Oates v Anthony Pitman & Co [1998] PNLR 685; Shaw v Fraser Southwell [1999] Lloyd’s Rep PN 633, CA; Greymalkin Ltd v Copleys [2004] EWHC 1155, [2004] PNLR 44.  6 Simpson v Grove Tompkins (1982) The Times, 17 May.  7 GP & P Ltd v Bulcraig & Davis [1986] EGLR 148 and [1988] 1 EGLR 138, CA.  8 Cygnet Health Care plc v Elletson & Co 10 May 1999 (unreported).  9 County Personnel (Employment Agency) Ltd v Alan R Pulver [1987] 1 WLR 916, CA; Hayes v James & Charles Dodd [1990] 2 All ER 815, CA; Patel v Hooper & Jackson [1999] Lloyd’s Rep PN 1, CA; Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534 (Blackburne J). 10 Jarvis v Richards (1980) 124 SJ 793; Connor & Labrum v Regoczi-Ritzman (1995) P & CR D41; Dodd Properties v Canterbury City Council [1980] 1 WLR  433, CA; Smith v South Gloucestershire Council [2002] EWCA Civ 1131, [2002] 38 EG 206, CA; Keydon Estates Ltd v Eversheds [2005] EWHC 972 (Ch), [2005] PNLR 40.

(c)  Measure of damage (i)  Loss of opportunity to purchase 9.60 If a buyer loses the chance to buy a particular property, the appropriate measure of damages is the difference between the purchase price at which he or she would have acquired the property and its actual value (usually at the date of purchase). Where the buyer had made a good bargain he or she will recover substantial damages. In Nash v Phillips1 C was refused damages for the cost of acquiring a more expensive substitute property. The court adopted the difference between the purchase price of the property and its actual value as the measure of damage subject to a 10% deduction for the risk that contracts would not have been exchanged and the costs which would have been incurred. In Stinchcombe and Cooper Ltd v Addison, Cooper, Jesson & Co2 where contracts had been exchanged but the seller was able to rescind because of the solicitor’s negligence C was awarded the difference between the purchase price and the value of the land at the date of rescission. In Jenmain Builders v Steed & Steed3 the buyers who were developers recovered nominal damages only because there was no evidence that the market value was any greater than they had agreed to pay for the property. They were refused damages for the loss of profit on the development because they had retained the purchase price and could have gone into the market and purchased a substitute property as a 465

9.61  Real estate development opportunity. However, where there is no alternative development opportunity available4 or the solicitor’s negligence prevents the buyer from taking advantage of any other opportunity5 the buyer will recover substantial damages (even if he or she had agreed to pay the market value of the relevant property). In Joyce v Bowman Law Ltd6  C  purchased a property but as a consequence of the negligence of his licensed conveyancer the contract did not contain an option to acquire certain additional land. He recovered damages for the lost opportunity, but those damages were heavily discounted on loss of a chance principles to reflect a number of contingencies which might well have prevented the development of the site. Where the solicitor’s negligence also prevents the buyer from exploiting the property for development subsequently damages may also be available.7 As the authorities demonstrate, loss of chance principles will usually apply in cases of this kind because the buyer has not lost an accrued right but an opportunity to acquire the relevant property or to do so on different terms. But in other cases loss of chance principles will have no relevance at all.8 1 (1974) 232 Estates Gazette 1219. See also Bate v Mishcon de Reya [2006]  EWCA  Civ 597 (where the Court of Appeal also accepted that in principle loss of bargain damages were recoverable but the claim failed on the facts). 2 (1971) 115 Sol Jo 368. 3 [2000] Lloyd’s Rep PN 549, CA at [31] and [35] (Chadwick LJ). 4 See Watts v Bell & Scott [2007] CSOH 108, [2007] PNLR 30 (where the judge held that C was entitled to recover the loss of profit on the basis that it could not use the funds set aside for the purchase to acquire any comparable property). 5 See 4 Eng Ltd v Harper [2008] EWHC 91 (Ch), [2009] Ch 91 (a deceit claim) at [53] (where David Richards J  distinguished Jenmain on the basis that Cs were locked into the earlier purchase and deprived of an alternative investment opportunity). See also Khakshouri v Jimenez [2017] EWHC 3392 (QB) (another deceit claim where Green J awarded damages by reference to the lost opportunity to complete an alternative development project). There is no reason why the court should not adopt a similar approach to damages provided that the losses are not too remote: see the cases considered in para 9.72, note 2, below. 6 [2010] EWHC 251 (Ch), [2010] 1 EGLR 129, [2010] PNLR 22 (Vos J). See also the analysis of this decision in Connells Survey & Valuation Ltd v MPG Investments LLP [2012] EWHC 4071 (Ch) at [29] and [30] (Robert Englehart QC) and in Assetco plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm) at [376] and [421]–[425] (Bryan J). 7 See Motor Crown Petroleum Ltd v SJ  Berwin [2000] Lloyd’s Rep PN  438, CA (where the solicitors failed to advise C that it could challenge a local development plan which adversely affected a proposed development. The chances of the challenge succeeding were put at 40%, and damages were assessed as being 40% of the value of the land if the lost challenge to the local development plan had succeeded.) 8 For a case in which the Court of Appeal did not consider that loss of chance principles applied: see Gosden v Halliwell Landu [2020] EWCA Civ 42. The facts are unusual and the negligence complained of was the failure to register a restriction which would have prevented disposal of the relevant property without Cs’ consent. Nevertheless Patten LJ’s judgment contains a useful insight on when loss of a chance principles are and are not relevant: see [42]–[47].

(ii)  Delayed purchase 9.61 Where the solicitor’s negligence causes a delay in completion rather than the failure of the transaction the claim will be limited to any consequential 466

Acting for the purchaser  9.63 expenditure such as the cost of additional accommodation, interest paid to the seller and (possibly) general damages for inconvenience.1 The buyer may also incur additional finance costs which are in principle recoverable provided that avoiding such losses can be shown to have been within the ambit of the duty breached by the solicitor. Where the negligent conduct causes the buyer to lose a purchase at the original price but it is later acquired at a higher price he or she ought to recover the difference between the price originally agreed and the market price of the property when finally acquired. This will usually be the ultimate purchase price but may not be.2 1 See Bailey v Bullock [1950] 2 All ER 1167, CA (solicitor’s failure to obtain possession on behalf of landlord client) and Raineri v Miles [1981] AC 1050 at 1094H. 2 See Simpson v Grove, Tompkins & Co (1982) The Times, 17  May, CA. C  had paid over the market price in order to ensure that he acquired the property which was not attributable to his solicitor’s breach of duty. Hence his damages were assessed as the difference between the originally agreed price and the open market value. He was not compensated for the bad bargain.

(iii)  Defective purchase 9.62 Where the buyer is able to show that the solicitor has negligently failed to identify a defect in the property, or has incorrectly advised that it had specific features (which it did not in fact have), the normal consequence is that he or she has paid too much for the property. The measure of damages in such circumstances is normally established by comparing the price paid with the price which the buyer would have paid at the date of the transaction if both parties been aware of the defect or the property did not have the relevant features. We call this method of assessing damages the ‘valuation method’. There are a number of variations on this basic form of valuation method. First, there are cases in which the buyer has been ‘locked in’ to the ownership of a defective property and has incurred additional consequential losses until he or she has been able to dispose of it. Secondly, there are cases in which a buyer has acted reasonably in curing the defect or where the defect can or could be cured by the award of damages. Thirdly, there is a small and exceptional group of cases in which either the buyer’s impecuniosity or the particular features of the property which he or she sought to acquire (or both of those factors) have resulted in the court awarding the sum of money required to purchase an equivalent property without the defect and, in cases of this kind, the loss is usually measured at the date of trial. We call an award of damages in the first type of case the ‘costs of extrication’ and an award of damages in the second type of case as ‘the cost of cure’. Finally, we call an award of damages in the third type of case as ‘the cost of replacement’. (1)  The valuation method 9.63 Date of transaction: The valuation method was recognised and applied in two early cases as at the date of the transaction. In Pilkington v Wood1 C was 467

9.64  Real estate awarded the difference between the market value of the property with a good title and its value subject to a defect in title but no damages for improvements which he had carried out to the property. The purchase price was treated as the market value at the date of breach. In Ford v White2 Pennycuick J rejected the submission that damages should be awarded on a warranty basis (the difference between the actual value of the property and the value which it would have had without the defect) and awarded as damages the difference between the purchase price and the market value of the property. Given that the seller had offered it for sale at a market price which reflected the defect, damages were nominal. The valuation method has been followed and applied as at the date of transaction in a number of similar cases. In Piper v Daybell, Court-Cooper & Co3 C recovered the difference between the price paid for the property and its market value subject to a right of way. In Collard v Saunders4 C was awarded the difference between the purchase price (representing the market value of the property as it was assumed to be) and its value out of repair. In Faragher v Gerber5  C  was awarded the difference between the price which she paid for the property and its value subject to a proposed highway development (to which Ds ought to have drawn her attention). In Mansion Estates v. Hayre & Co6 C was awarded the diminution in value of a site due to defects in title (together with excess stamp duty).7 1 [1953] Ch 770. 2 [1964] 1 WLR 885. It was accepted by the judge that if the claimant had had attempted to sell the property after he became aware of the defect he might have recovered damages for his wasted expenditure. Compare Barclay-White v Guillaume [1996] EGCS 123 where C recovered his wasted costs. Although he paid the market price for the property, he built over the boundary line because of his solicitor’s negligence. The measure of damages in Ford v White was also adopted in Capita Alternative Fund Services (Guernsey Ltd) v Drivers Jonas [2012] EWCA Civ 1417, [2013] 1 EGLR 119 (a valuer’s case). 3 (1969) 210 EG 1047. 4 (1972) 222 EG 795. 5 [1994] EGCS 122. 6 [2016] EWHC 96 (Ch), [2016] PLSCS 32 7 See also Mercantile Building Society v J W Mitchell Dodds & Co [1993] NPC 99, CA where the rule also appears to have been applied.

9.64 Subsequent events: In a number of cases the court has continued to adopt the valuation method at the date of breach or transaction even though subsequent events have altered the factual position. The principal reason why the court has continued to apply the valuation method is that subsequent events were not considered to be causally relevant. In Wapshott v Davies Donovan & Co1 Cs were awarded the difference between the purchase price of the properties and their actual value at the date of breach even though they were locked into the properties and lost a buyer at a higher price when the defect came to light.2 In Shaw v Fraser Southwell3  C  was awarded the difference between the purchase price and the value of the property subject to an onerous alienation covenant. A small profit realised by eight years later was held not to be relevant. In Greymalkin Ltd v Copleys4  C  was awarded damages by reference to the valuation method as at the date of transaction even though the 468

Acting for the purchaser  9.66 defects in title had been removed at no expense. However, they were unable to recover additional expenditure which was unconnected with Ds’ negligence. In Joyce v Darby and Darby5 the Court of Appeal applied the valuation method and held that C was entitled to the difference between the price paid for the property and its value subject to the restrictive covenants which Ds had failed to identify. The court declined to award the difference between the purchase price and the lower price which C  was only able to recover on a distressed sale of the property. Neither did they allow the costs which C  had incurred in injunction proceedings nor mortgage payments and insurance premiums which she had paid because none of them were caused by Ds’ negligence. But she did recover for the cost of wasted building works upon which she had embarked before the defect came to light. In Quilter v Hodson Developments Ltd6 C was awarded damages by reference to the valuation method because of an undisclosed dispute relating to a defective boiler system. A profit of £35,000 which she realised on resale was held not to be relevant either.7 1 [1996]  PNLR  361, CA. The decision was followed by in Griffiths v Last Cawthra Feather [2002] PNLR 27 (HHJ Grenfell). See also the discussion of the effect of subsequent events in Bacciottini v Gotelee & Goldsmith [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22 at [56]–[68] (Davis LJ). The case was a costs of cure case: see para 9.69, below. 2 The valuation method placed them in the position they would have been in if they had never bought and a generous award of interest compensated them for locking up their capital: see [1996] PNLR 361, CA at 375E. 3 [1999] Lloyd’s Rep PN 633, CA. 4 [2004] EWHC 1155, [2004] PNLR 44 (upheld on appeal at [2004] EWCA Civ 1754). See also [74]–[84] for a useful review of the earlier authorities. 5 [2014] EWCA Civ 677, [2014] 3 EGLR 49 at [87]–[108]. 6 [2016] EWCA Civ 1125, [2017] PNLR 7. 7 For the position in valuers’ cases see Earl of Malmesbury v Strutt & Parker [2007] EWHC 999 (QB), [2007] 1 EGLR 153 (Jack J) at [167]–[193].

9.65 Additional expenditure: In some cases where the court has applied the valuation method or the valuation method results in no loss, the court has awarded the additional expenditure caused by the professional’s negligence. In Patel v Hooper & Jackson1 (a surveyor’s case) Cs were awarded the difference in value at the date of breach. But because the property was uninhabitable and they were unable to sell the property for a number of years the Court of Appeal awarded the costs of alternative accommodation but not the finance costs (which they would have incurred in any event). In Cemp Properties (UK) v Dentsply Research & Development Corporation (No 2)2 Cs recovered damages assessed by the valuation method but also additional expenditure which they incurred over eight months before they discovered the true position. 1 [1999] 1 WLR 1792, CA. Note the expenditure which C did recover in Joyce v Darby and Darby [2014] EWCA Civ 677, [2014] 3 EGLR 49 (above). 2 [1991] 2 EGLR 197. In that case Ds were ordered to indemnify C against these losses.

9.66 Valuation issues: The price paid by the buyer is normally taken to be the value of the property without the defect and expert evidence is usually

469

9.67  Real estate adduced to establish the value of the property with the defect as at the date of transaction. On occasion, however, the court has assessed a claimant’s damages by reference to the reduction in the purchase price which the buyer would probably have achieved by negotiation with the seller.1 The cost of remedying the defect may also be helpful evidence of the difference in value of the property with and without it.2 In other cases the court may assess the difference in value by reference to a percentage of value.3 In Stanley K Oates v Anthony Pitman4 Cs purchased and developed a property before discovering that there was no planning permission for the new use. They obtained retrospective permission but sold the property at a reduced value because of the conversion works which were necessary to comply with the new permission. The Court of Appeal assessed damages by reference to the true value of the property as at date of acquisition. To make this assessment the court subtracted from the price actually paid in 1988 the costs of the extra works which would have been required to comply with the retrospective planning permission. Where the buyer has paid above the open market price which the property would have realised if it had been free of the relevant defect he or she will ordinarily be awarded damages calculated by reference to the open market value and not the actual price paid.5 1 See Asiansky Television plc v Bayer Rosin [2004] EWHC 1362 (QB) at [181]–[184] (Cresswell J). See also Owen v Fielding [1998] EGCS 110 (David Steel J). Cs were awarded the difference between the price paid for the property and its value subject to the rights of common which D had failed to identify. The judge found this to be 80% of the purchase price on the basis that Cs would have obtained a 20% discount at the date of purchase if they had known of the defect. Loss of profits on resale and damages for inconvenience were rejected. 2 This is the rationale of some of the cases in para 9.69, below. 3 See Powell v Whitman Breed Abbott & Morgan [2003] EWHC 1169 (QB) and supplemental judgment at [2003] EWHC 1279 (QB). Damages were assessed by reference to the valuation method at the date of transaction. The asset in question was a long lease granted to a company (and at the time excluded the right to enfranchise). The court took the value of a long lease at the date of transaction and discounted it by 6% to reflect C’s less valuable rights. 4 [1998] PNLR 683, CA. 5 See County Personnel v Alan R Pulver [1987] 1 WLR 916, CA at 925B (Bingham LJ).

9.67 Other dates: On occasion damages have also been assessed by comparing the value of the property with and without the relevant defect at a date other than the date of transaction. This could be the date on which the buyer resold the property or the date on which the defect came to light1 or the date of trial. In Connor & Labrum v Regoczi-Ritzman2 Robert Walker J awarded the difference between the price which Cs would have received on resale when the defect came to light and its actual value at the date of trial. In Cygnet Health Care plc v Elletson & Co3 C was awarded damages by the valuation method assessed at the date of sale together with the additional finance costs which he had incurred on the basis that he would have developed and sold the properties nearly three years earlier than he managed to do so. In Dent v Davis Blank Furniss4 Cs overpaid for a property worth £60,000 and spent a further £381,000 before discovering that most of the property was registered as common land. Over a period of about 18 months they were able to remove 470

Acting for the purchaser  9.68 part of the registration at a total cost of £20,000. At trial they claimed the difference between their total expenditure (£495,000) and the current value of the property. Blackburne J assessed damages by reference to the difference between the value of the improved property on the assumption that none of it was common land and its actual value at the date on which the Cs were partially successful in removing the registration. He compensated them for the fact that the asset which they had acquired and improved was worth relatively less than it would have been on the first occasion on which when they could have realised it (or part of it). 1 See Sir Thomas Bingham MR’s remarks on damages in Reeves v Thrings & Long [1996] PNLR 265, at 278E with which Hobhouse LJ agreed at 281D. 2 (1995) 70 P & CR D41. 3 (10 May 1999, unreported, HHJ Steel). 4 [2001] Lloyd’s Rep PN 534. For the issue whether the additional expenditure was recoverable see para 9.73, below.

(2)  The costs of extrication 9.68 In County Personnel Ltd v Alan R Pulver & Co1 C was awarded the cost of surrendering a lease with an onerous rent review clause as the primary head of loss. Two slightly different reasons were given by the court for departing from the valuation method. Bingham LJ considered that using the valuation method would involve ‘a somewhat speculative and unreal valuation exercise intended to reflect the substantive negative value of this underlease’. Sir Nicolas Browne-Wilkinson considered that assessing damages by this method would be ‘wholly artificial’ for a lease at a rack rent which had no capital value and would have had no capital value even if the rent review clause had not been defective.2 In GP & P Ltd v Bulcraig and Davies3 where C entered a lease unaware that the property was subject to a planning restriction it recovered all of its expenditure less a premium which it had received on the surrender of the lease. In Hayes v James & Charles Dodd4 Cs recovered all of the costs of the acquisition, operation and resale of a workshop and maisonette with defective rights of access over a six-year period. The reasons given by Staughton LJ for not using the valuation method were that Cs would not have bought at all if they had been properly advised, the case was not concerned with a readily saleable commodity and they did not act unreasonably in taking nearly six years to dispose of their interest. They were, however, required to give credit for the profit which they realised on resale of the maisonette. Vos J  applied Hayes v Dodd in Scott v Kennedys5 where Cs acquired a guesthouse without the benefit of planning permission. He approached each item of expenditure separately considering whether it was reasonably incurred and fell within the extent of liability. He then compared the income losses which the Cs had sustained against their capital expenditure before awarding them the total amount of their capital expenditure less the net proceeds of the property on resale. In Funnell v Adams & Remer6 where Cs entered into a 25-year lease with an onerous rent review clause but were able to assign it on shortly before 471

9.69  Real estate the first review took place Wilkie J adopted a very similar approach. He also emphasised the importance of establishing a causal link between the solicitor’s negligence and each item claimed.7 1 [1987] 1 WLR 916 at 926C and 928A, CA. This figure also included arrears of rent due as a consequence of a rent review. For an extrication case before Pulver see Transportation Agency Ltd v Jenkins (1972) 223 Estates Gazette 1101 (where Kerr J drew up ‘a balance of what the plaintiffs had in fact lost and gained’). For a case in which the court applied the valuation method and distinguished Pulver on the basis that the actions taken by Cs were not reasonable: see Kelleher v Don O’Connor & Co [2010] IEHC 313, [2010] 4 IR 380 (Clarke J). 2 [1987] 1 WLR 916 at 926B and 927G–928A. 3 [1986] 2  EGLR  148 (John Gorman QC) and [1988] 1  EGLR  138, CA. C  was also required to give credit for the use of the premises at a full market rent (even though it had been able to negotiate a lower rent). 4 [1990] 2 All ER 815, CA. See 819g–820b and 822d–h. On the facts Cs were only required to give credit for 80% of the profit on resale. The decision was applied in Siasati v Bottoms & Webb [1997] EGCS 22 (Geoffrey Brice QC). 5 [2011] EWHC 3808 (Ch). The judge applied the contractual test for remoteness and in Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146, [2016] Ch 529 Longmore LJ approved his decision (citing the previous edition of this book): see [187]. 6 [2007] EWHC 2166 (QB). See [20] for a useful statement of principle: ‘The act of extricating oneself by taking reasonable steps from a predicament does not, merely by virtue of that, break the chain of causation. Accordingly, if the consequences flowing from that course of action were reasonably foreseeable then they are, in principle, recoverable. That, however, cannot undermine the primary principle that there has to be a causal link between the loss suffered and the fault giving rise to the claim.’ 7 For a Scottish extrication case which turned on the application of similar principles see Kirkton Investments Ltd v VMH LLP [2011] CSOH 200 (Lord Docherty).

(3)  Costs of cure 9.69 The costs of cure may be an appropriate measure of damage where the buyer has either mitigated his or her loss by curing the defect in question or where the defect can effectively be cured by the payment of damages. Further, where the buyer incurs additional costs as a consequence of the delay in curing the defect additional damages may also be awarded. However, the cases in which the court has awarded the costs of cure usually involve a lower measure of damage than the valuation method and should be considered against that background.1 In Creech v Mayorcas2 where C had taken an assignment of a lease without landlord’s consent he was awarded the cost of obtaining the relevant licence together with some consequential expenses. In Nielsen v Watson3  C  was awarded the cost of buying a missing strip of land together with out of pocket expenses. In Sonardyne Ltd v Firth & Co4 C recovered the rent which it had overpaid in the past and the additional rent which it was required to pay in the future to compensate it for the fact that the rent review clause did not contain the standard disregard on improvements. In Gregory v Shepherds5  C  acquired property in Spain subject to a charge. The charge was vacated at a small cost but it took 10 years to achieve and C was unable to sell the property throughout this period. The Court of Appeal awarded the costs of curing the defect and damages for the loss of use of the capital for 472

Acting for the purchaser  9.70 a nine-year period. This measure of loss was represented by interest on the sum that would have been realised in the event that the property had been sold nine years earlier and the calculation was also ordered to take account (if necessary) of exchange rate fluctuations over the same period. In Bacciottini v Gotelee & Goldsmith6 the court rejected Cs’ claim for damages by reference to the valuation method and awarded damages by reference to the minimal costs which they had incurred in a successful application to remove a planning restriction.7 1 Where the costs of cure significantly exceed damages assessed by reference to the valuation method, the court is unlikely to adopt the more generous measure. See, in particular, Watts v Morrow [1991] 1 WLR 1421, CA (a valuer’s case) where the Court of Appeal refused to award Cs the costs of carrying out the repairs and limited the claim to the difference in value at the date of transaction on the basis that they should be put in the same position as if the survey had been performed competently. 2 (1966) 198 EG 1091. 3 (1981) 125 DLR (3d) 326 4 [1997] EGCS 84. 5 [2000] PNLR 769, CA. Morritt LJ stated this (at 785E): ‘[T]he appropriate measure of damages for a removable defect which has been removed should be compensation for its existence from the time when it should have been removed to the time it was in fact removed.’ 6 [2016] EWCA Civ 170, [2016] 4 WLR 98, [2016] PNLR 22. See, in particular, Davis LJ at [66]: ‘Although I would reach this conclusion by application of ordinary principles of mitigation, in practical terms the same conclusion is reached, in the circumstances of this case, by saying that the measure of loss is the cost to the appellants of removing the (eminently removable) defect: that is, in the event, the £250.’ 7 See also Computastaff Ltd v Ingledew Brown Bennison and Garrett (1983) 268 EG 906 where C’s complaint was D’s failure to give adequate advice about the rateable value of the premises. The court awarded the difference between the rates which C had expected to pay over the term and the rates which it actually had to pay both in the past and for the remainder of the term. This can be regarded either as an application of the valuation method or as an example of the costs of cure. Finally, see Xenakis v Birkett Long LLP [2014] EWHC 171 (QB), [2014] PNLR 14 where Ds failed to give Cs proper advice in relation to the period of their personal liability under a guarantee. The court awarded Cs interest for the period during which they had to fund the company’s business. It is probably better not to consider this a costs of cure case because the judge expressed concern that he was unable to award them their capital losses from the business itself (on the basis that the loans were repayable by the company).

(4)  Costs of replacement 9.70 In Murray v Lloyd1 the buyer was advised by her solicitors to take the assignment of a lease for 15 years in the name of a company. In doing so, she lost the opportunity to become a statutory tenant. She was awarded as damages the amount which it would cost to acquire a similar tenancy which would carry such rights on termination. The reason why the valuation method could not be applied was that the rights in question were personal and while unquestionably valuable could not be bought and sold on the open market.2 In Layzell v Smith Morton & Long3 where the solicitors failed to serve a notice claiming a right to succession of a tenancy under the Agricultural Holdings Act 1986 the court adopted a similar approach. C was awarded the cost of acquiring the freehold of a similar farm less the amount he would realise on a sale and leaseback of the 473

9.71  Real estate farm on the terms of the original tenancy. Finally, in Jarvis v Richards4 where the solicitor failed to complete the transfer of an interest in the matrimonial home C was awarded the cost of purchasing a comparable property at the date of trial. Because of the solicitor’s negligence, the matrimonial home had been repossessed by the mortgagee and C was unable to buy another property.5 1 [1989] 1 WLR 1060, [1990] 2 All ER 92. 2 See also Radford v De Froberville [1977] 1 WLR 1262 where Oliver J suggested that the lack of an open market would be likely to make assessing damages by the valuation method inappropriate. 3 [1992] 1 EGLR 169 (Schiemann J). 4 (1980) 124 SJ 793. 5 Compare Smith v South Gloucestershire Council [2002] EWCA Civ 1131, [2002] 3 EGLR 1 which involved damages under the Local Land Charges Act 1975 to which similar principles apply: see [13]. Cs bought a farmhouse which was subject to an agricultural charge which was not revealed by the local search. They could not sell the property or discharge the charge and the court awarded damages by reference to the amount which the claimants required to acquire a similar farmhouse which was unencumbered.

(iv)  Profit on resale 9.71 The normal rule is that the buyer cannot recover the loss of profit which he or she would have made on the resale of the property.1 Three reasons have been given in the authorities for limiting recovery in this way. First, in ‘no transaction’ cases a claim for lost profits on resale is inconsistent with the assertion that the buyer would not have purchased the property in the first place.2 Secondly, the solicitor’s duty is to exercise reasonable care. It is not a duty to guarantee the outcome of a transaction and the solicitor does not warrant that the information which he or she is providing is true.3 Thirdly, any claim for loss of profits necessarily involves selecting the future date at which those profits would have been realised and this may be difficult to establish.4 However, in most of those cases loss of profit would also have been too remote. But where the solicitor knew or ought to have known that the buyer was acquiring the property for development, the court is likely to find that the loss of profit on resale is recoverable. In G & K Ladenbau v de Reya5 where resale of the property was delayed by D’s failure to identify rights of common C was awarded the additional interest payable on the purchase price and also interest on the purchase price which would have been obtained on resale. Similarly, in Carter v TG Baynes & Sons6 where Ds failed to advise C of a density covenant and it took five years to obtain a release of the covenant C was awarded the difference between the profits which he would have obtained if he had been able to develop the land earlier and sell the individual houses and the reduced profits which he actually achieved. Finally, in Joyce v Bowman Law Ltd7 the lost profit on the development and resale of a cottage was held to be recoverable.8 1 For examples of cases in which the purchaser has not been able to recover an anticipated profit on resale see Pilkington v Wood [1953] Ch 770 (Harman J), Nash v Phillips (1974) 232 Estates Gazette 1219 (Foster J) and Wapshott v Davies Donovan & Co [1996] PNLR 361, CA. 2 See County Personnel (Employment Agency) Ltd v Alan R Pulver [1987] 1 WLR 916, CA at 926E (Bingham LJ). In both Connor v Regoczi-Ritzman (1995) P&CR D41 (Robert Walker J)

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Acting for the purchaser  9.73 and Stanley K Oates v Anthony Pitman [1998] PNLR 683, CA the court refused to award loss of profit on resale on the basis that they were ‘no transaction’ cases. 3 See Hayes v James & Charles Dodd [1990] 2 All ER 815, CA at 817 (Staughton LJ). 4 See Aylwen v Taylor Joynson Garrett [2001] EWCA Civ 1171, [2001] Lloyd’s Rep PN 687 at [38] (Arden LJ). 5 [1978] 1 WLR 266 (Mocatta J). For discussion of this point see 289C–F. 6 [1998] EGCS 109 (HHJ Prosser QC). 7 [2010] EWHC 251 (Ch), [2010] 1 EGLR 129 (Vos J). The case is discussed as a ‘lost opportunity’ case in para 9.60, above. Because the contract did not contain the option C lost the opportunity to buy an additional piece of land and develop it together with part of the land which he acquired. For present purposes the key point is that the lost profit on resale was not considered to be too remote. 8 See also Roker House Investments Ltd v Saunders [1997] 10 WLUK 407, [1997] EG 137 (CS) (Alliott J) discussed in para 9.87, below. It can be considered a profit on resale case although it involved the assignment of a lease.

(v)  Alternative investment opportunity 9.72 In Keydon Estates Ltd v Eversheds1 where the solicitor failed to identify a defect in an underlease Evans-Lombe J awarded damages by reference to the return which C would have achieved if it had acquired a comparable investment property with similar yields. However, that case involved a relatively simple exercise. The investment was the reversion to a 10-year lease of commercial property at a rack rent, C was a property investment company and there was expert evidence of other opportunities on the market at the same time and their yields. Keydon has not been applied in any subsequent authority although it is suggested that it was correct in principle. However, where the alternative investment would have been more speculative or would have involved a series of contingencies, it is suggested that loss of a chance principles should apply. The buyer will have to prove on a balance of probabilities that he or she would have made the investment. But the court will estimate the performance of the investment ‘by making the best attempt it can to evaluate the chances, great or small (unless those chances amount to no more than remote speculation), taking all significant factors into account’.2 1 [2005] EWHC 972 (Ch), [2005] PNLR 40. 2 See Parabola Investments Ltd v Browallia Cal Ltd [2010] EWCA Civ 486, [2011] QB 477 at [23] (Toulson LJ). Although Parabola was a deceit case it was applied by Floyd LJ to solicitors’ negligence cases in Wellesley Partners LLP  v Withers LLP  [2015]  EWCA  Civ 1146, [2016] Ch 529: see [100]–[110].

(d)  Extent of liability 9.73 There are only a few cases in which it has been necessary for the court to consider the SAAMCo principle and the extent of liability in relation claims against solicitors who act for a buyer in real estate transactions.1 Unsurprisingly, the damages recoverable from a solicitor in relation to a real estate purchase are limited to the reasonably foreseeable consequences flowing from the breach of duty. In Cottingham v Attey Bower & Jones2 Ds failed to advise Cs that the sellers had not obtained building regulation consent for certain works. They 475

9.74  Real estate had, however, obtained a surveyor’s report which pointed out certain defects. Cs claimed damages for the cost of curing all of the defects as the difference in value between the price they paid and the true value of the property. Rimer J held that damages were limited to the costs of remedying those defects which were carried out without the necessary consent. In Dent v Davis Blank Furniss3 Blackburne J adopted the same approach. He held that the extent of the solicitors’ liability was limited to the losses flowing from a commons registration and that Cs were not entitled to recover expenditure on improving the property.4 1 For detailed discussion see Chapter 3, paras 3.26 to 3.40, above. We no longer use ‘scope of duty’ as a shorthand for the SAAMCo principle on the basis that it is more concerned with the kind or extent of liability. In Taray Investments Ltd v Gateley Heritage LLP [2020] EWHC 716 (QB) Tipples J applied the SAAMCo principle to damages but held that there was no real and substantial chance that C would have acquired the relevant property: see [102]. 2 [2000] PNLR 557. 3 For the facts see para 9.67, above. For a further example of a buyer failing to recover (or only partially succeeding) because of the limited scope of the solicitor’s duty see Hinc v Warren Rees & Co [2002] EWCA Civ 764. 4 See also Scott v Kennedys [2011] EWHC 3808 (Ch) discussed in para 9.68, above (where Vos J subjected each head of loss to the application of the SAAMCo principle).

(e)  Damages for distress and inconvenience 9.74 Where a buyer has been physically inconvenienced, the courts have tended to be willing to recognise that physical discomfort with a modest award of damages on the ground that such losses can be characterised as physical consequences of the breach of duty. In Wapshott v Davies Donovan & Co1 Cs were awarded damages of £3,000 for the inconvenience and physical discomfort of living in a cramped and unsuitable flat for six years, in Faragher v Gerber2  C  was awarded £6,000 for the physical inconvenience of a new highway development adjacent to the property and in Patel v Hooper & Jackson3 Cs were each awarded £2,000 for discomfort. Initially there was much greater reluctance to award damages for distress, worry, or other emotional or mental trouble. In Hayes v James & Charles Dodd4 the reason given was that damages of this kind are not available in contract. However, since the decision of the House of Lords in Farley v Skinner5 damages for distress are in principle recoverable if the buyer can establish that one of the objects of the retainer was to provide peace of mind. In Herrmann v. Withers LLP6 (where the claim related to a right of access to a communal garden) Cs were awarded Cs £2,000 for distress and inconvenience because an important object of the contract was ‘to give pleasure, relaxation or peace of mind’. 1 [1996] PNLR 361, CA, at 377D–379A. 2 [1994] EGCS 122. 3 [1999] 1 WLR 1792, CA. 4 [1990] 2  All ER  815, CA. See also Verderame v Commercial Union Assurance Co [2000] Lloyd’s Rep PN 557, CA (an insurance broker’s case) at 563 col 2 (Balcombe LJ). 5 [2002] 2 AC 732, HL. 6 [2012] EWHC 1492 (Ch), [2012] PNLR 28 (Newey J).

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Acting for the vendor  9.76

D  ACTING FOR THE VENDOR 1 Liability (a)  Contract races 9.75 Outcome (11.3) of the 2011 Code1 used to impose a conduct obligation upon solicitors acting for sellers to inform all buyers immediately if the seller had an intention to deal with more than one buyer. The purpose of the rule against contract races was considered by Chadwick LJ in Jenmain Builders Ltd v Steed & Steed:2 ‘The purpose, as it seems to me, is to avoid the risk that a prospective purchaser, who has agreed a price subject to contract, will take steps, and incur expense, in the course of proceeding towards exchange of contracts in the false belief that there is no other prospective purchaser in competition with him with whom the vendor is dealing. He needs to know that there is another prospective purchaser in competition with him so that he can take decisions as to his own actions in the light of that knowledge. He is then able to make a more informed assessment of the risk that his agreement subject to contract may not lead to an exchange of contracts. The obligation on the vendor’s solicitor is an obligation to disclose information so that the person to whom the information is disclosed can take an informed decision as to the course of action which he will adopt.’ In Jenmain the solicitors acted for both seller and buyer and were held to owe a duty to inform the buyer that they had been instructed to act in a contract race. The SRA’s Standards and Regulations 2019 no longer contain a conduct rule dealing with contract races. But it is suggested that it would be professional misconduct to act for a seller in a contract race without informing each buyer and that Jenmain v Steed & Steed remains good law.3 1 This Outcome replaced r 10.06 of the Solicitors’ Code of Conduct 2007 which was in force between 1 July 2007 and 6 October 2011. Rule 10.06 replaced Practice Rule 6A of the Solicitors’ Practice Rules 1990. 2 [2000] Lloyd’s Rep PN  549, CA, per Chadwick LJ at para  27 (553 col 2). The rule under consideration in Jenmain was Practice Rule 6A. 3 See Rule 1.4 of the Code of Conduct for Solicitors: ‘You do not mislead or attempt to mislead your clients, the court or others, either by your own acts or omissions or allowing or being complicit in the acts or omissions of others (including your client).’

(b)  General advice 9.76 As a general rule a solicitor owes no general duty to give commercial advice to a client who is selling property unless it is obvious that the client requires advice of this nature1 or hidden pitfalls arise which give rise to a duty to warn.2 However, certain features of a transaction may in certain circumstances 477

9.77  Real estate give rise to a duty to give practical or commercial advice or to ensure that the interests of the client are adequately protected in the contract for sale. 1 See Chapter 2, para 2.26, above. 2 See paras 2.31 and 2.32, above and the analysis of Pickersgill v Riley [2004]  UKPC  14, [2004] PNLR 31 (which involved a seller providing a guarantee). See also Rentokil Initial 1927 plc v Goodman Derrick LLP [2014] EWHC 2994 (Ch) at [124]–[135] (Judge Dight) where a solicitor was held not liable even though he did not produce a formal report or go through the contract line by line. The principal issue was whether his drafting was defective and he had failed to comply with the client’s instructions in relation to individual conditions and the court found that the meaning of the terms which he had produced was plain and obvious and did comply with those instructions.

(i)  The sale price 9.77 Bowdage v Harold Michelmore & Co1 provides an example of the general rule. In that case it was held that there was no duty to advise the seller that the price at which she had granted an option over her land was unreasonable or to consult a valuer. Nevertheless, a solicitor would be under a duty to warn the seller to consider taking valuation advice if it is obvious that the client is prepared to sell at a significant undervalue without any obvious reason. In Johnson v Bingley, Dyson & Furey2 the judge accepted the general rule. But he found the defendants negligent for failing to advise the seller to take fresh valuation advice because (a) the solicitor had a concern about her capacity and taking instructions through her son and (b) the son had agreed a price reduction which appeared to make no commercial sense. 1 (1962) 183 EG 233 (Melford Stevenson J). 2 [1997] PNLR 392 (Benet Hytner QC) at 408A–G.

(ii)  The deposit 9.78 There is no rule of law that a contract for the disposition of real property must provide for the payment of a deposit. But it is so common for a deposit to be taken that the Conveyancing Handbook states that: ‘only in exceptional circumstances should a transaction proceed without a deposit being taken’.1 The amount of deposit is usually 10% (although the seller may accept an obligation to pay a 10% deposit in the event that the buyer fails to complete but a smaller percentage on exchange).2 The solicitor should not agree to take a deposit of less than 10% without advising the seller of the implications of this. Nor should the solicitor agree to accept a lower deposit without the seller’s express instructions.3 In the event that the seller is invited by the purchaser to enter a lock-out or exclusivity agreement then the seller’s solicitor should take care to ensure that the lock-out agreement is enforceable against the prospective buyer.4 1 See B17.2.7. See also Potters v Loppert [1973] Ch 399 (Sir John Pennycuick VC) at 405. 2 See the Conveyancing Handbook at B17.2.6.

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Acting for the vendor  9.81 3 See Morris v Duke-Cohan & Co [1975] 119 SJ 826. The buyer may claim relief under s 49(2) of the Law of Property Act 1925 and seek an order for the return of the deposit. But a 10% deposit is so conventional that it is suggested that this should not affect the duty of the solicitor (although it may affect the amount of any award of damages). 4 See Gribbon v Lutton [2001] EWCA Civ 1596, [2002] QB 902, CA.

(iii)  Overage clauses 9.79 A solicitor generally owes no duty to advise a seller to secure a share in any enhanced value of land sold.1 But where the buyer has agreed to make overage payments to the seller, the seller’s solicitor has an obligation to ensure that the contract for sale contains provision for adequate security for these payments.2 1 See Montlake v Lambert Smith Hampton Group Ltd [2004] EWHC 938 (Comm), [2004] 3 EGLR 129 (Langley J) at [237]. However, note Moda Brands Ltd v Gateley LLP  [2019]  EWHC  1326 (QB), [2019] PNLR 27 (Freedman J) where a solicitor was held liable for failing to take proper instructions and include the profit share of a particular unit in the sale terms. However, this was not a straightforward sale and involved a separate participation agreement between seller and buyer. 2 See Akasuc Enterprises Ltd v Farmer & Shirreff [2003] EWHC 1275 (Ch) (Peter Smith J). See, in particular, the analysis of the ways in which an overage payment could be protected at [82]– [91].

(iv) Tax 9.80 The seller’s solicitor should discover sufficient information from the client to determine whether the sale might attract capital gains tax or VAT and to advise the seller accordingly.1 Freehold sales of new commercial buildings within three years of completion attract VAT and a solicitor will be in breach of duty if he or she fails to ensure that the client is either advised or made aware of the need to take accountancy advice to establish the VAT which will be payable. Similarly, a solicitor acting for a commercial landlord granting a lease to a tenant is under a duty to advise the client to consider whether to make an election to pay VAT and to impose a similar obligation on the tenant. Failure to deal with the tenant’s liability to pay VAT may result in the rent received by the landlord being treated for VAT purposes as if it were inclusive of VAT.2 1 See the Conveyancing Handbook at A16.1.1 (CGT) and A17.7.1.1 (VAT). See also Hurlingham Estates Ltd v Wilde [1997] 1 Lloyd’s Rep 525. 2 See the Conveyancing Handbook at A17.6.1 (VAT on new commercial buildings) and A17.7.1 to A17.7.6.

(v)  Sale and leaseback 9.81 In Mortgage Business plc v O’Shaughnessy1 a number of sellers were persuaded to enter into an equity release scheme whereby they sold their properties to a buyer who then granted short leases back to them for a premium. The buyer also gave assurances that the sellers could remain in the properties 479

9.82  Real estate for as long as they wished. The leaseback arrangements were not mentioned in the contracts for sale and the buyer charged the properties to a number of commercial lenders. The Court of Appeal held that the leases and any informal interests which the sellers might have acquired were not binding on the lenders. Etherton LJ went out of his way to say that the failure by the sellers’ solicitors to ensure that all of the arrangements were contained in the contract for sale was ‘plainly inconsistent with proper conveyancing practice’.2 A solicitor who acts for a seller in relation to an equity release scheme (or in relation to a sale and leaseback more generally) must therefore ensure that the contract for sale includes all relevant terms including the terms of any leaseback arrangement and if he or she is also acting for a lender to report those arrangements to the lender. 1 [2012] EWCA Civ 17, [2012] 1 WLR 1521. 2 See [67].

(c)  Searches and inquiries 9.82 A solicitor owes a duty to the seller to answer inquiries and requisitions carefully and accurately. A careless failure to disclose the existence of adverse rights or encumbrances to the buyer which exposes the client to a claim for rescission or for damages for misrepresentation will subject the solicitor to a liability in negligence.1 Solicitors no longer answer pre-contract enquiries themselves or give any qualified assurance as to the accuracy of the seller’s answers.2 However, the failure to correct an inaccurate reply is likely to be held negligent3 and certain replies will carry implied representations that both the seller and the solicitor have carried out adequate investigations.4 If a solicitor exposes the seller to a claim because he or she has not carried out those investigations, he or she will be liable to the seller for exposing the client to a claim. Further, if there is a real doubt about whether the seller can answer a pre-contract enquiry truthfully without disclosing a defect in title or some other damaging information, it is the duty of the solicitor to point out the consequences of disclosure or non-disclosure to the client before replying to the enquiries.5 1 See Cemp Properties (UK) Ltd v Dentsply Research and Development Corpn (No.3) [1989] 2  EGLR  205 (Morritt J) where the solicitors admitted liability for failure to disclose to the purchaser deeds which contained rights of light and air. 2 There is no requirement in the standard form TA6/TA7/TA8 for the seller’s solicitor to provide a direct assurance that he or she has verified the information on the form. 3 See the Conveyancing Handbook at B10.5.4 (citing the authority of citing McMeekin v Long [2003] 29 EG 120). For an example of a solicitor’s failure to do so see Schyde Investments Ltd v Cleaver [2011] EWCA Civ 929, [2011] P&CR 336. 4 See para  9.27, above. The Conveyancing Handbook specifies that an adequate investigation must include the seller’s personal knowledge as well as the contents of such files, deeds and other documents which are in the solicitor’s own possession together with any other reasonable investigations which may be necessary: see B10.5.4 (above). 5 However, in Simmons v Pennington [1955] 1 WLR 183, CA a solicitor was held not liable to the seller for disclosing to the buyer that there had been breaches of a restrictive covenant as to user, although no attempt had been made to enforce them. It may be that the court would not follow this decision now (particularly when either buyer or seller could obtain title insurance).

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Acting for the vendor  9.84

(d) Leases 9.83 In the same way that the solicitor must advise a potential tenant about the terms of the proposed lease, he or she must give similar advice to a potential landlord. In Inter Leisure Ltd v Lamberts1 Ds inserted an ‘upwards downwards’ rent review clause in the draft lease by mistake and failed to negotiate for an ‘upwards only’ clause or advise C  that the lease had been executed in this form. In Theodore Goddard v Fletcher King Services Ltd2 Ds failed to notice that the part of a rent review clause which ensured that any rent review was upwards only had been removed by mistake. They recovered a contribution from C’s agents and surveyors for failing to notice the mistake as well. If a landlord is proposing to grant a lease to a limited company the solicitor would not usually3 be required to advise the taking of a guarantee from the directors of the company or from a parent company. But in the event that a guarantee is required the solicitor will be required to ensure that a binding guarantee in proper form is taken.4 Again, where the guarantee is taken from a limited company the solicitor will not usually owe a duty to advise the landlord to investigate the guarantor’s financial standing.5 Where the client is an original tenant who has negotiated a sale of the lease the solicitor would be obliged to advise him or her of any continuing liabilities.6 1 [1997] NPC 49 (Michael Harvey QC). Liability was admitted. 2 [1997] 2 EGLR 131 (HHJ Previte QC). 3 See Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, CA at 1616G where Stuart-Smith LJ stated that solicitors for an assignor would probably be negligent if they did not ask for a guarantee by a parent company of a subsidiary which was ‘only marginally solvent’. 4 See McElroy Milne v Commercial Electronics Ltd [1993] NZLR 39. 5 See Pickersgill v Riley [2004] UKPC 14, [2004] PNLR 31, and Football League Ltd v Edge Ellison [2006] EWHC 1462, [2006] PNLR 2. In both of these cases, solicitors were found not liable for failing to advise their former clients to take steps to establish a third party’s solvency. 6 See Allied Maples [1995] 1 WLR 1602 at 1608A–B, CA. The finding of negligence was not challenged on appeal. In fact C was a buyer of shares in a number of companies which had sold on a number of leases. Ds were found liable for failure to advise C of the subject companies’ potential first tenant liabilities.

(e)  Making title 9.84 Prior to the introduction of registered land the principal task of the seller’s solicitor was to make title to the subject property. This rarely presents a problem in the modern era and this is borne out by a comparison between the relatively large number of cases in which disappointed buyers have claimed against their solicitors as against the very small number of cases concerned with claims by disappointed sellers.1 Nevertheless, the seller’s solicitor should be careful to ensure that the seller has good title to the property before exchanging contracts. 1 For a case where a licensed conveyancer failed to make title to an unregistered development site see Hitchens and Higgins v Bacchus [1997] NPC 115, CA.

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9.85  Real estate

2 Damages (a)  Valuation method 9.85 The valuation method was applied in Johnson v Bingley Dyson & Furey1 where C would not have sold a freehold property ripe for development if she had been properly advised. She was awarded the difference between the market value at the date of breach (the date of sale) and the sale price. Deducted from the sale price was the amount which was required to pay compensation to a business tenant to obtain vacant possession. The valuation method is likely to provide the appropriate measure of damage where the property is freehold and the seller would not have sold it either on the terms agreed or any terms (if properly advised). 1 [1997] PNLR 392 (Benet Hytner QC)

(b)  Loss of a chance 9.86 Johnson v Bingley Dyson & Furey was a relatively simple case. But where the facts are more complex and the outcome (or range of outcomes) depends not only on the seller’s conduct but the reaction of the buyer or other third parties, damages are likely to be awarded on loss of chance principles.1 In Inter Leisure Ltd v Lamberts2 C entered into a lease with an upwards downwards rent review clause rather than an upwards only clause. The judge found that there was a 75% chance that the tenants would have accepted a lease with such a clause. He also found that there was a 33% chance that they would not have exercised a break clause on the first review if the lease had contained one. He assessed damages as 25% (i.e. 33% of 75%) of the difference between the value of a lease with an upwards-only rent review and the lease as granted at the date of the first review.3 In Tom Hoskins plc v EMW Law,4 where D’s failure to obtain the consent to the assignment of a number of pub leases caused a delay in completing their sales and a wind down of C’s loss-making business, Floyd J  also applied loss of a chance principles. But he did not consider it appropriate to multiply the different contingencies (as in Interleisure) because they were not independent of each other.5 In Moda Brands Ltd v Gateley LLP6 where C lost the right to share in the profits due from a particular unit on a sale and development, Freedman J  also applied loss of a chance principles but again on a different basis. He held that C had a real and substantial chance of achieving three different outcomes and combined all three mathematical outcomes in order to assess damages at 22.75% of the increased profit share. 1 For wider discussion of the principles which are likely to be relevant to any assessment see Chapter 3, paras 3.12 to 3.24, above. 2 [1997] NPC 49 (Michael Harvey QC): see para 3.30, above. 3 He also accepted the argument that he should make a separate award of damages to reflect the landlord’s lost opportunity to obtain vacant possession of the premises if the tenants had exercised the break clause. He also held that damages should be assessed at the first review

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Acting for the vendor  9.87 date because an upwards only rent review clause is designed to protect the landlord against subsequent falls in the market, the claimant did not learn of the defect until the first review and the solicitors had continued to act for the claimant in the meantime. 4 [2010] EWHC 479 (Ch). 5 See [133]–[135] and, in particular, the statement in [133] that ‘a simple multiple of these two percentages (to yield 16%) would not reflect the true chances of the deal being done. That is because the contingencies are not independent.’ His decision was followed by Males J in Fiona Trust and Holding Corp v Privalov (No 2) [2016] EWHC 2163 (Comm), [2017] 2 All ER 570 at [58] and Bryan J in Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291 at [421]–[449] who doubted Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329 (Ch) (see para 9.87, fn 4, below) stating at [447]: ‘As for Harding Holmes to the extent that the contingencies in that case were truly independent then I  do not consider that the approach of Proudman J to “look at the chances of the various contingencies happening in the round” to have been appropriate on the authorities. However such an approach is entirely appropriate where contingencies are not independent. It is also an approach that may be appropriate where multiple contingencies are affected by the same considerations (a Hanif type situation).’ 6 [2019] EWHC 1326 (QB), [2019] PNLR 27 at [183]–[199]. See also para 3.23, above (where the different approaches are described in more detail).

(c)  Other cases 9.87 Defects in leases and guarantees have given rise to a number of assessment problems (particularly in a falling market) where neither the valuation method nor loss of chance principles have been considered relevant. In Roker House Investments Ltd v Saunders1 Ds failed to appreciate that a guarantee given by the parent of the tenant was invalid and the defect did not come to light until C  came to sell. It mitigated its loss by paying a reverse premium for a surrender of the lease and selling with vacant possession but argued that damages should be assessed by the valuation method as at date of transaction. Alliott J  assessed damages as the loss on resale. In McElroy Milne v Commercial Electronics Ltd2 the Supreme Court of New Zealand also awarded the loss on resale on similar facts. Because Ds had failed to put a guarantee in place the landlord was unable to sell the reversion and this delayed the sale. C recovered the difference between the price which it would have obtained if it had sold the development with the benefit of the guarantee at the time at which it intended to sell (when the market was buoyant) and the price which it actually realised for the property some years later after a market collapse. Finally, the valuation method was not considered appropriate in Cemp Properties (UK) Ltd v Dentsply Research and Development Corpn Ltd3 either. The seller brought contribution proceedings against its solicitor for failure to identify a defect in title. The court held that the buyer was entitled to recover as damages the difference between the price paid for the property and its true value subject to the defect. But the seller was not entitled to recover this sum from the solicitors because it would never have been able to sell the property at the higher price. The solicitors were, however, ordered to indemnify the seller against the buyer’s claim for the wasted expenditure which it had incurred to extricate itself from the lease.4 1 Alliott J, 22 October 1997, [1997] 10 WLUK 407, [1997] EG 137 (CS).

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9.88  Real estate 2 [1993] NZLR 39. See 41 at lines 48–9. The decision was referred to by Lord Hoffmann with approval in SAAMCo [1997] AC 191 at 218H–219E. He described it as a case which turned on the principle that C’s reasonable attempt to cope with the consequences of D’s breach of duty did not negative the causal connection between that breach of duty and the ultimate loss. 3 [1989] 2 EGLR 205 at 207A (Morritt J). 4 Note also Harding Homes (East Street) Ltd v Bircham Dyson Bell [2015] EWHC 3329 (Ch) (Proudman J) where Cs’ claim failed on the facts because they failed to establish that they would have negotiated better terms.

(d)  Trading losses 9.88 Finally, in Tom Hoskins plc v EMW Law1 Floyd J also had to consider whether the trading losses which C  had incurred during the period of delay were recoverable. He distinguished Galoo v Bright Grahame Murray2 and held that trading losses were recoverable either on the orthodox test of remoteness or on the contractual interpretation approach.3 They were recoverable even though the only information which D had about C’s trading position was that the sales were urgent and that it was under pressure from its bank to reduce its borrowings. 1 [2010] EWHC 479 (Ch) at [148]–[157]: see para 9.86, above. In Assetco plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm), [2019] Bus LR 2291 Bryan J considered the context to be different to audit negligence cases: see [947]. Nevertheless, he held that trading losses were recoverable: see [962]. 2 [1994] 1 WLR 1360. 3 See Chapter 3, paras 3.54 to 3.60, above.

E  PARTICULAR KINDS OF PROPERTY 1  Lease renewals and extensions (a)  Acting for tenants 9.89 A fertile source of negligence claims against solicitors has been the procedural requirements of the Landlord and Tenant Act 1954, Pt II, which provides statutory protection for qualifying business tenancies. In 2004 the Act was amended.1 But it remains the case that strict time limits exist for taking various procedural steps, and failure to comply with those steps can result in a tenant losing the protection of the Act altogether and its tenancy then coming to an end. The amendments made the Act marginally more ‘tenant friendly’ and make less likely the kind of negligence claims made against solicitors acting for tenants in the past. However, the general approach taken to such claims may remain relevant and they include failure to advise a client or potential client to take the necessary steps required by the Act,2 giving the client the wrong time limits,3 failure to make an application to court before the date specified in the statutory section 25 notice or section 26 request4 and delay in the conduct of the application.5 Another source of negligence claims against 484

Particular kinds of property  9.90 solicitors has been leasehold enfranchisement and, in particular, the procedure under the Leasehold Reform Housing and Urban Development Act 1993. This is an equally technical area where the service of an invalid tenant’s notice or a landlord’s failure to serve a valid counter-notice can expose solicitors to the risk of claims.6 1 See the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 (SI 2003/3096). 2 See Whelton Sinclair v Hyland [1992] 2 EGLR 158, CA and Nahome v Last Cawthra Feather [2010] EWHC 76 (Ch) (HHJ David Cooke). 3 See Fairbrother v Gabb & Co [2002] EWCA Civ 803, [2002] 23 EG 119 (CS). 4 See R P Howard Ltd v Woodman Matthews & Co [1983] BCLC 117 (Staughton J), Hodge v Clifford Cowling & Co [1990] 2 EGLR 89, CA and Ricci v Masons [1993] 2 EGLR 159 (Lionel Swift QC). 5 See Teasdale v Williams & Co (1983) 269 Estates Gazette 1040, CA. 6 See St Anselm Development Co Ltd v Slaughter & May [2013] EWHC 125 (Ch) (where David Richards J held that a claim that the solicitor had negligently advised on the effect of a new extended lease on service charge arrangements was not barred by s 14A of the Limitation Act 1980).

9.90 The damages payable for breaches of this kind of duty usually fall under two heads: either the tenant is forced to take a less ‘valuable’ tenancy or the tenant is obliged to vacate and find new premises altogether. In the first kind of case the usual award of damages is the premium value of the tenancy with the benefit of its statutory rights. In Ricci v Masons1 the tenant was only able to negotiate a five-year contracted out tenancy (which had no further right of renewal). The judge found that if he had been able to exercise his statutory rights he would have been granted a ten-year lease subject to a redevelopment break clause at a lower rent which had a premium value of £100,000. In Aran Caterers v Stephen Lake Gilbert & Paling2 the court assessed damages as the difference between the premium value of the lease which C was able to negotiate and the premium value of the lease to which he would have been entitled by reference to the profits of his business. In a number of other cases the court has also awarded the difference in premium value.3 In both Hodge v Clifford Cowling & Co4 and Ricci v Masons it was held that the appropriate date for assessment of the tenant’s capital loss was the date of breach. In Ricci it was also held that subsequent events such as the tenant’s future intention to sell the business were irrelevant. Even where the tenant can prove no capital loss5 the court may assess damages by reference to the increased rent which the tenant is required to pay over the length of the term: see Teasdale v Williams & Co.6 1 [1993] 2 EGLR 159 (Lionel Swift QC). 2 [2002] 1 EG 76. The tenant failed to recover its relocation costs because it would have incurred them in any event when the landlord exercised a break clause. 3 In Whelton Sinclair v Hyland [1992] 2 EGLR 158 (above) C vacated and was awarded £5,000 loss of premium value. In Jolliffe v Charles Coleman & Co (1971) 219 Estates Gazette 1608 (Browne J) C was awarded £250 to reflect the difference in capital values. He also awarded the increased rent payable during the course of the proceedings as well as his capital loss. (C would have paid a lower interim rent pending the determination of his renewal application.) Compare Clark v Kirby-Smith [1964] Ch 506 (Plowman J) where C was unable to prove any loss.

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9.91  Real estate 4 [1990] 2 EGLR 89, CA. 5 Although the Act provides security of tenure, the rent payable on renewal is intended to be a market rent. 6 (1983) 269 Estates Gazette 1040, CA.

9.91 Where the tenant is obliged to give up possession of the premises the assessment of damage can be more complex. In Matlock Green Garages Ltd v Potter Brooke-Taylor & Wildgoose1 C lost the opportunity to take a 10-year lease of a petrol filling station and was only able to negotiate a short lease terminable on three months’ notice. When notice was served it closed down the petrol filling station and sold off a number of related businesses which were carried out on different sites. The judge awarded damages by calculating the reduction in the annual net maintainable profits of the tenant company as a whole. He rejected an assessment based on the diminution in value of the business at the date of breach and he also refused to award damages for the sale of the other businesses because these losses were too remote. Where the tenant carries on a single business which it is forced to close because of the loss of security of tenure the measure of loss will be the value of the business itself. In Nahome v Last Cawthra Feather2 C was forced to close a jewellery business and damages were assessed by reference to the value of the business and its stock. The judge followed Matlock Green Garages in rejecting a claim for losses to a related internet business because they were too remote. Where the tenant intends to move but is forced to move earlier than anticipated because of the loss of security of tenure the tenant will also be entitled to damages where this results in increased costs.3 1 [2000] Lloyd’s Rep PN 935 2 [2010]  EWHC  76 (Ch) (HHJ  David Cooke). Compare Vision Golf v Weightmans [2006] EWHC 1766 (Ch), [2005] PNLR 45 (Christopher Nugee QC) where the solicitors failed to apply for relief from forfeiture in a case where relief would have been granted. For the related judgment on the extent of liability see [2005] EWHC 1675 (Ch), [2005] 32 EG 66 (Lewison J). 3 See Abraxas Computer Services Ltd v Rabin Leacock Lipman [2000] EGCS 70 where it was held that the ‘claimant had lost the chance to go out into the market place and search for alternative premises under less pressured circumstances’.

(b)  Acting for landlords 9.92 In Nadreph Ltd v Willmett & Co1 the landlords recovered damages for paying statutory compensation to the tenant when they could have avoided doing so by serving a section 25 notice on the correct ground. The issue was whether C  had to set off the value of its own use of the premises not only against any loss of rent but also against the statutory compensation. Whitford J held that the solicitors were entitled to set off any gain which C made as a consequence of the tenant quitting the premises early. In Talisman Property Co (UK) Ltd v Norton Rose2 one group company went into occupation of the premises occupied by another group company (which was dormant). C’s strategy was to exploit the uncertainty over the identity of the tenant in order to avoid the obligation to pay statutory compensation and to ensure that the 486

Particular kinds of property  9.94 trading company renewed the lease. However, Ds served a counter-notice on the wrong ground with the effect that both companies were entitled to claim compensation. C lost its bargaining power and both companies withdrew their applications for new tenancies. The Court of Appeal accepted that there was a chance that the landlord could have avoided paying compensation and secured a new tenancy and awarded a percentage of the compensation together with a percentage of the rent which would have been payable under the new tenancy on a loss of a chance basis. 1 [1978] 1 WLR 1537 2 [2006] EWCA Civ 1104, [2006] 3 EGLR 59

2 Options (a) Reminders 9.93 Ordinarily a solicitor owes no duty to repeat advice once given. But this issue often arises where the advice was about the timing of the exercise of an option. In Yager v Fishman & Co1 Ds were held not liable for failing to remind their client to exercise a break option in a lease or for failing to exercise it themselves. The case has often been taken as authority for the proposition that a solicitor is under no duty to remind. It is clear, however, that the Court of Appeal was not laying down any particular rule in relation to the exercise of options or the issuing of reminders. This was not a case in which the client had forgotten the date. His complaint was that Ds should have advised him to take a different course and to break the lease. This was held to be a matter of commercial judgment. In Donmez v Barnes & Partners,2 by contrast, D (who acted for the grantee of a lease which contained an option to purchase the freehold within two years of the commencement of the term) was held liable for failing to ask C to come and see him as the time drew near for the exercise of the option.3 It cannot be said, therefore, that as a general rule a solicitor owes no duty to remind the client about the need to consider exercising an option. Whether the solicitor will owe a duty is likely to depend on (a) the terms of the option and, in particular, how soon and how often the right to exercise it arises, (b) the nature of the original advice and whether it was given in writing, (c) the existence of a continuing retainer, and (d) the knowledge and experience of the client. 1 [1944] 1 All ER 552, CA. 2 [1996] EGCS 129 (HHJ Prosser QC). 3 See also West London Observer v Parsons (1955) 166 Estates Gazette 749 (Gorman J): advice given in 1950 (in writing) and 1951 (orally); opportunity to break lost in 1953.

(b)  Exercise of the option 9.94 In juridical terms an option is a privilege not a right. It is well established that the conditions for the exercise of an option must be satisfied 487

9.95  Real estate strictly. If a solicitor is instructed to exercise an option on behalf of the grantee then he or she will be negligent if the exercise of the option is invalid because conditions which it is the solicitor’s responsibility to comply with are not satisfied. For example, if the exercise of the option is invalid because the form of the trigger notice is defective or it is not served properly or on the right recipient, the solicitor is likely to be held negligent. In Tonitto v Bassal1 D was held liable for a failure to deliver a signed contract for sale together with the notice of exercise and a payment (all of which were required by the option agreement). In Roberts v J  W  Ward & Son2 Ds failed to specify the price in the notice and also to serve one of the parties. Although there was some uncertainty in the drafting of the option conditions they were liable not only for failing to serve a party but also for serving an invalid notice. In Titanic Investments Ltd v MacFarlanes3 Ds were held liable for agreeing to a formula for the determination of the price without advising their clients fully of the terms proposed and obtaining their agreement to them. Claims also frequently arise out of the ineffective exercise of a break clause. Common questions are whether the solicitor’s duty extends to giving advice about compliance with conditions which are the practical responsibility of the tenant (eg to provide vacant possession of the property on the break date) and, if so, whether such advice must be given within sufficient time to enable the tenant to make the relevant arrangements.4 For example, in Credit Lyonnais v Russell Jones & Walker5 the solicitor was held liable for failing to advise the client that time was of the essence for a payment which was a condition of the exercise of the break clause. Similarly, in Secretary of State for the Environment Transport and the Regions v Unicorn Consultancy Services the exercise of the break clause was conditional upon making a payment by the due date. The solicitor was held liable for failing to remind the claimant to make the payment on time.6 1 (1992) 28 NSWLR 564. 2 (1981) 125 Sol Jo 120, CA. 3 [1997] NPC 105 (Robert Walker J) and (3 December 1998, unreported), CA. 4 See, eg, Avocet Industrial Estates LLP v Merol Ltd [2011] EWHC 3422 (Ch) (where the tenant failed to comply with a condition requiring it to pay historic contractual interest reserved as rent). 5 [2002] EWHC 1310 (Ch), [2003] PNLR 2. The decision is a leading case on the extent of the duty to give advice: see Chapter 2, para 2.32, above. 6 Rimer J, 19 October 2000 (unreported).

(c) Damages (i)  Grant of the option 9.95 Where the solicitor’s breach of duty leads to the client either granting or taking an option on defective terms, the appropriate measure of damage is likely to turn on what the outcome would have been if the client had received the proper advice. In Titanic Investments v MacFarlanes1 the court found that agreement would have been reached on some terms and approached the assessment of damages by considering the potential outcomes and evaluating 488

Particular kinds of property  9.96 the chances of each occurring. In Amerena v Barling2 the Court of Appeal assessed damages by the valuation method at the date of grant of the option. There were a number of reasons why the date of breach was the appropriate date: first, the subject matter of the option was shares; secondly, it was clear that C had made a good bargain and the value of the shares subject to the option at the date of its grant was no less than their unfettered value; thirdly – and perhaps most importantly – there was little or no explanation for C’s decision to buy out the option at an inflated price which was held to be unreasonable.3 1 [1997] NPC 105, CA. 2 (1993) 69 P & CR 252. 3 Note Fryatt v Preston Mellor Harrison [2015] EWHC 1683 (Ch) (Mark Cawson QC) where the solicitor was held negligent for failure to explain the difference between an option over the land and an option over shares but C failed to establish on a balance of probabilities that he would have acted differently and the claim failed.

(ii)  Exercise of the option 9.96 In Homsy v Murphy1 the court awarded damages based on the difference between the purchase price and the value of the land at the date of exercise of the option. C had a buyer for both the option land and his own land at a price which reflected the marriage value of the two interests and it was held that the valuation ought to take into account the marriage value. Where the solicitor is responsible for the failure to exercise a break right, the loss will depend upon the tenant’s ability to mitigate by subletting or assigning or surrendering the premises. All of these possibilities are likely to require the tenant to pay a reverse premium which will provide the principal component of the loss. 1 (1996) 73 P&CR 26, CA.

489

Chapter 10

Lenders’ claims

A  CONTRACT AND THE TORT OF NEGLIGENCE 1  Introduction and summary of key issues 10.01 In the period from roughly 1994 until 2000 mortgage lenders found that they had suffered large losses due to the fall in the UK property market during the 1991–92 recession, and they responded by bringing very large numbers of claims against solicitors who had acted for them. This resulted in a considerable volume of decided cases, which established principles which applied to claims in contract, negligence, breach of warranty of authority, breach of trust and breach of fiduciary duty. From 2000 until around 2008 relatively few claims were brought. However, following the 2008 credit crunch and subsequent recession, lenders again brought significant numbers of claims, especially in the period up to 2016. 10.02 One recurring theme in this type of litigation has been attempts by solicitors to show that, in deciding to make the loans which led to their losses, lenders had acted irresponsibly and imprudently and so with contributory negligence, and that any compensation payable should be reduced accordingly. Solicitors have often been able to show that lenders acted with considerable negligence in deciding to make loans. The quality of lending decisions was if anything worse over the 2000–07 period, which saw a sharp increase in selfcertification of income and in interest-only mortgages. The result was that lenders found themselves vulnerable to significant reductions in damages if suing in the tort of negligence alone. This in turn caused lenders to look for causes of action or bases of claim to which, as a matter of law, contributory negligence was no defence. It is thought that this imperative led to a change in focus of lenders’ claims since 2010, to claims for breach of trust, breach of warranty of authority, and for breach of strict contractual duties including breach of undertaking. We consider these areas of controversy below. 10.03 Following criticism of poor lending practices leading up to the credit crunch, the Financial Conduct Authority (‘FCA’) produced a Mortgage Market Review in 2010 which resulted in the introduction of stricter mortgage lending rules with effect from April 2014. The revised Mortgage Conduct of Business rules (or ‘MCOB’) place particular emphasis on lenders assessing affordability 490

Contract and the tort of negligence  10.06 for the individual borrower. Self-certification of income and most interest-only lending in a residential context has been outlawed. Compliance with MCOB will obviously be relevant to issues of contributory negligence in lending after April 2014. 10.04 First, we will set the scene for those unfamiliar with lenders’ claims; this first section need not be read by anyone familiar with this type of claim. Next we deal with claims in contract and the tort of negligence. This includes considering the impact of the Council of Mortgage Lenders’ Handbook (renamed the UK  Finance Mortgage Lenders’ Handbook from 1  July 2017) first introduced in 1999 and revised several times since; the Solicitors’ Codes of Conduct 2007 and 2011 and the new SRA Code of Conduct for Individuals 2019 and SRA  Code of Conduct for Firms 2019 which came into effect on 25  November 2019. (Reference should be made to earlier editions of this book for the regime under the earlier 1999 Solicitors’ Practice Rules, r.6(3) of which applied until 1 July 2007.) We consider liability in contract and tort; causation; the SAAMCo principle; assessing loss in lender claims; contributory negligence; mitigation; contribution; and syndication and securitisation. In the remaining sections we deal with claims in fraud, breach of warranty of authority, breach of undertaking, breach of trust, breach of fiduciary duty and for money had and received, as they arise specifically in a lender context.

2  Factual background to lenders’ claims1 10.05 In order to understand the issues in lenders’ claims, some background knowledge is helpful. This concerns the ways in which lenders normally deal with mortgage applications and solicitors normally deal with residential conveyancing when acting for both lender and borrower, and the nature of subsale and identity frauds. 1 For eg a description of the procedure followed by the Nationwide Building Society in the period 1989 to 1991, see Nationwide BS v Balmer Radmore [1999] Lloyd’s Rep PN 241 at 247–251; [1999] PNLR 606 at 615–622.

10.06 A typical transaction might proceed as follows. A prospective housebuyer (‘the borrower’) applies to a mortgage lender (‘the lender’), often through a broker or intermediary, for a mortgage to buy a property (‘the property’). Generally the borrower will formally apply for a mortgage only once he or she has agreed a price for the purchase, subject to contract; although since the introduction of affordability rules in 2014 it has become common for borrowers to obtain a ‘decision in principle’ from the lender before looking for a property. In deciding whether to lend money to the borrower, the lender considers essentially two issues: first, the value of the property which is to be taken as security for the loan, and second, the ability of the borrower to make the repayments required. The latter will be referred to as the value of the borrower’s covenant: the borrower covenants with the lender to make the repayments. 491

10.07  Lenders’ claims

(a)  Value of the security 10.07 The lender will take a first legal charge over the property, which should enable it to take possession of, and sell, the property in the event of the borrower defaulting. Hence the lender must consider the value of the property, and the proportion of the valuation which the borrower wishes to borrow. In order to determine the value, lenders will normally commission and receive a written valuation report from a competent valuer. Pausing there, this means that in all claims by lenders against solicitors, both the lender and the solicitors should consider whether the valuer who prepared the valuation report was negligent, and, if so, whether a claim or contribution proceedings should be instituted.1 Once the lender has received the valuation report, it must consider how much the borrower wishes to borrow. This proportion is known as the ‘loan to value’ ratio or ‘LTV’. For instance, if a property is valued at £100,000 and the borrower wishes to borrow £75,000, then the LTV is 75%. The lender will most probably have written lending criteria which set out the maximum percentage of the valuation, or LTV, which it is prepared to lend. Some lenders might lend up to 75% of the value of the property, others 90%, and, in the past at least, others have lent 100%. Lending more than 75% LTV in a market where property prices are known to be falling and after little scrutiny of the borrower’s finances may well constitute contributory negligence.2 Much of the discussion of liability below considers the circumstances in which solicitors who discover information which casts doubt on the value of the property offered as security ought to report such information to the lender. 1 See para 10.180, below. 2 See para 10.161, below.

(b)  Value of the borrower’s covenant 10.08 The second issue is whether the borrower will be able to afford to make the repayments required to finance the proposed loan. Since April 2014, a new regime has been in place, of affordability checks that lenders must carry out, including objective proof of net income, committed expenditure and essential costs of living.1 Lenders must also now have in place a written responsible lending or financing policy, setting out among other things how income and expenditure are to be assessed, including the types of income acceptable and proof required; how future changes in interest rates are to be taken into account and the method of calculation of the advance which is affordable. Historically, for what were known as ‘full status mortgages’, questions were asked on the mortgage application form relating to income and affordability. The lender will also undertake ‘status checks’, or enquiries as to the borrower’s creditworthiness. The precise steps which a particular lender takes will depend on the terms of that lender’s mortgage criteria. Detailed requirements are now set out in MCOB  11.6. In practice these may include seeking: a banker’s reference; a reference from the borrower’s landlord (if the 492

Contract and the tort of negligence  10.10 borrower is renting his or her accommodation) or the previous lender if it is mortgaged; a search with a credit reference agency to determine whether there are any unpaid county court judgments or previous insolvencies; in the case of an employee, an employer’s reference; in the case of a self-employed person, three years’ accounts and possibly an accountant’s reference; a search of the electoral roll to see whether the borrower is recorded as living at the address given in the application form. The lender may interview the borrower to satisfy itself of the truth of his or her answers. The extent to which a particular claimant lender has undertaken such enquiries is likely to be relevant in determining whether it has been contributorily negligent, and since April 2014 compliance with MCOB 11.6 is critically important. As we shall see below, in general it is doubtful whether solicitors have any implied duty to report matters which they discover which are relevant only to the borrower’s ability to pay. 1 MCOB  11.6 ‘Responsible lending and financing’. All the Mortgage Conditions of Business or ‘MCOB’ can be found on the FCA website, which includes a useful historical function permitting the rules at a specific date to be viewed. There are special, looser rules for ‘high net worth customers’.

10.09 In the past, an alternative approach was for a lender to rely almost entirely on the value of the property as security for the loan, and to make no, or limited, investigation of the borrower’s finances1. Depending on their precise terms, loans made on this basis were known as ‘non-status’ loans (if the lender had not investigated the borrower’s financial status at all) or ‘self-certifying loans’ (where the lender had relied upon the borrower’s own statement as to his or her means). Further, in ‘buy to let’ lending, where the intention is that the borrower will not live in the property but will rent it out, the lender may proceed on the basis that it need not consider the borrower’s income from their employment, since the rent received from the property should provide the sums required to pay the mortgage. It appears that loans of these varieties have led to more losses for lenders than other loans. We discuss the circumstances in which lending on such a basis might amount to contributory negligence below.2 1 Such lending has now been outlawed by MCOB 11.6.5 and 11.6.6 – see FCA website. 2 See para 10.172, below.

(c)  Lender’s retainer of the solicitor 10.10 Once the lender is satisfied as to both the value of the security and the borrower’s ability to pay, it makes an offer of advance, and it issues written instructions to solicitors at the same time. Frequently, in ordinary residential conveyancing, the same solicitors act for both lender and borrower. Where the lending is residential, the lender’s instructions to the solicitors will usually incorporate Part 1 of the Lenders’ Handbook, which we consider below. (Sometimes the instructions will incorporate the Lenders’ Handbook even for commercial conveyancing.) The written instructions set out the express terms of the lender’s retainer of the solicitors. The solicitors are normally required to 493

10.11  Lenders’ claims submit to the lender a report on title or certificate of title. The certificate of title is generally the principal document in which the solicitors report information to the lender. There is a form of certificate of title approved by the CML/ UK Finance and the Law Society; we consider this below. If the lender receives a certificate of title which raises no concerns about the transaction, then it will normally proceed to forward the advance money to the solicitors so that the transaction may be completed. The lender will expect to be provided by the solicitors with an enforceable and valid first legal charge over the property after completion. We consider the nature of the solicitors’ duties further below.

(d)  Sub-sales, back to back sales and direct payments 10.11 It is helpful to have one particular kind of mortgage fraud in mind in interpreting the case law. Simplified, it operates as follows. A sells a property to B, and then B sells it on to C. The sales from A to B and from B to C take place on the same day, or within a short space of time. A sells to B for say £100,000, and B sells exactly the same property to C for, say, £150,000. The true value of the property is £100,000. The property market is falling or static at the time, so there is no reason for C’s solicitor to suppose that the value of the property has suddenly increased by 50% in a single day. C’s mortgage lender is unaware of the sale from A to B, and may lend, say, £120,000 on C’s supposed purchase from B for £150,000. If B and C are in league, then the sale from B to C may be a device to deceive C’s lender. B and C can use £100,000 of C’s lender’s money to pay off A and retain the remaining £20,000; they then disappear with the £20,000. B and C may inform their respective solicitors that there is no need for the payment of a deposit, or even of any of the balance of £30,000, because C has paid the £30,000 directly to B. The point is that the price at which B  is selling to C  (£150,000) is a sham: the true value of the property is the price at which A is selling to B (£100,000), but C’s lender must be deceived into believing the true value to be £150,000. This is why, from the lender’s point of view, knowledge of the price at which A is selling to B may be very helpful in detecting the fraud and withdrawing from the transaction. It is also why both the lender and the solicitor may also wish to blame C’s lender’s valuer who has presumably valued the property at £150,000 rather than £100,000. The word sub-sale tends to be used to describe the case where A sells to B and then B sells on to C soon after. 10.12 One might ask why fraudsters thought it necessary to enter into such an elaborate series of transactions in order to defraud mortgage lenders. Our example assumes that A is honest and the sale from A to B is at the market price of £100,000. It would of course be possible for a fraudster, B, to purchase the property for £100,000 and tell the lender that the price was £150,000. But this would require the involvement of a dishonest solicitor who was willing to tell the lender client a blatant lie as to the price at which the property was being bought. If C  is a fraudster, the advantage of the sub-sale mechanism is that 494

Contract and the tort of negligence  10.14 C does not require a dishonest solicitor in order to ensure that his or her lender does not find out the full story of the transactions. As long as C’s solicitor either fails to find out the price of the sale from A to B, or does not trouble to consider whether it is a matter which should be reported to C’s lender, the transaction may proceed without C’s lender knowing of it. Thus the transaction may proceed without C needing to find a dishonest solicitor. This was perhaps the reason for its popularity as a fraudulent device.

(e)  Identity fraud 10.13 Recent cases suggest there has been an upsurge in identity fraud. In one variant of this, the fraudster pretends to be the owner of a property, wishing to remortgage it. The fraudster provides documents suggesting that s/he owns the property, applies for a remortgage and instructs solicitors to act in the remortgage. The lender approves the loan, the solicitors complete the conveyancing formalities, the lender releases the advance, and part of it is submitted to the existing lender, part to the fraudster. The fraudster then disappears, and it transpires that s/he was not the true owner: the true owner is still living in the property, oblivious to the supposed transaction. In another variant of this type of fraud, the fraudster purports to sell the property as owner, instructing his or her own solicitors and producing fraudulent identity documents for the required money-laundering checks. A buyer is found, who may buy with the assistance of a mortgage. Funds are transferred from the lender and buyer to the buyer’s solicitors and then to the seller’s solicitors, who release them to the fraudster, who disappears. These types of fraud may lead to claims by the lender against (in the first type of case) the lender’s solicitors, or (in the second) both the seller’s and the buyer/lender’s solicitors. These may include, variously, claims for breach of undertaking, breach of trust, breach of contractual terms in the Lenders’ Handbook and/or breach of warranty of authority.

(f)  Law Society and SRA Guidance 10.14 The Law Society and subsequently the Solicitors Regulation Authority (SRA) has issued various guidance notes in relation to mortgage fraud. The court is likely to pay considerable attention to the contents of such guidance at any given time, so it may assist lenders to show that, at the time of any given transaction, their solicitors were in breach of such guidance and thus were negligent and possibly in breach of a requirement in the Lenders’ Handbook to comply with such guidance. In order to consider such a claim in any given case it is necessary to ascertain from publications such as the relevant edition of the Law Society’s Conveyancing Handbook or the internet what guidance had been issued at the date of the facts in the case. See in particular the Law Society’s Mortgage Fraud Guidance Notes dated 18  March 2008, 15 April 2009, 6 October 2011, 31 July 2014, 11 February 2019 and 13 January 2020 495

10.15  Lenders’ claims (available, including historic versions, on the Law Society website) and the Joint Law Society and HM Land Registry property and title fraud advice note, issued on 8 September 2017 (also available on the Law Society website).

3  The Lenders’ Handbook and solicitors’ regulation 10.15 In the 1990s there was a negotiation between the Law Society on behalf of the solicitors’ profession and the Council of Mortgage Lenders (‘CML’) on behalf of mortgage lenders to agree terms on which solicitors would act for both lender and borrower in residential conveyancing. This led to the introduction in 1999 of r 6(3) of the Solicitors’ Practice Rules, co-ordinated with the terms of the CML  Lenders’ Handbook. The Lenders’ Handbook included terms which were intended to be incorporated into lenders’ retainers of solicitors.1 From time to time the Lenders’ Handbook has been amended, so in any particular case it is necessary to have in mind the version and so the terms which were in force at the time of the transaction in question. It was renamed the UK Finance Mortgage Lenders’ Handbook on 1 July 2017. The Lenders’ Handbook, including details of the amendments made on various dates, is available online at www.cml.org.uk/lenders-handbook/. On 1 July 2007, r 6(3) of the Solicitors’ Practice Rules was replaced by r 3.16–3.22 of the Solicitors Code of Conduct 2007, although these were very similar to the provisions of practice r 6(3). These remained in force until October 2011 when they were replaced by the SRA Code of Conduct 2011, which in turn on 25 November 2019 was replaced with by the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. The 2011 Code effected a major change in style, described as ‘outcomes-focused regulation’. Throughout it, detailed regulations were replaced by higher level ‘outcomes’ and ‘indicative behaviours’. This was as true of conveyancing as anything else. Acting for both lender and borrower fell within Chapter 3 on Conflicts of Interest. The 2011 Code went through many versions, but Chapter 3 remained essentially unchanged. (There is an archive of versions and dates on the SRA’s website (www.sra.org.uk) which enables one to use the version which was in force on the particular transaction date.) However, it seems that the 2011 change in style did not aid comprehension. As indicated, in 2019 the 2011 Code was replaced with new Codes of Conduct, which aimed to be even shorter and simpler. There are now seven SRA Principles, and the two SRA Codes of Conduct, one for Individuals and one for Firms, each in similar terms. The relevant section is now 6.2 of the 2019 Codes, on avoiding conflicts of interest. The SRA issues Guidance to supplement the Codes, and it has issued a Guidance Note on Conflicts of Interest, dated 2 March 2020. 1 See also the Building Societies Association’s Mortgage Instructions, which are similar.

10.16 From the solicitors’ point of view, the main aim of introducing a system of rules, co-ordinated with lenders, seems to have been to reduce the scope of solicitors’ duties to lenders and so to reduce the number of 496

Contract and the tort of negligence  10.18 successful claims against solicitors. In 2007, the aim of the rules was said to be to: ‘give certainty to all the parties (lender, borrower and solicitor), help to reduce claims on indemnity insurance, and address any loss of public confidence in the profession arising from lender claims.’1 The objectives of increasing certainty, and reducing claims, were at that time pursued by (i) setting out detailed rules on the extent to which solicitors could undertake duties to lenders, and (ii) incorporating into the lender’s retainer of the solicitor limits so that the retainer could not impose on the solicitor duties which went beyond the duties in (i). However, the abolition from 2011 of detailed rules in the Code of Conduct, continued in the SRA  Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019, has greatly reduced the extent to which the lender’s retainer may in practice be so restricted. Below, we consider some of the limits on the solicitor’s duties under these two differing regimes. (For details of the pre-2007 regime under r 6(3) of the 1999 rules, reference should be made to earlier editions of this book.) 1 Solicitors’ Regulation Authority, briefing paper for Rules and Ethics Committee dated 26 March 2007, ‘Practice Rule 6(3) and the City of London Law Society’s Certificate of Title for Commercial Transactions’ para 10.

10.17 It is not possible in this book to consider every variation to the terms of the Code. Instead, in this section we will consider the position (a) as it was from 1  July 2007 until 5  October 2011, before the introduction of the SRA Code of Conduct 2011; and (b) the position under the 2011 Code, and as it has continued under the SRA Code of Conduct for Individuals and the SRA  Code of Conduct for Firms 2019. The regime from 2007 until 2011 has been retained in the current edition because disputes are still often being litigated which concern it and because the impact of the changes in 2011 is more readily understood against that background. For the 2011 Code, we have used version 21 of Chapter 3 of the Code, in force from 6 December 2018. For the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019, we have used the versions as issued on 25 November 2019 (with supplementary Guidance). As to the 2011 Code, while it is important in any given case to use the version in force at the date of the specific facts in issue, Chapter 3 on Conflicts of Interests did not change in any material respect over the whole period it was in force. The regime from November 2019 continues the approach of setting out broad principles, which are supplemented by Guidance. 10.18 Part 1 of the Lenders’ Handbook contains standard form instructions to solicitors acting for both lenders and borrowers in residential mortgage transactions.1 Part 2 of the Handbook allows individual lenders to stipulate their own specific instructions to the solicitor. Before 6 October 2011, cl 1.5 of the Handbook provided: 497

10.19  Lenders’ claims ‘The limitations contained in rule 6(3)(c) and (e) of the Solicitors’ Practice Rules 1990 (and where applicable the Solicitors’ Code of Conduct 2007) apply to the instructions contained in the Lenders’ Handbook and any separate instructions.’2 This statement was presumably effective in law. If that was correct, then the solicitor’s contractual obligations to the lender could not go beyond the limitations. The limitations appeared in rr 3.19 and 3.21 of the Solicitors’ Code of Conduct 2007. Rule 3.21 provided: ‘The terms of 3.16 to 3.20 above will prevail in the event of any ambiguity in the lender’s instructions, or discrepancy between the instructions and 3.19 above or the approved certificate.’ Rules 3.16–3.20 of the Solicitors’ Code of Conduct 20073 contained restrictions imposed by the Code on the scope of obligations which solicitors acting in lending transactions could accept from lender clients. Hence, it appears that, at least in cases where the lender used the Lenders’ Handbook, the lender would have accepted that the limitations contained in rr 3.16–3.20 applied to the scope of the solicitor’s duty owed to the lender, whatever the lender’s precise instructions said. As indicated above, the purpose of this from the solicitors’ point of view was to prevent the imposition of wide-ranging duties on solicitors leading to the risk of extensive liability to lenders. 1 UK  Finance Lenders Handbook Parts 1 and 3 dated 1  July 2017. For the position as to incorporation of terms into the contract of retainer in cases where the Lenders’ Handbook is not used, see generally Chadwick J’s discussion in Bristol & West BS v Fancy and Jackson [1997] 4 All ER 582, 603h–605d, and in Bristol and West Building Society v May, May & Merrimans [1996] 2 All ER 801 at 809g. 2 There was an exception for licensed conveyancers, with whom we are not concerned in this book. 3 Available, along with historic versions, on the SRA website.

10.19 From the commencement of the 2011 Code, clause 1.5 of the Lenders’ Handbook was modified to read: ‘If you are regulated by the Solicitors Regulation Authority (SRA) the limitations contained in the SRA’s Code of Conduct 2011 apply to the instructions contained in the Lenders’ Handbook and any separate instructions.” However while lenders therefore still agreed that limitations in the 2011 Code would apply to limit their instructions, the detailed rules in the Code itself had been replaced by much more general principles. This continues to be the approach under the SRA  Code of Conduct for Individuals 2019 and the SRA  Code of Conduct for Firms 2019. On the face of it, the 2011 and 2019 Codes represent less of a fetter on the terms of the lender’s retainer than the 2007 Code, especially since the Lenders’ Handbook has continued to be detailed. (The current version of the Lenders’ Handbook (as at June 2020) was dated 1 July 2017, and has not been updated to refer to the 2019 Codes of Conduct.) 498

Contract and the tort of negligence  10.23

(a)  The regime from 2007 until 2011 – acting for lender and borrower 10.20 Rule 3.16(2)(a) provided that a solicitor might not act for both lender and borrower on the grant of a mortgage of land if a conflict of interest ‘exists or arises’. Rules 3.01–3.03 dealt with when a conflict of interest arose. (i)  Individual and standard mortgages 10.21 Assuming that there was no conflict of interest, it was necessary to distinguish between ‘standard’ and ‘individual’ mortgages for the purposes of the Rules. Rule 3.17.1 provided that a mortgage was a standard mortgage where: ‘(a) it is provided in the normal course of the lender’s activities; (b) a significant part of the lender’s activities consists of lending; and (c)

the mortgage is on standard terms.’

It added that an individual mortgage was any other mortgage, though r 3.17(2) added that a mortgage would not be on standard terms if material terms in any of the documents relating to the mortgage transaction were negotiated between the borrower and lender’s lawyers at the time of effecting the mortgage.1 The definition of standard mortgage was important because of the rules which applied to such a mortgage, discussed below. 1 See r 3.17 in full for the complete definition of standard and individual mortgages.

10.22 Individual mortgages appear to have been the exception rather than the rule. In relation to them, if the lender and borrower were at arms’ length then they had to be separately represented,1 but the remainder of the requirements of rr 3.16–3.22 did not apply. If the lender and borrower were not at arms’ length, then the Code imposed no limits on the solicitor’s duty (unless there was a conflict of interest). 1 Rules 3.16(2)(b) and 3.17(5).

(ii)  Standard mortgages – property to be used only as borrower’s residence 10.23 In the case of standard mortgages, if the property the subject of the loan was to be used only as the borrower’s private residence, then the effect of r 3.16(2)(c) was that a solicitor could act for both lender and borrower provided that the lender’s instructions (i) did not go beyond the matters stipulated in r  3.19, and (ii) permitted use of the approved certificate of title required by r 3.20. So in the normal case of a residential mortgage transaction, the effect of 499

10.24  Lenders’ claims the 2007 Code was that the solicitor acting for both lender and borrower had to ensure that his or her instructions complied with r 3.19 and that the certificate of title used was as provided for in r 3.20. The approved certificate of title included (and has continued to date to include) the following passage: ‘Our duties to you are limited to the matters set out in this certificate and we accept no further liability or responsibility whatsoever. The payment by you to us (by whatever means) of the mortgage advance or any part of it constitutes acceptance of this limitation and any assignment to you by the Borrower of any rights of action against us to which the Borrower may be entitled shall take effect subject to this limitation.’ The purpose of the rule was plainly to limit the extent of the solicitor’s duties to the lender. In addition, by r.3.18 the solicitor had to notify the lender in writing if he or she proposed to act for each of the seller, the buyer and the lender in the transaction, or if the prospective borrower was linked to the solicitor in any of the ways set out in r 3.18(1)(a). (iii) Standard mortgages – property not to be used only as borrower’s residence 10.24 If, on the other hand, the property was not to be used only as the borrower’s private residence, for example for buy to let mortgages, then the requirement to use the certificate of title in accordance with r 3.20 fell away, but the instructions were still not permitted to go beyond the matters set out in r 3.19 (see r 3.16(2)(d)). Further, the solicitor was still obliged to notify the lender in writing if he or she proposed to act for each of the seller, the buyer and the lender in the transaction, or if the prospective borrower was linked to the solicitor in the ways set out in r 3.18.

(b)  The regime from 2007 until 2011 – acting for borrower only or for lender only 10.25 If the solicitor was acting only for the borrower in relation to a standard mortgage then, if the property was to be used solely as the borrower’s private residence, the solicitor could not accept or act upon any requirements, by undertaking or otherwise, which would place the solicitor under obligations to the lender which went beyond the matters set out in r 3.19.1 If, however, the property was to be used other than solely as the borrower’s private residence, eg  if it was a buy to let mortgage, then the solicitor could give a certificate of title in a form approved by the Solicitors’ Regulation Authority (‘SRA’).2 In 2007 the SRA approved the then latest form of the City of London Law Society’s Certificate of Title for this purpose. This was for use in commercial cases where the solicitor acted only for the borrower but was instructed to provide a certificate of title to the lender. The implication was that the matters 500

Contract and the tort of negligence  10.27 dealt with in the City of London Law Society’s Certificate of Title could go beyond the matters set out in r 3.19, but that this did not matter because it was to be used only in commercial rather than residential conveyancing. This was an important exception to the standard rule. Further, the provisions of rr 3.16–3.22 did not specifically deal with the position where the solicitor acted only for the lender; it is thought that they did not apply in that case. 1 Rule 3.22(1). 2 Rule 3.22(2).

10.26 Strictly, the provisions of the Solicitors’ Codes of Conduct, and before them the Solicitors’ Practice Rules, were and are disciplinary rules governing solicitors’ professional conduct, rather than terms of the retainer between the solicitor and a borrower or lender client. In cases, however, where the Lenders’ Handbook has been used, it appears that the relevant provisions of the Code or Practice Rules are incorporated into the retainer by virtue of cl 1.5 of the Lenders’ Handbook.1 This is (to a degree) confirmed by the case of E Surv Ltd v Goldsmith Williams Solicitors2 in which Sir Stanley Burnton in the Court of Appeal noted that it was common ground between the parties ‘that the provisions of the Handbook must be read together with the Solicitors’ Practice Rules 1990 [being the rules then applicable]’.3 As we will see, the Court went on to hold that general duties under pre-existing law were not excluded. In cases where the Lenders’ Handbook does not apply, it will be harder to argue that the Code limits the lender’s retainer, though solicitors who failed to ensure that their instructions did not go beyond the extent permitted by the Code will have been in breach of their professional duties. 1 Available at www.cml.org.uk/lenders-handbook/englandandwales/. 2 [2015] EWCA Civ 1147, [2016] 4 WLR 44. 3 At [26], although see also the comments of Patten LJ at [54], considered at para 10.42, below.

(c)  The SRA Codes of Conduct 2011 and 2019 – acting for lender and borrower 10.27 The SRA Code of Conduct 2011 came into force on 6 October 2011. As explained at para 10.16, above, cl 1.5 of Part 1 of the Lenders’ Handbook was amended at the same time to state that the limitations contained in the 2011 Code applied to the instructions in the Lenders’ Handbook and any separate instructions. In principle therefore, the position was similar to that previously, in that the obligations in Part 1 of the Lenders’ Handbook were enforceable only if they complied with the limitations contained in the 2011 Code. This has continued with the replacement of the 2011 Code by the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. Indeed as noted at para 10.19, above, the Lenders’ Handbook has not been updated since the 2019 regime came into force and so it still refers to the 2011 Code (as at the time of writing in June 2020). No doubt this would be interpreted for transactions since 25 November 2019 as a reference to the SRA Code of 501

10.28  Lenders’ claims Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. For present purposes there is little practical difference from the 2011 Code. We will consider the 2011 Code therefore and then any relevant differences under the 2019 regime. 10.28 The 2011 Code distinguished between principles and outcomes, which were mandatory, and indicative behaviours, which were ‘not mandatory but may help us to decide whether an outcome has been achieved in compliance with the Principles’.1 Issues likely to arise where solicitors act for both borrowers and lenders were dealt with in Chapter 3 of the Code. Part of the SRA’s purpose in introducing Chapter 3 appears to have been to sweep away detailed rules, particularly in respect of conveyancing. The intention was to replace specific rules with a greater emphasis on identifying and dealing with conflicts in all types of matter, and on having systems and controls in place to enable solicitors to do so. 1 SRA Handbook (December 2018 edition), Introduction to the Code of Conduct.

(i)  2011 Code – Outcome 3.6 10.29 Under the 2011 Code, where there was a conflict or potential conflict between the interests of two or more current clients (a ‘client conflict’), solicitors could act only if the case fell within Outcomes 3.6 or 3.7.1 The relevant Outcome for present purposes was O(3.6): ‘where there is a client conflict and the clients have a substantially common interest in relation to a matter or a particular aspect of it, you only act if: (a)

you have explained the relevant issues and risks to the clients and you have a reasonable belief that they understand those issues and risks;

(b) all the clients have given informed consent in writing to you acting; (c) you are satisfied that it is reasonable for you to act for all the clients and that it is in their best interests; and (d) you are satisfied that the benefits to the clients of you doing so outweigh the risks.’ Since this was an Outcome, compliance with it was mandatory. However, the obligations quoted at (a) to (d) arose only if there was a client conflict. It was not clear whether there was a client conflict in every case where a solicitor acted for both lender and borrower, since there was always a potential conflict of interest, or only if information came to light which suggested there was an actual conflict of interest. It had been thought that the latter was the better view, because of the perceived inconvenience if solicitors had to comply with (a) to 502

Contract and the tort of negligence  10.30 (d) on every occasion where they acted for both lender and borrower. However, as we will see below, under similar (but not identical) provisions in the 2019 Code, it is the advice of the Law Society that the equivalent factors under that Code should be considered in every case where a solicitor acts for lender and borrower. 1 SRA Handbook (from October 2011). The parts relevant to the present discussion did not change from 2011 until the Code was replaced by the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019 on 25 November 2019.

(ii)  2011 Code – Indicative Behaviour 3.7 10.30 So far, it will be noted that there has been no reference to any of the detailed rules of the sort which appeared in paras 3.16–3.22 of the 2007 Code. The 2011 Code did not ignore those altogether, but the only reference to that type of rule appeared in an Indicative Behaviour, IB(3.7): ‘Acting in the following way(s) may tend to show that you have achieved these outcomes and therefore complied with the Principles: … IB(3.7) “acting for clients who are the lender and borrower on the grant of a mortgage of land only where: (a) the mortgage is a standard mortgage (i.e. one provided in the normal course of the lender’s activities, where a significant part of the lender’s activities consists of lending and the mortgage is on standard terms) of property to be used as the borrower’s private residence; (b) you are satisfied that it is reasonable and in the clients’ best interests for you to act; and (c) the certificate of title required by the lender is in the form approved by the Society and the Council of Mortgage Lenders.”’ The form of certificate of title approved by the Law Society and the CML was not changed in October 2011. With effect from 30 November 2015, an amended certificate of title was agreed between the Law Society and the CML. While making some changes to the detailed content, the approved form of certificate as amended continued to set out a detailed list of types of instruction which a solicitor might accept, and to make clear that the solicitor’s duties might not and did not go beyond that list. When the essential form and content of this certificate of title was first approved under the pre-2011 regime, it was based on clear rules which defined how far a solicitor’s duty might go. However, the certificate’s contents were not essentially changed in 2015, despite the change to the 2011 Code.1 Thus there appeared to be a tension under the 2011 Code: IB(3.7) was not mandatory, and compliance with it was relevant only in that it ‘may tend’ to show compliance with the Principles of the Code; on the other 503

10.31  Lenders’ claims hand, IB(3.7) appears to have been expressed in language which suggested that it was mandatory: it said that solicitors might act for lender and borrower ‘only’ where each of the four conditions of IB(3.7) were satisfied. This left two areas for consideration: cases which fell within IB(3.7), and cases which did not. 1 A copy of the current (as at June 2020) version of the approved certificate is on the Law Society’s website

(iii)  2011 Code – cases within IB(3.7) 10.31 Paragraphs (a)–(d) of IB(3.7) are quoted above and are selfexplanatory. The definition of ‘standard mortgage’ is almost identical to that in the 2007 Code. We are concerned here with lending where the borrower will live in the property, not buy to let lending. It was generally clear when a case fell within the terms of IB(3.7). In such a case, in order to have complied with IB(3.7) the solicitor must have used the approved form of certificate of title, which, as indicated above, will have limited the solicitor’s duties to the lender to, in effect, the same duties as permitted under the 2007 Code. The question that may arise is, what is the position in such a case if the solicitor has failed to use the approved form of certificate of title? Were the provisions of IB(3.7) ‘limitations’, such that the effect of 1.5 of Part 1 of the Lenders’ Handbook, quoted above at para.10.18, was that the solicitors’ duties to the lender were limited to the matters set out in the approved certificate of title, whether or not the solicitor had in fact used it? If they were limitations, they seem weak limitations, since their only effect was that they might ‘tend to show’ that the relevant outcome had not been achieved. On the other hand, if they were not limitations, then (i) the ‘limitations’ referred to in 1.5 of Part 1 of the Lenders’ Handbook must have been narrow in scope, and (ii) the effect of IB(3.7) would appear to have been minimal. The better view may be that, where IB(3.7) applied, its requirement that the approved certificate of title be used was a ‘limitation’ for the purposes of 1.5 of Part 1 of the Lenders’ Handbook, so that the Lenders’ Handbook was subject to the limitations contained in the approved certificate of title. (iv)  2011 Code – cases not within IB(3.7) 10.32 The most obvious categories of cases which fell outside the provisions of IB(3.7) were (i) lending secured by mortgages which were not standard mortgages, and (ii) buy to let lending, where the borrower was not going to occupy the property as his/her private residence. IB(3.7) would not have applied to such cases. Did the 2011 Code apply limitations in such cases, so that solicitors instructed pursuant to Part 1 of the Lenders’ Handbook were automatically subject to such limitations? The rules were not clear as to this. It could be argued that, if IB(3.7) was a ‘limitation’ at all for this purpose, then the effect of it stating that solicitors might act for both lenders and borrowers 504

Contract and the tort of negligence  10.33 ‘only’ if the requirements of IB(3.7) are satisfied was that, if they were not satisfied, solicitors might not act for both lender and borrower. But the effect of that would appear to have been that solicitors could never act for both lender and borrower in a buy to let transaction. That would appear to be too much of a firm rule for the purposes of principles-based regulation. The better view is probably that, in cases which did not fall within IB(3.7) at that time, there was no longer any limitation on the duties which a solicitor might accept as owed to a lender when acting for both lender and borrower. On that view, the effect of the 2011 Code was to abolish such regulation, at least by rules, so that in such cases there were no longer any rule-based restrictions on the scope of duties which solicitors might undertake to lenders, and the question was simply whether a solicitor had complied with Outcome 3.6, set out above. This would appear to have been in accordance with the underlying philosophy of the 2011 Code, though it might be thought that abolishing these rule-based limitations was generally bad news for solicitors and good news for lenders. It is unclear whether those who drafted the 2011 Code had that in mind. (v)  SRA Codes of Conduct for Individuals and for Firms 2019 10.33 The SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019 which came into force on 25 November 2019 operate a similar philosophy to the 2011 Code, except that the principles and rules have been further simplified. Guidance has been issued by the SRA on Conflicts of Interest, updated on 2 March 2020, but this does not deal specifically with acting for both lender and borrower. Rather it expands on the meanings of the exception which is in paragraph 6.2 of each of the two 2019 Codes of Conduct, and states: ‘6.2  You do not act in relation to a matter or a particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it, unless: (a) the clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or (b) the clients are competing for the same objective, and the conditions below are met, namely that: (i)

all the clients have given informed consent, given or evidenced in writing, to you acting;

(ii) where appropriate, you put in place effective safeguards to protect your clients’ confidential information; and (iii) you are satisfied it is reasonable for you to act for all the clients.’ It is unlikely that (b) will apply to cases where a solicitor is instructed by both lender and borrower, so one is essentially concerned with limb (a). Conditions 505

10.34  Lenders’ claims (i) to (iii) – which apply to both (a) and (b) – are similar to those under the 2011 Code but not identical. There is a new emphasis on safeguards to protect the clients’ confidential information. This was always a general obligation under the 2011 Code, but placing it here puts renewed emphasis on the risks regarding confidential information which are likely to arise when acting for two parties, such as a lender and a borrower. The 2020 Guidance on paragraph 6.2 expands on this problem, and says there are two situations in which acting for two clients with a substantially common interest may be possible. This first (applying only to Firms) is where effective safeguards can be put in place, including separate fee earners and structural separation. The second is where effective safeguards are not ‘appropriate’. 10.34 This second situation is the one which may cover lender and borrower. The Guidance says it may apply where the clients agree that it is desirable for the same lawyer to represent them, and they agree with the solicitor which information can and cannot be shared, so structural safeguards to protect their confidential information are not required. The Guidance emphasises that the solicitor needs to ensure that informed consent (in or evidenced in writing) has been given; that no structural safeguards are needed, including the solicitor’s agreement not to share material information which is confidential to the other client and to which that other has not consented to disclosure which otherwise the solicitor would be obliged to make; and that it remains in the best interest of each client to act on this basis during the course of the matter. The Guidance further states that: ‘In deciding whether it is reasonable to act for all of the clients, you will want to consider factors such as: –

The respective knowledge and bargaining power of the clients. Is one party particularly vulnerable or in a relatively weak position and should be referred for independent advice? For example, one client may be an individual and the other a corporate entity with access to an in house legal team. Or it could be that one client may be facing financial problems which would put them under pressure to reach an agreement that might not be in their best interests.

–

The extent to which there will need to be negotiations between the clients. The more serious any unresolved issues are, then the less it is likely to be reasonable for you to act.

–

Any particular benefits to the clients (eg  speed, convenience, cost) from you acting for both.

–

Any risk of the inappropriate transmission of confidential data.’

Plainly a number of these factors could apply when considering acting for lender and borrower, especially a borrower who is under financial pressure to remortgage. It may be that it will now be difficult to justify a solicitor acting 506

Contract and the tort of negligence  10.36 for borrower and lender in such a case, even though this will increase the costs to the borrower. 10.35 There is now no specific mention of the situation of solicitors acting for both lender and borrower in the 2019 Code or accompanying Guidance. The Law Society has however issued a Practice Note on Conflicts of Interest, most recently dated 2 December 2019, ie just after the 2019 Codes came into force. In addition to general advice, the Practice Note considers scenariospecific issues, including at 8.2, acting for clients who are lender and borrower. At 8.2.1 the Practice Note states: ‘You should not assume, when acting for both lender and borrower in individual or corporate matters, that there’s no conflict of interest. Rather, you must consider each case in the light of the provisions in the SRA Codes of Conduct, including whether there’s an imbalance in bargaining power between the clients. If you do decide to act for both parties, it’s our view that it would be good practice to record your decision and the reason for it. In addition, you must comply with the relevant principles. In these circumstances, the key principle you should take into account is principle 7, which requires you to act in the best interests of each client.’ This indicates that solicitors will now have to consider the specific factors in paragraph 6.2 of the Code in every case where they are acting for borrower and lender, even the very straightforward. In particular there will be an imbalance of bargaining power between lender and borrower to consider in most standard mortgages. The Practice Note also says ‘the risk of conflict is high if nonstandard terms are being used or if, in the case of a standard mortgage, you do not use the approved certificate of title’, which is similar to previous SRA Guidance. 10.36 The Law Society Practice Note goes on at 8.2.2 to consider the confidentiality and disclosure issues raised by cases where a solicitor acts for lender and borrower. It says that if, eg  the borrower discloses personal information such as that they have lost their job, the solicitor has an obligation to keep this confidential even though it may also be material information which they are obliged to disclose to the lender. In such a case it is said that the duty of confidentiality will prevail, but they would not ordinarily be excused from their duty of disclosure to the lender. In other words, they will generally need to return the lender’s instructions. The Note expressly considers whether the duty of disclosure can be contractually modified, but says that a solicitor should ask themselves whether continuing to act (for either party) would be appropriate if they became aware of a fraud on the lender. In conclusion the Note says: 507

10.37  Lenders’ claims ‘You must consider confidentiality issues carefully when considering acting for clients who are the lender and borrower and in relation to the conflicts of interest exceptions within section 6.2(a) and 6.2(b).’ 10.37 It should be noted that there has been no change to the form of the approved certificate of title upon the coming into force of the 2019 Codes. Although the relevant page of the Law Society’s website has been updated to refer to the 2019 Codes, giving the impression that the approved certificate has also been updated, in fact no changes have been made. The same observations already made at para 10.30, above in relation to the 2011 Code, as to the interrelationship with the Lender’s Handbook and the certificate of title, apply with even greater force to the 2019 Code. Like the 2011 Code, the 2019 Code does not have any detailed rules which can readily be incorporated to restrict automatically the scope of the solicitor’s retainer by the lender. It seems likely therefore that if a solicitor wishes to limit the scope of that retainer in a case where they are acting for the borrower as well, they will now have to do this expressly, after having considered the conflicts guidance already discussed.

(d)  Acting for lender only – the position from July 2012 10.38 In July 2012 the CML introduced Part 3 of its Lenders’ Handbook,1 which is for use where the solicitor in a residential conveyancing transaction represents only the lender. This has since been amended, most recently on 26 May 2016 (at the time of writing in June 2020). Reference should be made to the version in force at the time of the particular transaction. Part 3 makes clear at 2.1 that since the solicitor is only representing the lender, ‘the limitations on our instructions referred to in Chapter 3 of the Solicitors’ Code of Conduct 2011 do not apply’. This would no doubt be interpreted after 25  November 2019 as referring to the equivalent provisions of the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. Whatever the position now is where the solicitor acts for both lender and borrower, the 2019 Codes will not anyway limit the scope of the solicitor’s retainer where they are acting solely for the lender. 1 UK Finance Lenders Handbook Parts 1 and 3

4  Express contractual terms 10.39 Historically, cases concerning the express terms of a solicitor’s retainer by a lender have been treated as falling into two broad categories. Considering first transactions where the 2007 Code applied, ie those conducted prior to 6 October 2011, they are: (i)

cases not governed by Part 1 of the Lenders’ Handbook and where the approved certificate of title was not used. If the solicitor was acting for 508

Contract and the tort of negligence  10.41 both lender and borrower, these might have been commercial cases, or residential cases where the lender was not a member of the CML; or they might have been cases where the solicitor acted only for the lender. (ii) Cases governed by Part 1 of the Lenders’ Handbook and/or in which the approved certificate of title was used. The relevant rules in the 2007 Solicitors’ Code of Conduct were rr 3.16–3.22. The approved certificate of title essentially reproduced the restrictions in the 2007 Code so, even in cases in which the approved certificate was not actually used, any effect on the extent of the solicitor’s duties is likely to be the same. In such cases, the focus will be on the limits on duty in Part 1 of the Lenders’ Handbook. The position may differ in relation to transactions conducted after 6 October 2011, where the 2011 Code or the 2019 Codes and the revised Lenders’ Handbook (if applicable) will be what apply. The differences have been considered at paras 10.27 to10.37, above. However, if the approved form of certificate of title has been used (even if not strictly applicable, eg  in buy to let cases), then any restrictions on the solicitor’s instructions which can be derived from the terms of the approved certificate of title will be incorporated. 10.40 In what follows, we consider issues relating to the breach of express terms in various types of case. 10.41 As to the status of the Lender’s Handbook and approved certificate of title, in R v Cornelius1 a five-judge court of the Criminal Division of the Court of Appeal stated: ‘These paragraphs are part of a standard Certificate contained in the Council of Mortgage Lenders’ Handbook. They are clearly professionally drafted for use in conveyancing transactions up and down the country. In interpreting standard forms of Certificate such as these the court must apply consistent interpretations and not draw fine distinctions. The Certificate is drafted by the Council of Mortgage Lenders; and if they wish to impose liability on conveyancers, they must do so in clear terms…’. Further, cl 1.4 of Part 1 of the Lenders’ Handbook (in its various versions) states: ‘The standard of care which we expect of you is that of a reasonably competent solicitor or licensed conveyancer acting on behalf of a mortgagee.’ It is suggested therefore that, while the terms of the rest of Part 1 of the Lenders’ Handbook identify what steps the solicitor is required to take, if it is alleged that the solicitor has breached those duties, the question will generally 509

10.42  Lenders’ claims be whether the solicitor failed to exercise reasonable care in attempting to take those steps. 1 [2012] EWCA Crim 500, [2012] PNLR 23, at [25]. Although this was a criminal law decision, the constitution of the court included Lewison LJ, who before promotion to the Court of Appeal was a judge of the Chancery Division.

10.42 In E Surv Ltd v Goldsmith Williams Solicitors,1 Patten LJ in the Court of Appeal emphasised that it was not the purpose of the solicitors’ practice rules (there r 6(3) of the Solicitors Practice Rules 1990) to specify how a solicitor in a mortgage transaction should carry out their instructions or what was within the scope of their duty of care; for that one must look at their instructions, there the CML Handbook. The purpose of r 6(3), he said, was to set limits on the type of instructions which a solicitor might properly accept, not to set out the terms on which such a solicitor might be instructed in matters he is permitted to accept, or to regulate the limits of his reporting obligations when acting for both borrower and lender. 1 [2015] EWCA Civ 1147; [2016] 4 WLR 44 at [54]–[55]

10.43 This suggests that the courts will be much less inclined than previously to look at the terms of the certificate of title (insofar as it simply sets out or refers to rules in the Code of Conduct) when determining the scope of express duties, but will instead focus on the terms of what is now the Lenders’ Handbook.

(a)  Reporting sub-sales (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.44 The nature of a sub-sale fraud combined with a direct payment is summarised in paras 10.10 to 10.11. A large percentage of the cases decided in the 1990s lenders’ managed litigation1 concerned failure to report matters of these kinds. In only one of those cases had the lender incorporated a term in its instructions which expressly required that solicitors report sub-sales to it.2 In the others the obligation to report sub-sales, as opposed to direct payments, arose from the solicitors’ implied rather than express duties.3 However, given the prominence of sub-sale frauds in that period, express obligations to report sub-sales will be frequently found in more recent transactions. It goes without saying that it is important to obtain and review the express terms which applied, which will generally be in a lender’s standard format. The content of such standard terms varies to a surprising degree, and sometimes it can be difficult for lenders to track down the precise version used. Nowadays conveyancers are often given an online link to a lender’s standard terms in their instructions, 510

Contract and the tort of negligence  10.46 which may no longer work or be relevant if the transaction is being examined many years later. 1 Bristol & West BS v Fancy & Jackson [1997] 4 All ER 582 (Chadwick J), and Nationwide BS v Balmer Radmore [1999] Lloyd’s Rep PN 241 (Blackburne J). 2 This was Colin Bishop. The lender was the Cheshunt Building Society, which was subsequently taken over by the Bristol and West. The defendant solicitors claimed that the requirement to report sub-sales applied only to sales where there was only one transfer document, executed by each of the various vendors and purchasers. Chadwick J rejected that argument: see [1997] 4 All ER 582 at 609g. A transaction was a sub-sale which had to be reported to the Cheshunt, under its standard terms, whether the transactions were in one or in two separate sets of documents. Hence the solicitors were held liable. 3 See para 10.90ff, below.

(ii)  Cases subject to the Lenders’ Handbook or approved CoT 10.45

Clause 5.1.1 of part 1 of the current Lenders’ Handbook provides:

‘Please report to us immediately if the owner or registered proprietor has been registered for less than six months.’ Similarly, by the approved certificate of title (‘CoT’), the solicitor certifies that: ‘(vii)  if the Property is to be purchased by the Borrower: … (b)

the seller has owned or been the registered owner of the Property for not less than six months …”

Under the heading ‘Types of instruction which may be accepted’ in the CoT, para (e) permits: ‘reporting if the seller or borrower (if the property is already owned by the borrower) has not owned or been the registered owner of the property for at least six months.’ These limitations continued to be set out in the approved certificate of title, even though para 3.19(e) of the 2007 version of the Code, from which they derive, has not been in effect for many years. 10.46 This will cover any sub-sale at the time of or within the six months prior to the purchase. Where such a report is made, this provision does not state that the solicitor has a duty to point out to the lender the significance of such information, namely that the price at which the lender thinks the property is being sold may not represent its true value. It remains to be seen whether the solicitor has an implied duty to point this out, though the terms of the exclusion at the end of the approved certificate of title, quoted above at para  10.18, suggest not. Although sub-paragraph (w) of the approved certificate of title provides that the solicitors’ duties may include ‘giving legal advice on any matters reported on under 2.3, suggesting courses of action open to the lender, and complying with the lender’s instructions on the action to be taken’, it is suggested that this does not impose a duty to point out the significance, from 511

10.47  Lenders’ claims the point of view of the lender’s lending decision, of the information that there has been a sub-sale or the relevance of this to the lender’s valuation of the property. It is thought those are commercial matters for the lender rather than legal matters for the solicitor. On the other hand, para (a)(ii) of the approved certificate of title provides that the solicitor may accept instructions that oblige the solicitor to comply with the guidance given by the Law Society or the SRA on property fraud and money laundering. The Lenders’ Handbook provides at cl 3.1.2 that the solicitor ‘must follow the guidance in the Law Society’s mortgage fraud practice note’.1 Thus it would appear that, if applying that guidance would require the solicitor to report suspicions of fraud to the lender, then, as a matter of contractual obligation, the solicitor must do so in a case to which the Handbook applies. 1 Historically, the Law Society produced a ‘Property Fraud Warning Card’ (colloquially known as the ‘Green Card’), which briefly set out a number of warning signs. More recently it has issued Mortgage Fraud Practice Notes, the contents of which are discussed in more detail below at para 10.48, below.

(b)  Discrepancies in the purchase price and direct payments (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.47 An obligation to report direct payments may arise pursuant to the express terms of the retainer in the following way. In Fancy and Jackson, Bristol and West’s solicitors’ instructions required that the solicitor report to the lender any discrepancy in the details shown in the offer of advance. Those details included the purchase price. Further, in signing the report on title the solicitor had to confirm that the details of the transaction accorded exactly with the particulars in the offer of advance, including the purchase price. The general nature of the solicitor’s obligation, in Chadwick J’s analysis, was as follows.1 First, solicitors who knew that the true purchase price payable by the purchaser/borrower to the vendor was not the purchase price stated in the offer of advance could not properly sign and return the report without qualification. Secondly, solicitors who signed and returned the report and request without qualification were, at the least, warranting to the lender that they had made those enquiries which competent solicitors, acting reasonably, would make in order to satisfy themselves that the purchase price stated in the offer of advance was the true purchase price to be paid and that, in light of those enquiries, they knew of no reason why they could not give the unqualified confirmation which they had signed. Thus, solicitors who signed the report on title in circumstances where either they had not made such reasonable enquiries, or they had made them and they suggested that the true purchase price was different from that stated in the offer of advance, would be in breach of duty. 1 Bristol & West BS v Fancy & Jackson [1997] 4 All ER 582 at 605e–f. Blackburne J’s approach in Balmer Radmore was similar: [1999] Lloyd’s Rep PN 241 at 266–268.

512

Contract and the tort of negligence  10.48 10.48 This raises the question as to what circumstances should cause a reasonably careful solicitor to conclude that the purchase price might not be that stated in the offer of advance. •

The Law Society’s original Guidance on Mortgage Fraud, first published as long ago as 30 November 1990, stated: ‘Solicitors acting contemporaneously for a buyer and a lender should consider their position very carefully if there is any change in the purchase price, or if the solicitors become aware of any other information which they would reasonably expect the lender to consider important in deciding whether, or on what terms, it would make the mortgage advance available. In such circumstances the solicitors’ duty to act in the best interests of the lender would require them to pass on such information to the lender… Solicitors must not withhold information relevant to a transaction from any client and for a lender this includes not only straightforward price reductions but may also include other allowances (eg  for repairs, payment of costs, the inclusion of chattels in the price and incentives of the kind offered by builders such as free holidays and part-subsidisation of mortgage payments) which amount to a price reduction and which would affect the lender’s decision to make the advance. Solicitors should not attempt to arbitrate on whether the price change is material but should notify the lender.’ [Emphasis added]

•

By February 1999, the Law Society’s ‘Green Card’ warning on mortgage fraud identified, as signs of mortgage fraud: misrepresentation of the purchase price; a deposit or any part of purchase price paid or said to be paid direct; and changes and adjustments to the purchase price.

•

From 18 March 2008, the Law Society’s Fraud Practice Note additionally warned solicitors that incentives might include cash back, free holidays, household fittings, payment of legal fees, and help with mortgage repayments or rental guarantees.

•

From October 2011 until the time of writing, the various versions of the SRA’s Mortgage Fraud Practice Note1 have included, as matters relating to value which are warning signs of mortgage fraud, the following: –

The property value has significantly increased in a short period of time out of line with the market in the area.

–

The mortgage is for the full property value. This should be considered in light of the other warning signs.

–

The seller or developer have provided incentives, allowances or discounts, which may include cash back, free holidays, household fittings, payment of legal fees, help with mortgage repayments or rental guarantees, among others. The solicitor should consider whether this information has been properly disclosed to the lender. 513

10.49  Lenders’ claims

•

–

The deposit is being paid by someone other than the purchaser. The solicitor should ask why, where the money is coming from, and whether this information has been properly disclosed to the lender.

–

The purchaser has paid the deposit directly to the seller or a developer. The solicitor should ask for evidence of the payment and consider whether this information has been properly disclosed to the lender.

–

There is money left over from the mortgage after the purchase price has been paid, and the solicitor is asked to pay this money to the account of someone they do not know, or to the introducer. The solicitor should ask why, and remember that they must not use their client account as a mere banking facility.

–

The solicitor is asked to enter a price on the title that is greater than they know was paid for the property. They should ask why the prices are different.

–

There has been a recent transfer of land where no money has changed hands or the price was significantly less than the full market value.

From February 2019, another potential warning sign listed is that the value attributed to chattels appears high.

Since the 1990s solicitors have therefore had duties to report incentives which altered the true price being paid by the purchaser, ‘price’ being broadly construed. 1 At the time of writing (June 2020) the latest version was dated 13 January 2020, the previous versions being 31  July 2014 and 11  February 2019. There are some differences between the versions and, while they are not large, reference should be made to the version applicable at the relevant time. Older versions are on the Law Society website.

10.49 In Balmer Radmore, Blackburne J considered that an agreement by the vendor to pay the purchaser’s costs and expenses of the purchase would amount to a price reduction which should be reported, though if the vendor supplied the purchaser with a free structural survey that would not.1 In National Home Loans Corpn plc v Stevens & Co,2 the lender’s documents were in similar terms, and the solicitor had an express obligation to report changes in the purchase price. The price stated in the contract and the offer of advance was £62,650, but surveyors’ reports suggested that the purchaser would have to carry out significant repairs, and for that reason the vendor agreed to an ‘allowance’ of £3,000 on the purchase price. In other words, although the sum stated in the contract remained £62,650, the sum which the purchaser actually had to pay the vendor was only £59,650. The solicitor considered that the £3,000 would genuinely be spent on repairs and so was an ‘allowance’ rather than a reduction in price, and did not have to be reported. The Deputy Recorder 514

Contract and the tort of negligence  10.51 held that there had been a reduction in price, so that the solicitor had acted in breach of duty in failing to report it to the lender. As to causation, however, he held that if the reduction had been reported, the lender would simply have reduced the advance by £297.50, so damages were £297.50 plus interest. 1 Balmer Radmore [1999] Lloyd’s Rep PN 241 at 265. Note that the definition of incentives has become broader in more recent versions of the Practice Note, as noted above. 2 A decision of John Tackaberry QC sitting as a Deputy Recorder on Official Referee’s Business (2 June 1997, unreported).

10.50 More recently, in Morkot v Watson & Brown Solicitors1 HHJ Behrens (sitting as a judge of the High Court) held, applying Balmer Radmore, that a vendor-gifted deposit was a well-established badge of a mortgage fraud. He concluded that the solicitors, who were acting for both the borrowers and lenders on multiple purchases of buy-to-let properties, had been under a duty to disclose the gifted deposit to the lenders and to advise the borrowers that it was unlikely that they would then be made mortgage offers. The borrowers therefore recovered from the solicitor damages consisting of their actual losses from entering into the transactions. 1 [2014]  EWHC  3439 (QB), [2015]  PNLR  9. The judge also found breaches of the solicitors’ fiduciary duties.

10.51 As to direct payments, expert evidence in Fancy and Jackson showed that in the vast majority of transactions, the whole of the price payable on the purchase of domestic property passed through the bank account of the purchaser’s solicitor.1 Thus it was unusual for money to pass directly from purchaser to vendor. Addressing the issue in Balmer Radmore, Blackburne J said this:2 ‘The failure of the solicitor to obtain verification of a direct payment leaves open the possibility that vendor and purchaser/borrower were misrepresenting the position, that, in truth, no payment had been made and that the true price being paid for the property was the contract price less the direct payment; in short, that the assertion of a direct payment was intended to conceal a price reduction. This possibility, if accurate, meant that vendor and purchaser/borrower were together engaged in a fraud on the Society, representing dishonestly that the price to be paid for the property was £x whereas, in truth, it was £x less the amount of the direct payment. The purpose of such dishonesty could only be to induce the Society, supported by a valuation overstating the true value of the property, into making the advance in the belief that the overall price paid was indeed £x. There arrived a time when the device of the so-called direct payment, where unverified, came to be recognised by solicitors as one of the badges of mortgage fraud. This, together with a recognition of other indications of mortgage fraud, led in March 1991 to the publication by the Law Society of the so-called “Green Card” warning on mortgage 515

10.52  Lenders’ claims fraud. It included, among one of the signs to watch for in cases of mortgage fraud, “a deposit paid direct–a deposit, perhaps exceeding a normal deposit, paid direct or said to be paid direct, to the seller”. In his evidence, Mr Ward3 accepted that, after the publication of the Green Card warning, there was what he described as a “fairly absolute” requirement on solicitors to report to the lender an unverified claim by the borrower to have made a direct payment.’ Thus, although none of the cases in either Fancy and Jackson or Balmer Radmore concerned a failure to report an unverified direct payment which was after publication of the Law Society’s Green Card – since 2008, the Practice Note on Mortgage Fraud – it is clear such a failure would amount to a breach of duty. This is confirmed by Morkot v Watson & Brown, cited above. 1 See [1997] 4 All ER 582 at 605g–h. 2 [1999] Lloyd’s Rep 241 PN at 266. 3 The defendants’ solicitor expert.

(ii)  Cases subject to the Lenders’ Handbook and/or approved CoT 10.52 The Lenders’ Handbook has always required solicitors to comply, among other things, with current Law Society/SRA guidance on preventing mortgage fraud. The principles in paras 10.31 to 10.37 above will apply equally to cases which are subject to the Lenders’ Handbook and/or the approved CoT. The current version of the Lenders’ Handbook states at cl 3.1.2: ‘3.1.2 You must follow the rules and guidance of your professional body relating to money laundering and comply with the current money laundering regulations and the Proceeds of Crime Act 2002 to the extent that they apply and you must follow other relevant guidance, for example, the Law Society of England and Wales mortgage fraud practice note … and take account of relevant regulatory warning notices.’ 10.53 Sub-paragraph (d) of the list of permitted instructions contained in the approved certificate of title provides that the solicitor’s instructions may include: ‘… reporting the purchase price stated in the transfer and on how the borrower says that the purchase money (other than the mortgage advance) is to be provided; and reporting if you will not have control over the payment of all the purchase money (other than a deposit paid to an estate agent or a reservation fee paid to a builder or developer).’ The current version of the Lenders’ Handbook provides (like previous ones) in Part 1 at cl 5.13.1: ‘you must ask the borrower how the balance of the purchase price is being provided. If you become aware that the borrower is not 516

Contract and the tort of negligence  10.55 providing the balance of the purchase price from his own funds or is proposing to give a second charge over the property, you must report this to us if the borrower agrees … failing which you must return our instructions and explain that you are unable to continue to act for us as there is a conflict of interest’. Cl 6.3.1 provides: ‘The purchase price for the property must be the same as set out in our instructions. If it is not you must tell us …’. Further, cl 6.4.4 of the Lenders’ Handbook requires the solicitor to report to the lender any arrangement whereby there is either: ‘… a cashback to the buyer; or part of the purchase price is being satisfied by a non-cash incentive to the buyer; or any indirect incentive (cash or non-cash) or rental guarantee’. [Emphasis added.] 10.54 It is suggested that these obligations are permissible under the approved certificate of title and its precursors, since they simply seek to define what the lender may consider to constitute a change in the purchase price. The words emphasised were added from 1  June 2007; before that date, the solicitor’s obligations were limited to the first two matters. It could be argued that those would not have extended to such incentives as payment of SDLT or legal costs or the provision of furniture, but see the reference to such items in the 1990 guidance, set out above. However, the solicitor’s duty to report such matters was taken beyond doubt by March 2008. The terms of the Practice Note on Mortgage Fraud as issued in March 2008 and from October that year are detailed in para  10.48 above. From 18  March 2008 this stated at 4.6 (‘Recording the property value’) that, in ascertaining the price to be recorded on all the documentation, the solicitor should ‘consider any direct payments, allowances, incentives or discounts’. That edition of the Practice Note specifically highlighted the use of indirect incentives. 10.55 From 1  September 2008, the CML introduced a ‘Disclosure of Incentives’ form, the use of which was compulsory in cases to which the Lenders’ Handbook applied, in all transactions where the property was being purchased from a builder or developer. The form made clear the types of incentives which might be considered as affecting the true price of the property. From 21  February 2018, it has been replaced by a ‘UK  Finance Disclosure Form’ which is significantly wider in scope, the use of which has been compulsory since 1 August 2018. It applies to any property which is to be occupied or purchased for the first time, or for the first time in its current form, ie  including new build, renovated or converted properties. Clause 6.4 of the Lenders’ Handbook requires the solicitor to receive and hold a fully completed copy of the form from the developer’s conveyancer. It includes detailed questions on price and any discounts; assisted purchase (including 517

10.56  Lenders’ claims shared equity); loans from the seller or other purchase schemes; introductory fees; incentives including deposit paid by seller, guaranteed rental income, mortgage subsidies, SDLT payments, valuer or legal fees or cashbacks; part exchange; and assistance with moving or selling costs. It also asks for detailed information about the nature of the property and must be manually signed. 10.56 In the Northern Irish case of Capital Home Loans Ltd v Hewitt and Gilpin Solicitors Ltd1 it was held that the failure to report incentives including payment of stamp duty and the vendor’s costs from the mortgage monies was a breach of the duties under the Handbook, which was incorporated into the retainer. 1 [2016] NICA 45; [2017] PNLR 12: CA decision, reciting first instance decision of Horner J, not appealed on this issue. The lender lost on causation, as the judge held it would have made the loans in any event, upheld by the NICA.

(c)  Resident borrower (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.57 Birmingham Midshires Mortgage Services Ltd v David Parry & Co1 dates from a time before buy to let mortgages were common. The solicitor’s instructions required him to ensure that the general and special conditions specified in the offer of advance were ‘complied with and brought to the [borrower]’s attention on or before completion’. General condition 4 provided that the borrower must ’personally reside in the property within 30 days of completion’. The lender contended that the solicitor either did know, or ought to have known, that the borrower did not intend personally to occupy the property within 30 days of completion, and that the terms quoted required the solicitor to inform the lender of this, which he had failed to do. The court disagreed. It construed these terms as requiring the solicitor to bring the terms of general condition 4 to the borrower’s attention, ‘and to report to the [lender] knowledge on his part that [the borrower] does not intend to comply with the condition’. Thus the solicitor would be in breach of duty if he had actual knowledge that the borrower did not intend to reside in the property at all, and had not reported this to the lender. But:2 ‘There is no obligation imposed on [the solicitor] to check with [the borrower] that he intends to reside in the property personally or to report to the [lender] facts relating to [the borrower]’s current or past residence. [The solicitor] was entitled to assume, in the absence of information to the contrary, that [the borrower] intended to comply with the terms of the offer of advance which he had accepted … Without the benefit of hindsight a reasonably competent solicitor would have been entitled to take the view that the available information about the circumstances and actions of [the borrower] was consistent with an intention on his part to use [the property] as a secondary residence; 518

Contract and the tort of negligence  10.58 that would constitute “personal residence” within general condition 4. There was no condition in the offer of advance that [the borrower] should reside in [the property] as his only or primary residence.’ 1 [1997] EGCS 150, CA. 2 Transcript, p 21. Blackburne J applied this on the facts of the case of Balmer Radmore itself: see [1999] Lloyd’s Rep PN 558.

(ii)  Cases subject to the Lenders’ Handbook or approved CoT 10.58 Sub-paragraph (o) of the list of permitted instructions provides that the solicitor’s instructions may include an obligation to ask ‘the borrower for confirmation that the information about occupants given in the mortgage instructions or offer is correct’. Clause 7 of the Lenders’ Handbook deals with the solicitor’s obligations as regards other occupiers of the property. It provides: ‘7.2  If your instructions state the name of a person who is to live at the property, you should ask the borrower before completing the mortgage that the information given by us in our mortgage instructions or mortgage offer about occupants is correct and nobody else is to live at the property. 7.3  Unless we state otherwise … you must obtain a signed deed or form of consent from all occupants aged 17 or over of whom you are aware who are not a party to the mortgage before completion of the mortgage … 7.4  We recognise that in some cases the information given to us or you by a borrower may be incorrect or misleading. If you have any reason to doubt the accuracy of any information disclosed, you should report it to us … provided the borrower agrees; if the borrower does not agree, you should return our instructions.’ Presumably there is an obligation to tell the lender if the borrower’s answer under cl 7.2 is that the information is not correct. The effect appears to be similar to Parry, though it is more wide-ranging and includes cases where the mortgage instructions refer to persons other than the borrower occupying the property. The obligation in cl 7.4 to report appears to be an objective one, which arises if a reasonable solicitor would have had reason to doubt the accuracy of the borrower’s information, whether or not the solicitor in fact did. There is also an obligation at cl 16.4, concerning properties which are not ‘buy-to-let’, as follows: ‘16.4.1  If prior to completion of the retainer, the Borrower informs you of an intention to let the property you should advise the borrower that any letting of the property is prohibited without our prior consent. If the borrower wishes to let the property after completion then an application for consent should be made to us by the borrower …’ 519

10.59  Lenders’ claims It is notable that this does not require the solicitor to tell the lender of the borrower’s intention and, as such, would appear to be a more limited obligation than that in Parry.

(d)  Redemption of existing mortgages before completion (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.59 Birmingham Midshires Mortgage Services Ltd v David Parry & Co1 raised another point. The solicitors’ instructions contained a term that the borrower’s ‘existing mortgages must be redeemed on or before completion of this advance’. It was argued that this term required redemption not only of existing mortgages secured over the property which was to be charged to the lender, but also of charges over other properties which the borrower owned. Read literally, the term would have applied to other charges. However, the Court of Appeal construed the term in the context that the borrower was not required, by the terms of the offer of advance, to redeem mortgages over other properties, and on the basis that it is not generally part of the solicitor’s duty to report matters relating to the borrower’s financial position.2 Thus the lender’s argument was rejected. 1 [1997] EGCS 150, CA. 2 See para 10.100ff, below for the solicitor’s duties in relation to the borrower’s financial position.

(ii)  Cases subject to the Lenders’ Handbook or approved CoT 10.60 In the approved certificate of title, sub-paragraph (t) of the list of permissible instructions provides that the solicitor’s duties may include ensuring the redemption or postponement of existing mortgages secured on the property. Sub-paragraph (s) adds that those duties may include: ‘procuring the redemption of: (i)

existing mortgages on property the subject of any associated sale of which you are aware; and

(ii) any other mortgages secured against a property located in England or Wales made by an identified lender where an identified account number or numbers or a property address has been given by the lender.’ Thus, compared with the result in Parry, there is scope for lenders to increase slightly the obligations on the solicitor in relation to the redemption of mortgages over other property. However, the Lenders’ Handbook itself does not include any such obligation on the solicitor. There is only the obligation in cl 5.6.1 to ensure that the subject property is free from any charges or encumbrances and in cl. 5.12.1, that ‘All existing charges must be redeemed on or before completion, unless we agree that an existing charge may be postponed to 520

Contract and the tort of negligence  10.62 rank after our mortgage.” This clause is similar to the one in Parry, except the context is even more obviously limited to the subject property. One can safely assume therefore that this clause would be interpreted as relating only to charges over the subject property. This means it is only if there are additional express instructions to the solicitor to procure the redemption of charges over other properties that there is likely to be an obligation to that effect.

(e)  Obligation to report material changes in circumstances 10.61 In National Home Loans Corpn v Giffen Couch & Archer,1 the lender contended that when, after their instruction by the lender, the defendant solicitors learnt that the borrowers were under threat of legal proceedings from their previous lender, this amounted to a material change of circumstances which ought to have been reported to the lender. By para  6 of the lender’s report on title the solicitors certified that: ‘We are not aware of any material change in the applicant’s circumstances subsequent to the date of the offer of loan’. Peter Gibson LJ, delivering the only reasoned judgment, said that this would naturally lead the defendant solicitors to believe that, subject only to a clear bankruptcy search being obtained, the lender was satisfied that the borrowers’ circumstances at the date of the offer of advance made them suitable borrowers.2 He rejected the argument that knowledge that the borrowers were under threat of legal proceedings constituted a material change in circumstances. It was the existence of the arrears that was material; the additional information that the previous lenders might be proposing to commence possession proceedings on the basis of those arrears was not a material change of circumstances, and the defendants were not obliged to report it.3 The Lenders’ Handbook, by contrast, does not contain a provision requiring the reporting of material changes in the borrower’s circumstances, so this issue is unlikely to arise in cases to which the Handbook applies. It does, however, require that the solicitor report discrepancies between the solicitor’s instructions and the title documents and ‘other matters revealed by your investigations’. It is thought that, as the Handbook tends to spell out all obligations in detail,4 this provision should be narrowly construed, but this remains to be decided. 1 [1998] 1 WLR 207, CA. This case is discussed in more detail in para 10.73ff, below. 2 See [1998] 1 WLR 207 at 214F. 3 See [1998] 1 WLR 207 at 217A–B. 4 Cf R v Cornelius, para 10.41 above.

(f)  Failing to obtain proper security on completion (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.62 The primary function of a solicitor acting for a lender in a standard transaction is to ensure that the lender obtains a valid and effective first charge 521

10.63  Lenders’ claims on the property, which requires in particular that the charge is over good and marketable title.1 Chadwick J elaborated on this in Bristol and West Building Society v May, May & Merrimans:2 ‘… in signing and returning the report on title, the solicitor warrants or represents that his principal obligation under the contract has been performed –“I/We have investigated the title of this property and report that I/We consider the title to be good and marketable and that it may be safely accepted by the society.” It is, I think, beyond argument that a solicitor who had not investigated title at all or who had not investigated the particular matters which the solicitor’s instructions require to be investigated – see, in particular, para 4 (searches), para 5 (vacant possession and rights of persons in occupation) and para 7 (leasehold securities) – would be in breach of his contract with the society if he were to sign and return the report on title without qualification. Alternatively, by returning the report on title without qualification, he would be in breach of warranty or guilty of misrepresentation. So, also, the solicitor would be in breach of his contract with the society if he had failed to exercise the required degree of care and skill in carrying out his investigation. Further, the solicitor would be in breach of contract, breach of warranty or guilty of misrepresentation, if he were to sign and return the report on title without qualification in circumstances where, having made a full investigation of the title, he did not consider the title to be good and marketable. Yet further, he would be in breach of contract if, having made a full investigation of title, he were to sign and return the report on title without qualification in circumstances in which a reasonable conveyancing solicitor, exercising the required degree of care and skill, could not have reached the conclusion that the title was good and marketable on the material available.’ Note that, on this formulation of the solicitor’s duties, the duty is largely based on or derived from the duty to act with reasonable professional skill and care. 1 See National Home Loans Corpn plc v Giffen, Couch & Archer [1998] 1 WLR 207 at 214B, CA. 2 [1996] 2 All ER 801 at 809h–810c.

10.63 Further, in the Fancy and Jackson case itself, Chadwick J held that solicitors who did not have an official search certificate from the Land Registry at the time of completion acted in breach of duty. They had not investigated title properly before completion. Again, in Alliance & Leicester Building Society v Wheelers,1 the lender’s instructions to the defendant solicitors contained a term which read: ‘Completing solicitors to be satisfied that all the necessary planning, byelaw and statutory consents are in force and suitable for the use of the property as offices’. The solicitors wrote to the lender saying that there was planning permission for use of the property as B1 office use. This was 522

Contract and the tort of negligence  10.65 incorrect. The permitted use was D1, as a surgery. For that reason, summary judgment was granted against the solicitors.2 1 23 January 1997 (unreported), Carnwath J. 2 For a discussion of ‘shared ownership’ schemes, see Halifax plc v Gould and Swayne [1999] PNLR 184, CA, although all the court had to do was conclude that the solicitors had an arguable defence to the allegations of negligence.

(ii)  Cases subject to the Lenders’ Handbook and/or approved CoT 10.64 Platform Funding Ltd v Miller Parris Solicitors1 concerned cl 5.4.1 of Part 1 of the Lenders’ Handbook (now cl 5.6.1), which required that title to the property must be: ‘good and marketable free of any restrictions, covenants, easements, charges or encumbrances which, at the time of completion, might reasonably be expected to materially adversely affect the value of the property or its future marketability…’. [Emphasis added] The defendant solicitors acted for the lender on the remortgage of a lease. It was arguable that, on the correct construction of the lease, the property could be sub-let only for use as a private residence for the sole occupation of members of the tenant’s family or household. The solicitor did not, however, report this to the lender. The judge held (on summary judgment) that the test of whether the defendant solicitor was in breach of duty, in failing to make such a report, was: ‘… whether a competent solicitor, exercising reasonable skill and care, would recognise that [the clause] might reasonably be interpreted as imposing a material restriction’. The judge held that the test was satisfied, and the solicitor was in breach of duty, although causation issues were remitted for trial. 1 (2012) 165(16) SJLB 39; [2012] 2 P & CR DG7, Bristol Mercantile Court, QBD, HHJ HavelockAllan QC.

(g)  Identity fraud (i)  Cases where the Lenders’ Handbook and approved CoT do not apply 10.65 Various cases concern the liability of solicitors who agree with a lender to ensure that specific persons sign a charge in favour of the lender, but then find that the signature of one of those persons on the charge has been forged. If it is found that the solicitors failed to act with reasonable care to ensure that the right people signed the charge then they are likely to be found liable in negligence. Further, if the same solicitors act for both lender and borrowers, then the solicitors may be liable to the lender for breach of warranty of authority.1 Claims for breach of trust may also be made.2 But are lenders able to argue that, even if the solicitor, acting with reasonable skill and care, 523

10.66  Lenders’ claims would not have detected the forgery, the solicitor is still liable to the lender in contract? In other words, can it be said that the solicitor’s contractual obligation to the lender is a strict one, to ensure that the correct people sign the charge, so that the solicitor is liable if the wrong people sign, even though he or she took reasonable skill and care? Note these are cases where the lender is making a claim against its own solicitor; there may be different considerations where the lender is claiming for breach of undertaking against a solicitor who acted solely for the borrower, and where the lender was separately represented.3 1 See paras 10.195ff, below and 5.26ff, above. In the context of a guarantor who claims that her signature has been obtained by undue influence, the Court of Appeal has held that solicitors acting only for the lender have a duty to take reasonable steps to ensure that a guarantor is advised by either the borrower’s solicitor or an independent solicitor: Mercantile Credit Co Ltd v Fenwick [1999] Lloyd’s Rep PN 408, though see also para 9.07, above. 2 See para 10.201, below and Chapter 4. 3 For example in LSC Finance Ltd v Abensons Law Ltd [2015] EWHC 1163 (Ch).

10.66 In Zwebner v The Mortgage Corpn Ltd,1 the report on title which the lender’s solicitors signed contained an undertaking that all appropriate documents would be ‘properly executed’ on completion. Mr Zwebner was borrowing money from the lender on the security of a house which he owned jointly with Mrs Zwebner, so it was necessary for Mrs Zwebner to sign the mortgage. In fact her signature was forged. The Court of Appeal held that the solicitors’ contractual obligation to ensure that the wife signed the mortgage deed was a strict one, so that it would have been breached even if the solicitors had acted with reasonable care. But in Midland Bank plc v Cox McQueen,2 Lord Woolf MR, with whom the other judges agreed, distinguished Zwebner. The solicitors had agreed to ensure that the wife signed a charge for a lender, but her signature was forged. The points of distinction were that in Cox the solicitors merely certified that the wife had signed, rather than undertaking, and merely agreed that she would sign, rather than stating that the charge would be ‘properly’ executed. But Lord Woolf added a statement of general principle, which applies in construing the terms of solicitors’ retainers in this type of case. This is quoted in full at para 1.02, above.3 The Court of Appeal reached a similar conclusion, interpreting a solicitor’s obligation to ensure that the lender obtained good marketable title, in Barclays Bank plc v Weeks Legg & Dean.4 Strictly speaking, decisions on construction all turn on the precise documents in issue, so that authorities do not greatly assist in interpreting documents with slightly different words. But the rationale which Lord Woolf set out in the passage quoted is not of such limited application. Further, the Court of Appeal subsequently applied it in UCB Corporate Services Ltd v Clyde & Co.5 1 [1998] PNLR 769, CA. 2 [1999] Lloyd’s Rep PN 223, CA. 3 [1999] Lloyd’s Rep PN 223 at 229. See also Mercantile Credit Co Ltd v Fenwick [1999] Lloyd’s Rep PN 408, CA. 4 [1999] QB 309. See further paras 10.114, below and 4.10, above. 5 [2000] Lloyd’s Rep PN 653. In relation to the different question of a solicitor’s duty to a party whom the solicitor claimed to represent, see Al-Sabah v Ali [1999] EGCS 11, Ferris J.

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Contract and the tort of negligence  10.69 (ii)  Cases subject to the Lenders’ Handbook or approved CoT 10.67 Identity fraud is covered in cl 3 of Part 1 of the Lenders’ Handbook. Clause 3.1.3 deals with confirming the identity of those acting for the seller. ‘If you are not familiar with the seller’s regulated legal representatives … you must verify that they are currently on record with the Solicitors Regulation Authority, Council for Licensed Conveyancers or other legal regulatory body as practising at the address they have provided to you.’ The term has been tightened compared to earlier versions, which referred to verifying the address on the seller’s solicitor’s notepaper. The defendant solicitors were held to have breached the older version of the term in Mortgage Express v Iqbal Hafeez Solicitors1, where the defendants’ only reasons for thinking that those acting for the sellers were solicitors were seeing a sign on an office/shop front, and a passing reference in a conversation with an unqualified solicitors’ clerk. 1 [2011] EWHC 3037 (Ch) (John Randall QC).

10.68 There are detailed provisions in the Handbook concerning checking the identity of the borrower. By sub-paragraph (a)(i) of the approved certificate of title, the duties of a solicitor acting for both lender and borrower may include: ‘taking reasonable steps to check the identity of the borrower (and anyone else required to sign the mortgage deed or other document connected with the mortgage) by reference to a document or documents, such as a passport, precisely specified in writing by the lender.’ By sub-paragraph (n), the solicitor’s duties may also include procuring execution of the mortgage deed and guarantee ‘by the persons whose identities have been checked in accordance with any requirements of the lender under (a)…’. Note that these provisions relate to checking the identity of any signatory of a document, and not only the borrower. It is suggested that the clear intent of these provisions is that the solicitor does not guarantee that the person signing is the correct party; rather, he or she undertakes an obligation to use reasonable care in checking the borrower’s (or other signatory’s) identity by reference to documents which the lender specifies.1 In this respect the approved certificate of title takes a similar approach to that taken in the later cases referred to in para. 10.51 above. 1 See also cl 1.4 of Part 1 of the Lenders’ Handbook: ‘the standard of care which we expect of you is that of a reasonably competent solicitor or licensed conveyancer acting on behalf of a mortgagee.’

10.69 This approach is reflected in Part 1 of the Lenders’ Handbook, which provides that: 525

10.70  Lenders’ claims ‘3.1.5 Unless you personally know the signatory of a document, you must ask the signatory to provide evidence of identity, which you must carefully check. You should check the signatory’s identity against one of the documents from list A or two of the documents in list B…. [Lists A and B then follow in the Handbook] 3.1.6  You should check that any document you use to verify a signatory’s identity appears to be authentic and current, signed in the relevant place. You should take a copy of it and keep the copy on your file. You should also check that the signatory’s signature on any document being used to verify identity matches the signatory’s signature on the document we require the signatory to sign and that the address shown on any document used to verify identity is that of the signatory.’ As with the approved CoT, it is suggested that the solicitor’s duty is to take reasonable care in taking the required steps. If this is correct, the solicitor does not have an absolute duty to detect impostors, merely a duty to take reasonable care to detect them. These provisions do not on their face impose a strict obligation to provide documents on which the signature has not been forged; they require the solicitor to ‘check’ and/or to ‘carefully check’, which implies the use of reasonable care. However, the requirements as to the documents to be checked are specific and a solicitor can expect to be held in breach if he or she does not follow them precisely. This may be contrasted to the position with breach of a solicitor’s undertaking, which may result in strict liability.1 1 Liability for breach of undertaking, the potential for it to be strict and the consequences thereof, are considered in Chapter 5.

10.70 The documents in List A, such as a photo-card driving licence or passport, contain a picture of the person identified and a signature. If a solicitor receives one of those documents and meets the client in person, it will generally be easy to check whether the person he or she is meeting is the person photographed. But the Lenders’ Handbook does not contain a requirement that the solicitor meet the borrower face to face. Receiving a passport is less of a protection if one does not meet the client and so cannot check the borrower’s likeness to a photograph. The solicitor may comply with the Handbook requirements by seeing no document from List A, but two documents from List B. The documents in List B do not contain photographs, and not all of them contain signatures. It therefore appears that a solicitor may comply with the requirements of the Handbook in circumstances where he or she does not meet the client, and receives two documents from List B, neither of which contains either a photograph or a signature. Although cl 3.1.6 refers to checking signatures on documents, if the document contains no signature and is not required to contain one, the solicitor cannot check any signature. 10.71 It is arguable that the provisions quoted above require the solicitor to see originals, so that seeing copies, even certified copies, will not suffice. 526

Contract and the tort of negligence  10.73 This would appear to be inconsistent with the anti-money laundering practice notes referred to in the next paragraph. Nevertheless, the provision of certified copies rather than originals could raise an issue. If the reason for the provision of copies is that the client has instructed a solicitor whose office is a long way away from the client’s home or work, is there a good reason why the client has done this? 10.72 In cases where solicitors have relied on documents from List B, lenders may rely on cl 3.1.2 of Part 1 of the Lenders’ Handbook, which requires solicitors to comply with the Law Society’s guidance on anti-money laundering (‘AML’) and the current money laundering regulations. In so far as the AML guidance and/or regulations are tighter than cl 3.1.5 and List B, the former will presumably take precedence.1 Until 26 June 2017, the relevant regulations were the Money Laundering Regulations 2007.2 They were then replaced by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.3 The 2007 regulations will continue to be relevant to many older transactions, so both will be considered. 1 In the combined appeals in P&P Property Ltd v Owen White & Catlin LLP; Dreamvar (UK) Ltd v Mary Monson Solicitors Ltd [2018] EWCA Civ 1082, [2018] PNLR 29, the Court of Appeal observed at [31] that while the purpose of the 2007 AML regulations was not to prevent fraud, their existence was an important background feature in determining what liability should be imposed on solicitors who undertook a property sale on behalf of a client who turned out to be an imposter. It can be expected that the content of the regulations will influence the interpretation of both express and implied terms. Neither of the sellers’ solicitors in those cases complied with the AML regulations. The decision of the Court of Appeal is considered in detail in Chapter 9 on Real Estate. 2 SI 2007/2157. 3 SI 2017/692.

10.73 The 2007 regulations set out rules for customer due diligence (‘CDD’) for, among others, solicitors. The last guidance issued by the Law Society under the 2007 regulations was the Anti-Money Laundering Practice Note of October 2013.1 In cases where the solicitor did not meet the client in person, and the client was a natural person rather than eg a company, the AML guidance provided that solicitors had to undertake enhanced due diligence.2 This might involve obtaining further documents from different sources evidencing identity, or seeking copies of documents provided by persons who were themselves regulated. The Practice Note suggested that if a solicitor obtained copies of, for example, a passport, certified by someone whom the solicitor was able to confirm was another regulated solicitor, that should be sufficient to comply with the AML guidance and so with the Lenders’ Handbook. On the other hand, a photocopy passport where the copy was not certified at all or was certified by someone who was not a regulated professional, is unlikely to suffice in a case where the solicitor did not meet the client. 1 For earlier transactions see the Law Society’s AML  Practice Note of 6  October 2011, or preceding practice notes. 2 As did reg 14(2) of the 2007 Regulations.

527

10.74  Lenders’ claims 10.74 For older cases, prior to October 2011, para  3.09ff of the previous version of the Law Society’s AML guidance set out the steps which solicitors might take in relation to clients who could not meet the solicitor face to face. Like the later guidance, it provided (at para  3.91) a non-exhaustive list of individuals who might be considered suitable persons to certify a document. Paragraph  3.77 provided that certified copies of original identification documents should be retained as evidence that the checks had been carried out, and that ‘in the case of photographic evidence of an individual’s identity the person certifying should confirm that the individual is the person shown in the photograph’. Presumably this stipulation also applied to the certification of such documents by a third party. That guidance went on to state, at para 3.94: ‘Where it is not possible either to meet the client or for someone else to take and certify copies for you as set out above, you may not wish to ask the client to post valuable identity documents to you so, in practice, you may not see documents such as a passport, driving licence or identity card. You could, however, ask to see a combination of other less valuable documents which might satisfy you as to identity.’ The former guidance therefore envisaged that identity checks could be carried out by way of the provision of original documents by post, and by obtaining originals of several different council tax and utility bills, rather than any photographic evidence of identity. It also stated, however, that: ‘In all cases you must satisfy yourself that you have evidence which is reasonably capable of establishing (and does in fact establish to your satisfaction) that the client is the person he or she claims to be.’ It is arguable that the provision of council tax and utility bills by post should not be capable of so satisfying the solicitor, particularly in the context of a sale or remortgage of property held in joint names. 10.75 The 2017 regulations take a different, ‘risk-based’ approach. They require solicitors to carry out prior AML risk assessments on the firm’s business as a whole, taking into account its customers, geographic areas, services, transactions and delivery channels (reg  18). The firm must produce a risk assessment report and produce and implement policies aimed at managing and mitigating the risks posed by the business (reg 19). Their policies must enable them to identify and scrutinise certain specified ‘risky’ types of transaction.1 Most relevantly for present purposes, these risky types of transaction include (reg 19(4)(a)): (i)

any case where— (aa) a transaction is complex and unusually large, or there is an unusual pattern of transactions, and (bb) the transaction or transactions have no apparent economic or legal purpose, and 528

Contract and the tort of negligence  10.77 (ii) any other activity or situation which the relevant person regards as particularly likely by its nature to be related to money laundering or terrorist financing;’ In any particular case, a solicitor must consider the practice’s risk assessment and also assess the risks of that transaction (reg  28(12)). The steps which are taken by a firm to manage and mitigate the risks may be like the CDD checks carried out under the 2007 Regulations. However, ‘risky’ transactions falling within reg  19(4)(a) are now among the categories of case where the solicitor must apply enhanced customer due diligence under reg  33 (see reg 33(1)(f) and (g)). Cases involving mortgage fraud could well have these features and so have required enhanced due diligence. It is also likely that under the risk-based approach, clients whom the solicitor never meets will require enhanced due diligence, as falling under ‘any other case which by its nature can present a higher risk of money laundering …’ (reg  33(1)(g)). One of the customer risk factors which must be taken into account when assessing whether there is a high risk of money laundering is if non-face-toface transactions are involved (reg  33(6)(b)(iii)). It seems unlikely now that relying only on two documents from List B  which have no signature in a transaction where the solicitor never meets the client would be sufficient to meet these risk-based criteria. 1 Reg 19(4)(a).

10.76 Following the coming into force of the 2017 Regulations, AML guidance is now produced jointly by all the legal sector AML supervisors, which includes the Law Society. Guidance under the 2017 regulations has been produced, approved by HM  Treasury and was published on 6  March 2018.1 Much of this is in similar terms to the guidance under the 2007 regulations, but there are some differences. The requirements where a solicitor is relying on certification by another regulated person have been tightened up. As the 2018 Guidance confirms at para  4.4.1, a solicitor must immediately obtain from that person all the information needed to comply with the regulations; must enter into arrangements enabling them to obtain immediately on request copies of identification and verification data held by that other person and require them to hold compliant copies; they should ask what CDD enquiries the other person has made, especially when dealing with someone outside the UK; and should check the CDD information is not out of date. 1 Legal Sector Affinity Group, Anti-Money Laundering Guidance for the Legal Sector, available on the Law Society’s website. Applies across the whole of the legal sector.

10.77 A  final point on failure to obtain sufficient evidence of identity relates to causation. Suppose that, in breach of duty, a solicitor fails to obtain evidence which should have been obtained. It is then necessary to ask what 529

10.78  Lenders’ claims would have happened if the solicitor had asked for the relevant evidence. The premise of these cases tends to be that a fraudster was involved. One response of a fraudster to a request for more evidence of identity might be to produce it, by dishonest means. If the position is that, had the solicitor asked for more evidence of identity, the fraudster would most probably have produced it and the solicitor, acting reasonably, would not have detected the fraud, then it may be that the lender will be unable to prove causation of loss. However, in circumstances where it will often be impossible for anyone to prove what the fraudster would have done, this may be an unattractive argument. The lender may argue that the fraudster would instead have moved on to an easier target. This appears to be what happened in the P&P  case for example, where the fraudster initially applied for a remortgage but then, when pressed by the lender for better identity evidence, changed tactics to a sale instead.1 1 P&P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082; [2018] PNLR 29 at [9].

(h)  Following Law Society or SRA guidance 10.78 The approved certificate of title provides that solicitors’ duties may include the obligation to comply with guidance of the Law Society or SRA in relation to property fraud or money laundering (sub-paragraph a(ii)). Clause 3.1.2 of Part 1 of the current Lenders’ Handbook contains such requirements. As discussed above, the latest warning in relation to property fraud is the Law Society’s Mortgage Fraud Practice note of 13  January 2020 (available along with earlier versions on the Law Society’s website). That guidance is self-explanatory. Reference should also be made to the Joint Law Society and HM Land Registry note on Property Fraud issued on 8 September 2017 which is also available on the Law Society’s website. The anti-money laundering guidance has been referred to above at para 10.72ff. 10.79 Lenders will wish where possible to show that their claim includes failures to report matters set out in the mortgage fraud or anti-money laundering guidance. If they can show this, they will be able to escape the limiting effect of other parts of the approved certificate of title, and should be able to show breach of duty without any need to rely on implied terms. This may be a major battleground in future litigation relating to the effect of the Lenders’ Handbook: can the lender show that the information which the solicitor failed to report was reportable pursuant to the Law Society or SRA’s fraud or anti-money laundering guidance, especially under the risk-based requirements post-2017? But even in cases not governed by the Lenders’ Handbook or approved CoT, the court may be heavily influenced, in considering the question of failure to exercise reasonable care, by a failure to follow Law Society guidance – see the discussion of implied terms below. 530

Contract and the tort of negligence  10.81

(i)  Remaining issues in cases subject to the CML Lenders’ Handbook or approved CoT (i)  Conflicts of interest1 10.80 As indicated above, the danger of acting in conflict of interest1 has been part of the rationale for rules limiting the scope of solicitors’ duties when acting simultaneously for borrower and lender. Consistently with this, cl 1.16 of Part 1 of the Lenders’ Handbook provides that ‘if there is any conflict of interest, you must not act for us and must return our instructions’. Similarly, cl 5.3.1 provides: ‘If any matter comes to your attention which you should reasonably expect us to consider important in deciding whether or not to lend to the borrower (such as whether the borrower has given misleading information to us or the information which you might reasonably expect to have been given to us is no longer true) and you are unable to disclose that information to us because of a conflict of interest, you must cease to act for us and return our instructions stating that you consider a conflict of interest has arisen. This does not apply if acting in accordance with Part 3 …’. [Part 3 applies where the solicitor acts only for the lender and not for the borrower.] Further, cl 5.13.1 provides that: ‘… if you become aware that the borrower is not providing the balance of the purchase price from his own funds or is proposing to give a second charge over the property, you must report this to us if the borrower agrees … failing which you must return our instructions and explain that you are unable to continue to act for us as there is a conflict of interest.’ 1 See Chapter 6 for a full discussion of this issue.

10.81 The Handbook does not set out a formula similar to that in cl 5.13.1 in relation to every piece of information which it would be in the lender’s interest to know, and in the borrower’s interest for the lender not to know. It is therefore necessary to construe the terms of the Handbook.1 It is suggested that in principle and in light of cl 5.3.1 the same will apply to all such situations: if the solicitor realises that information should be communicated to the lender, but the borrower refuses to permit the solicitor to do so then a conflict of interest has arisen and the solicitor must cease to act. This will not apply, however, if the borrower has expressly or impliedly consented to the solicitor communicating such information to the lender. 1 Cf para 4.09, above.

531

10.82  Lenders’ claims 10.82 Further, it is possible that, in a lender’s claim, the court may conclude that, when a borrower authorises his/her solicitor to act for the lender, the borrower also authorises the solicitor to communicate to the lender anything which must be communicated in order for the solicitor to be able to comply with the lender’s instructions: see paras 10.95 to 10.96 below. However, this might lead to an anomaly. Returning to Part 1 of the Handbook, compare cl 5.3.1 with cl 6.4.4 which requires the solicitor to tell the lender if the solicitor becomes aware of a cashback to the buyer; cl 6.4.4 contains no proviso about asking the borrower for permission to report to the lender, such as appears in cl 5.13.1. Does this mean that, if a solicitor becomes aware of information which is reportable under cl 5.13.1, s/he must ask the borrower to consent to reporting it to the lender and withdraw if the borrower refuses, since that is what cl 5.13.1 says, but that if the solicitor becomes aware of information which is reportable under cl 6.4.4 the solicitor may ignore the borrower’s wishes and simply report it to the lender, since cl 6.4.4 contains nothing about withdrawing if the borrower does not consent to the reporting? But for the authorities cited at para 10.105, to the effect that the borrower impliedly consents to the solicitor reporting matters to the lender, this would seem an undesirable inconsistency; it remains to be seen whether it is correct even on the basis of those authorities. 10.83 On these questions guidance issued further to the SRA  Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019, especially the Law Society’s Practice Note on Conflicts of Interest dated 2 December 2019, is clearer (see the discussion at para 10.33, above). Unless the express terms of any carve out in relation to confidential information provides otherwise, such information remains confidential to the borrower, but the solicitor will also be in breach of their duties to the lender if they continue to act. There was similar advice in the Law Society’s slightly earlier Practice Note on Conflicts of Interest in Conveyancing dated 15 August 2019 (also available on the Law Society’s website). (ii)  Terms of reporting 10.84

Clause 2.3 of Part 1 of the Handbook provides that:

‘If you need to report a matter to us, you must do so as soon as you become aware of it so as to avoid any delay. If you do not believe that a matter is adequately provided for in the Handbook, you should •

identify the relevant Handbook provision and the extent to which the issue is not covered by it;

•

provide a concise summary of the legal risks.

•

provide your recommendation on how we should protect our interest. 532

Contract and the tort of negligence  10.85 After reporting a matter you should not complete the mortgage until you have received our further written instructions.’ [Emphasis added] This is likely to be highly material to causation: to know how the lender would have responded if there had been no breach of duty, it is material to know what the lender would have been told if there had been no breach of duty. The effect of this is considered in more detail below at para 10.116. The position as to terms of reporting is similar even in cases to which the Handbook does not apply. In Nationwide BS v Littlestone & Cowan1 Blackburne J said that, in order to satisfy his duty to report matters to the lender, the defendant solicitor had to state in a letter not only the essential reportable facts but also: ‘… why he was reporting the matter … In my view it is not a sufficient discharge of that duty simply to report the bare facts and leave it to the recipient within the Society, whoever he or she might be, to guess what the reason is for the disclosure.’ Note, however, that the duty to report is limited to reporting ‘legal risks’. It is suggested that this mirrors the distinction between legal and commercial advice, referred to in Chapter 2. The solicitor’s duty does not extend to reporting matters which are not of a conveyancing or legal nature, and which are more in the nature of pure underwriting issues for the lender. 1 [1999] Lloyd’s Rep PN 625 (Blackburne J) at 629, col.2.

(iii)  Other occupiers, and guarantors 10.85 There is a discussion of the problems which arise where a party either jointly signs a mortgage, or guarantees another’s liability, but later claims not to have understood what they were signing, at para 9.09ff, above. Such a person may, if in actual occupation of the property when the transfer took place, have an overriding interest in the property which takes precedence over the lender’s charge. The House of Lords considered some of those issues in Royal Bank of Scotland v Etridge (No 2).1 From the lender’s point of view, so far as overriding interests are concerned, the first question is whether there is another person living at the property who might have an overriding interest. Hence cl 7.2 and 7.4 of Part 1 of the Lenders’ Handbook provide: ‘7.2  If your instructions state the name of a person who is to live at the property, you should ask the borrower before completing the mortgage that [sic] the information given by us in our mortgage instructions or mortgage offer about occupants is correct and nobody else is to live at the property… 7.4 … If you have any reason to doubt the accuracy of any information disclosed, you should report it to us … provided the borrower agrees; if the borrower does not agree, you should return our instructions.’ 533

10.86  Lenders’ claims It is thought that the general approach to such questions set out in the quotation from the Parry case above at para 10.59 is likely to apply to the solicitor’s duty under these provisions: it is unlikely that the solicitor has a duty to exercise great scepticism as to what the borrower says in answer to the solicitor’s question. On the other hand, if the solicitor does suspect that the borrower is lying then cl 7.4 applies. 1 [2001] UKHL 44, [2002] 2 AC 773.

10.86 Once the solicitor is aware that there are occupants of the property who might be entitled to overriding interests, cl 7.3 and 8.1 apply: ‘7.3  Unless we state otherwise … you must obtain a signed deed or form of consent from all occupants aged 17 or over of whom you are aware who are not a party to the mortgage before completion of the mortgage … 8.1  Unless we state otherwise … you must not advise: •

any borrower who does not personally benefit from the loan; or

•

any guarantor; or

•

anyone intending to occupy the property who is to execute a consent to the mortgage and you must arrange for them to seek independent legal advice.’ [Emphasis added]

10.87 It is in the lender’s interest that anyone who is not a borrower but who might have an overriding interest should obtain independent legal advice and then sign a form consenting to any interest of theirs being subject to the lender’s charge. If such a person does not sign a consent form or is not given independent legal advice before signing such a form, then they may later claim to have an overriding interest which takes priority over the lender’s charge. Clause 8.2 of the Handbook does provide for the possibility that the lender might instruct the solicitor acting for the lender and borrower to give advice to the person signing the consent form. It is thought, however, that from the solicitor’s point of view such a course is likely to be fraught with difficulty, bearing in mind the different duties which may be owed to the borrower, the lender, and the person being asked to sign the consent form. The result of the Etridge case is that it is the lender which, if aware of the other occupier or guarantor of the loan, must ensure that such person is given independent legal advice by a solicitor: see para 9.15, above. Nevertheless, the Handbook imposes an obligation on the solicitor acting for the borrower and lender to ‘arrange’ for such person to obtain independent legal advice. Assuming, however, that such a solicitor is acting only for the borrower and lender, and not for the person asked to sign the consent form, it is hard to see how that solicitor can be expected to do more than (i) suggest that the person signing the consent form seek independent legal advice and (ii) if that person agrees, make the arrangements for them to see an independent solicitor. There may be a question 534

Contract and the tort of negligence  10.89 as to who will pay for this advice. If the borrower refuses to do so then it is suggested that the solicitor acting for the borrower and lender should decline to advise the occupier, though that solicitor should advise the lender of the problem. Finally, note also that cl 11.1.2 states that the solicitor must explain to ‘any … person signing or executing a document’ their responsibilities and liabilities under any documents being signed. It is doubtful, however, whether this applies in a case such as a third party signing a consent form since, by virtue of cl 8.1, the Handbook requires that, unless instructed to the contrary, the solicitor ‘must not advise’ such person. (iv) Completion 10.88

Clause10.7 of Part 1 of the Handbook provides:

‘You must hold the loan on trust for us until completion. If completion is delayed, you must return it to us when and how we tell you …’. In Lloyds TSB Bank plc v Markandan & Uddin1 the Court of Appeal considered the meaning of ‘completion’ in this clause, albeit for the purposes of a claim in breach of trust rather than breach of contract. That effect of that case is considered at para 4.05, above. In the combined appeals in P&P Property Ltd v Owen White & Catlin LLP; Dreamvar (UK) Ltd v Mary Monson Solicitors Ltd2 the Court of Appeal held that the references to ‘completion’ in the Law Society’s Code for Completion by Post (2011 edition) had the same meaning, ie  an exchange of money for genuine transfers. Since there was no such completion where the transfers were forged, the vendor’s solicitors had no authority under the terms of the Code to release the money to their clients. 1 [2011] EWCA Civ 65, [2012] 2 All ER 884. Followed by the Court of Appeal in Santander UK Plc v. RA Legal Solicitors [2014] EWCA Civ 183. 2 [2018] EWCA Civ 1082, [2018] PNLR 29 at [94]–[98]. Discussed in detail in Chapter 5.

5  Liability for breach of implied contractual terms and in the tort of negligence 10.89 Section 13 of the Supply of Goods and Services Act 1982 implies into the solicitor’s contract of retainer a term that the solicitor must act with reasonable skill and care. This standard is generally treated as imposing the same standard as the duty which the solicitor owes the client in the tort of negligence, to act with reasonable skill and care. The question is the extent to which, in the absence of breach of an express contractual term, the court will hold that a solicitor acting for a lender has failed to act with such skill or care. In this context, it is helpful to consider, first, the pre-1999 law on implied duties of solicitors to lenders, and then whether the terms of the Lenders’ Handbook (where applicable) and the approved certificate of title mean that a court today would take a different approach. In considering these issues, the information 535

10.90  Lenders’ claims which it is alleged there is an implied duty to report should be separated into two categories: information relating to the value of the property which is to be taken as security for the loan, and information relating to the value of the borrower’s covenant.1 We consider these two categories in turn. We then look at possible limitations on the duty to report information. 1 See para 10.7ff, above, and National Home Loans Corpn plc v Giffen Couch & Archer [1998] 1 WLR 207 at 216E–G, CA.

(a)  Matters relevant to the value of the security (i) The Bowerman duty 10.90 In Mortgage Express Ltd v Bowerman & Partners1 (‘Bowerman’), the facts were as follows. On 21  November 1990 the claimant lender sent a letter instructing Mr Gilroy of the defendant solicitors to act for the claimant in relation to the proposed purchase by a Mr Hadi of a flat in Queensway, London for £220,000, with a loan of £180,150 from the claimant. The letter included a valuation of the property in the sum of £199,000, and it was apparent that the claimant’s loan was based on this valuation. Mr Gilroy then agreed to act on Mr Hadi’s behalf and discovered that the proposed vendor was a Mr Arrach. On 26 November 1990 Mr Gilroy learnt that in fact Mr Arrach had not yet purchased the property: he was due to purchase it from a Mr Rasool for £150,000, and simultaneously to sell it on to Mr Hadi for £220,000, an increase of nearly 50% in price. Mr Gilroy was concerned that Mr Hadi might be paying too much, and that the valuation of £199,000 might be incorrect, so he warned Mr Hadi of the price at which Mr Arrach was purchasing. Mr Gilroy also knew that Mr Rasool had purchased the property only a few days earlier on 2 November 1990, that the London property market was not rising at the time, and suspected that Mr Rasool’s purchase had been at a sum lower than £150,000. He did not report any of this information to the claimant lender in his report on title or by other means. The transaction completed, Mr Hadi made only one mortgage payment before defaulting, and the claimant repossessed the property and sold it at a loss. 1 [1996] 2 All ER 836, CA.

10.91 The judge found that, in failing to report such matters to the claimant, the defendant had breached its duty to the claimant. The Court of Appeal upheld that conclusion. Sir Thomas Bingham MR said:1 ‘A  client cannot expect a solicitor to undertake work he has not asked him to do, and will not wish to pay him for such work. But if in the course of doing the work he is instructed to do the solicitor comes into possession of information which is not confidential and which is clearly of potential significance to the client, I  think that the client would reasonably expect the solicitor to pass it on and feel understandably aggrieved if he did not. 536

Contract and the tort of negligence  10.93 I would accordingly … accept … the submission of Mortgage Express … that if in the course of investigating title, a solicitor discovers facts which a reasonably competent solicitor would realise might have a material bearing on the valuation of the lender’s security or some other ingredient of the lending decision, then it is his duty to point this out.’ [Emphasis added] Millett LJ, concurring, said:2 ‘It might be thought … that the question which the judge should have asked herself was: “Would a solicitor of ordinary competence have regarded the information that Mr Arrach was paying only £150,000 for the flat as throwing doubt on the valuation of £199,000?” That, however, would not, in my opinion, be an accurate formulation of the question. Mr Gilroy was not a valuer and it was not his responsibility to doubt a professional valuation. The question which the judge had to ask herself was whether a solicitor of ordinary competence would have regarded the information in question as information which might cause the [lender] to doubt the correctness of the valuation which they had obtained.’ [Emphasis added] Schiemann LJ agreed with both judgments. 1 [1996] 2 All ER 836 at 842d–f, CA. 2 [1996] 2 All ER 836 at 845e–g, CA.

10.92 The relevant information in Bowerman was that which a solicitor of ordinary competence would have regarded as information which might cause the lender to doubt the correctness of the valuation it had obtained. Sir Thomas Bingham MR formulated the implied duty as going further, and relating not only to information of that kind, but also to information which might have a material bearing on ‘some other ingredient of the lending decision’.1 It will be suggested below2 that it may be questioned whether an implied duty extends to this second type of information. For now we concentrate on the first type: information which a solicitor of ordinary competence would have regarded as information which might cause the lender to doubt the correctness of the valuation it had obtained. For brevity we refer to this as the ‘Bowerman duty’. 1 In E Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4 WLR 44, a two person Court of Appeal repeated this wider formulation. However, this was obiter as the information affected the adequacy of the security and the correctness of the valuation. 2 See para 10.100ff, below.

10.93 Considering Bowerman in Balmer Radmore, Blackburne J said that he accepted the defendants’ submission that:1 ‘… in considering whether a solicitor acting for a lender is subject to a Bowerman type duty, the correct approach is to examine the terms of the retainer and then consider what implied obligations, if any, there 537

10.94  Lenders’ claims are to accompany the expressed ones. Having said that, however, I am inclined to think that the Bowerman duty is a species of obligation which the court will ordinarily imply, or find present, where a solicitor acts for a lender in a mortgage transaction except to the extent that to do so would be inconsistent with the express terms of the engagement or with the surrounding circumstances of the relationship.’ Blackburne J did not consider that the terms of Nationwide’s instructions were inconsistent with the existence of such a duty. His judgment, including this part, was cited with approval by the Court of Appeal in E Surv Ltd v Goldsmith Williams Solicitors.2 1 Nationwide BS v Balmer Radmore [1999] Lloyd’s Rep PN 241 at 258; also [1999] PNLR 606 at 634. 2 [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [37].

(ii)  Cases to which Part 1 of the Lenders’ Handbook, or the approved CoT, apply 10.94 The issue of whether the Bowerman duty continued to apply in transactions governed by Part 1 of the Lenders’ Handbook, and whether the duty was consistent with the express terms of the Handbook, arose for determination in E  Surv Ltd v Goldsmith Williams Solicitors.1 The Court of Appeal concluded that the Bowerman duty was not excluded, since it was not only consistent with but contemplated as continuing by the terms of the Handbook. Sir Stanley Burnton said: ‘[38]  Like Blackburne J2, I  consider that the question whether the solicitors were under the Bowerman duty in the present case depends on whether, properly construed, that duty was excluded by, or was inconsistent with, the terms of the solicitors’ retainer, as contained in the CML’s Handbook3. [39]  In my judgment, the answer to this question is clearly “No”. Clause 1.3 of the Handbook4 is inconsistent with its provisions being a comprehensive and exclusive statement of the solicitors’ responsibilities. Clause 5.1.25 can only be explained on the basis that if the matter that “comes to the attention of the fee earner dealing with the transaction which the [fee earner] should reasonably expect [the lender] to consider important in deciding whether or not to lend to the borrower” and that matter is not confidential to the borrower, the fee earner should report it to the lender. The examples set out in the parentheses are just that. Turning to the Law Society’s Practice Rules, as has been seen one of the matters listed under rule 6(3)(c) was “making appropriate searches relating to the property in public registers … and reporting any results … which the solicitor considers may adversely affect the lender”. It is not now suggested that a search of the Land Registry is not a search for the purposes of this sub538

Contract and the tort of negligence  10.94 paragraph. The search in this case resulted in the information that the property had been purchased recently at a price that suggested strongly that the valuation was excessive. This was obviously relevant to the value of the proposed security. [40]  I  do not think that this conclusion is negated by the terms of the standard form of certificate of title. The solicitors did not have any liability or responsibility beyond carrying out their instructions, which involved the making of appropriate searches, and advising the lender of the results of those searches, including information that affected the value of the proposed security. A narrow reading of the certificate would be inconsistent with clauses 1.3 and 5.1.2 of the Lenders’ Handbook.”6 Patten LJ reached the same view in his judgment: ‘[55]  … It is important to bear in mind that it is not the function of rule 6  SPR to specify how a solicitor in a mortgage transaction should carry out his instructions or what is the scope of his duty of care. Rule 6 is there to set limits to the type of instructions which a solicitor in such a transaction may properly accept; not to set out the terms upon which the solicitor may be instructed in respect of matters which he is permitted to carry out or to regulate the limits of his reporting obligations when acting for both lender and borrower in the transaction. Like Sir Stanley Burnton, I consider that rule 6(3)(c)(ii) does not preclude the existence of a Bowerman duty but to discover whether such a duty is included within the scope of the solicitors’ retainer one must look at their instructions. [56]  In this case those instructions are contained in the CML Handbook … The Handbook in this form post-dates the decision in Bowerman … [57]  In the end the appeal raises a question of construction about the terms of clause 5.3.1 … The sub-clause does not in terms impose a duty of disclosure but it recognises in words which echo the judgment of Sir Thomas Bingham MR in the Bowerman case that reportable matters which come to the solicitor’s attention when dealing with the transaction and are not confidential to the borrower must be communicated to the lender. It therefore acknowledges the existence of a Bowerman-type reporting duty as part of the solicitors’ instructions …’. 1 [2015] EWCA Civ 1147, [2016] 4 WLR 44. 2 In Balmer Radmore. 3 The version of the Lenders’ Handbook being considered was that dated 6 May 2005. 4 Cl 1.3: ‘The Lenders’ Handbook does not affect any responsibilities you have to us under the general law or any practice rule or guidance issued by your professional body from time to time.’ Unchanged in later versions.

539

10.95  Lenders’ claims 5 As applicable at the relevant time: ‘5.1.2 If any matter comes to the attention of the fee earner dealing with the transaction which you should reasonably expect us to consider important in deciding whether or not to lend to the borrower (such as whether the borrower has given misleading information to us or the information which you might reasonably expect to have been given to us is no longer true) and you are unable to disclose that information to us because of a conflict of interest, you must cease to act for us and return our Instructions stating that you consider a conflict of interest has arisen.’ The relevant clause is now 5.3.1 and is to the same effect. 6 Sir Stanley Burnton at [41] expressly disagreed with views to the contrary which were expressed in a previous edition of this book at para 10.67.

10.95 Sir Stanley Burnton, who gave the main judgment in E  Surv Ltd v Goldsmith Williams Solicitors, elaborated on the extent of the duty in the following terms:1 ‘[42]  This does not mean that a solicitor instructed to act for both lender and borrower must act as a detective or bloodhound. The solicitor instructed on the terms of the CML  Handbook was not required to carry out any work that was outside the scope of his instructions. It was only if, while carrying out that work, he came into possession of non-confidential information that a reasonably competent solicitor would realise adversely affected the title to the mortgage property or the value of the security that he was under a duty to report it to the lender.’ 1 [2016] 4 WLR 44 at [42].

(iii)  Cases to which the Lenders’ Handbook and approved CoT do not apply 10.96 This means that for the purposes of the Bowerman duty there is little practical difference between cases to which the Lenders’ Handbook and approved CoT apply and those to which they do not. In cases to which they do not, it will be necessary to consider the particular express instructions. In Balmer Radmore Blackburne J concluded on this point in the following terms:1 ‘… a solicitor retained by the Society on the terms of its standard printed conditions was obliged to report to it information obtained by him in the course of investigating title or preparing for completion which was not confidential and which a solicitor of ordinary competence would have regarded as information which might cause the Society to doubt either the correctness of the valuation which, as the solicitor would know, it had obtained or the bona fides of the borrower. It is not necessary for me to express any view on whether the duty extended to a requirement to report information discovered by him which might affect some other ingredient of the Society’s lending decision.’ Two points can be noted on this formulation. First, it suggests that, even in cases where there is an implied duty to report, it is subject to two further 540

Contract and the tort of negligence  10.97 restrictions: it relates only to information which (i) the solicitor obtains in the course of investigating title or preparing for completion, and (ii) the solicitor is not prevented from reporting by obligations of confidentiality owed to the borrower. These limitations also appear in the passage quoted from Sir Thomas Bingham above, and in the passage just quoted from Sir Stanley Burnton in E Surv Ltd v Goldsmith Williams Solicitors. We consider them further below.2 Second, as to the scope of the duty, it extends beyond information which the solicitor of ordinary competence would have regarded as information which might cause the lender to doubt the correctness of the valuation. On Blackburne J’s formulation, it extends to information which the solicitor would have regarded as information which might cause the lender to doubt the bona fides of the borrower. Again, we consider this further below.3 1 [1999] Lloyd’s Rep PN 241at 259. 2 Paragraph 10.107ff, below. 3 Paragraph 10.100ff, below.

10.97 Leaving those points aside for the moment, what is the extent of the Bowerman duty? The effect of Balmer Radmore is that, in cases where the property market was falling, the duty is likely to extend to reporting sub-sales or back to back transactions in which there was a price uplift that was anything other than minimal. For example, in ATM  Abdullah, one of the Balmer Radmore managed list cases, the defendant solicitor failed to report a backto-back transaction in autumn 1991 where there was a price increase from £54,000 to £63,000, an uplift of 17%, but the head vendor was a mortgagee in possession. Blackburne J held the solicitor liable. Property prices were falling at the time. Although a reasonably competent solicitor might have thought that the explanation for the price rise was that the head vendor was a mortgagee in possession selling at a discount:1 ‘… he would have been mindful that whereas he had no particular expertise in matters of valuation, the Society did have access to persons who possessed such expertise. In these circumstances he would surely not have taken upon himself to conclude that the explanation for the uplift in price was indeed because the head sale was by a mortgagee in possession. In my view, a reasonably competent solicitor would not have speculated on the reasons for the uplift but would have reported the matter to the Society as being information which might cause the Society to doubt the correctness of the £63,000 valuation which it had obtained of which, having received a copy, Mr Abdullah was aware. £54,000 was almost £6,000 less than the amount of the Society’s offer of advance.’ It did not, however, follow that the lender recovered all its loss on the transaction. The judge held that, if this information had been reported, the lender would still have lent to the borrower, but would have lent £2,800 less than it did, so 541

10.98  Lenders’ claims damages were £2,800 plus interest. It is unclear if the solicitor would still have had a duty to report the uplift if property prices had been rising. 1 [1999] Lloyd’s Rep PN 616 at 621 col 2.

10.98 It is no excuse that, before completion, the defendant solicitor did not know the amount of the price increase. In investigating title to registered land, he or she ought to find out who the registered owner is. In the case of a sub-sale, this will not be the party from whom the borrower is buying (‘the intermediate vendor’), so the solicitor will know that a sub-sale or back to back transaction is involved. Before completing the transaction, the solicitor ought to insist upon seeing a copy of the contract between the registered owner and the intermediate vendor, in order to be sure that the intermediate vendor can make title. It is possible that, before exchange of contracts, the intermediate vendor might supply the borrower with a copy of his or her own contract with the registered owner from which the price had been redacted, so as to prevent the borrower from finding out the amount of the intermediate vendor’s profit. But, after exchange and before completion, it would not matter if the borrower found this out, so the intermediate vendor’s solicitors could not refuse to make available an unexpurgated copy of his contract. Thus, before completion, the solicitor acting for the lender and borrower ought to know the amount of the price uplift.1 If exchange of contracts and completion on both transactions were due to take place on the same day, the borrower’s solicitor would not know the price at which the intermediate vendor was buying, but the transaction would be so unusual that the solicitor would have an obligation to explain its nature to the lender.2 1 See ATM  Abdullah in the Balmer Radmore judgment: [1999] Lloyd’s Rep PN  616. Further, office copy entries may show the previous purchase price, and this itself may be reportable pursuant to the Bowerman duty. 2 Balmer Radmore [1999] Lloyd’s Rep PN 241 at 269.

10.99 A similar duty may apply in relation to a re-mortgage. If a borrower purchases a property for £120,000 and then obtains an offer of re-mortgage a few days later in the sum of £134,000, the solicitor acting for the lender offering the re-mortgage ought to find out the amount of the earlier purchase and realise that it casts doubt on the second lender’s valuation. This is because the lender’s valuation must state that the property was worth at least the amount of the advance of £134,000, and thus considerably more than the purchase price a few days earlier.1 1 See Littlestone & Cowan in the Balmer Radmore judgment: [1999] Lloyd’s Rep PN 625.

(b)  Creditworthiness of the borrower 10.100 Having considered implied duties to report matters relevant to the value of the property, we now consider implied duties to report matters relevant 542

Contract and the tort of negligence  10.102 to the creditworthiness of the borrower. There will in any event be a duty on the solicitor to report matters which, on considering the Law Society’s guidance on property fraud, suggest fraud; it is possible that those might include matters relevant to creditworthiness of the borrower. However, it appears there will be no general duty on solicitors to report to lenders matters relevant only to the borrower’s creditworthiness. There may of course be an express duty of this kind, and there may be cases where the solicitors’ instructions would be construed to include such a term by implication. These points emerge from the Court of Appeal’s decision, subsequent to Bowerman, in National Home Loans Corpn plc v Giffen, Couch & Archer (‘Giffen’),1 confirmed by the Court of Appeal in Birmingham Midshires Mortgage Services Ltd v David Parry & Co.2 1 [1998] 1 WLR 207, CA. 2 [1997] ECGS 150, CA.

10.101 In Giffen, a Mr Choudhry borrowed from the Halifax Building Society to purchase 224 Buckingham Road, Bletchley. On 30 June 1988 Mr Choudhry transferred title to the property into his own and his wife’s names, and Mr and Mrs Choudhry (‘the borrowers’) remortgaged the property to a company known as Western Trust, using part of the advance to pay off the Halifax. In February 1989 the borrowers wished to re-mortgage again. They were introduced to the claimant lender by an intermediary. They applied to the lender for a remortgage in an application form dated 10 February 1989. In the application form they stated that they had never at any time been in arrears by more than one month with any existing or previous loan and had never had any county court judgment recorded against them. On 5 April 1989 the lender offered the borrowers an advance and on the same day instructed the defendant solicitors to act for it ‘in the preparation of a mortgage with any other appropriate documents in accordance with the Notes for Guidance and the documents provided’. The lender sent the defendants its Instructions to Solicitors and Licensed Conveyancers and instructed them to report on title on the lender’s standard form. On 31  May 1989 the defendants submitted a report on title to the lender. Completion, using the lender’s money, took place on 9 June 1989. The borrowers quickly fell into arrears and the lender sold the property as mortgagee in possession on 13 April 1992, leaving a shortfall on the borrowers’ account. 10.102 The lender’s case was as follows. By 17 May 1989, the defendants had discovered that there were arrears of over £4,000 on the borrowers’ mortgage with Western Trust, and that there was a danger of Western Trust commencing legal proceedings to repossess the property. The defendants did not report these pieces of information to the claimant lender. In particular, they did not refer to them in their report on title dated 31 May 1989. The lender claimed that the defendants ought to have reported such information to it, and that, by failing to do so, the defendants were in breach of their implied contractual duty and duty of care owed to the lender. 543

10.103  Lenders’ claims 10.103 The Court of Appeal disagreed. Peter Gibson LJ, with whom the other two judges agreed, set out five factors which were relevant to determining the scope of the defendants’ duties:1 ‘(1)  The instructions from the plaintiff required the defendants to act for the plaintiff “in the preparation of a mortgage … in accordance with the Notes for Guidance and the documents provided.” Any solicitor of ordinary competence and experience would realise that the defendants’ primary function was to make sure that the plaintiff received a valid and effective first mortgage on the property, and that required in particular that the plaintiff should receive a good and marketable title. The approval of the title by the defendants was an express condition of the loan. (2) The plaintiff, an experienced commercial lender, provided its own detailed printed instructions to the solicitors. Those instructions specified the particular matters on which the plaintiff required to be advised. This made clear, for example, that the investigation of title should go beyond ordinary conveyancing matters, but extended to matters which might affect the valuation put upon the property. To give another example, they were required to advise if any information suggested that the property was not to be the principal residence of [the borrowers] for the sole continuing occupation of them and their family. The plaintiff provided its own form of a report on title which stated precisely what the solicitor was required to certify. In these circumstances, whatever the position in other cases with differing circumstances, there is limited room here for treating the scope of the duty of care as extending to require the solicitor to take action which has not been expressly required by the plaintiff in its instructions. (3)  Subject to para  6 of the report on title, the only action which the defendants were instructed to take relating to the financial circumstances of [the borrowers] was twofold: to do a bankruptcy search and to report on any matter revealed by the search. (4) The plaintiff did not send a copy of the application by [the borrowers] to the defendants, and there is no evidence that they knew any of its contents.’ The relevance of this was that the defendants could not have known that the information which they had as to the arrears demonstrated that the borrowers had lied to the claimant on the application form. Continuing the quotation: ‘(5)  Further, the report on title, in requiring the defendants to certify that they were not aware of any material change in the circumstances of [the borrowers] subsequent to the date of offer of loan, would naturally lead the defendants to believe that, subject only to a clear bankruptcy search being obtained, the plaintiff was satisfied that the 544

Contract and the tort of negligence  10.105 circumstances of [the borrowers] at that date were such that they were appropriate borrowers. The defendants did not know what inquiries, if any, had been made by the plaintiff. Mrs Butler, a legal executive who was employed by the defendants and who … dealt with the matter for them, presumed that the plaintiff would have sought a reference from Western Trust.’ The presence of the fifth factor is probably not a necessary condition for concluding that there is no implied duty to report matters relevant to creditworthiness.2 1 See [1998] 1 WLR 207 at 214A–G. 2 See Birmingham Midshires Mortgage Services Ltd v David Parry & Co [1997] ECGS 150, CA.

10.104 Blackburne J  distinguished Giffen in Balmer Radmore on the following bases:1 ‘The question in that case was whether the solicitor should have reported certain information which cast doubt on the borrowers’ ability to pay. The information was of a kind which it would be reasonable to suppose the plaintiff would have obtained from other sources. The instructions were held, where matters of creditworthiness were concerned, to be of very limited scope. The decision does not seek to limit the scope of the duty to report where, as here, the information relates to matters going to the value of the property and therefore to the adequacy of the security or where, as here, the information derives from an investigation of title and therefore from matters which it is the business of the solicitor to investigate and not that of the Society or of others on its behalf.’ Following this approach, it is thought that there is a distinction in the nature of the duties which the court will ordinarily imply, between, first, matters which a solicitor would normally discover in the course of his or her investigation of title on behalf of the lender, which will tend to be relevant to the value of the security, and secondly, matters going to the creditworthiness of the borrowers, which the solicitor could normally expect that the lender would find out itself, and which a solicitor acting only for the lender and not the borrowers would probably not discover. There will normally be an implied duty to report information which falls into the first category, but not the second. This approach of limiting solicitors’ duties to those within the solicitor’s core function is similar to that taken in Midland Bank plc v Cox McQueen.2 1 Balmer Radmore [1999] Lloyd’s Rep PN 241 at 258. 2 Referred to at para 10.66, above.

10.105 There is a question as to whether Bowerman should be interpreted to give rise to an implied duty which goes beyond a duty to report information which a solicitor of ordinary competence would have regarded as information 545

10.106  Lenders’ claims which might cause the lender to doubt the correctness of the valuation. (On Blackburne J’s formulation, the obligation is also limited to reporting information which is discovered in the course of investigating title or preparing for completion.1) But will the duty implied as a result of Bowerman go further, and encompass, as Sir Thomas Bingham suggested in Bowerman,2 a duty to report information which a solicitor of ordinary competence would have regarded as information which might cause the lender to doubt ‘some other ingredient of the lending decision’? 1 This is subject to an exception which we consider at para 10.112, below. 2 See the passage quoted at para 10.91, above.

10.106 There are potential inconsistencies between this broader duty and the subsequent decision in Giffen. As set out above, in Giffen, the Court of Appeal distinguished Bowerman on five bases. The key points were that information as to creditworthiness did not relate to title or the adequacy of the security, or to any other matter on which the defendant solicitors were instructed to advise. Peter Gibson LJ pointed out that Millett LJ had decided Bowerman on a narrower basis than Sir Thomas Bingham MR, stating that the reportable information appeared on the face of the vendor’s title, and thus was information which the defendant solicitors would have discovered in the course of investigating title. It is thought that, to be consistent with Giffen, it is necessary to construe the duty arising out of Bowerman as being confined to what we have called the Bowerman duty,1 at least where the solicitors are not expressly instructed to report on other, non-property related matters. This may still be a broad duty, since many matters may be relevant to the value of the property, and in particular information suggesting sub-sale frauds generally will be relevant to value. If, however, one were to construe the Bowerman duty as extending, for example, to a duty to report all matters suggesting bad faith of the borrowers, then one might have difficulty in explaining why the claimant lost in Giffen: the information as to arrears in that case might be seen as being information which suggested that the borrowers were acting in bad faith and knew that they would never be able to repay the lender. 1 Paragraph 10.90, above.

10.107 The interrelationship between Bowerman and Giffen was referred to by Sir Stanley Burnton in E Surv Ltd v Goldsmith Williams Solicitors in the following passage: ‘[36] The Bowerman case was considered by the Court of Appeal in National Home Loans Corpn plc v Giffen Couch & Archer [1998] 1 WLR 207, in which it was held on the facts of that case that the information that it was alleged the solicitor should have passed on to the lender (namely the borrower’s existing arrears under his existing mortgage and the threat of legal proceedings by his existing mortgagee) did not relate to title or to the adequacy of the security, or 546

Contract and the tort of negligence  10.108 to any other matter on which he was instructed to report or to advise, and he was therefore not in breach of any duty to his lender client in not reporting that information. It is not suggested that this gloss on the Bowerman duty is relevant to the instant case: the information that it is alleged should have been reported to the lender clearly affected the adequacy of the security.’1 Sir Stanley Burnton seems to have viewed Giffen as widening the scope of the implied duty, by extending it to other matters on which the solicitor was instructed to report, rather than narrowing it from information which might cause the lender to doubt ‘some other ingredient of the lending decision’ per Sir Thomas Bingham. However, he certainly interpreted the core Bowerman duty as relating to information uncovered while investigating title which might relate to the adequacy of the security. In contrast Patten LJ summarised the Bowerman decision in terms which reflected only Sir Thomas Bingham’s formulation:2 ‘It is not disputed by the solicitors that the facts about the proximity of the purchase and the disparity between the purchase price and the £725,000 valuation of the property were matters which should have been reported by the solicitors to their lender client under the principles explained by this Court in Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER 836. That case established that the solicitors’ duty of care in carrying out their task of investigating title extended to the disclosure of facts which they, as reasonably competent solicitors, ought to have realised would have a material bearing on the valuation or the lending decision: see Sir Thomas Bingham MR at p 842F.’ Overall the Court of Appeal in Goldsmith Williams did not need to resolve the question of whether the duty is any wider and so did not do so. It is suggested therefore that the current position is that while the implied duty does extend to information which a solicitor of ordinary competence would have regarded as relevant to a matter on which he or she was actually instructed to advise or report, it does not otherwise extend to information which such a solicitor would consider a lender might regard as relevant to its lending decision. 1 [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [36]. 2 [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [52].

(c)  Implied waiver of confidentiality by the borrower 10.108 Where the Bowerman duty does apply, it is subject to two limitations: first, it is limited to information which is not confidential; secondly, it is generally limited to information which the solicitor discovers in the course of doing the work which he or she is instructed to do on behalf of the lender, which is principally investigating title and preparing for completion.1 The second limitation will be considered further below at para 10.112. As to the 547

10.108  Lenders’ claims first, what counts as confidential information for these purposes? Breach of confidence is considered in detail in Chapter 6. In relation to lenders’ claims, the problem is likely to arise where, as is normally the case, the same solicitor acts for both lender and borrower. In Balmer Radmore Blackburne J set out the position, in relation to information which the solicitor has learnt in the course of handling the transaction for which the borrower seeks a loan from the lender, as follows:2 ‘In Bowerman, Millett LJ said this (at page 844j): “A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender. No such conflict, however, arose in the present case. It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the mortgagee’s solicitor. He has the implied authority of his client to communicate all documents of title to the mortgagee’s solicitor.”

In Mothew,3 he said this (at page 20d): “By instructing him to act for them, the purchasers must be taken to have authorised the defendant to complete the report without which the mortgage advance would not have been forthcoming; and to complete it truthfully. The defendant was required by the society to report on the purchasers’ title as well as to confirm the absence of any further borrowing. The two stood in exactly the same case. The defendant would not have been in breach of his duty to the purchasers if he had disclosed the facts to the society any more than if he had reported a defect in their title.”

This proposition can be tested by considering what the defendant’s position would have been if he had acted for the purchasers and another solicitor had been instructed to act for the society. He would have been required to deduce the purchasers’ title to the satisfaction of the society’s solicitor, and to confirm to him that no further borrowing or second charge was in contemplation. His duty to the purchasers would have required him to ascertain the facts from them and to report them to the society. Unless they told him the facts and instructed him to lie to the society, instructions which he would be bound to refuse, his duty to the purchasers would not inhibit him in providing full and truthful information to the solicitor acting for the society. The answer to the first question, therefore, lies in ascertaining what it is that the solicitor is obliged by his instructions to report on to the 548

Contract and the tort of negligence  10.111 lender: the implied authority to disclose covers all matters to which the instructions relate. By naming his own solicitor to act also for the society, which occurred in each of the twelve cases before me, the borrower must therefore be taken to have authorised the solicitor to complete the report on title and make whatever disclosures were necessary to enable the solicitor to comply with the society’s instructions, without which the mortgage advance would not be forthcoming, and to complete the report on title truthfully.’ 1 See the formulations of Sir Thomas Bingham MR at para 10.91 and Blackburne J at para 10.93, above. 2 [1999] Lloyd’s Rep PN 241 at 261. 3 Bristol and West Building Society v Mothew [1998] Ch 1, CA.

10.109 This suggests that it was unlikely, at least historically, that confidentiality owed to the borrowers, in relation to the instant transaction, would be a bar to the solicitor reporting to the lender. On Blackburne J’s formulation, where borrowers named their own solicitor to act also for the lender, they impliedly authorised the solicitor to disclose to the lender any matters, concerning the instant transaction, which it is necessary to disclose in order to comply with the lender’s instructions. Thus, if a piece of information needed to be reported in order to comply with the lender’s instructions, the borrower would be taken to have impliedly authorised such disclosure, even if the information is confidential, so confidentiality will be no bar to disclosure. 10.110 Patten LJ confirmed this in E Surv Ltd v Goldsmith Williams Solicitors, saying:1 ‘The disclosure obligation may also be confined by the fact that the solicitor in a mortgage transaction will often be acting for both lender and borrower and so face potential conflicts of duty in relation to information which is confidential. In a typical lending transaction problems about conflicts of duty will usually be resolved by the lender’s requirement that the borrower consent to the disclosure of information material to the transaction …’ 1 [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [53]–[54].

10.111 However, more recent guidance to solicitors on how they should handle the potential conflict of interest between a borrower and a lender seems to make it less likely that such an authority to disclose confidential information of the borrower would now be implied where it is not express. The guidance as to handling conflicts of interest in the Practice Notes issued by the Law Society in 20191 essentially say that the duty of confidentiality to the borrower takes precedence over the duty to disclose to the lender, but that the effect is that the 549

10.112  Lenders’ claims solicitor will generally have to return the lender’s instructions if they receive such confidential information which cannot be disclosed. 1 Practice Note on Conflicts of Interest in Conveyancing dated 15 August 2019 and Practice Note on Conflicts of Interest dated 2 December 2019. See discussion at 10.36ff above.

(d)  Information learnt from other transactions 10.112 The second limitation on the implied duty to report information, arising out of Bowerman, was that the duty generally related only to information which the solicitor discovered in the course of doing the work which they were instructed to do on behalf of the lender. This is principally investigating title and preparing for completion. Thus, under Bowerman it has been held that there is generally no implied duty to report information which the solicitor knows from other sources, for instance, from working for the borrower client on other unrelated transactions.1 That proposition might, however, appear to be in conflict with the House of Lords’ subsequent decision in Hilton v Barker Booth & Eastwood,2 which is discussed in Chapters 2, 4 and 6.3 In Hilton, the House held that solicitors who acted for two parties to an agreement had a duty to one party (A) to reveal what they knew about the dubious character of the other party (B), though they also owed a duty to B not to reveal the same information to A. They did not reveal the information to A, so they complied with their duty to B but breached their duty to A and had to compensate A. But Lord Walker declined the opportunity to review the lenders’ cases.4 As a result, the question of whether Hilton requires the overruling of any lenders’ claims remains to be determined in later cases. Further authority is plainly required on this issue. It is thought that the question must be determined by construing the terms of the Lenders’ Handbook. The structure of the Handbook in general is that if a solicitor realises that a matter should be reported to the lender then the solicitor must ask for the borrower’s permission. If the borrower consents, the matter can be reported; if the borrower does not consent, the solicitor must cease to act. If the borrower does not consent but the solicitor nevertheless continues to act without reporting to the lender, then the solicitor is likely to be in breach of fiduciary duty. If the solicitor negligently fails to realise that he or she should ask the borrower’s consent to report an issue then the solicitor is likely to be liable to the lender in negligence and breach of contract but not breach of fiduciary duty. Finally, for attempts by lenders to override the confidentiality of borrowers by the wording of their mortgage application forms, see para 14.13 below. 1 Bristol and West Building Society v Baden Barnes Groves & Co (No  1) [2000] Lloyd’s Rep PN 788 (Chadwick J). 2 [2005] UKHL 8, [2005] 1 WLR 567. 3 See paras 2.13, 4.27 and 6.39, above. 4 [2005] UKHL 8, [2005] 1 WLR 567 at 580C–G.

10.113 The position is different where the information which the solicitors know from other sources, taken with the information which they have in relation 550

Contract and the tort of negligence  10.114 to the lender’s transaction, provides the solicitors with strong evidence of fraud. In that case, any confidentiality of the borrower’s is overridden,1 and the solicitors will have an implied duty to report to the lender both the information, and the reason why they are reporting it, namely, that it leads them to suspect fraud.2 1 Darlington Building Society v O’Rourke James Scourfield & McCarthy [1999] Lloyd’s Rep PN 33, CA. 2 See Blackburne J’s decision in Vanderpump & Sykes, part of the Balmer Radmore judgment: [1999] Lloyd’s Rep PN 422.

6  Forms of undertaking agreed between banks and the Law Society 10.114 In Barclays Bank plc v Weeks Legg & Dean,1 the Court of Appeal considered three cases relating to a solicitor’s undertaking to a lender that the lender’s money would be used only for the purpose of obtaining ‘good marketable title’ to the property in question. In each case, the solicitor had provided an undertaking in a form agreed between banks and the Law Society.2 It is important to recognise that these were not standard lenders’ cases, because, with one small exception, the bank did not instruct the solicitors to act for it in the transaction; it did not ask the solicitors to provide a report on title or to advise in relation to any aspect of the transaction; and the solicitors were not paid by the bank for their services.3 Millett LJ, with whom the other judges agreed, said that, as the undertaking was designed to stand alone as the only communication passing between the solicitor and the bank, the scope of the solicitor’s obligations was determined exclusively by the terms of the undertaking.4 It follows that there would be no room for implied contractual obligations, or a duty of care in tort, which went beyond the express terms of the undertaking. This distinguishes cases based on such an undertaking from the standard case which we have just considered. 1 [1999] QB 309, CA. 2 The undertaking read: ‘Undertaking by Solicitor To send Deeds/Land Certificate to Bank on completion of a purchase, the Bank and/ or the Customer having provided the purchase monies. TO BARCLAYS BANK PLC If you provide facilities to my/our client … for the purchase of the Freehold/Leasehold property…. I/We undertake: (a) that any sums received from you or your customer for the purpose of this transaction will be applied solely for acquiring a good marketable title to such property and in paying any necessary deposit legal costs and disbursements in connection with such purpose. The purchase price contemplated is £… gross and with apportionments and any necessary disbursements is not expected to exceed £… (b) after the property has been acquired by … and all necessary stamping and registration completed to send the Title Deeds and/or Land Certificates and documents to you and in the meantime to hold them to your order.’ 3 See [1999] QB 309 at 323B–C. 4 [1999] QB 309 at 323G.

551

10.115  Lenders’ claims 10.115 By the express terms of the undertaking, the solicitors agreed that the bank’s money would be applied solely for obtaining a ‘good marketable title’. Millett LJ said:1 ‘The obligation of a vendor is to deduce sufficient title to the property which he has contracted to sell. The expression “good marketable title” describes the quality of the evidence which the purchaser is bound to accept as sufficient to discharge this obligation. It says nothing about the nature or extent of the property contracted to be sold to which title must be deduced. The expression is a compendious one which describes the title and not the property. It is used in contradistinction to “a good holding title”, by which is meant a title which a willing purchaser might reasonably be advised to accept, but which the court would not force on a reluctant purchaser.’ In the first case, the land in question was purchased subject to a special condition that it was subject to a right of way in favour of an adjoining owner. The Court of Appeal held that this did not mean that the solicitors were wrong to state that title to the property was good and marketable: an unwilling purchaser could have been forced to buy the land. The fact that the right of way rendered the land less valuable than the lender bank had thought was irrelevant to the question of whether there was good marketable title to it. Although the case turns on construction, one might observe that the effect of the bank’s argument was that the solicitors’ obligations were similar to those which they would have had if they had supplied a report on title, even though the solicitors had been paid nothing by the bank and had not supplied a report on title. In that context, it is perhaps unsurprising that the bank’s contentions were rejected. 1 [1999] QB 309 at 325F–G.

7 Causation (a)  Proof of causation 10.116 In contract and in negligence, the test of causation applied to lenders’ cases turns on whether, if the solicitors had reported the matters which they ought to have reported, the lender would have made the advance which it in fact made. This is a question of fact and the burden of proof is on the lender to prove that it would not have made the advance (or would have made a lesser advance). This has recently needed to be confirmed by the Court of Appeal in E Surv Ltd v Goldsmith Williams Solicitors1 and by the Northern Ireland Court of Appeal in Capital Home Loans Ltd v Hewit and Gilpin Solicitors.2 This has important implications for the quality of the evidence which needs to be led on behalf of the lender. The Goldsmith Williams case was a contribution claim by surveyors, who had settled the lender’s negligence claim, against the solicitors who had also acted. No evidence was obtained by the surveyors from the lender’s underwriters. There was not even a copy of the lender’s lending 552

Contract and the tort of negligence  10.117 manual available. In those circumstances the trial judge had been driven to speculate as to what would have happened if the lender had been informed of the date and price of the borrower’s recent purchase. In the process he wrongly reversed the burden of proof. As Sir Stanley Burnton said:3 ‘[48]  … It was for the surveyors to establish that the solicitors’ breach of duty was a cause of the lender’s loss. It was of course open to the solicitors to adduce such evidence as they considered appropriate on the issue of causation, but it could not be held against them that they did not do so. It was for the surveyors to secure the evidence they required, if necessary by the issue of a witness summons against a relevant witness … [49]  Ultimately, my view is that the judge did not have the evidence before him that enabled him to answer the question [whether the information would have affected their decision to lend]. In my judgment, the surveyors did not prove that the lender would have reacted to the information that the solicitors should have provided on the purchase price and date of purchase of the property, which was not materially different from the information given to them by the borrower [in the application form, which the solicitors did not see].’ The appeal was therefore allowed on the issue of causation. The surveyors had to prove causation on the contribution because the lender would have had to prove this in its claim. 1 [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [44]–[49]. 2 [2016] NICA 45; [2016] PNLR 12. 3 At [48]–[49].

10.117 In Capital Home Loans v Hewit and Gilpin the Northern Irish Court of Appeal expressly followed1 Goldsmith Williams. It upheld the trial judge’s conclusion that the lender had called insufficient evidence for him to conclude that it would not have made the advances if it had received proper information. The lender had relied only on its lending manual, oral evidence from a member of the lender’s litigation department and expert lending evidence. It had not called evidence from any of the original underwriters, apparently as a matter of policy rather than because they could not be located. The judge had stated that a deliberate decision had been made not to call them and speculated that this was because the lender did not want to concede that it had known full well the true nature of the transactions (transfers to associated companies where the balance of the purchase price was paid by share issue). He concluded that none of the witnesses called could say what the underwriters knew or thought at the relevant time. The NI Court of Appeal upheld his decision. It held that the lending manual operated as guidelines rather than fixed rules and left significant discretion to the underwriter. The evidence of the other witnesses could not then discharge the burden of proving what the underwriters would have done. The Court of Appeal noted that the judge had raised with counsel that a key 553

10.118  Lenders’ claims issue was what the person actually dealing with the transaction had thought, and he might draw an inference as to why that person was not called. Despite a six-month adjournment of the trial, the lender had not chosen to follow this up and secure late attendance of any of the underwriters. The Court of Appeal concluded that not only was the judge entitled to decide that causation was not proved but that they themselves were satisfied that the evidence available did not discharge the burden of proof on causation.2 1 [2016] NICA 45, [2016] PNLR 12 at [12]. 2 At [29]–[34].

10.118 This emphasises how much may turn on the judge’s assessment of the particular lending officer and the difficulties which may be caused if that person (or at the very least, a person from the same department at the time) can no longer be traced. This is especially so if the lending was bespoke and guidelines discretionary; the position may be different if a lending manual can be produced which clearly shows the same advance would not have been permitted if the relevant information had been reported. The lender’s position may also be helped if it can show it has a good reason for not calling the relevant underwriting witness (eg  they cannot be traced) so that no adverse inference should be drawn from their absence.1 1 Compare the clinical negligence case of Wisniewski v Central Manchester Health Authority [1998] PIQR P324 on the circumstances in which the court may draw adverse conclusions from the absence of a witness. In a case of negligent omission, where a witness does not attend who might be expected to do so to explain what they would have done in the hypothetical scenario, the court can only draw an adverse inference from their non-attendance if (a) there is other evidence to support the opposing party’s case and (b) a credible explanation for the absence of the witness is not given.

10.119 There are essentially three possible answers to the question of what the lender would have done if the solicitor had reported as he or she ought to have done. First, it might have made the same advance in the same amount. In that case, it can recover only nominal damages, and probably not costs.1 Secondly, it might have lent to the same borrower but on a lower advance. In that case, its loss is the difference between the advance it in fact made, and the advance it would have made if there had been no breach of duty, plus interest.2 Thirdly, it might not have lent at all. In that case, one moves to consider basic loss and the effect of SAAMCo3 and Hughes-Holland v BPE Solicitors,4 which we deal with below. 1 Cf Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394, CA. 2 See the ATM Abdullah decision in Balmer Radmore: [1999] Lloyd’s Rep PN 616. 3 [1997] AC 191, HL. 4 [2017] UKSC 21, [2017] 2 WLR 1029, SC.

10.120 The response which the underwriter would have made will depend in part on the terms in which the solicitor would have reported the relevant information, if he or she had not been in breach of duty. In Balmer Radmore, 554

Contract and the tort of negligence  10.122 Blackburne J said that the solicitor ought to have reported as if he or she were writing to an intelligent layman.1 But his decisions in the individual cases suggest that his approach was rather that the solicitor should assume he was writing to a layman who needed potential difficulties spelt out in the clearest possible way. This is perhaps not unfair, since, in relation to contributory negligence, he found that the lender’s employees did not generally think about applications in a careful or critical way. The judge held that the solicitor’s duty was not merely to report the bare facts which ought to be passed to the lender, but also the reason why they were being reported; see quotation at 10.93 above. 1 [1999] Lloyd’s Rep PN  241 at 270. See also Nationwide BS  v Vanderpump & Sykes [1999] Lloyd’s Rep PN 422 at 440.

10.121 Is the position any different in cases where the approved certificate of title, or its predecessors were used? The approved CoT provides that one of the obligations which the solicitor may owe the lender is: ‘(w) giving legal advice on any matters reported under this section … suggesting courses of action open to the lender, and complying with the lender’s instructions on the action to be taken.’ Relevant here is cl 2.3 of Part 1 of the Lenders’ Handbook, quoted above at 10.94. Where a matter is not adequately covered by the Handbook, the solicitor should identify the relevant provision and the extent to which the matter is not covered; and provide a concise summary of the legal risks and the solicitor’s recommendation for protecting the lender’s interest. This would seem to entail giving advice on steps to take, as well as on facts and ‘legal risks’ (which are not defined). In other cases where a solicitor needs to report, cl 2.3 simply says he or she must do so as soon as he or she becomes aware of it. Given the general provisions in cl 1.3 and 1.4 as to the standard of care expected, and that the Handbook has been interpreted as not being a complete code,1 it is thought that the scope of the solicitor’s obligation to report, where the matter falls under a provision of the Handbook, will be similar to that set out in the preceding paragraph. 1 See E Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4 WLR 44.

10.122 There is a further issue on causation. This concerns the correct test for causation in negligent misrepresentation cases. It arises from what Millett LJ said in Bristol and West Building Society v Mothew,1 as to the Court of Appeal’s decision in Downs v Chappell.2 This issue is dealt with in Chapter 3, to which reference should be made.3 In Connaught Income Fund (Series 1) v Hewetts Solicitors4 Deputy Judge Mark Cawson QC declined to follow Millett LJ’s approach, in a lender claim context. He applied the general rule that the claimant had to prove on the balance of probabilities that the lender would not have made the advance if there had been no negligence. It was not sufficient, he held, to prove only that the lender had relied on the negligent report. 1 [1998] Ch 1 at 11B–D, CA. 2 [1997] 1 WLR 426, CA.

555

10.123  Lenders’ claims 3 See para 3.08ff, above. 4 [2016]  EWHC  2286 (Ch). The claimant and the lender were different but closely associated parties.

(b)  Effect of intervening redemption of mortgage 10.123 One aspect of causation which has come to increased prominence recently is the effect on causation and loss of an intervening re-lending or restructure which has involved a redemption of the original mortgage. Although this has arisen in the context of lenders’ claims against valuers for negligence, the issue may equally arise in the context of lenders’ claims against their solicitors. 10.124 The starting point is the valuer’s negligence case of Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd.1 The lender had made an advance to the borrower against a property, in reliance upon a valuation by the defendant. Six months later the borrower had applied for a further advance, for which another valuation was obtained from a different valuer. As the lender’s systems did not allow it to make further advances, the lender proceeded by way of a redemption of the first mortgage. A  second mortgage, with a fresh legal charge, was granted by the lender for the whole increased sum, on slightly different terms. The first valuation was assumed to have been negligent, the true value of the property having been less than the original advance. The lender brought a claim against the defendant for its losses resulting from the original advance (conceding that it could only recover against the second valuer for the losses resulting from the further advance). The Court of Appeal upheld the trial judge’s conclusion that there was no recoverable loss against the defendant. Their reasoning was that the valuer was liable only for the adverse consequences flowing from entering into the original mortgage transaction and attributable to the deficiency in the first valuation. That transaction had come to an end when the first mortgage was redeemed, in circumstances where on its face, the lender had suffered no loss as its mortgage had been fully redeemed. While there might initially have been an inchoate obligation to the lender as a result of the negligent valuation, once the mortgage was fully redeemed, that liability ceased because the transaction had been satisfactorily completed. Therefore, the lender had suffered no recoverable loss. 1 [2002] EWCA Civ 336, [2002] PNLR 35, [2002] 12 EG 133.

10.125 Some of the consequences of Preferred Mortgages were explored by the Supreme Court in what is now the leading case on this issue, Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd.1 Tiuta was also a valuers’ negligence claim and had similar facts to Preferred, except that the same valuer had undertaken both the first and second valuations. It was assumed that the second valuation was negligent, but no allegation of negligence was made by the 556

Contract and the tort of negligence  10.126 lender about the first. It was also assumed for the purposes of summary judgment (although disputed) that the original charge had been redeemed. The lender took the stance that, applying Preferred Mortgages, the second advance was a wholly separate transaction. Therefore, it argued, it should be able to recover all of its losses by reference to the second valuation. The defendants applied for summary judgment on the basis that the lender would have suffered most of its losses in any event, by reason of the first advance, so that, aside from the additional lending, the claim failed the ‘but for’ test of causation. This argument was successful before the Deputy Judge but was rejected by a majority in the Court of Appeal. The surveyors appealed to the Supreme Court, which allowed the appeal. 1 [2017] UKSC 77, [2017] 1 WLR 4627.

10.126 Lord Sumption, giving the judgment of the Court, restored a ‘but for’ test of causation: if the valuers had not been negligent in reporting the value of the property for the second facility, the lenders would not have entered into the second facility, but they would still have entered into the first. On that hypothesis, they would have been better off in two respects: they would have still had the further advance and: ‘the loans made under the first facility would not have been discharged with the money advanced under the second facility, so that if the valuation prepared for the first facility had been negligent, the irrecoverable loans made under that facility would in principle have been recoverable as damages. There being no allegation of negligence in relation to the first facility, this point does not arise. Accordingly the lenders’ loss is limited to the new money advanced under the second facility.’1 In rejecting the analysis of the majority in the Court of Appeal, Lord Sumption said further at [9]: ‘…It does not follow from the fact that the advance under the second facility was applied in discharge of the advances under the first, that the court is obliged to ignore the fact that the lender would have lost the advances under the first facility in any event.’ As to the argument that the surveyors would have contemplated that an amount comprising the total of both facilities might be granted in reliance on that second valuation, Lord Sumption said: ‘… the valuer cannot be liable for more than the difference which his negligence has made, simply because he contemplated that on hypothetical facts different from those which actually obtained, he might have been …”2 1 [2017] UKSC 77, [2017] 1 WLR 4627 at [7]. The correctness of Preferred Mortgages was not challenged by either party in Tiuta in the Supreme Court, but it was implicitly approved by the Supreme Court in its decision. 2 At [10].

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10.127  Lenders’ claims 10.127 The important point for lender claims against solicitors is the general one that if, for whatever reason, the lender has redeemed the original mortgage or charge and replaced it with a fresh one securing a new advance, then any losses caused by eg  negligent conveyancing associated with the original lending will have become irrecoverable. Such a redemption may have happened in connection with a further advance, or simply a restructuring of existing lending following the borrower getting into financial difficulties; the reasons are irrelevant. However, it is important to note that in both Preferred and Tiuta, the original legal charge was (or was taken to have been) redeemed and extinguished. What remains unclear is the scope of the principle to be drawn from these cases, and whether it is limited to situations, like Preferred and Tiuta, where the charge has been redeemed. Can it properly be extended to cases where the lender has merely replaced one loan account with another, with the same security (generally an all monies legal charge) remaining in place throughout? Such a case would not on the face of it be a redemption. 10.128 Applying the analysis of Lord Sumption, the question is whether or not there has been a ‘discharge of the existing indebtedness’.1 It is suggested that there has been no such discharge where the chose in action represented by a debit on a loan account has simply been transferred by the lender from one account to another of the borrower, the borrower remaining indebted throughout. However, this is an issue where further judicial consideration is required. 1 Tiuta at [9] and [13].

10.129 In Re Black Ant Co Ltd (in Administration)1 the Court of Appeal concluded that there was no new or further advance (and so a fortiori no discharge of any existing indebtedness) where new facility letters were issued which provided for outstanding interest on the loan to be rolled up, and for varied terms to apply. Even if the terms of the agreement were varied, there was no new advance. The issue of a new facility letter cannot therefore amount to a ‘discharge’, even though it is a variation and so in principle a new contract. Given the frequency with which lenders restructure lending and change the form and terms on which lending is granted, this is an issue which will regularly crop up in the context of negligence claims which relate to earlier advances. 1 Also known as Urban Ventures Ltd v Thomas [2016] EWCA Civ 30, [2016] 2 P&CR DG2. This was in the context of a priorities claim between two charge-holders.

8  Basic or transactional loss 10.130 The decision of the House of Lords in SAAMCo introduced a distinction, in cases to which it applies, between two kinds of loss. Although the case did not provide labels for these two types, we use here the terms basic loss and attributable loss. Attributable loss is the loss which is recoverable in 558

Contract and the tort of negligence  10.132 accordance with the principles set out in SAAMCo, and as further expounded by the Supreme Court in Hughes-Holland v BPE  Solicitors,1 which we consider below.2 Basic loss was a term used by Lord Hobhouse in Platform Home Loans Ltd v Oyston Shipways Ltd.3 He derived it from Lord Nicholls’s definition of the ‘basic comparison’ which has to be made in a lender’s case, and which we discussed in Chapter 7.4 The basic loss is assessed according to the principles set out in Swingcastle Ltd v Alastair Gibson.5 This is a question of comparing the position which the lender is in fact in, with the position it would have been in if there had been no advance. This has also been described as the ‘transactional loss’, eg by the Court of Appeal in LSREF III Wight Ltd v Gateley LLP, which usefully summarised how it should be assessed in a lender claim against a solicitor.6 1 [2017] UKSC 21, [2017] 2 WLR 1029. 2 We take the term ‘attributable’ from SAAMCo. See also para 3.35ff, above. 3 [2000] 2 AC 190 at 201G, HL. 4 See para 7.37ff, above. 5 [1991] 2 AC 223, HL. 6 [2016] EWCA Civ 359, [2016] PNLR 21 at [25]–[30].

10.131 In Swingcastle, the defendant valuer negligently overvalued the borrowers’ property. In reliance on the valuation, the claimant lenders advanced money to the borrowers, secured by a mortgage. Under the terms of the loan, the borrowers were required to pay interest at the rate of 36.51% per annum, or 45.619% per annum in the event of default. The issue in the appeal was whether a lender who made a loan at a high rate of interest in reliance on a negligent valuation could recover, as part of his damages from the negligent valuer, interest at the contractual rate which the lender was entitled to be paid by the borrower and which remained outstanding at the termination of the transaction between lender and borrower. The House of Lords held that it could not. The valuers had not guaranteed that the borrowers would pay the money owing under the loan. The correct measure of loss was damages to put the lender in the position it would have been in if there had been no negligence. If there had been no negligence, the lender would not have entered into the transaction. Thus the lender was entitled to damages to compensate it for the difference between (i) the position it was in fact in, and (ii) the position it would have been in if there had been no transaction. It was up to the lender to provide evidence as to (ii), so that the court could make the necessary comparison. But what the lender could not do was claim from the valuer the interest calculated at the rates of 36.51% and 45.619% which the borrowers had failed to pay: had there been no negligence, the lender would not have entered into the transaction and the borrower would not having been paying these high interest rates. 10.132 The amount claimed in each case will depend on the evidence which the lender provides as to the position it would have been in if there had been no transaction. In part this will depend on whether the money which was advanced was money which the lender already had in its possession, ie from 559

10.132  Lenders’ claims depositors with the lender, or was money it had to borrow, generally on the wholesale money markets. In the former case, the loss would be calculated by reference to what the lender would have done with the money if there had been no transaction. In Fancy and Jackson, Chadwick J  summarised the lenders’ claim as to quantum of loss as follows:1 ‘The society quantifies [its] loss by adding to the principal sum lent the interest which would have been earned on an equivalent sum invested in the money market at London Inter-Bank Offered Rates (LIBOR) and deducting from the aggregate the interest and capital repayments (if any) actually made by the borrowers and the net recoveries (if any) from the realisation of the mortgaged property on sale.’ Presumably the lender’s evidence was that, if there had been no transaction, it would have lent the money to others at LIBOR. On the other hand, the lender’s evidence is often that the lender itself had to borrow the money which it advanced to the borrower. Thus part of the claim is for the cost to the lender of borrowing the money which formed the advance, since, if there had been no transaction, the lender would not have borrowed the money. But, in this case too, the evidence tends to be that the cost of funding should be calculated by reference to LIBOR plus or minus a small percentage. The claimant’s calculation of its loss in a case of this second kind might look like this: £ 100,000

Advance Cost to the lender of borrowing the amount of the advance (interest it has had to pay to borrow the £100,000)

 20,000

120,000 Less Borrowers’ payments Sale price Less cost of sale (estate agents’ and solicitors’ fees) Net proceeds of sale Total deductions

  5,000

80,000  3,000

77,000

77,000

82,000  82,000  38,000

Total claim

Where a lender employs in-house solicitors or estate agents who act in the repossession of the property, their costs are recoverable as though they were those of independent professionals charging reasonable and fair fees for the work done.2 In principle, deductions for items such as solicitors’ fees should be made at the date when the claimant paid the fee, so that interest on such 560

Contract and the tort of negligence  10.133 sums runs only from the date when the claimant suffered the loss. It should be emphasised that the calculation set out in the table is merely an example of what might be claimed. 1 See [1997] 4 All ER 582 at 616e–f. 2 Portman Building Society v Bevan Ashford [2000] Lloyd’s Rep PN 354, CA, not overruled on this point.

10.133 One of the issues considered by the Court of Appeal in LSREF III Wight Ltd v Gateley LLP1 was the date by reference to which this calculation of the basic (or transactional) loss should be carried out. There the security was still unsold at the date of trial and so the lender’s loss remained uncrystallised. The trial judge had assessed the basic loss as at the transaction date. The Court of Appeal rejected that approach, saying that the court should not blind itself to later events when assessing the transactional loss, even though different considerations meant (as we shall see below), that the attributable loss should generally be ascertained as at the transaction date.2 Briggs LJ, giving the judgment of the court, said: ‘[30] Generally speaking, the lender’s transactional loss will be most easily identified once it has crystallised by realisation of the security and the application of the proceeds of its sale to the reduction of the outstanding debt. As was decided in the Nykredit case, this does not of course mean that the lender had suffered no transactional loss until it realises the security. Where the transactional loss has not been crystallised by realisation and sale, a loss may nonetheless be identified as the result of comparing a) the amount of money lent by the lender, plus interest at a proper rate, and b) the value of the rights acquired, including the borrower’s covenant and the security: see per Lord Nicholls at p.1631 D-F.’ After considering the reasons given in SAAMCo and Nykredit for rejecting in those cases an assessment of basic loss at the transaction date, Briggs LJ continued: ‘[32]  As in the Nykredit case, the Claimant in the present case had not crystallised its transactional loss by the time of the trial. It may even be (if the auction sale falls through due to the absence of landlord consent) that its loss has still to be crystallised, although the uncertainties as to its amount are now, as the result of the auction sale, much less than they were at the time of the trial in December 2014. Nonetheless the present case demonstrates how uncertainties as to transactional loss may narrow over time. In this case it would be little more than speculation in late 2007 what the value of the Property would be, with or without the defect in the Lease, at the time when (if at all) the Legal Charge needed to be enforced. The Property might or might not have been developed, market prices might have risen or fallen, and the fortunes of the borrower… and the guarantor… might have risen or, as they had in fact, fallen… 561

10.134  Lenders’ claims [33] Thus it is that, in my judgment, where the transactional loss of someone who has lent money on negligent advice remains un-crystallised at the date of trial, it will be a rare case in which a quantification of that loss would be better calculated by reference to any earlier date than the trial date. As Lord Nicholls said in the Nykredit case at p.1633C: “Realisation of the security does not create the lender’s loss, nor does it convert a potential loss into an actual loss. Rather, it crystallises the amount of a present loss, which hitherto had been open to be aggravated or diminished by movements in the property market. I can see no necessity for the law to travel the commercially unrealistic road. The amount of a plaintiff’s loss frequently becomes clearer after court proceedings have been started and while awaiting trial. This is an everyday experience”

Of course, if the lender’s transactional loss is crystallised by a realisation of the security prior to trial, there is generally no need to postpone the quantification of that loss to a later date. All that the court needs to do is to quantify it then (which will usually be a simple process of accounting uncomplicated by valuation issues) and then add interest at an appropriate rate.’ This approach also permitted mitigation steps to be taken into account when they occurred (or should have occurred).3 Accordingly, unless there are very unusual circumstances, the basic loss should be calculated as at the date of sale of the security, where it has been sold, or as at the trial date, where it has not been sold. 1 [2016] EWCA Civ 359, [2016] PNLR 21. 2 At [28]–[29]. 3 At [58]–[64]. The claimant had entered into an agreement to rectify the defect after trial but before the appeal. It had also auctioned the property although not finalised the sale. The Court of Appeal therefore assessed the basic loss as at the date of the appeal, since they then had much the best information as to loss. The decision on mitigation is considered further below at para 10.179.

10.134 In Barclays Bank Plc v Christie Owen & Davies Ltd,1 (a valuers’ negligence case) the court had to resolve several issues concerning whether sums should be credited as ‘recoveries’ in assessing the basic loss. Deputy Judge Richard Spearman QC concluded among other things that:2 (i)

where there was pre-existing lending and security, the bank did not need to give credit for parts of the sale proceeds which were in fact used by it to discharge pre-existing lending. This applied to both term loans and overdraft facilities (to the extent of the approved facility);

(ii) where payments of interest or capital were made by the borrower from an overdrawn bank account also held with the bank, the bank did not need to give credit for payments from the date on which the balance permanently exceeded the approved overdraft; 562

Contract and the tort of negligence  10.135 (iii) where an advance is paid into an account also held with the bank which is overdrawn but within its limit, this does not count as a ‘recovery’ by the bank which must be credited, except to the extent the overdraft limit was reduced at the same time. Note that if the lender has chosen to attribute the proceeds of sale of the security to the loan account for the subject transaction and not to other earlier lending, it will be bound by its election and will be treated as having extinguished/ reduced its loss accordingly – see eg Capital Home Loans Ltd v Countrywide Surveyors Ltd.3 1 [2016] EWHC 2351 (Ch), [2017] PNLR 8. 2 At [205]–[225]. 3 [2011] 3 EGLR 153.

(a) Interest 10.135 A number of issues can arise in relation to interest. First, at what rate should interest be awarded? This has often been agreed in lenders’ cases. In principle, at least where interest is being awarded as damages rather than on damages (see below), the right approach will be to consider the rate at which the claimant actually suffered the loss. This will depend on the claimant’s evidence. For a large clearing bank, this may be quite generalised evidence that it borrows what it needs at LIBOR or slightly higher. Note, however, that a lender’s claim that all the money used to fund the advance had to be borrowed on the money markets may require further scrutiny. The Northern Rock crisis developed because Northern Rock used wholesale money markets to fund a higher percentage of its loan book than any other major UK lender. 28% of its funds were loaned by depositors and 72% raised from the money markets. In the case of other lenders, it appears that a larger proportion of their funds is provided by customers’ deposits. It appears that the cost of funding loans from the money markets may be higher than the cost of funding them from depositors.1 In such a case, a lender 60% of whose loans were funded by deposits might be in difficulty in claiming that any given loan had been funded exclusively from the more expensive money markets. On the other hand, the lender might argue that the additional money required to make the particular loan in question had to be funded exclusively from the money markets. The question of whether the cost of funding should be taken as the average of what the lender has to pay, or as the cost of funding additional capacity over and above cheaper sources such as depositors’ funds, has yet to be determined. For institutional lenders, it appears that courts will be willing to accept they must have incurred a cost of funding at LIBOR even if the available evidence is quite sparse,2 but that clear evidence must be produced if a higher rate is sought. 1 See Nationwide BS  v Dunlop Haywards (DHL) Ltd [2009]  EWHC  254 (Comm), [2010] 1 WLR 258 (Christopher Clarke J) at [20]. 2 See eg  Canada Square v Kinleigh Folkard and Hayward (CC) [2016]  PNLR  3 at [68] and Barclays Bank Plc v Christie Owen & Davies Ltd [2016] EWHC 2351 (Ch), [2017] PNLR 8 at [214]–[216] and [227]–[230].

563

10.136  Lenders’ claims 10.136 Secondly, are lenders entitled to claim interest on a compound rather than a simple basis where the evidence shows they have suffered a loss calculated by reference to compound interest? This will be most cases, since both payment for cost of funds and payments to depositors are generally payable on a compounded basis. It is necessary to distinguish between interest on damages and interest as damages. A  claim to interest on damages arises where the total amount of damages payable has already been calculated, and interest is payable on that total sum from a date prior to trial until trial. A claim to interest as damages arises where part of the damages claimed, and set out in the statement of case, is interest. In the example given in para 10.102, the claim to interest should be pleaded, and would then count as a claim for interest as damages. The power to award interest on damages in common law claims arises from Senior Courts Act 1981, s  35A, but that provision permits the award of only simple interest. For that reason lenders tend to frame their claims to interest in terms of interest as damages rather than interest on damages, although claiming the latter as an alternative. 10.137 As a result of dicta in the House of Lords’ decision in Sempra Metals Ltd v Inland Revenue Comrs,1 it appears that former arguments2 that there is no power to award compound interest where interest as damages is claimed at common law, are wrong. The claimant must plead and prove its entitlement to lost interest, including compound interest, as special damages. The lender must also provide evidence as to the incidence of rests in the compounding of interest. In practice this will usually coincide with the period by which the borrower paid interest (whether monthly or quarterly). But, if the lender provides the necessary evidence and can surmount standard rules as to remoteness of damage and mitigation of loss then a claimant lender should be entitled to recover compound interest as damages. In practice, remoteness is unlikely to pose a problem, and has not done in cases where compound interest has been claimed (see 10.134). As Lord Nicholls observed at the start of his speech in Sempra, ‘we live in a world where interest payments for the use of money are calculated on a compound basis’.3 It would be hard to argue that solicitors acting for lenders are unaware of this. 1 [2007] UKHL 34, [2007] 3 WLR 354. See para 4.63, above. 2 Discussed in the first edition of this book. Even under the former law, the difficulties could be surmounted. See Hartle v Laceys [1999] Lloyd’s Rep PN 315, CA, and Mortgage Corpn v Halifax (SW) Ltd [1999] Lloyd’s Rep PN 159. 3 [2007] UKHL 34, [2007] 3 WLR 354 at [52].

9  Attributable loss 10.138 Once the claimant has proved its case in breach of duty, causation, and has established the amount of the basic loss, the question arises of whether it can recover all the basic loss, or whether there should be a reduction on account of the principles in SAAMCo.1 SAAMCo concerned three cases 564

Contract and the tort of negligence  10.140 brought by lenders against valuers. We will consider the effect of the decision in relation to valuers and how the Supreme Court restated and expanded on that decision in the 2017 case of Hughes-Holland v BPE Solicitors.2 Then we consider how SAAMCo affects the calculation of interest. Finally we consider how the SAAMCo principle falls to be applied in solicitors’ negligence cases, which can raise some difficult questions. 1 [1997] AC 191, HL. See also para 3.35, above. 2 [2017] UKSC 21, [2017] 2 WLR 1029.

(a)  SAAMCo and valuers 10.139 Each of the cases considered in SAAMCo concerned the assessment of damages where a valuer had negligently overvalued a property, and a lender had lent on the security of the property in reliance on the overvaluation. The practical result of the decision in relation to valuers is that, other than in exceptional cases, the lender’s damages are limited to the lower of: (i)

the basic loss, calculated as set out in the last section, and so generally including compound interest as damages; and

(ii) the amount of the overvaluation. In cases where (ii) is lower than (i), the lender will be entitled to simple interest on the amount of the overvaluation, from the date when the basic loss reaches the amount of the overvaluation.1 Thus if the true value of the property was £100,000, and the valuer stated the value to be £150,000, then the amount of the overvaluation would be £50,000. The valuer cannot be liable to the lender in damages for more than the amount of the overvaluation. In our example, the valuer could not be liable for more than £50,000 in damages, though simple interest would be added. 1 See Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, HL.

10.140 The practical effect of this rule is to limit the damages which the lender can recover. Lord Hoffmann explained the rationale for the rule by reference to an example:1 ‘A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee.’ Lord Hoffmann said that the doctor should not be liable for the injury. The reason was set out in the following principle:2 565

10.141  Lenders’ claims ‘that a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.’ Hence the principle is that in cases where the defendant is sued for breach of a duty to provide information, the defendant is not liable for losses which would have occurred even if the information had been correct. Thus, in Lord Hoffmann’s example, the doctor is not liable for the mountaineer’s injury, which would have occurred even if the doctor’s advice, that the mountaineer’s knee was fit, had been correct. On the other hand, if the mountaineer’s injury had been caused by his weak knee, so that the injury would not have occurred if the doctor’s advice had been correct, then the doctor would be liable for the injury. 1 SAAMCo [1997] AC 191 at 213D–E. 2 See SAAMCo [1997] AC 191 at 214C–E.

10.141 Applying this test to valuers, Lord Hoffmann assessed the difference between the negligent valuation, and the true value of the property, at the date of the valuation. Lord Hoffmann then said that the consequences of the valuation being wrong were that the lender had less security than it thought, by the amount of the overvaluation.1 Taking the example above, £150,000 – £100,000 = £50,000; the lender therefore had £50,000 less security than it thought. Damages were to be limited to that sum, in other words, being the extent of the overvaluation. The principle did not apply in three exceptional types of case. The first two exceptions were cases based on fraud2 or breach of warranty. The third was cases where the defendant was in breach of a duty to advise the claimant what course of action to take, rather than a duty to provide information. This third category does not normally apply in lenders’ cases, although exceptionally it may do (see below). 1 [1997] AC 191 at 215E, 216D. 2 See para 10.193, below.

(b)  Hughes-Holland v BPE 10.142 Hughes-Holland v BPE Solicitors1 concerned a negligence claim by a private individual, Mr Gabriel, against his solicitors, BPE.2 Mr Gabriel had agreed to make a secured loan of £200,000 to a business associate, Mr Little, for the purpose of developing a site on a disused airfield. As a result of BPE’s negligence, he believed the loan monies would be used for the development. 566

Contract and the tort of negligence  10.143 In fact they were to be used to discharge an existing legal charge over the property and VAT bill, leaving little or no monies for the development. The project was a disaster and Mr Gabriel made no recovery from a subsequent sale of the site. He established that he would not have lent the money if he had known the true nature of the transaction. The Supreme Court held that, on the available evidence, it was likely that the project would still have been a disaster and he would have lost all his money even if it had been spent on an attempted development. Accordingly, although he could prove he would not have suffered a loss if he had been properly advised, none of that loss fell within the scope of the solicitors’ duty. Rather, it all arose from commercial misjudgements which were no concern of BPE. Therefore Mr Gabriel (or rather his trustee in bankruptcy) recovered no damages. 1 [2017] UKSC 21, [2017] 2 WLR 1029, also known as Gabriel v Little. 2 At least by the time it reached the Supreme Court: claims in fraud and breach of fiduciary duty had been dismissed by the trial judge. By this stage, the appeal was being pursued by Mr Gabriel’s trustee in bankruptcy, Mr Hughes-Holland.

10.143 In restating SAAMCo in BPE, Lord Sumption, with whom the other members of the Supreme Court agreed, stressed that the SAAMCo principle was concerned with assigning responsibility for the consequences of a breach, rather than with causation per se.1 He said:2 ‘… The essential distinction which underlies the whole of [Lord Hoffmann’s] analysis is between the assessment of the loss caused by the breach of duty and the extent of the defendant’s duty to protect the claimant against it …’ After noting that the SAAMCo principle had been further elaborated in Nykredit and Platform Home Loans v Oyston Shipways,3 he said: ‘[34]  The decision in SAAMCO has often been misunderstood, not least by the writers who have criticised it. The misunderstanding arises, I think, from a tendency to overlook two fundamental features of the reasoning. [35]  The first is that where the contribution of the defendant is to supply material which the client will take into account in making his own decision on the basis of a broader assessment of the risks, the defendant has no legal responsibility for his decision … [36]  The second fundamental feature of the reasoning follows from the first. It is that the principle has nothing to do with the causation of loss as that expression is usually understood in the law …’. Lord Sumption explained the difference between an ‘advice’ case and an ‘information’ case in the following terms: ‘[40]  In cases falling within Lord Hoffmann’s “advice” category, it is left to the adviser to consider what matters should be taken into 567

10.143  Lenders’ claims account in deciding whether to enter into the transaction. His duty is to consider all relevant matters and not only specific factors in the decision. If one of those matters is negligently ignored or misjudged, and this proves to be critical to the decision, the client will in principle be entitled to recover all loss flowing from the transaction which he should have protected his client against … If the adviser has a duty to protect his client (so far as due care can do it) against the full range of risks associated with a potential transaction, the client will not have retained responsibility for any of them. The adviser’s responsibility extends to the decision … [41]  By comparison, in the “information” category, a professional adviser contributes a limited part of the material on which his client will rely in deciding whether to enter into a prospective transaction, but the process of identifying the other relevant considerations and the overall assessment of the commercial merits of the transaction are exclusively matters for the client (or possibly his other advisers). In such a case, as Lord Hoffmann explained in Nykredit, the defendant’s legal responsibility does not extend to the decision itself. It follows that even if the material which the defendant supplied is known to be critical to the decision to enter into the transaction, he is liable only for the financial consequences of its being wrong and not for the financial consequences of the claimant entering into the transaction so far as these are greater. Otherwise the defendant would become the underwriter of the financial fortunes of the whole transaction by virtue of having assumed a duty of care in relation to just one element of someone else’s decision. [42]  What is clear is that the fact that the material contributed by the defendant is known to be critical to the claimant’s decision whether to enter into the transaction does not itself turn it into an “advice” case. Otherwise all “no transaction” cases would give rise to liability for the entire foreseeable loss flowing from the transaction, which is the very proposition rejected in SAAMCO …’. He suggested that the difference between advice and information cases was more of a spectrum and he commented on the usual position of the conveyancer as follows, at [44]: ‘… A valuer or a conveyancer, for example, will rarely supply more than a specific part of the material on which his client’s decision is based. He is generally no more than a provider of what Lord Hoffmann called “information” …’. 1 [2017] UKSC 21, [2017] 2 WLR 1029 at [20]–[27]. Lord Sumption had been leading counsel for the surveyors in SAAMCo. 2 At [27]. 3 [2000] 2 AC 190.

568

Contract and the tort of negligence  10.145

(c)  SAAMCo and interest 10.144 How should interest be assessed in cases where the basic loss exceeds the amount of the attributable loss, so that there is a reduction in damages on account of SAAMCo? Assuming that the claim for basic loss includes interest as damages, accumulating as loss which the lender has had to pay but would not have done if there had been no breach of duty, the first step is to calculate when the amount of the basic loss reaches the level of the attributable loss. At that date, interest as damages ceases to be awarded. From that date the claimant is entitled only to simple interest on the amount of the attributable loss (including essentially the amount of any compound interest up to that date necessary to reach that limit), pursuant to s 35A of the Senior Courts Act 1981, usually until trial.1 Morritt LJ commented on such calculations in Platform Home Loans Ltd v Oyston Shipways Ltd:2 ‘I confess that I am greatly concerned at the time and expense which is likely to be incurred in carrying out these computations. So far as I  can see if the interest representing the cost to [the lender] of the money lent to [the borrower] is the same as the interest awarded under s  35A  Supreme Court Act 1981 then whatever the answers to these complicated enquiries3 the same figure will be produced. In these circumstances I consider that the party requiring the full calculation to be made should pay for it unless it can be demonstrated that it made so significant a difference to the result as would justify the costs involved.’ However the calculations will only be the same if (i) there is no claim for compound, as opposed to simple, interest as part of the basic loss, and (ii) as in Nykredit, it is agreed that the appropriate rate for the award of interest under s 35A is the same as the rate claimed as part of the basic loss. In light of the House of Lords’ decision in Sempra Metals, it is likely that lenders will be able to claim compound interest as damages in most cases, and indeed that has been the practice in the cases reported since. It appears therefore that the concern set out in the quotation has been superseded. The lender will claim compound interest, as damages, until the level of loss reaches the level of the attributable loss; after that date, simple statutory interest will be payable on the attributable loss figure. In practice, this does not appear to have proved too complex a calculation to carry out. 1 See Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, HL. 2 [1998] Ch 466. Although the Court of Appeal’s decision was overturned by the House of Lords, the House did not need to comment this passage. 3 Ie as to the date when the cause of action accrued, calculated in the way set out above.

(d)  SAAMCo and solicitors 10.145 BPE confirmed what had been clear from Bristol and West Building Society v Mothew1 and Fancy and Jackson,2 that the principles in SAAMCo 569

10.146  Lenders’ claims would apply to lenders’ claims brought against solicitors as well as valuers. However, their application is more complex because the factual scenarios are more varied. In terms of the analytical approach to be taken when deciding whether loss falls within the scope of the defendant’s duty of care, Lord Sumption said in BPE:3 ‘As for the SAAMCO “cap” or restriction, which excludes loss that would still have been suffered even if the erroneous information had been true, that is simply a tool for giving effect to the distinction between (i) loss flowing from the fact that as a result of the defendant’s negligence the information was wrong and (ii) loss flowing from the decision to enter into the transaction at all …’ [Emphasis added] In essence, in all cases where SAAMCo applies, but especially in claims against solicitors, the lender has to prove two different counter-factuals, and the losses it would have suffered in each: (i)

what it would have done and what it would have lost if the solicitor had acted non-negligently [factual causation]; and

(ii) to what extent its losses would have been less if the true position had actually been as the solicitor presented it to be [SAAMCo limit].4 It can then recover only the lesser of these two figures. 1 [1998] Ch 1, CA. 2 [1997] 4 All ER 582 (Chadwick J). 3 [2017] UKSC 21, [2017] 2 WLR 1029 at [45]. 4 The test of causation is separate from the question of applying SAAMCo – see Lord Hoffmann’s emphasis of this in Nykredit [1997] 1 WLR 1627 at 1638F–G, HL.

10.146 Lord Sumption confirmed in BPE1 that the burden of proving facts which engage the SAAMCo principle rests with the claimant. This, he said, was because it was an essential part of the claimant’s case that he was owed a relevant duty. This means that a claimant lender must expressly plead how its losses would have been less if the true position had been as the solicitor negligently led it to believe, and also adduce evidence to prove this. In BPE itself, the claimant failed because the available evidence showed that the site would still have been worthless even if £200,000 had been spent attempting to develop it. However, on less extreme facts, a claimant in Mr Gabriel’s position might well have been able to call evidence to prove that spending money on developing the property would have increased its value. 1 [2017] UKSC 21, [2017] 2 WLR 1029 at [53].

10.147 In practice, most negligence claims by lenders against solicitors fall into one of three broad categories, in terms of how SAAMCo applies: (i)

cases where the lender’s loss is not attributable to the breach of duty, so that only nominal damages/no losses flow from the breach; 570

Contract and the tort of negligence  10.148 (ii) cases where the breach of duty was relevant to the valuation of the property; and (iii) cases where if there had been no breach of duty, the lender would have received information about the borrower’s solvency and/or honesty or other information about the true funding of the transaction. This may also be expressed as saying that the breach of duty is relevant to the value of the borrower’s covenant. The application of SAAMCo can therefore be seen to depend on whether the breach of duty is relevant to one or other of the two principal ingredients of the lending decision, as described in Nykredit: the value of the property and the value of the borrower’s covenant. 10.148 In BPE Lord Sumption reviewed and in some cases overruled earlier decisions concerning lender claims against conveyancing solicitors, including parts of Fancy and Jackson and also the Court of Appeal decision in Portman Building Society v Bevan Ashford.1 In a section of his judgment entitled ‘Conveyancers’, he analysed the issues in the following terms:2 ‘… However, much the most fertile area of development has been a body of case law concerning the liability of conveyancing solicitors for negligence in reporting on title or related matters to a prospective mortgage lender … [48]  The background to most of the conveyancing cases was similar to that of the valuation cases. As a result of a steep fall in the residential property market in the early 1990s many mortgage lenders were left with non-performing loans for which the property no longer provided full security. Some of them sued solicitors who had negligently failed to report at the time of the conveyance on some matter which they said would have deterred them from entering into the transaction if they had known of it. In each case, the lender sought to recover the entire loss on the relevant loan account from the solicitor. The pathfinder was the Bristol and West Building Society, which brought 87 actions against solicitors on this basis. Eight of them were heard together by Chadwick J. Judgment was given on these cases under the title Bristol and West Building Society v Fancy & Jackson [1997] 4 All ER 582 in July 1997, a few months after the decision in SAAMCO but before the important elucidations in Nykredit. [49] Chadwick J  found that in three of the eight cases the lender would have refused to proceed if the solicitor had complied with its duty to report some relevant fact. These were accordingly “no transaction” cases. He resolved them as follows: (1)

The first of the three cases, Fancy & Jackson, was straightforward. The solicitor completed the transaction without obtaining a 571

10.148  Lenders’ claims search certificate to establish title, but the certificate, if it had been obtained, would have been clear. There was therefore no recoverable loss. (2) In the Steggles Palmer case, the solicitors failed to report that the transaction was by way of sale and sub-sale under which a connected intermediate vendor made a profit of £7,000. If the lender had known this, it would have concluded that the borrower was dishonest and would have refused on principle to lend to him. The judge held the solicitors liable for the entire loss on the loan account, because “the defendants should be responsible for the consequences of the society not being in the position to take the decision which it would have taken if the defendants had done what they should have done”: p 622E–F. (3) Colin Bishop was another case of back to back sale and sub-sale with an uplift of £25,000, about a third of the purchase price, but in this case there was no reason to think that the borrower was connected with the intermediate vendor. That would have made no difference to the lender’s decision. They would still have walked away from the transaction because they had a strict policy of not lending where the proposed purchase was linked to a prior transaction, whether the parties were connected or not … It followed that the existence of linked transactions was just as fundamental to the lender in Colin Bishop as it was in Steggles Palmer. But it was not as fundamental to the judge. He appears to have distinguished between the two cases because of the quality of the lender’s reasons for walking away. In Steggles Palmer the lender would have refused to proceed because the borrower was an unacceptable counterparty, whereas in Colin Bishop, objectively the problem need not have been fundamental because it could have been rectified by a further valuation: p  622G–J. The judge therefore concluded that in Colin Bishop if the true value corresponded to the lender’s valuation (a question which had yet to be determined), there would be no loss, whereas such a finding would not in his view have been relevant in Steggles Palmer. [50]  I  respectfully doubt whether these are rational distinctions. In all three cases, the solicitors were on the face of it supplying specific information in accordance with the lender’s standard reporting instructions. The lender would in due course take it into account in deciding whether and if so how much to lend, along with other important information for which the solicitors had no responsibility, such as the valuation of the property, the amount of the loan, and the borrower’s capacity to service it. The solicitors had not assumed responsibility for identifying all the matters relevant to the lender’s 572

Contract and the tort of negligence  10.148 decision or for advising them whether to proceed. That was a matter for the lender, and would depend not just on the whole of the material before it but on its internal guidelines and lending policies and the judgment of individual loan officers. All of these cases therefore came within Lord Hoffmann’s “information” category. [51]  Mr Halpern [for the Appellant] relied on the decision in Steggles Palmer for the proposition that none the less where the defendant ought to have reported some fact which was fundamental to the claimant’s decision whether to proceed, the whole loss flowing from the transaction was recoverable as such. I agree that that is what Chadwick J appears to have decided in Steggles Palmer, but I consider that he was wrong to do so. The facts of Steggles Palmer were no different in any legally relevant respect from those of Colin Bishop. The duty of the solicitors depended on their retainer, which was agreed before any breach of duty occurred and appears to have been in substantially similar terms in both cases. In both cases, it extended to the care with which the solicitor answered the questions in the lender’s standard reporting instructions, but not to the decision whether to proceed with the transaction. It followed that the loss flowing from the decision to lend could not as such be within the scope of their duty. Chadwick J’s approach was to make the measure of damages depend not on the scope of the duty but on the gravity of the particular breach and on his assessment of the objective quality of the reasons why the lender would have responded by refusing to proceed. In effect, he reverted in Steggles Palmer to the distinction between “no transaction” and “successful transaction” cases which had been rejected in SAAMCO. His observation that the lender had been deprived of the opportunity to make the decision that he would have made is only another way of saying that this was a “no transaction” case. [52]  For the same reason, I  consider that the Court of Appeal was wrong to apply the reasoning in Steggles Palmer in Portman Building Society v Bevan Ashford [2000]  PNLR  344, where the facts were indistinguishable. Otton LJ, delivering the leading judgment, declined to ask himself whether the scope of the solicitor’s duty extended to the lender’s decision or only to the material which the solicitor contributed to that decision, because in his view the distinction was irrelevant in a case where the facts withheld were sufficiently grave . ..This involves the same error as affected Chadwick J’s analysis in Steggles Palmer, namely that the mere fact that the breach of duty caused the lender to proceed when he would otherwise have withdrawn was enough to make the solicitors legally responsible for the lender’s decision and all its financial consequences. All “no transaction” cases have this characteristic, whether or not the fact withheld or misrepresented goes to the viability of the transaction or the honesty of the counterparty, because in all of them the fact withheld or misrepresented is ex 573

10.149  Lenders’ claims hypothesi sufficiently fundamental to have caused the lender to walk away had he known the truth …’. To the extent that earlier decisions have survived BPE unscathed, we will consider them below, together with some which have come after BPE and sought to apply it. 1 [2000] Lloyd’s Rep. PN 354, [2000] PNLR 344, (2000) 80 P & CR 239. 2 [2017] UKSC 21, [2017] 2 WLR 1029 at [47]–[52].

(i)  Loss not attributable to breach of duty 10.149 As Lord Sumption indicated in BPE as quoted above, Fancy and Jackson itself is an example of a case where none of the basic loss was recoverable. As Chadwick J said:1 ‘The defendants ought to have informed the society that they did not have an official search certificate. If they had done so, the society would not have authorised the advance – or, at least, would not have authorised completion on 6 October 1989. But the loss which the society has suffered as a consequence of making the advance on 6  October 1989 is not caused by the absence of an official search certificate on that day. The title to the property taken as security was not, in fact, defective. The society obtained what it intended to obtain when it decided to enter the transaction. The loss which occurred would have occurred in exactly the same way and to exactly the same extent if the defendants had had what, by implication, they represented they did have on 6 October 1989 – namely a clear search certificate showing good title to the property.’ Although the solicitor’s breach of duty was relevant to the quality of the title to the property which formed the lender’s security, the breach of duty did not reduce the value of that security, because there was no defect in the title. For this reason, no loss was recoverable. 1 [1997] 4 All ER 582 at 621j–622a.

10.150 We can test this by applying the two counter-factual checks set out at 10.145 above: (i)

If the solicitor had acted non-negligently, the lender would have refused to complete because there was no official search – factual causation proved.

(ii) However, if the position had been as the solicitors presented it, ie  if they had had a search certificate, then the loss would have been exactly the same, because the title was not defective. Therefore no loss was attributable: the loss was the same as if the information had been correct. 574

Contract and the tort of negligence  10.152 10.151 Similarly, in Mothew,1 in breach of contract and negligently the defendant solicitor failed to report to the claimant lender that the borrowers, Mr and Mrs Towers, were not proposing to comply with an express condition of the advance which required that they provide the balance of the purchase money, apart from the lender’s advance, without resort to further borrowing. The information which should have been reported was that the borrowers were arranging for an existing bank debt of £3,350 to be secured by a second charge on the property. Millett LJ said:2 ‘The society was told that Mr and Mrs Towers had no other indebtedness and that no second charge was contemplated. The existence of the second charge did not affect the society’s security. The absence of any indebtedness to the bank would not have put money in the purchasers’ pocket; it would merely have reduced their liabilities. Whether their liability to the bank affected their ability to make mortgage repayments to the society has yet to be established, but given the smallness of the liability its effect on the purchasers’ ability to meet their obligations to the society may have been negligible. It may even be, for example, that the purchasers made no payments at all to the bank at the relevant time, and if so it is difficult to see how any part of the loss suffered by the society can be attributable to the inaccuracy of the information supplied to it by the defendant. It would have occurred even if the information had been correct.’ [Emphasis added] In cases where the lender would have suffered the same loss as it in fact suffered even if the information which the solicitor wrongly supplied had been correct, then only nominal contractual damages or no damages in tort should be awarded. As discussed above at 10.142, BPE itself provides a further example of a case in which no loss was recoverable because none of it was attributable to the breach of duty. Mr Little’s project was so disastrous that Mr Gabriel would have suffered a total loss even if all of his £200,000 had in fact been spent on developing the site, as he had negligently been led to believe it would. 1 [1998] Ch 1, CA. 2 [1998] Ch 1 at 12H–13A.

(ii)  Breach of duty relevant only to valuation of the property 10.152 In Colin Bishop, another of the cases decided in Fancy and Jackson, the matters which the solicitor ought to have reported included a sub-sale with a price increase of 33%. Chadwick J held that, had these matters been reported to the lender, this would have caused it to doubt its valuation. He held that the recoverable loss was ‘the loss suffered by the society as a consequence of the [lender] taking a security which was less valuable than it thought’, and added that ‘the position seems to me indistinguishable from the valuer cases 575

10.153  Lenders’ claims considered in [SAAMCo] itself’.1 As discussed above, Chadwick J’s approach to Colin Bishop was approved by Lord Sumption in BPE, although he noted that the true value had not been determined – if it had proved the same as the lender’s valuation, there would have been no loss. On this analysis, the limit of the attributable loss is the difference between the amount of security which the lender thought it was obtaining, and the amount which it was in fact obtaining. This should be calculated as the difference between the true value of the property, usually at the date of the advance, and the value which the lender believed it to have. This was confirmed by the Court of Appeal in LSREF III Wight Ltd v Gateley,2 which was another case where solicitors failed to spot a defect in the security, in that case an insolvency forfeiture clause in a lease. The Court held that the limit of the attributable loss equated to the consequent diminution in value of the security, and that this should be assessed as at the date of the original transaction, even if the basic loss was calculated as at a later date.3 A failure to report vendor incentives such as cash-backs or payment of professional fees may also fall into this category, if the true value of the property was proportionately less. 1 See [1997] 4 All ER 582 at 622j. 2 [2016] EWCA Civ 359, [2016] PNLR 21. 3 At [27]–[30]. In that case the basic loss was calculated at the appeal date – see discussion above at 10.133.

10.153 As in the valuer cases, the difference in value of the security is not the same as the difference between the advance the lender made and the advance it would have made if it had known the true value (unless the lender would have lent 100% of the valuation). For example, if the lender thought it was obtaining security worth £150,000, but the true value was only £100,000, the difference in the security and so the limit of the attributable loss would be £50,000. If the lender was using a LTV ratio of 80%, then on its perceived value of the property, it would have lent £120,000, whereas if it had known that the true value was £100,000, it would have lent only £80,000. The difference between these two figures is £40,000. If the lender would still have lent if it had known the true value, then £40,000 (plus interest) represents its basic or transactional loss whereas £50,000 is the limit produced by SAAMCo. The application of SAAMCo is a different question to causation, which explains why the two measures are different. 10.154 Lloyds Bank Plc v Crosse & Crosse1 also concerned a negligent failure by solicitors to detect and report a defect in title, there the presence of restrictive covenants. On appeal, the Court of Appeal concluded that the existence of the covenants did not mean that the plot had no value and the position of the lender was akin to that of a valuer in SAAMCo. Losses were therefore limited to the difference in value with and without the defect, and the case was remitted for this to be determined. 1 [2001] EWCA Civ 366, [2001] Lloyd’s Rep PN 452, [2001] PNLR 34.

576

Contract and the tort of negligence  10.158 10.155 A similar result was reached in Alliance & Leicester Building Society v Wheelers.1 The defendant solicitors confirmed to the lender that there was planning permission under category B1 for a block to be used as offices. The lender lent on the security of the block. It transpired that the solicitor had been wrong: the planning permission was for D1 use rather than B1 use. Carnwath J held that it was appropriate to apply SAAMCo, and that the measure of loss was the difference between what the property would have been worth with the planning permission which the lender believed it to have, and its value with the planning permission which it in fact had. 1 23 January 1997 (unreported), Ch D.

10.156 Credit & Mercantile plc v Nabarro1 was another case where the solicitors negligently failed to report adequately on planning permission. The defendant solicitors applied successfully for a declaration by way of summary judgment that the claimant lender’s losses must be limited to the difference between the actual value of the property and the value with an implementable planning permission, in accordance with SAAMCo. The lender had no real prospect of obtaining any more than this. 1 [2014] EWHC 2819 (Ch), [2015] PNLR 14.

(iii)  Breach of duty relevant to nature/value of borrower’s covenant 10.157 As discussed above at 10.148, in BPE the Supreme Court overruled the decisions of Chadwick J in Steggles Palmer (one of the cases in the Fancy and Jackson litigation) and the Court of Appeal in Portman BS v Bevan Ashford.1 These were both cases in which the lender had been allowed to recover all of its basic loss on the basis that the information which the solicitors had negligently failed to pass on would have shown that the borrowers were persons to whom the lender would not have been willing to lend at all (eg because they were dishonest). Lord Sumption criticised these decisions as not having in reality applied a SAAMCo-type analysis at all. Instead they had reverted to considering whether the information was fundamental to the lender’s decision to lend, precisely the approach which had been rejected in SAAMCo. He also noted that Chadwick J’s decisions pre-dated the further elucidation of the SAAMCo principles in Nykredit. 1 [2000] PNLR 354, CA.

10.158 These are justified criticisms, but Lord Sumption did not go on to say how such cases should be resolved if SAAMCo principles are correctly applied. This therefore remains a live question. Taking Nykredit as the starting point, the rights which the lender is acquiring in exchange for its loan monies are (i) a security over the property and (ii) the borrower’s covenant.1 Where the solicitor has failed, in breach of his or her obligations under the retainer, to report information which would be relevant to the value of either of these 577

10.159  Lenders’ claims ‘assets’, any consequent deficiency can properly be said to be within the scope of the solicitor’s duty of care. The types of information which could be said to relate to the value of the borrower’s covenant, and where the solicitor is likely to have a reporting obligation (eg under the Lenders’ Handbook) may include: supposed ‘direct payments’ from the borrower to the vendor; borrower fraud eg as to the true purchase price; and borrower bankruptcy. This suggests that a lender claimant in such cases may have to obtain evidence as to the consequent difference in the value of the borrower’s covenant, at the date the transaction was entered into. In Nykredit Lord Nicholls expressed the view that: ‘… Ascribing a value to the borrower’s covenant should not be unduly troublesome. A comparable exercise regarding lessees’ covenants is a routine matter when valuing property …’.2 However, in reality it appears to be far from easy to obtain such evidence, and there is little evidence in the authorities of it having been done. A  rare example is Canada Square Operations Ltd v Kinleigh Folkard and Hayward Ltd,3 which like Nykredit itself, raised the issue of the date on which the lender first suffered loss. According to Nykredit, this is to be calculated by adding the true value of the security to the true value of the borrower’s covenant and comparing this to the advance plus cost of funding interest. In Canada Square the defendant relied on expert evidence from a chartered accountant as to the value of the borrowers’ covenant. Applying established accountancy principles and assumptions, the expert sought to build a picture of the borrowers’ financial worth and future prospects, and his evidence was accepted on this issue. Such an approach could also be taken to establishing the difference between the true value of the borrower’s covenant and the value it appeared to have, in a case where a solicitor negligently failed to pass on information relevant to its value. In cases where the information would have revealed the borrower as wholly worthless or the transaction as wholly fraudulent, it can be expected that lenders will argue that the whole of the loss was within the scope of the duty of care. It could be said, for example, that the usual expectation is that the borrower will discharge the whole of the loan by their payments and that the lender will not have to resort to the security at all, so that the genuine, solvent borrower’s covenant extends to the whole loan. Among other things, it may be appropriate for an institutional lender to produce statistical and/or witness evidence that this was its usual experience. One thing that is clear is that this is one area where further judicial guidance is needed, following BPE. 1 Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627 at 1631. 2 Nykredit at 1632. 3 (17  September 2015)  CC (London), Deputy Judge David Halpern QC  [2016]  PNLR  3. An example of a case where the court concluded that the borrower’s covenant became worthless when he stopped making payments is Bridging Loans v Toombs [2017] EWCA Civ 205.

10.159 One case which was not overruled or disapproved in BPE and which appears to remain good law is Broker House Insurance Services Ltd v OJS Law.1 In that case Lewison J, obiter, suggested an explanation for Steggles 578

Contract and the tort of negligence  10.161 Palmer and Portman which was different from the reasoning actually stated in those cases (and later rejected by the Supreme Court). He suggested that the information the solicitor had negligently failed to report related to the value of the borrower’s covenant; that it was the failure of the covenant which had caused the lender all the loss, and so all the loss was recoverable from the solicitor. This is an analysis which appears to be completely consistent with Lord Sumption’s principles in BPE and may therefore be an indicator as to how SAAMCo principles should be applied in borrower dishonesty cases. 1 [2010] EWHC 3816(Ch), [2011] PNLR 23 (Lewison J), at [13].

(iv)  Exceptional cases: solicitor as adviser 10.160 The case of Various Claimants v Giambrone and Law1 shows that in an extreme case, it is possible that a solicitor apparently acting as a conveyancer may nevertheless be held to have taken legal responsibility for the decision to enter into the transaction. In a case concerning the sale to numerous British and Irish investors of off-plan properties in Calabria, Italy and extensive failures by the solicitors concerned to have regard to their investor clients’ interests, the Court of Appeal held that the solicitors were ‘guiding the whole decisionmaking process’. While disavowing the terminology of ‘information’ and ‘advice’ in favour of ‘category 1’ and ‘category 2’, Jackson LJ held that ‘If and in so far as the claimants’ claims rest on negligent information or advice, in my view this is a category 2 [ie an advice] case’.2 1 [2017] EWCA Civ 1193; [2018] PNLR 2. 2 In ‘Equitable Compensation and the SAAMCO principle’ (2018) 134(Apr) LQR  165–171, Professor Paul Davies, Chair in Commercial Law at University College London, criticises this aspect of the case, because there were aspects of the decision to invest which Giambrone could not have advised on. Prof Davies notes that the result – recovery of the lost deposits from the solicitors (clearly considered by both the trial judge and Court of Appeal to be the fair one) – could have been achieved by the traditional remedy against such a custodian trustee of taking an account and falsifying the wrongful disbursements. However, he says the decisions in Target Holdings Ltd v Redferns [1996] AC 421 and AIB Group (UK) Plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 have instead put the focus on equitable compensation, and on assessing loss. He comments that the Court of Appeal’s decision to apply SAAMCo to equitable compensation logically follows from that approach. The implication is that the difficulties with the reasoning in Giambrone are the natural consequence of the recent emphasis on equitable compensation as the appropriate remedy as opposed to the taking of an account. Prof Davies indeed suggests that the reasoning in AIB may need to be reconsidered at a suitable juncture by the Supreme Court.

10  Contributory negligence 10.161 Reductions of damages on account of contributory negligence may be made in claims where the lender’s cause of action is negligence or a contractual failure that amounts to failing to take reasonable skill and care. We have already considered, in Chapter 8, the general principles which apply to claims that damages be reduced on account of contributory negligence. See in particular 579

10.162  Lenders’ claims the discussions of (i) whether contributory negligence is available for breaches of the Lenders’ Handbook, at para 8.06, and (ii) the House of Lords’ decision in Platform Home Loans Ltd v Oyston Shipways Ltd1 that deductions on account of contributory negligence should be made from the basic loss rather than the attributable loss. We now turn to various further matters which apply in particular to lenders’ claims, assuming that a plea of contributory negligence is available to the defendant as a matter of law. 1 [2000] 2 AC 190. See paras 8.07 to 8.12, above.

10.162 First, the burden of proof is on the defendant.1 Secondly, in cases where quantum is large, it may often be prudent to engage an expert witness to comment on the prudence or otherwise of the lender’s lending decision. Thirdly, allegations of contributory negligence in particular cases turn on the facts of the specific case, so that the value of authority is limited. Nevertheless, some trends may be observed. 1 Confirmed in the valuer’s negligence claim Webb Resolutions Ltd v E.Surv Ltd [2012] EWHC 3653 (TCC), [2013] PNLR 15.

10.163 Allegations of contributory negligence in lenders’ claims tend to be of two kinds. In cases where the valuer was an employee of the lender, there may be allegations of negligence on the part of the valuer, for which the lender is liable. More commonly, there may be allegations that the lender acted negligently in the scrutiny it applied to the borrower’s application for a mortgage or remortgage, before making the offer of advance. We have set out the broad nature of the enquiries which lenders generally carry out above at paras 10.07 to 10.08, above. 10.164 Blackburne J  dealt in detail with allegations of contributory negligence, both of a generalised kind and in relation to particular cases, in Balmer Radmore.1 His discussion related to the conduct of the Nationwide Building Society in the period 1990–1991. He found that, prior to March 1991, the society had provided inadequate training of its staff, in particular in relation to the dangers of mortgage fraud. Commenting on the performance of members of the society’s staff in considering mortgage applications, he said:2 ‘With one or two notable exceptions … I  had the impression that, in general, the process was one of going through the motions of ticking off the boxes to see that the relevant information had been supplied and that, applying the relevant lending criteria, the valuation and income disclosed justified the loan applied for. There seemed to be very little critical evaluation of the information supplied looked at overall. For example, the fact that in Richard Grosse & Co the information available to the Society indicated that the applicant had written cheques which were dishonoured was either not noticed or simply ignored. On occasions procedures were simply ignored.’ 580

Contract and the tort of negligence  10.165 In general the society did not interview applicants, but Blackburne J considered that:3 ‘The utility of conducting an interview, at any rate in the case of new borrowers to the Society is, in most cases, obvious. It serves as a means of reducing the risk of fraud. Over and above that, in cases where the loan applied for is to be a high proportion of the value of the property offered by way of security (and the loan applied for is at or near the maximum allowed applying the Society’s income criteria) then, unless the applicant’s creditworthiness is clearly evident from the information supplied to the Society and there is no reason to doubt the accuracy of that information, the interview serves as a means of assessing whether the applicant is likely to be able to honour his commitments.’ During the period leading up to the credit crunch in 2008 the approach taken by mortgage lenders showed little if any improvement. For a discussion of the practice of lenders in this period, in the slightly different context of buy to let lending, see Paratus AMC Ltd v Countrywide Surveyors Ltd.4 As explained at para 10.3 above, in the light of the widespread criticism of lending practices in that period, from April 2014 much stricter rules were imposed on lenders, at least in relation to residential borrowing by individuals, for assessing the ability of borrowers to meet their mortgage obligations. It can be expected that lending decisions from that period onwards will display greater scrutiny of borrowers’ financial circumstances, and that any failures to apply these new MCOB rules will be a useful tool for solicitors seeking to establish contributory negligence by lenders. 1 [1999] Lloyd’s Rep PN 241 at 282–299 for the general discussion. 2 [1999] Lloyd’s Rep PN 241 at 288. 3 [1999] Lloyd’s Rep PN 241 at 288. 4 [2011] EWHC 3307 (Ch), [2012] PNLR 12 (HHJ Keyser QC) at [66]–[83].

(a)  Levels of deduction for contributory negligence 10.165 Writing about contributory negligence in lenders’ claims in 1998, Hugh Evans1 observed that: ‘With two exceptions, none of the reported cases have assessed contributory negligence at above 30 per cent. In the two exceptions, the remarks on contributory negligence were obiter, as the defendants were found not to be negligent.’ Subsequently, in relation to the 12 individual cases which Blackburne J had to decide in Balmer Radmore, he made reductions for contributory negligence on a percentage basis in ten.2 In those ten cases, he made reductions for contributory negligence of 90% in one case, 75% in another, 66% in three cases, 50% in two cases, and in the three remaining cases of 40%, 30% and 581

10.166  Lenders’ claims 20% respectively.3 However, in several of these cases the reduction included reductions on account of the negligence of the lender’s own in-house valuers. The use of in-house valuers is not characteristic of lending since the 1990s, so the reductions in these cases will be of limited relevance to current cases. In no case did Blackburne J hold that there was no contributory negligence. These levels of reduction were much higher than had been the norm before this. More generally it could also be said that many of the Balmer Radmore cases were unusual on their facts. 1 ‘Contributory Negligence by Lenders’ (1998) 14 PN 43 at 47–8. 2 The other two cases were cases where, if there had been no negligence, the lender would still have lent. Here the contributory negligence was expressed by reference solely to the excessive LTV, and was capable of precise calculation. See Adams Delmar and ATM  Abdullah, and para 10.168, below. 3 In two of the ten cases no deduction for contributory negligence was in practice made because the solicitor was also in breach of fiduciary duty.

10.166 Although the amount by which damages should be reduced on account of contributory negligence is essentially a question for the discretion of the judge on which authority does not bind, courts have seemed willing to assess reductions for contributory negligence on the part of lenders at higher levels than had been the case before Balmer Radmore.1 In the Paratus case, the judge would have reduced damages by 60% on account of contributory negligence; we consider the facts of that case further below. 1 See also The Housing Loan Corp plc v William H  Brown [1999] Lloyd’s Rep PN  185, CA: the Court of Appeal refused to overturn a finding of 75% contributory negligence in a lender’s action against a surveyor.

10.167 It is suggested that where the claimant in a professional negligence action is an institution such as a lender, the courts are likely to be more critical of its conduct and more rigorous in requiring it to protect its own interests than where the claimant is a private individual. As to the likely tariff, in cases where a significant but not substantial degree of contributory negligence is established, it is suggested that the court is likely to reduce damages by a figure of the order of 20 to 30%, and it will only be where there have been major errors on the part of the lender that the reduction will be of the order of 50 to 60%. Paratus was a case in the latter category. Reductions of the order of 90% have not been made in recent cases.

(b)  Excessive LTVs 10.168 A  number of points arise in relation to allegations that lenders have advanced money using an excessive loan to value ratio, or ‘LTV’,1 for example, over 75% of the valuation. In Fancy and Jackson,2 Chadwick J set out a calculation on the following basis: interest rates (then) of roughly 10%, no payments of interest by the borrower, a period of roughly two years to repossess and sell the property, sale at the amount of the valuation, and sale costs of 4%. 582

Contract and the tort of negligence  10.170 On those figures, if a lender lent 75% of the valuation, then it would recover all its money and break even on repossession; if it lent more than this, it would lose out. He concluded that, to the extent that there had been a contribution to the lender’s losses by its having lent more than 75% of the value of the property, this had been negligent. To that extent, its losses should be reduced. 1 For ‘LTVs’ see para 10.6, above. 2 See [1997] 4 All ER 582 at 624e–h.

10.169 Blackburne J considered this part of Chadwick J’s judgment in Balmer Radmore. While he found force in the point he added:1 ‘I accept Mr Patten’s submission that the Society was entitled to lend in excess of 75% LTV without additional security provided that the value of the property (ie the security offered) exceeded the amount of the loan. I also accept Mr Patten’s submission that lending over 75% or 80% LTV is not per se negligent. Whether it is in any particular case must depend on the facts of that case. Thus, it would not, I  think, be negligent to lend 95%, or even 100%, LTV to a borrower with an impeccable borrowing record and a sufficient and secured source of income or where property values are rising. If, on the other hand, little or no scrutiny has been applied to the borrower’s disclosed source of income or to his loan record and other financial commitments, or where property values are static or falling, it is difficult to see how a decision to lend 95% LTV or more can be prudent. It is no answer in such a case to maintain that, viewed overall, a policy of high LTV lending has proved profitable and that the risk of loss on any individual transaction will be more than offset by the profits made elsewhere and by the cushion against default provided by the SMA scheme. The question therefore is whether, in the particular case, the decision to lend at the particular LTV was a prudent one.’ Further, at the time of writing in 2019, interest rates have for a considerable time been much lower than 10%, so Chadwick J’s calculation would need to be re-considered. As Blackburne J indicated, it may also be material if, at the time of the advance, the property market was rising strongly. In a subsequent surveyors’ negligence claim, the judge held that the lender had been negligent in lending more than 80% of the value of the property, but this was only because the valuation report indicated that the property was unusual and might prove difficult to sell.2 1 [1999] Lloyd’s Rep PN 241 at 289–290. 2 Preferred Mortgages Ltd v Countrywide Surveyors Ltd [2005] EWHC 2820; [2006] PNLR 9.

10.170 One of the individual cases which Blackburne J  had to decide was ATM Abdullah, which provides an example of his application of the principles 583

10.171  Lenders’ claims quoted in the last paragraph. Of the lender’s decision to lend on a 95% LTV, he said:1 ‘[The borrower] was just over 24. He had no known track record as an owner or tenant of property. Nothing was known of [the borrower]’s ability to handle a large loan or meet his financial obligations. The housing market was in decline. No one could say how long this would last and whether, in particular, property values would start moving up again. In my view the Society should not have advanced more than 75% of valuation.’ In a 2011 decision, Paratus AMC Ltd v Countrywide Solicitors Ltd,2 the judge declined to hold that it was negligent for a lender to have a business model whereby it lent 90% of the value of the property on a self-certified basis. He concluded, however, that ‘this was certainly at the high-risk end of the market’, and went on to hold that: ‘If [the lender] was going to make an advance with a high LTV, it needed to ensure that it had properly investigated and verified the matters of central importance.’ His approach, therefore, was that if the basic business model was inherently risky then the lender must apply a high level of scrutiny to the information which it had about the borrower. We consider below how the judge assessed this. Further, in relation to LTVs, if the court does find that the LTV was excessive, in principle it should calculate the precise amount by which the advance was too much, and reduce the basic loss by that precise amount.3 1 [1999] Lloyd’s Rep PN 616 at 623 col 2. 2 Above, at [78]–[83]. 3 See Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190, HL, per Lord Hobhouse at 204A–C and Lord Millett at 213B.

10.171 Some lenders supplement their security by taking a mortgage indemnity guarantee (‘MIG’). A condition of the offer of advance is that the borrower pays a premium, which is deducted from the advance, to a third-party insurance company. Under the terms of the MIG, if the borrower defaults and the lender repossesses the property, the insurance company becomes liable to pay the lender a sum calculated by reference to, but lower than, the amount of the lender’s shortfall after taking account of the net proceeds of sale of the property. It is generally not open to defendant solicitors to require that lenders give credit for the proceeds of such policies.1 On the other hand, in answering a claim of negligence in lending on a LTV ratio that was too high, it is not open to the lender to rely upon the fact that it has required the borrower to take out a MIG: ‘the conduct is negligent or imprudent whether or not the [lender] has insured against consequential loss.’2 1 Bristol and West Building Society v May, May & Merrimans (No  2) [1997] 3  All ER 206,(Chadwick J); Portman Building Society v Bevan Ashford [2000] Lloyd’s Rep PN 354,

584

Contract and the tort of negligence  10.174 CA (not reversed on this issue by the Supreme Court in Hughes-Holland v BPE); Arab Bank plc v John D Wood (Commercial) Ltd [2000] 1 WLR 857, CA. 2 Fancy and Jackson at 625e–f.

(c)  Non-status lending 10.172 In some (pre-2014) cases, lenders made no or almost no enquiries as to the status or creditworthiness of the borrower, and instead relied solely on the value of the property as security. This procedure is inherently more risky than a standard lending decision, unless the lender has adopted a considerably lower LTV than it would have done had it undertaken status checks. The question of whether this procedure was negligent depends, in any given case, on the LTV which was used, but also on the other facts of the case.1 1 See Jacob J  at first instance in Platform Home Loans Ltd v Oyston Shipways Ltd [1996] 2  EGLR  110 and The Mortgage Corpn v Halifax (SW) Ltd [1999] 1 Lloyd’s Rep PN  159 (HHJ Lawrie sitting as a deputy High Court judge).

10.173 It has also been held that it is relevant whether the lender’s practices were in accordance with accepted practices in the market: in Webb Resolutions Ltd v E.Surv Ltd1 (a valuer’s negligence claim), Coulson J  held that the appropriate standard was that of a reasonably competent centralised lender at the time. In that case, he said that lending large sums of money on a selfcertified basis, relying on intermediaries and placing complete faith in tick-box forms, was a potential recipe for disaster, but that such lending was common in the period 2004–07. In one of the two cases before him, he therefore made no deduction, as it was impossible to say that the decision to lend was negligent. In the other, however, he held that the borrower was plainly in financial difficulty and the bank should have considered any loan very carefully. Since there was no supporting evidence of income, he concluded the bank had been negligent and made a reduction of 50%. 1 [2012] EWHC 3653 (TCC), [2013] PNLR 15.

10.174 In the Paratus1 case, also a valuers’ negligence claim, the judge considered that, in light of the 90% LTV, the lender ought to have ‘properly investigated and verified matters of central importance’. In his view the loan was in effect self-certified, since the only information regarding the borrower’s income was his own assertion in the application form. The judge identified two major respects in which the lender had failed to carry out sufficient investigation. First, the borrower had been asked to disclose outstanding debts on the mortgage application form. By carrying out an Experian credit search, the lender had discovered that the borrower had failed to disclose around £600,000 worth of debts. The judge considered that this non-disclosure raised considerable questions as to the borrower’s honesty. Yet the lender failed to make further enquiry into the non-disclosure. Second, the borrower claimed that his income was £200,000 p.a. but the lender had evidence suggesting 585

10.175  Lenders’ claims that it might be only £85,000 p.a. Again, the lender failed to make further enquiry into this discrepancy. Had the lender done so, it would probably have concluded that the borrower’s income was of the order of £85,000, was insufficient to justify the loan sought, and that the borrower was dishonest, so that it would not have made the advance. The contributory negligence was thus in part causative of the loss. Had the defendant been liable, the judge would have reduced damages by 60% of the entire loss. 1 Above at para 10.164, fn 4.

(d)  Borrower known to lack integrity 10.175 In Barclays Bank Plc v Christie Owen & Davies Ltd,1 another valuers’ negligence claim, the judge (Richard Spearman QC, sitting as a Deputy Judge of the High Court) held the bank had failed to respond as any reasonably competent bank would have on discovering that the borrowers had a lending history which displayed a lack of integrity. The borrowers had failed to use a previous loan to the company for the purpose for which it was intended; instead it had been used by the directors to purchase property in their own names in Spain. The bank was aware of these facts when it decided to make the subject loan. The judge held that had the bank acted with due care, it would have refused the loan. He therefore made a reduction for contributory negligence of 40%. 1 [2016] EWHC 2351 (Ch), [2017] PNLR 8.

11 Mitigation 10.176 The issues which arise in relation to mitigation in lenders’ cases were best summarised by Chadwick J in Fancy and Jackson:1 ‘The pattern of realisation in cases of this nature requires a number of sequential steps which may be summarised as follows. First, there is the society’s decision to initiate the process of realisation following the borrower’s default. Second, there is the issue of a summons for possession. Third, there is the order for possession. Fourth, there is the taking of possession. Fifth, there is the contract for sale. Sixth, there is completion of that contract. Delay in taking any of those steps will prolong the period between the borrower’s default and the recovery of moneys advanced. Prolongation of that period will increase that element of the society’s claim which is said to represent “lost interest” on the principal advanced. It may also have the effect, in a falling market, of reducing the amount for which the mortgaged property is sold; and so reducing the amount to be set against the claim for principal and lost interest. Accordingly, there are two questions to be considered: (i) whether there has been unreasonable delay by 586

Contract and the tort of negligence  10.179 the society in taking any of the steps which had to be taken towards realisation in the particular case and (ii) whether that delay did, in fact, have the effect of reducing the amount for which the mortgaged property was sold.’ 1 [1997] 4 All ER 582 at 623g–j.

10.177 Chadwick J  went on to consider those two questions in relation to the cases of Steggles Palmer and Colin Bishop.1 In each case, he set out the lender’s progress, or lack of progress, in relation to each of the six steps set out in the quotation. The judge considered there had been unreasonable delay of, respectively, 42 months’ and 30 months.2 There is insufficient space to set out here the details of the way those conclusions were reached, but it can be said that the judge subjected the lenders’ conduct to fairly severe scrutiny. In each case he concluded that the delay would not have altered the price at which the property was ultimately sold. He held however that there should be excluded from the claimants’ loss (i) lost interest and (ii) periodic outgoings, in relation to the periods he had identified as ones where the lender delayed unreasonably.3 1 This was not included in the All England Law Report. It is necessary to consider p 6 of the transcript (22 July 1997). The overruling of Steggles Palmer by the Supreme Court in BPE does not affect his decision on this point, save that it would therefore have been obiter. 2 See p 10 of the transcript (22 July 1997). 3 See also Western Trust & Savings Ltd v Travers & Co [1997]  PNLR  295, CA, discussed at para 3.70, above.

10.178 One question which arises is whether deductions for failure to mitigate should be made from the basic loss figure or the attributable loss. We have seen that, in relation to contributory negligence, the House of Lords has decided that the deduction should be made from the basic rather than the attributable loss.1 By parity of reasoning, the same should apply to mitigation costs or deductions for failure to mitigate. 1 See the discussion of Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190, HL, at para 8.07ff, above.

10.179 In LSREF III Wight Ltd v. Gateley1 the Court of Appeal confirmed that mitigation should be considered and then assessed as part of calculating the lender’s basic (or transactional) loss. The case concerned a negligent failure by solicitors to identify and report on a clause in a leasehold title which provided that the lease would be forfeit if the borrower became insolvent. As at the date of trial, the security remained unsold and the loss uncrystallised. The trial judge rejected an argument that the lender had failed to mitigate its loss by failing to negotiate a variation of the lease with the landlord. He therefore awarded a difference in capital value of £240,000. Immediately following the trial, the lender negotiated such a variation for a payment of £150,000 plus associated costs of £7,100, and agreed a sale, subject to contract. The solicitors appealed, arguing that the lender had unreasonably failed to mitigate its loss. 587

10.180  Lenders’ claims The appeal (and a cross appeal) was allowed and damages were awarded in the amount of £157,100 plus interest. The Court of Appeal held that the lender had unreasonably failed to mitigate; on the facts the landlord would have been willing to negotiate and the payment required had yielded a much greater increase in the value of the security. The transactional loss should be quantified as at the date of the appeal: the bank had now fully mitigated its loss, but the transactional loss should be assessed as £157,100, representing the costs of rectifying the defect. 1 [2016] EWCA Civ 359, [2016] PNLR 21, especially at [59]–[64].

12 Contribution 10.180 In Chapter 8, we considered the principles which govern claims for contribution. A  solicitor sued in a lenders’ claim will generally have no contribution claim against the borrower.1 On the other hand, solicitors sued by lenders should normally consider whether it is appropriate to seek contribution from valuers or, in cases where they were involved, from financial intermediaries or even accountants who may have provided financial references. The principles on which those other professionals may be held liable are beyond the scope of this book. Those representing solicitors, however, will wish to consider the likelihood of successfully showing that valuers have acted negligently, and whether the valuer either was insured or is worth suing. 1 Howkins & Harrison v Tyler and Powell [2001] PNLR 27, CA. See also para 8.22, above.

10.181 In the case of E.Surv Ltd v Goldsmith Williams Solicitors1 the valuer settled the lender’s claim against it and then brought a claim against the solicitors involved. However, it did not call evidence at trial from either of the lender’s underwriters, who had authorised the loan. The Court of Appeal concluded that the valuer was therefore unable to positively prove, the burden of proof being on it, that the loan would not have been made if the relevant information had been disclosed by the solicitors to the lender. The valuer’s contribution claim against the solicitors therefore failed on causation. This case emphasises the importance, perhaps as part of the terms of any settlement with the lender, of ensuring that the settling defendant will be able to obtain co-operation and call evidence from the lender’s witnesses if necessary. 1 [2015] EWCA Civ 1147, [2016] 4 WLR 44.

10.182 Two lenders’ cases in which the court had to consider contribution between solicitors and valuers were Bristol and West Building Society v Christie1 and Chelsea Building Society v Goddard & Smith.2 In each case, the court ordered the solicitors and the valuers to pay 50% of the damages each. In St Paul Travelers Insurance Co Ltd v Okporuah3 a supposed borrower who allowed himself to become involved in the fraud of a solicitor deceiving a lender was held entitled to claim contribution of 50% from the solicitor. Also 588

Contract and the tort of negligence  10.185 relevant is Nationwide BS  v Dunlop Haywards (DHL) Ltd, discussed, as to share of contribution, at para 8.36ff, above. 1 [1996] EGCS 53 (HHJ Esyr Lewis QC). Official Referees’ Business. 2 [1996] EGCS 157 (HHJ Overend sitting as a judge of the Queen’s Bench Division). 3 [2006] EWHC 2107 (Ch), (HHJ Hodge QC).

13  Syndication and securitisation 10.183 Mortgage lenders now commonly engage in syndication or securitisation of loans. The variety of possible sets of facts is diverse, but reference may be made to a number of types of loan dealt with in the cases. It is helpful to distinguish between claims in contract and in tort. Although the cases referred to relate principally to claims against valuers, the same principles should apply in relation to claims against solicitors. As a preliminary point, however, it should be noted that the courts are not enthusiastic about arguments whose effect is to produce a ‘legal black hole’, that is to say, arguments whose effect is that although a professional may negligently have caused loss, nevertheless no one can sue for damages because the party entitled to sue has suffered no loss and the party which has suffered the loss is not entitled to sue the negligent professional.1 1 See Offer-Hoar v Larkstore Ltd [2006] EWCA Civ 1079, [2006] 1 WLR 2926, per Rix LJ at [85]–[86], and Pegasus Management Holdings SCA v Ernst & Young [2012] EWHC 738 (Ch), [2012] PNLR 24 (Mann J).

(a) Contract 10.184 Where there are simply many lenders lending separate amounts, according to separate loan agreements, in relation to one transaction, and the solicitor is instructed by each lender individually, there will generally be no difficulty in each lender suing the solicitor in contract. If there was only one loan agreement, to which many lenders were parties, and the solicitor’s report on title was addressed to all the lenders, then each of the lenders would probably have a cause of action either in contract or in tort on the basis that the solicitor owed each of the lenders a duty of care.1 1 Cf Interallianz Finance AG v Independent Insurance Co Ltd [1997] EGCS 91 (Thomas J).

(i) Novation 10.185 At first instance in Banque Bruxelles Lambert SA  v Eagle Star Insurance Co Ltd,1 Phillips J  had to consider the position where, after completion of the transaction in which the defendant valuers had acted, the claimant lender, BBL, syndicated parts of the loan. In other words, parts of BBL’s loan were transferred to third-party lenders by novation. The third parties took parts of BBL’s rights pursuant to the original transaction, and 589

10.186  Lenders’ claims in return reimbursed BBL for part of the original loan. BBL contended that these subsequent agreements were res inter alios acta, in other words that they should not be taken into account in assessing BBL’s damages, so that there should be no deduction from BBL’s damages on the basis that some of the loss which BBL would otherwise have suffered on the transaction had been transferred to the third party lenders. Phillips J  rejected this argument. The doctrine of res inter alios acta did not apply to allow BBL to claim loss which in fact had been suffered by the third parties. Nor was he prepared to apply the principle of Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd2 to allow BBL to claim loss suffered by third parties. Subsequently, however, this decision has been distinguished: see below. 1 [1995] 2 All ER 769 at 802g–j. 2 [1994] 1 AC 85, HL.

(ii)  Sub-participation agreements 10.186 BBL was distinguished in Interallianz Finance AG  v Independent Insurance Co Ltd.1 As in BBL, when the defendant valuers undertook their valuation there was only one lender, Interallianz, who instructed them. The valuers were unaware of any plans to share the risk of the loan among different financial institutions. After the transaction had completed, Interallianz spread the risk of the loan by means of sub-participation agreements. These were different from the novations which had occurred in BBL. The effect of the sub-participation agreements was that, unlike in BBL, Interallianz remained the only party with a direct contractual relationship with the borrower. Under the sub-participation agreements, the sub-participators had no direct interest in the mortgage, and were not lenders to the borrower. Rather, they had a loan agreement with Interallianz, but the loan did not have to be repaid if the borrower defaulted. All that the sub-participators were entitled to were the amounts which Interallianz actually recovered under its mortgage with the borrowers. In fact, the sub-participation agreements reduced the amount of Interallianz’s losses, because Interallianz had received funds from the subparticipators. But Thomas J held that sums received under those agreements were res inter alios acta which should be ignored in calculating Interallianz’s loss, because: ‘… they were not known to or contemplated by Allsop [the valuer], they were entered into before any loss was contemplated although after Allsop’s breach of duty was in fact committed (but unknown to Interallianz), they did not arise out of Allsop’s breach of duty and had nothing to do with Allsop’s valuation.’ He added, however, that if Interallianz had entered into the agreements with knowledge of the alleged negligence, and they had been part of action taken in consequence of it, then benefits received pursuant to those agreements would have been taken into account. Further, in obiter dicta, Thomas J said that, if he 590

Contract and the tort of negligence  10.188 were wrong that the proceeds of the sub-participation agreements should not be taken into account, in any event there was an implied term in the agreements that Interallianz should account to the sub-participators for any damages they received, and so, in any event, there should be no deduction from Interallianz’s damages on account of the sub-participation agreements. 1 [1997] EGCS 91 (Thomas J).

10.187 The decision in Interallianz was approved by the Court of Appeal in Titan Europe 2006-3 Plc v Colliers International Plc1 (considered more fully below). Longmore LJ noted that the judge in Interallianz had relied on the House of Lords’ decision in British Westinghouse v Underground Electric Railways2 which had held that subsequent transactions, if they were to be taken into account, had to arise ‘out of the consequences of the breach and in the ordinary course of business’. It is considered that this analysis is consistent with the subsequent guidance on res inter alios acta provided by the Supreme Court in Swynson Ltd v Lowick Rose llp:3 there was no discharge of the borrower’s liabilities to the lender in Interallianz (unlike in Swynson); all that happened was that the lender took steps to spread its risk by a series of separate agreements, undertaken without knowledge of the breach. In that sense, any benefit to the lender arose independently of the loss, as required by the analysis in Swynson. 1 [2015] EWCA Civ 1083, [2016] PNLR 7 at [36]–[37]. The comments were obiter as the valuers succeeded on appeal on liability. 2 [1912] AC 673. 3 [2017] UKSC 32, [2018] AC 313.

(iii)  Syndication and trust arrangements 10.188 In Helmsley Acceptances Ltd v Lambert Smith Hampton1 the lender appeared to lend £1.25m to the borrower, in reliance on the defendants’ valuation report. In fact, however, all but £10,000 of the advance was raised, before drawdown of the advance, by documents called deeds of assignment. The deeds of assignment were entered into by the lender and third parties; the third parties supplied the balance of the loan, that is, all of it bar £10,000. The lender agreed with each third party to hold a part of the loan proportionate to that third party’s contribution to the total advance, and interest due on it, on trust for the third party. The valuer applied for summary judgment on the basis that, even if it had negligently caused loss, the lender had lost only its own £10,000 at most; the rest of the loss had been suffered by the third parties. The Court of Appeal held that the valuer was not entitled to summary judgment. It was arguable that there was a trust not only of the loan and interest due on it, but also of the benefit of any chose in action, such as a right to sue for professional negligence, so that the lender held the right to sue on trust for the third parties. In that case the valuer would have to pay damages to the lender who would account to the third parties. Further, it was a difficult and 591

10.189  Lenders’ claims developing area of law in which it would be inappropriate to grant summary judgment. BBL was distinguished on the basis that (i) there was a novation rather than an assignment and trust, and (ii) Philips J had thought that the third parties might have their own claims against the valuer, whereas they did not in Helmsley. 1 [2010] EWCA Civ 356.

(iv) Securitisation1 10.189 Paratus AMC  Ltd v Countrywide Surveyors Ltd2 contains a helpful discussion of a securitisation arrangement. The original lender made loans and from time to time bundled them up into a portfolio, retained legal title to the loans, and transferred them in equity to a limited company. The limited company was a special purpose vehicle or ‘SPV’: it had no business other than dealing with the loans. The SPV issued loan notes which were transferred to investors in return for investments; the SPV used the investors’ money to buy the bundle of loans from the original lender. The SPV used payments from the borrowers to repay the investors. Thus, if loss was suffered on one of the loans which had been securitised, it could be argued that the original lender had suffered no loss since it had received full value for transfer of the loans. The investors had suffered losses but had no right of action against the negligent valuer. HHJ Keyser QC considered this argument, obiter. In his view, because the original lender retained legal title to the loans, the original lender could sue the valuer for negligence and receive full compensation from the valuer for any loss suffered; the original lender would then have to account to the SPV for the sums received.3 Hence, if negligent, the valuers would not be able to argue that the original lender had suffered no loss. 1 See further Benjamin, Financial Law (2007), Ch 18. 2 [2011] EWHC 3307 (Ch), [2012] PNLR 12 (HHJ Keyser QC), at [59]ff. 3 Cf, in the context of a possession action, Paragon Finance plc v Pender [2005] EWCA Civ 760, [2005] 1 WLR 3412.

10.190 A  similar conclusion was reached by the Court of Appeal (also obiter, as it held that the defendant valuer had not been negligent) in Titan Europe 2006-3 Plc v Colliers International Plc.1 After quoting the trial judge’s summary of the terms of the securitisation, Longmore LJ said:2 ‘In these circumstances it is not at first sight easy to see why Titan as the legal and beneficial owner of both the securitised loans and the securities cannot sue Colliers to recover any loss resulting from Colliers’ negligence in relation to the valuation. It may well be that after recovery of that loss, the loss will be treated as a receivable that must be applied in accordance with the provisions of [the securitisation scheme] but that is a matter with which Colliers should have no legitimate concern.’ 592

Contract and the tort of negligence  10.190 Colliers had argued that the Noteholders had their own cause of action so that potentially Colliers was exposed to a risk of action from them also and that Titan should not therefore be permitted to pursue a claim. In rejecting this submission, Longmore LJ said:3 ‘… It is a commonplace truism of property law that the owner of property has rights of suit for substantial damages in respect of any actionable negligence, see e.g. The Sanix Ace [1987] 1 Lloyd’s Rep. 465. In our judgment the same applies to rights of suit in relation to loans and the securities underlying them. The choses in action owned by Titan in this respect are just as much property as any other sort of property and Titan’s title to those choses in action entitles it to sue for substantial damages if it has a cause of action at all. It clearly would have had such a cause of action against Colliers (if Colliers had been negligent) since Colliers expressly assumed responsibility to Titan as the “purchaser or transferee” of the loan pursuant to the “Liability and Publication” section of their valuation report.’ And: ‘[32]  But in our view that enquiry [as to whether the Noteholders had a cause of action] is irrelevant because Titan owned both the loans and the securities. The case is therefore different from The Albazero in which the claimant charterer had parted not merely with the risk in the goods but also with the property. In this case Titan may well have parted with the risk but it had retained the property in the loans and the securities and therefore, in our view, has title to sue Colliers for their negligence if any. [33]  Since Colliers expressly assumed responsibility to “any actual or prospective investor” in the Liability and Publication section of their report, we would be reluctant to say that a Noteholder could never bring an action but, since the Noteholders stand in much the same relation to Titan as a shareholder stands in relation to a company whose shares he owns, any such action by a Noteholder might well be met with the assertion that his loss was reflective of Titan’s loss and thus be defeated by the doctrine of reflective loss as exemplified by Johnson v Gore Brown [2002] 2  A.C. 1. Gardner v Parker [2005] B.C.C. 46 … makes it clear that the reflective loss principle is by no means confined in its effect to shareholders.’ While Titan’s claim was in negligence rather than contract (see below), this reasoning would apply a fortiori to a claim in contract. Although the decision in Titan was obiter, it now seems unlikely that a continuing legal or beneficial owner of a loan and/or security will be barred from recovery merely because the risks have been distributed through a securitisation scheme. 1 [2015] EWCA Civ 1083, [2016] PNLR 7. 2 At [27]. 3 At [30].

593

10.191  Lenders’ claims

(b) Tort 10.191 If the third party provider of funds does not or cannot sue in contract, it may still have a claim in tort, as in N M Rothschild & Sons Ltd v Berenson.1 Barclays Bank instructed the solicitors, and solicitors’ certificate of title was addressed to Barclays, but the funds were being provided by other banks. When the solicitors were instructed, Barclays explained to them in general terms that it and other financial institutions would be providing the funds for the advance. The Court of Appeal held that, because this had been explained, it should have been self-evident to any reasonably competent solicitor that all those lending would be doing so on the basis that the solicitor had provided a true and accurate certificate of title. Hence the solicitors owed a duty of care to the other lenders. Titan (considered above) was also a claim brought solely in negligence. The valuer expressly accepted that it owed a duty of care in relation to the valuation to among others a purchaser or transferee of the loan such as Titan. The original loan had been made by Credit Suisse and the loan was then sold, legally and beneficially, to Titan pursuant to a securitisation scheme. The Court of Appeal concluded that if breach of duty had been proved, Titan would have been able to recover substantial damages. 1 [1997] NPC 15, CA. See para 1.24, above.

10.192 In Secured Residential Funding Ltd v Nationwide Building Society,1 a valuers’ case, the court held that the defendant valuers were not liable in tort for losses suffered by a third-party lender which had relied upon their valuation report. The judge held that the defendants could not be liable in tort to the third party unless they had in fact known that the third party was lending in reliance upon their report, or ought to have known this. He found that the defendants had not had either actual or constructive knowledge of the third party’s involvement, and so the third party had no claim. As to constructive knowledge, he said that the defendants could not be held liable unless there was, at least, a ‘high degree of probability’ that someone other than the intended recipient of the valuation report would rely upon its contents. 1 [1997] NPC 147 (Daniel Brennan QC).

B FRAUD 10.193 Fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.1 Because of dangers as to the extent of insurance cover where there has been fraud,2 even in cases where it lurks in the shadows it is rare for claimants to allege fraud, especially against sole practitioner solicitors. Proof of fraud by a sole practitioner, or by all the partners in a firm, will cause the insurer to decline cover and the claimant is likely to find in such 594

Breach of warranty of authority and breach of undertaking  10.195 cases that the defendants have insufficient assets to meet the claim personally. There is less risk of cover being declined in cases of a firm which also includes honest partners or where the dishonest person was an employee rather than a partner.3 1 Derry v Peek (1889) 14 App Cas 337, per Lord Hershell at 374. 2 See cl 6.8 of the SRA Minimum Terms and Conditions of Professional Indemnity Insurance, Appendix 1 of the SRA Indemnity Insurance Rules 2013. 3 Compare Kumar v AGF Insurance Ltd [1999] PNLR 269 (Thomas J).

10.194 If fraud is established, the claimant benefits from a more lenient limitation period,1 a more favourable rule in relation to causation,2 no risk of reductions in damages in respect of contributory negligence, even if the claimant was negligent,3 and no reduction in damages on account of SAAMCo. Further, it is no answer to a claim in fraud to contend that the claimants could have discovered the truth but failed to do so on account of their own carelessness.4 On the other hand, an allegation of fraud must be carefully pleaded.5 In Paragon Finance plc v Hare,6 Moore-Bick J struck out allegations of conspiracy to defraud against defendant solicitors. It was not enough simply to plead the primary facts: the claimant had to go further and set out clearly how those primary facts gave rise to the inference that the defendants were party to a conspiracy. Further, the court will not infer dishonesty or recklessness without cogent evidence which in effect compels such a conclusion.7 Thus only the most serious of lenders’ cases fall within this category. 1 See para 7.74, above. 2 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, HL. 3 Alliance and Leicester Building Society v Edgestop Ltd [1993] 1 WLR  1462 (Mummery J), Nationwide Building Society v Thimbleby & Co [1999] Lloyd’s Rep PN 359 (Blackburne J), and Standard Chartered Bank v Pakistan National Shipping Corpn [2002] UKHL 43, [2003] 1 AC 959. 4 Nationwide Building Society v Dunlop Haywards Ltd [2007] EWHC 1374 (Comm) (Simon J) at [75]. This was a claim by a lender against a valuer; the judge granted summary judgment on a fraud allegation. 5 See 8.2 of Practice Direction 16 to CPR Part 16, Statements of Case. 6 (1999) Times, 1 April (Moore-Bick J). 7 Per Blackburne J in Vanderpump & Sykes, one of the Balmore Radmore decisions: see [1999] Lloyd’s Rep PN 422 at 430 col.1.

C  BREACH OF WARRANTY OF AUTHORITY AND BREACH OF UNDERTAKING 10.195 Identity fraud may give rise to claims by lenders as well as by individual buyers, including for breach of warranty of authority and/or breach of undertaking. These matters are dealt with fully in Chapters 4 and 5 above. The law in this area has recently been substantially restated by the Court of Appeal in the conjoined appeals in P&P Property Ltd v Owen White & Catlin 595

10.196  Lenders’ claims LLP and Dreamvar (UK) Ltd v Mishcon de Reya1 which are considered in detail in those chapters. Chapter 4 also considers the breach of trust claims which may be raised in such cases. 1 [2018] EWCA Civ 1082, [2018] 3 WLR 1244.

10.196 From lenders’ point of view, both breach of undertaking and breach of warranty of authority (where available) are attractive causes of action since (i) liability is strict, so there is no need to prove a failure by the solicitor to take reasonable care, (ii) the measure of loss is contractual rather than tortious, which may give the lender a larger recovery, and (iii) contributory negligence is not a defence, since liability does not depend on negligence on the part of the defendant.1 However, for a breach of warranty of authority claim, the claimant must also show reliance on the warranty, which the purchaser claimants in P&P were unable to do. The claimants in both P&P and Dreamvar succeeded in their claims for breach of undertaking, as it was held that the meaning of ‘seller’ in those standard form undertakings could only properly equate to the true owner of the property. 1 See para 8.13, above.

10.197 Such claims have tended to be brought in three types of situation: (i)

The defendant solicitor acts for the supposed sellers who are co-owners. The solicitor has (eg) the husband’s authority but the husband forges the wife’s authority so that the solicitor who appears to act for the sellers in fact acts for only one of them. As long as the sellers’ solicitor knows that the buyer’s solicitor is acting not only for the buyer but also for a lender, this is sufficient to enable the buyer’s lender to rely on any warranty of authority which the sellers’ solicitor gives to the buyer.1 As discussed in Chapter 5, whether the seller’s solicitor gives the buyer a warranty that s/he acts for both the parties who own the property will depend on the precise factual circumstances and terms of the warranty given.

(ii) A variant on (i) arises where there is one owner of the property, but an imposter pretends to be that person and instructs solicitors on the footing that s/he is that owner and wishes to sell. On completion any existing charge is paid off, but the imposter takes the balance of the purchase money and disappears; the true owners know nothing about the supposed sale. This was the scenario in the P&P and Dreamvar cases. (iii) The defendant solicitor acts for the party supposedly remortgaging the property. In this case the fraudster is both the defendant solicitor’s client and the lender’s borrower customer. The party supposedly remortgaging the property turns out to be an impostor. In this case the solicitor must have failed to spot the fraud, but so must the lender, which is likely to have had just as good an opportunity to spot the fraud as the solicitor. First instance and appellate Scottish authority suggests that the lender 596

Breach of warranty of authority and breach of undertaking  10.199 will have no claim for breach of warranty of authority in this type of case.2 If the lender has used the Lenders’ Handbook then it may be able to allege breaches of the solicitor’s contractual obligations to carry out identity checks: see para 10.52ff, above. 1 Penn v Bristol & West BS [1997] 1 WLR 1356 (CA). 2 See para 5.26, above.

10.198 So far as cases in categories (i) and (ii) are concerned, if the supposed seller’s solicitor signs the contract on behalf of the seller, but it turns out that the client of that solicitor is not the seller, the buyer’s lender is likely to be able to succeed in a claim for breach of warranty of authority on the basis that the act of signing the contract, expressly on behalf of the seller, amounted to a warranty that the solicitor acted for the true owner and not an impostor.1 In addition, in cases where the parties’ solicitors have opted to use the 2011 edition of the Law Society’s Code for Completion by Post, or the new 2019 Code for Completion by Post,2 there will be a claim for breach of undertaking, on the authority of P&P and Dreamvar. In such cases, the lender is now likely to be able to succeed on summary judgment. These situations are considered in detail at para 5.26, above. 1 This occurred in P&P  Property Ltd v Owen White & Catlin LLP  [2018]  EWCA  Civ 1082, [2018] 3 WLR  1244. See also Suleiman v Shahsavari [1988] 1 WLR  1181, (1989) 57  P  & CR 465 (Andrew Park QC), referred to with approval in Penn. 2 The Guidance to the 2019 Code says that it is intended to have the same effect as the 2011 Code in this respect, and to reflect the decision in Dreamvar while making no changes to the seller’s solicitor’s obligations. Copies of both the 2011 and 2019 Codes for Completion by Post and the 2019 Guidance are on the Law Society’s website.

10.199 In the present context, the seller’s solicitor will, by para 7 of the 2011 Code for Completion by Post (or para 8 of the 2019 Code), have undertaken: ‘(i) to have the seller’s authority to receive the purchase money on completion; and (ii) on completion to have the authority of the proprietor of each mortgage, charge or other financial incumbrance which was specified under paragraph 61 but has not then been redeemed or discharged, to receive the sum intended to repay it; BUT if the seller’s solicitor does not have all the necessary authorities then: (iii) to advise the buyer’s solicitor no later than 4pm on the working day before the completion date of the absence of those authorities or immediately if any is withdrawn later; and (iv) not to complete without the buyer’s solicitors’ instructions.’ Suppose that the seller’s solicitor has given no advice to the borrower’s solicitor in accordance with the proviso in (iii) and the transaction has apparently 597

10.200  Lenders’ claims completed. On the authority of P&P  and Dreamvar,2 a solicitor purporting to act for the seller has undertaken to have the seller’s authority to accept the purchase money on completion. If that solicitor receives the purchase money and pays it away to someone who is an impostor and not the seller then that solicitor is in breach of undertaking. He or she must therefore compensate the buyer, and logically also the buyer’s lender, for that breach, in accordance with the principles discussed in Chapter 5. Further, see Chapter 9 for other undertakings which may not have been complied with. 1 This ought to be all charges, etc on the title of the property which need to be removed in order that the buyer’s lender may have a first legal charge. 2 At [112]–[119].

D  ACTIONS FOR MONEY HAD AND RECEIVED 10.200 In Portman Building Society v Hamlyn Taylor Neck,1 the Court of Appeal struck out as hopeless a claim by a lender against solicitors brought as an action for money had and received. The lender sought to rely on this claim as, unlike its other claims, it was not statute-barred. For the purposes of the application, it had to be assumed that the lender’s allegation, which was that it had paid the advance money to the solicitors under a mistake of fact caused by the solicitors, was correct. Millett LJ said that an action for money had and received was a claim for restitution for unjust enrichment. The action could not succeed because the solicitors had not been enriched at all: they had paid away the lender’s money in accordance with the lender’s instructions. Although those instructions were capable of being revoked, they had not been revoked, and continued to bind the solicitors. Thus the solicitors’ defence was that they had properly accounted for the lender’s money, in accordance with the lender’s instructions. No action for money had and received would succeed unless the lender had revoked its instructions before the solicitors paid away the money. Thus, except in cases where the lender does expressly revoke the solicitor’s instructions to pay the money to the borrowers, before the solicitor makes the payment, it is unlikely that actions by lenders for money had and received will succeed. 1 [1998] 4 All ER 202, CA.

E EQUITY 10.201 Equity is discussed in detail in Chapter 4. The discussion there is of relevance to lenders’ claims in two particular respects. First is claims by lenders against solicitors for breach of trust, which have been the subject of detailed consideration by both the Supreme Court1 and the Court of Appeal in recent years. The Court of Appeal in Lloyds TSB Bank Plc v Markandan & Uddin2 598

Equity  10.201 confirmed that a solicitor who releases the lender’s advance in return for forged documents acts without authority and thus in breach of trust. This is discussed at para 4.05 above. The second area of relevance is breach of fiduciary duty. Balmer Radmore suggests that, depending on the facts, there may be large reductions for contributory negligence in lenders’ claims in contract and the tort of negligence, but there will be no such reductions in cases where the claimant is able to establish a breach of fiduciary duty which amounts to conscious disloyalty by the solicitor to the lender client.3 Thus it will be in the interests of lenders to characterise solicitors’ conduct as being in breach of fiduciary duty whenever possible. But references to breach of fiduciary duty should not be ‘scattered throughout the pleadings with complete abandon’.4 See generally the discussion of breach of fiduciary duty in Chapter 4. 1 AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC, [2015] AC 1503. 2 [2012] EWCA Civ 65, [2012] 2 All ER 884, [2012] PNLR 20. 3 Balmer Radmore [1999] Lloyd’s Rep PN 241 at 278 and para 4.54ff, above. 4 Sir Peter Millett, ‘Equity’s Place in the Law of Commerce’ (1998) 114 LQR 214 at 217.

599

Chapter 11

Wills, estates and trusts

A  THE PREPARATION AND EXECUTION OF WILLS 1  Duty of care (a)  Claims involving a client’s will or estate 11.01 With a few limited exceptions a claim in contract or tort survives the death of the victim.1 In general terms, therefore, the rights of the victim of a tort or breach of contract will form part of his or her estate and the personal representatives will have the right to bring any claims for breach of contract or negligence against the contract breaker or tortfeasor. This principle applies to all categories of claims such as, for example, a claim for breach of an employment contract or a claim for personal injury. It is important to remember, therefore, when considering the authorities discussed in this chapter that this principle generally applies to any claim against a solicitor or any claim which involves the victim’s will or estate. If a client (‘T’) retains a solicitor (’S’)2 and has a claim for breach of that retainer, that claim should vest in T’s personal representatives whether or not it relates to the preparation of a will (under which the personal representatives were themselves appointed) and whether or not it has any connection with T’s estate. Moreover, this principle should still apply even if the claim is closely related to the testamentary process. Where, for example, the assets available for distribution by the personal representatives of an estate are reduced because of negligent income or capital gains tax advice which S has given to T before T’s death, there is no reason why the personal representatives cannot themselves pursue that claim.3 Again, where the estate suffers loss because S  (who holds the will for safekeeping) fails to inform the new executors and delays occur in the administration of the estate, the position should be the same. The personal representatives should bring the claim.4 Finally, where they distribute the estate to the wrong individuals as a consequence of S’s negligent advice, the personal representatives should also be able to pursue any claims both to recover the trust property or for professional negligence against the relevant advisers.5 In each of these examples there is no obvious reason why the beneficiaries of the estate, as opposed to the personal representatives, need to be parties to the proceedings or to bring a claim themselves. Even in the last example the personal representatives should bring any claim against the solicitors for compensation for the assets which they 600

The preparation and execution of wills  11.02 have mistakenly distributed to the wrong beneficiaries and to recover damages for any other consequences of the solicitor’s negligence. 1 Law Reform (Miscellaneous Provisions) Act 1934, s 1(1). 2 The abbreviations ’T’ and ’S’, and ‘B’ for beneficiary, are used throughout this chapter. 3 See the example given by Neuberger J in Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19 at [27]. This example was also discussed by the Court of Appeal in Shell UK Ltd v Total UK  Ltd [2010]  EWCA  Civ 180, [2011]  QB  86 at [139]–[142]. Inheritance tax gives rise to special problems: see para 11.18, below. For a recent example of the confirmation of the principle see Anderson v Wilson [2019] CSIH 4, [2020] SCLR 105 where the Inner House held that two beneficiaries could not bring a claim for undue influence in respect of dispositions made by their father. The claim could only be brought by the estate. 4 See Hawkins v Clayton (1988) 78 ALR 69 (HCA). Compare also the facts of Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19 (Neuberger J). In that case it was held that the solicitors owed a duty to the executors of an estate but not to the beneficiaries to apply for probate and administer the estate: see O’Sullivan, ‘Solicitors, executors and beneficiaries: Who can sue and who can be sued?’ (2003) 19 PN 507. 5 See the example given by Deane J in Hawkins v Clayton (1988) 78 ALR 69 at 99, lines 27–44.

(b)  The beneficiary principle 11.02 Nevertheless, many claims arise out of the drafting and preparation of wills1 and 40 years ago English law first recognised the independent right of a beneficiary (or an intended beneficiary) under a will to bring a claim against a firm of solicitors which had acted for the testator. Such a claim was first recognised in Ross v Caunters.2 This was a landmark case because it was the first occasion on which liability had been imposed on a professional adviser outside the contractual context and the adviser was found to be liable to a third party who was not the client. In White v Jones3 the House of Lords confirmed that a solicitor who negligently failed to give effect to his client’s testamentary intentions would be liable to compensate the intended beneficiaries for the loss of their interests in the estate. The House of Lords chose not to adopt the reasoning in Ross v Caunters but nevertheless held by a majority of three to two that a solicitor can be liable to a disappointed beneficiary for negligently carrying out the testator’s instructions and depriving the beneficiary of an intended legacy. Although all members of the committee delivered speeches both Lord BrowneWilkinson and Lord Nolan agreed with Lord Goff who recognised the need ‘to fashion a remedy to fill a lacuna in the law so as to prevent the injustice which would otherwise occur on the facts of cases such as the present’ and held ‘that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor’s negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor’.4 The duty of care owed by a solicitor to a disappointed beneficiary is therefore treated as a limited exception to the general principle that a solicitor owes duties only to his or her client.5 The extent of that exception is now considered in testamentary cases.6 1 On 6 May 2014 the SRA issued guidance on the drafting and preparation of wills which was updated on 25 November 2019. It stated that the most common quality failures identified in the

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11.03  Wills, estates and trusts preparation of wills include: (a) inadequacy where wills fail to fully account for an estate or take certain outcomes into consideration, potentially leading to an invalid will; (b) legality where actions specified in a will are potentially illegal; (c) inconsistency where the language and logic used in a will is contradictory; and (d) detail where items, people and requests are missed out of a will or described in insufficient detail. 2 [1980] Ch 297 (Sir Robert Megarry V-C). 3 [1995] 2 AC 207. 4 See 268B and 268D. 5 For an analysis of the ratio decidendi see Carr-Glynn v Frearsons [1999] Ch  326, CA at 334H–335E (Chadwick LJ). See also Worby v Rosser [2000] PNLR 140, CA at 148B–149B and Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19 (Neuberger J) at [16]–[17] (quoted below). 6 For discussion of duties owed to third parties more generally see Chapter 1, paras 1.19 to 1.33, above. The beneficiary principle is examined in that context at paras 1.26 to 1.28.

11.03 In Ross v Caunters the solicitor had failed to spot a procedural defect which invalidated the will, namely, that it had been witnessed by the spouse of a beneficiary. In White v Jones the solicitor failed to act on the testator’s instructions in time and he died before a new will could be executed. In both cases the personal representatives could recover only nominal damages because the estate had suffered no loss. In both cases the only victims were the disappointed beneficiaries who had lost the interests in the estate which they would have received if the testator’s instructions had been carried out. In White v Jones it was recognised that to impose liability in these circumstances would be exceptional. But this exceptional liability was justified on the basis that it was required to fill a gap in the law:1 ‘In the forefront stands the extraordinary fact that, if such a duty is not recognised, the only persons who might have a valid claim (ie the testator and his estate) have suffered no loss, and the only person who has suffered a loss (ie the disappointed beneficiary) has no claim: see Ross v Caunters [1980] Ch 297, 303A, per Sir Robert Megarry V-C. It can, therefore be said that, if the solicitor owes no duty to the intended beneficiaries, there is a lacuna in the law which needs to be filled. This I regard as being a point of cardinal importance in the present case.’ The principal policy justification for the rule is therefore that unless the beneficiary can sue the solicitor there is no effective remedy. In Chappell v Somers & Blake2 Neuberger J identified two strands to this policy: ‘Considering this issue by reference to general policy, as opposed to legal principle, I am of the view that there are two main points. The first is that it would be wrong if the solicitors escaped any liability for damages in a case such as this, merely because they could identify a dichotomy between the person who can claim against them for a breach of duty, namely the executrix, and the person who can be said to have suffered the damage, namely the beneficiary. I  believe that this principle, which is there identified as “the impulse to do practical justice”, is supported by the speech of Lord Goff of Chieveley in White v Jones [1995] 2 AC 207 at 259–260. In that case, the majority 602

The preparation and execution of wills  11.04 of the House of Lords held that a solicitor who had been negligent in drafting a will could be sued by the disappointed beneficiary, because otherwise the solicitor could escape liability, as the client, the deceased, had suffered no loss … The second policy principle appears to me to be that, given that any damages would ultimately come to the beneficiary, irrespective of who has the right to sue, the question of whether it is the executrix or the beneficiary who can bring the proceedings is not of great significance. The essential point is to ensure that there cannot be double recovery (ie  that the same damages cannot be recovered twice, once by the beneficiary and once by the executor).’ 1 [1995] 2 AC 207 at 259H (Lord Goff). This principle has not been accepted in all jurisdictions: see Seale v Perry [1982] VR 193 (Supreme Court of Victoria). 2 [2003] EWHC 1644 (Ch), [2004] Ch 19 at [16]–[17]. The decision was approved by the Court of Appeal in Shell UK Ltd v Total UK Ltd [2010] EWCA Civ 180, [2011] QB 86 at [142].

(c)  The scope of the duty (i) Proximity 11.04 There are four limitations on the extent of the duty of a solicitor to a beneficiary or intended beneficiary.1 First, there must be a close degree of proximity between the disappointed beneficiary and the solicitor. Because of the nature of the exception the scope of the solicitor’s duty to the disappointed beneficiary cannot be wider than that of the duty that he or she owed to the original client. It is obvious therefore that if the solicitor owed no duty to the testator, the disappointed beneficiary will have no claim even though he or she may have suffered loss.2 In Worby v Rosser3 Chadwick LJ stated that it ‘is the retainer which both imposes those duties and defines their scope’. In CarrGlynn v Frearsons4 he also emphasised that the scope of the duty which the solicitor owes to the claimant is a duty to carry out the testator’s instructions and not a duty to confer a particular benefit: ‘The duty owed by the solicitors to the specific legatee is not a duty to take care to ensure that the specific legatee receives his legacy. It is a duty to take care to ensure that effect is given to the testator’s testamentary intentions. The loss from which the specific legatee is to be saved harmless is the loss which he will suffer if effect is not given to the testator’s testamentary intentions. That is the loss of the interest which he would have had as a beneficiary in an estate comprising the relevant property.’ 1 See Clark v Bruce Lance & Co [1988] 1 WLR 881, CA at 888–889 (Balcombe LJ). 2 For one example see Hall v Estate of Bruce Bennett [2003] WTLR 827 (CA of Ontario) where S declined to act for T on the grounds that he was not satisfied that T had testamentary capacity. Charron JA said this at [57]: ‘In the absence of a retainer, the harm that may be occasioned to the third party beneficiary by the failure to make a will may still be foreseeable but, absent exceptional circumstances, it is my view that there would be insufficient proximity between the

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11.05  Wills, estates and trusts parties to give rise to a duty of care. It is usually the retainer that creates the necessary proximity not only between the solicitor and the client but between the solicitor and the third party.’ 3 [2000] PNLR 140, CA at 147A. 4 [1999] Ch 326, CA at 337E–F. See also Punford v Gilberts Accountants [1998] PNLR 763, CA at 766G (Sir Christopher Slade) and Trusted v Clifford Chance [2000] WTLR 1219 (Jonathan Parker J) at 1256.

(ii)  Object of the transaction 11.05 Secondly, the transaction must have as its object the benefit of the claimant. If the transaction did not have this object S  does not owe a duty of care to B in relation to any advice which he or she gave to T even if that advice has caused B loss. In practice, this limits the range of transactions in which a duty of care will arise to the will-making process or closely analogous transactions. In Carr-Glynn v Frearsons1 the Court of Appeal extended the scope of the duty beyond the preparation and execution of the will to closely associated acts or advice. In that case, S was found liable for failing to advise T, who owned a property jointly with her nephew but wished to leave her share to her niece, to serve a notice on the nephew immediately severing their joint tenancy. T was 81 years old and came to S wishing to change her will for the purpose of leaving her half share to the niece. If she failed to sever the joint tenancy it was obvious that the gift would fail and S recognised the need to do so. It was found that the ‘need to take care to ensure that the asset fell into the estate was integral to the carrying into effect of the testatrix’s intention …’.2 In Clarke v Bruce Lance & Co3 by contrast it was held that S owed no duty of care to B for failing to advise T not to grant an option for a fixed price over a petrol filling station simply because they had earlier prepared his will in which the station had been left to B. T was free at any time to deal with his assets as he chose. Although the grant of the option on the advice of S had the effect of reducing the value of the asset which B received under the will, the advice which S had given about the option was not part of the will-making process. Whether or not S was negligent in advising T about the option he owed no duty of care to B just because T had chosen to dispose of or fetter one of his assets.4 1 [1999] Ch 326, CA. 2 [1999] Ch 326 at 335H. S advised T to obtain the title deeds from her nephew before serving the notice of severance. There was no reason why a notice could not have been served without waiting for the deeds. 3 [1988] 1 WLR 881, CA. The case is an extreme one and was an application by the defendants to strike out. One oddity is that the claim was not brought by the estate. 4 See also Punford v Gilberts Accountants [1998] PNLR 763, CA in which the defendants were a firm of accountants. In Herring v Shorts Financial Services LLP [2016] WTLR 1203 (Leeds County Court, HHJ Behrens), the judge declined to impose upon a financial advisor a duty in favour of the beneficiaries of the will of the advisor’s client. The advisor had given advice in relation to the setting up of certain inter vivos trusts designed to reduce inheritance tax liability. T subsequently made a will which failed to take account of the fact that certain of the trust assets would fall into her residuary estate rather than passing to Bs. There was also a claim against S who had drafted the will (which had been compromised). The judge rejected the argument that the tax advice was part of the will-making process, but found it ‘hard to resist the conclusion’ that S had been negligent in drafting the will without fully understanding the operation of the trusts.

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The preparation and execution of wills  11.07 11.06 More difficult, however, are those cases in which the complaint against S is that he or she failed to give relevant tax advice or gave the wrong tax advice to T and the tax advice is very closely related to the will-making process. It has been held at first instance that S owes no duty to B to give advice to enter into a deed of variation to minimise inheritance tax1 under an earlier will and by the Court of Appeal that no duty is owed to T’s personal representatives to ensure that inheritance tax measures taken by T were effective. In Daniels v Thompson2 Mrs Daniels transferred her home to her son to avoid inheritance tax but the transfer failed to have that effect because she retained a benefit in the property. The issue of limitation was tried as a preliminary issue but on appeal the Court of Appeal also held that Mrs Daniels’ personal representatives had no claim for damages because she had suffered no loss in her lifetime, and therefore had no claim in tort that survived for the benefit of her estate. For present purposes the important point to note about Daniels is that no claim was made by the beneficiaries of the estate and the Court of Appeal did not have to consider whether the solicitors owed them a duty of care under the beneficiary principle. This point arose in both Rind v Theodore Goddard3 and Vinton v Fladgate Fielder4 and on both occasions it was held arguable as a matter of law that the solicitors owed a duty of care to the beneficiaries in relation to inheritance tax advice.5 In neither case did the court have to make a final determination on this issue because they were both strike out applications and applications for reverse summary judgment. The point therefore remains open. But it is suggested that claims of this kind satisfy the second limitation. The object of the transaction in each of these cases was to confer a benefit on the beneficiaries of the client’s estate (a tax saving) and there is a sufficiently close analogy with the will-making process to impose a duty of care.6 1 See Cancer Research Campaign v Ernest Brown & Co [1998] PNLR 592 (Harman J), in which it was held that solicitors who acted for a testatrix, who died shortly after her brother, owed no duty to the charitable beneficiaries under her will to advise her to execute a deed of variation of her brother’s will renouncing her interest in favour of them. The decision must be treated with some caution in the light of Carr-Glynn v Frearsons [1999] Ch 326, CA. 2 [2004] EWCA Civ 307, [2004] PNLR 33. For further discussion see para 11.18, below. 3 [2008] EWHC 459 (Ch), [2008] PNLR 24 (Morgan J) at [56]. 4 [2010] EWHC 904 (Ch), [2010] PNLR 26, [2010] STC 1868 (Norris J) at [13]. 5 In Macaulay v Premium Life Insurance Co Ltd (29 April 1999, unreported) Park J also refused to strike out a claim by the beneficiaries. However, in Daniels Carnwath LJ declined to follow the decision on the question of whether the solicitors owed a duty of care to T’s personal representatives: see [2004] EWCA Civ 307, [2004] PNLR 33 at [58]. 6 In Vinton Norris J  rejected the argument that will making was the only context in which a duty of care has been recognised: see [23] and [24]. He also allowed the executors’ claims in contract and tort to go to trial. In a subsequent Scottish case, Milligan’s Executors v Hewats [2013] CSOH 60, [2013] PNLR 23 (where the facts were similar to Daniels), the executors’ claim in tort was similarly dismissed on the basis that T had suffered no loss during her lifetime and hence had no rights against S which devolved on her executors.

(iii)  Class of potential beneficiaries 11.07 Thirdly, the class of potential beneficiaries must not be so large that it will expose the solicitors to a ‘liability in an indeterminate amount for an 605

11.08  Wills, estates and trusts indeterminate time to an indeterminate class’. This was also fatal to the claim in Clarke v Bruce Lance & Co1 where S  could not have been expected to contemplate that B would suffer damage by the defective drafting of an option agreement for T (his father). T was free to deal with the property during his lifetime or to make an alternative will. If S owed a duty to B, he also owed a duty to anyone to whom his father might have given the property during his lifetime or to whom it might have passed under his will or on intestacy. The solicitor will only be liable, therefore, if it was reasonably foreseeable that the claimant would suffer loss or that a defined class of beneficiaries which included the claimant would suffer loss if the solicitor was negligent. In Gibbons v Nelsons2 the claimants, who were family members, alleged that S had failed to remind T that she was entitled to a half share in a trust fund and to advise her to consider how to deal with it in her will. They also alleged that if S had raised the point T would have appointed her share in the fund to them as her sister and nephew. One reason why the claim failed was because S was unaware of the existence of the claimants or their potential entitlement. Blackburne J considered that the following knowledge was required before such a claim could succeed:3 ‘While acknowledging that it may not be necessary for the solicitor to be aware of the precise identity of the intended beneficiary (he may, for example, be aware that the testator intends to make a gift to someone identified only as “my son” or to a defined class eg “my children and grandchildren”) I am of the view that the law requires, at the very least, that the solicitor should know (1) what the benefit is that the testator-client wishes to confer and (2) who the person or persons or class of persons are (in each case ascertainable if not actually named) on whom the client-testator wishes to confer the benefit. I have seen nothing in any of the authorities which justifies an extension of the assumption of responsibility to cases where these two elements are not present.’ 1 [1988] 1 WLR 881, CA at 889 (Balcombe LJ). For discussion of the same point see also White v Jones [1995] 2 AC 207 at 225H–226A (Sir Donald Nicholls V-C), Sutherland v Public Trustee [1980] 2  NZLR  536 at 547–548 and Rind v Theodore Goddard [2008]  EWHC  459 (Ch), [2008] PNLR 24 (Morgan J) at [72]–[78]. In White v Jones in the House of Lords Lord Nolan stressed the importance of the family relationship between the testator and the beneficiaries: see [1995] 2 AC 207 at 292F–295D. 2 [2000] PNLR 734. 3 At 752G–753A.

(iv)  No other remedy 11.08 Finally, the court will not impose a duty of care unless there is no other effective remedy. The remedy ‘fashioned’ by the House of Lords in White v Jones was designed to deal with the situation where the only person who had suffered a loss had no title to sue. But where the personal representatives and beneficiaries have identical claims against the solicitor, the claim must be brought by the estate and not the beneficiaries. There is no gap and no need 606

The preparation and execution of wills  11.09 for the court to provide a remedy. In Worby v Rosser1 Bs were beneficiaries under a will made in 1983. In 1989 T instructed S to draw up a new will. He was induced to do so by the undue influence of his accountant (who was also named in the new will as one of the beneficiaries). Bs brought proceedings against the executors and beneficiaries under the 1989 will and, after a 48-day probate action, were successful in setting aside the new will. When they were unable to enforce the orders for costs against the defendants, they commenced proceedings against S on the ground that he had failed to satisfy himself that T had the proper testamentary capacity to make the new will in 1989 and that the costs of the probate action would have been avoided if he had acted with reasonable care. The Court of Appeal dismissed the action on the basis that S owed no duty of care to Bs. The estate was potentially liable to pay their costs2 and if the estate had suffered a loss the personal representatives should bring the claim:3 ‘The remedy is provided in circumstances in which it can be seen that there is a breach of duty by the solicitor to the testator in circumstances in which the persons who have suffered a loss from that breach will have no recourse unless they can sue in their own right … In the present case there is no lacuna to be filled. If the solicitor’s breach of duty under his retainer has given rise to the need for expensive probate proceedings, resulting in unrecovered costs, then, prima facie, those costs fall to be borne by the estate for the reasons which I have already sought to explain. If the estate bears the costs thereby and suffers loss then, if there is to be a remedy against the solicitor, it should be the estate’s remedy for the loss to the estate. There is no need to fashion an independent remedy for a beneficiary who has been engaged in the probate proceedings. His or her costs, if properly incurred in obtaining probate of the true will, can be provided for out of the estate. If there has been a breach of duty by the solicitor, the estate can recover from the solicitor the additional costs (including the costs to which the beneficiary is entitled out of the estate).’ In Chappell v Somers & Blake4 Neuberger J  reached a similar conclusion. Because the executors had a direct claim against S, there was no reason to invoke the beneficiary principle by finding that S owed a direct duty of care owed to B  although he ordered that B  be joined as a party to avoid double recovery. 1 [2000] PNLR 140, CA. Compare Knox v Till [2000] PNLR 67 (CA of New Zealand). 2 The difficulty with the claim was that the beneficiaries had not sought a specific order that their costs be paid out of the estate under the principle in Sutton v Drax (1815) 2 Phill 323. If they had done so, a claim could have been mounted by the personal representatives. 3 Chadwick LJ at [2000] PNLR 140 at 149B–G. 4 [2003] EWHC 1644 (Ch), [2004] Ch 19 at [17] and [32].

11.09 There may, however, be claims that only the intended beneficiary can bring and which are complementary to any claims brought by the personal 607

11.10  Wills, estates and trusts representatives. If the testator’s intentions cannot be given effect by granting a remedy to the estate, then the court will fill the gap by granting a remedy to the beneficiaries directly. In Carr-Glynn v Frearsons1 the personal representatives had a good claim against S because the estate had itself been deprived of the asset. But the personal representatives had suffered no loss (or no loss for which the court could effectively compensate). If they brought the claim, any damages which they recovered would fall into the residue of T’s estate and be divided between her residuary beneficiaries rather than go to B (as T had intended). This was not what T had intended nor was it S’s duty to achieve. In those circumstances, the Court of Appeal held that S owed an independent duty of care to B and she could bring a claim in her own right:2 ‘The duties owed by the solicitors to the testator and to the specific legatee are not inconsistent. They are complementary. To the extent that the duty to the specific legatee is fulfilled, the duty to the testator is cut down. If and to the extent that the relevant property would have been distributed to the specific legatee in the ordinary course of administration, the other persons interested in the estate can suffer no loss. In so far as the relevant property or any part of it would have been applied in the ordinary course of administration to discharge liabilities of the estate, the specific legatee can suffer no loss.’ This decision also illustrates an important point about the scope of the duty owed to beneficiaries. It is a duty to give effect to T’s intentions, not a duty to ensure that the beneficiary receives the particular asset. It follows that where B  would have been entitled to a specific legacy if T’s intentions had been carried out, he or she will normally be able to bring a direct claim against S. But if the estate is insolvent or potentially insolvent, B will not have a claim. If the personal representatives would have been required to realise the asset or assets in order to meet their liabilities, B would never have received them (even if S had exercised skill and care). Likewise, if B would have received the particular asset or fund net of tax or after some deduction to meet the liabilities of the estate B’s claim will be limited to the net amount which he or she would have received on distribution. 1 [1999] Ch 326, CA. 2 Chadwick LJ at 337F–G.

11.10 Finally, where the estate and the intended beneficiaries have competing or inconsistent claims the scope of the duty will also determine which of the personal representatives or the beneficiaries are entitled to recover damages. This is demonstrated by Corbett v Bond Pearce.1 In that case the claimant successfully challenged the last will made by his aunt because of a technical defect. Her residuary estate passed to him but the costs of the probate action were ordered to be paid out of the assets. He then brought proceedings in his capacity as the executor of the previous will against the solicitors who had drafted the new will in order to recover the costs of the probate action. 608

The preparation and execution of wills  11.11 However, they had already compensated the disappointed beneficiaries to whom the residuary estate would have passed under the new will. The claimant argued that because they had failed to carry out his aunt’s instructions and ensure that she executed a valid will the estate had suffered an additional loss, namely, the costs of the probate action. The judge at first instance accepted this argument. The Court of Appeal allowed the appeal on the basis that their duty was to ensure that they gave effect to the aunt’s intentions:2 ‘Accordingly, in the present case, it is necessary to determine the scope of the duty of care owed by the defendants to the testatrix by reference to the kind of damage from which they had to take care to keep her harmless, having regard to the terms of their retainer. Having such regard, I think that it is clear that this kind of damage was the loss which those who would become interested in the estate, whether as beneficiaries under the September will or as creditors, would suffer if effect were not given to her latest testamentary intentions. It was not the loss which the various classes of beneficiaries named in the February will would suffer in that event, because the testatrix had no wish or intention that the February will should have any effect after she had signed the September will and the two deeds of gift had been perfected.’ If the claimant was entitled to recover the costs of the probate action in his capacity as the personal representative, the solicitors would have been liable for double recovery. The intended beneficiaries had already been compensated in full for the full value of the interests which they would have received if the new will had been valid. Even though the estate had incurred the costs of the probate action the estate was not entitled to compensation. The claimant and the other beneficiaries under the old (but valid) will would have received nothing if the solicitors had carried out his aunt’s instructions and the beneficiaries under the new (but defective) will had received the value of their interests. 1 [2001] EWCA Civ 531, [2001] PNLR 31. 2 See [31] and [32]. The action was remitted to the High Court for further hearing on the question whether the estate was entitled to recover damages: see [2006]  EWHC  909 (Ch), [2006] WTLR 967. As Rimer J stated at [43] damages should only have been recoverable by the estate if it had been insolvent and unable to pay its debts. However, the order made by the Court of Appeal went wider than this and the decision is of interest on the heads of loss which may be recoverable (see below).

2  Breach of duty (a) Preparation 11.11 In the reported cases, solicitors have been found liable to disappointed beneficiaries for failure to carry out a testator’s instructions to draw up a new will within a reasonable time.1 Two decisions serve to illustrate the timescale 609

11.11  Wills, estates and trusts within which the court will expect a solicitor to act. In X  v Woollcombe Yonge2 T (who was in hospital) gave instructions to S to change her will on 25 June. S’s probate clerk was away that week and drew up the will early the following week intending to finalise it on 3 July. On 1 July T died. Neuberger J held that S was not negligent. In Hooper v Fynemores,3 however, the facts were as follows. On 3 September T instructed S to draw up a new will. On the same day a draft was prepared and an appointment made to see T  on 6 October. On 8 September T was admitted to hospital. On 7 October D made an appointment to see him in hospital but later cancelled it. On 21  October T  died. Pumfrey J  held that S  was liable. S  was under a duty to keep an appointment with an elderly client in hospital (as she was) unless the client was content for it to be cancelled. S was also under a duty to satisfy himself that the additional delay was not detrimental to the client’s interests. But once the solicitor acts promptly in drawing up the will and sending it to the client there is no automatic obligation to follow this up by chasing the client. In Atkins v Dunn & Baker4 S sent a draft to T but when T gave no further instructions he did not chase him. The Court of Appeal held that in the circumstances this was not negligent. Pill LJ stated this:5 ‘I am unable to accept that invariably and inevitably there is a duty upon a solicitor, who has carried out instructions to prepare a draft Will and has sent that draft to the client, to follow the matter up. There will often be situations in relation to Wills and other documents where there is a duty to send a reminder or further guidance to the client. An example which arose in argument is the situation where instructions were given to have a Will executed before budget day. It may be negligent for a solicitor, who had sent a draft, to fail to remind the proposed testator that budget day is approaching and that, if action is to be taken, it should be taken promptly. As Mr Kempson stated in evidence, clients do change their minds, for good reason or bad, maybe following consultation with other members of the family or after their own reappraisal of the circumstances in which they find themselves, or for other reasons. This was a case where there was a potential conflict of interest between the claimant and Winifred, especially as Winifred’s health was such that the need for expensive care could have arisen as well as the need to have a roof over her head. In the circumstances of this case, the recorder was entitled to hold that “the ball was in the client’s court”, and that the failure to send a reminder did not constitute such a fall below the standard to be expected of a competent solicitor as to amount to negligence.’ 1 See the facts of White v Jones [1995] 2 AC  207. See also Smith v Claremont Haynes & Co (1991) Times, 3 September (HHJ Barnett QC), Whittingham v Crease [1978] 88 DLR (3d) 353 and Gartside v Sheffield, Young and Ellis [1983] NZLR 37. 2 [2001] Lloyd’s Rep PN 274. Expert evidence was held not to be of assistance on this issue. 3 [2002] Lloyd’s Rep PN 18. 4 [2004] EWCA Civ 263, [2004] WTLR 477. 5 At [20] and [21].

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The preparation and execution of wills  11.12

(b) Execution 11.12 If a will is not executed in the presence of a solicitor, the solicitor owes a duty to check that it has been properly executed. In Humblestone v Martin Tolhurst Partnership1 Mann J stated this: ‘On the basis of that law I  have no difficulty in concluding that in principle a solicitor is capable of owing a duty to both testator and beneficiaries, in an appropriate case, to ensure and check that the proper formalities for the execution of a Will have been complied with. The question therefore arises as to how that law applies to the facts of this case. I  consider that it is clear on the facts that I  have found that the Defendants owed a duty to Mr Fahy, and a consequential duty to his beneficiaries, to check that the document executed by him was properly executed and that that duty was broken. I say that for at least two reasons. First, the solicitors were instructed to draft the Will and knew that in due course they would be asked to keep it in safe custody. In the course of their functions it became apparent that they would not be supervising its execution. I think that the normal fulfilment of such a retainer would require the solicitors when the document was returned to them for safekeeping, to check that, on its face, and on the facts then known to them, its execution was ostensibly valid … The second reason for the duty arising on the facts of this case is that, on the facts as I have found them, the solicitors assumed such a duty by checking the Wills when they were returned. I have found that they were checked and found “in order”. In so doing, the solicitors assumed a duty of care and were in breach of it. It makes no difference if, as may have been the case, that pronouncement was by a secretary.’ Solicitors are also under a duty to ensure that a will has been witnessed properly. In Ross v Caunters2 Sir Robert Megarry V-C found the defendants liable for failure to warn a testator that a will should not be witnessed by a spouse of a beneficiary and to check that it had been attested properly. As a consequence of this failure, the gift to the beneficiary was void under s  15 of the Wills Act 1837. In Esterhuizen v Allied Dunbar3 it was held to be negligent to leave the will with the testator to get it executed and witnessed by himself. The judge stated that ‘in ordinary circumstances just to leave written instructions and to do no more would not only be contrary with good practice but also in my view negligent’. He also approved the practice whereby the solicitor must either ensure that the testator comes into the office to execute the will or visits the testator at home with a member of staff to attest the will. Finally, in Hall v Meyrick4 the Court of Appeal upheld the decision of the trial judge that a solicitor owed a duty to draw to the attention of two clients who had instructed him to prepare their wills that those wills would become invalid if they married. They had been living under the same roof for 15 years and they made wills benefitting each other.5 611

11.13  Wills, estates and trusts 1 [2004]  EWHC  151 (Ch), [2004]  WTLR  343 at [28]–[30]: See also Gray v Richards Butler [2000] WTLR 143 (cited by Mann J in Humblestone v Martin Tolhurst Partnership at [29]). 2 [1980] Ch 297. The decision itself was of substantial importance for some time but following White v Jones the reasoning can no longer be relied on. See also, to the same effect, Watts v Public Trustee [1980] WAR 97. In Seale v Perry [1982] VR 193 the Supreme Court of Victoria refused to follow Ross v Caunters and held that a solicitor owed no duty of care to ensure that a will was properly attested. See also Osborne v Follett Stock [2017] EWHC 1811 (QB), [2017] PNLR 35 for a similar mistake. 3 [1998] 2 FLR 668 (Longmore J). See also Oats in (1998) 11 Sol Jo 1132, 1135. 4 [1957] 2  QB  455, CA. The action was, however, dismissed because the judge allowed an amendment to the pleadings after the expiry of the limitation period. 5 Section 18(4)(b) of the Wills Act 1837 (as amended by the Administration of Justice Act 1982) now contains a saving for the case where the testator was ‘expecting to be married’ at the date of execution.

(c)  Taking instructions 11.13 A solicitor owes a duty to take adequate instructions to ensure that the client has considered how to deal with all of his or her assets and to ensure that he or she fully understands the legal effect of the dispositions in the will.1 A solicitor also owes a duty to give proper effect to the client’s instructions2 and, where necessary, to clarify them.3 There are also a number of dicta in cases concerned with want of knowledge or approval which suggest that it would be negligent to take instructions through a beneficiary4 and that it is the solicitor’s duty to satisfy himself or herself that the will represents the client’s genuine wishes and that the client has mental capacity to execute it.5 Furthermore, a solicitor should not accept instructions to prepare a will under which he or she is to be a beneficiary unless the client takes independent advice.6 The effect of accepting instructions in these circumstances is to place on the solicitor the burden of proving that the testator or testatrix knew and approved of the contents of the will7 and where the solicitor fails to discharge that burden8 he or she will face a claim either from the beneficiaries under any earlier will or from the beneficiaries who could have expected to benefit if the will had expressed the client’s true intentions.9 There is no authority under English law that a solicitor who takes instructions but has some reason to doubt the client’s mental capacity, should cease to act but a number of Commonwealth authorities suggest that the solicitor should either withdraw or carry out the instructions but taking greater care to record the circumstances in which those instructions are given. Where the solicitor declines to act, these authorities also suggest that the solicitor cannot be liable to any disappointed beneficiaries.10  1 In Gibbons v Nelsons [2000]  PNLR  734 Blackburne J  stated (at 742G–743C): ‘Although the burden of proof rests with the claimant to establish what the scope was of the solicitor’s retainer, once the claimant establishes that the solicitor was retained to prepare a will, the burden must, I  think, shift to the solicitor to show, if he can, that his responsibility for the preparation of the will did not extend to advising the client on some aspect of the will relevant to the claim.’  2 See Martin v Triggs Turner Bartons [2009] EWHC 1920 (Ch), [2010] PNLR 3 (Floyd J) where the solicitors drafted a power of advancement ‘back to front’. They gave power to the will

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The preparation and execution of wills  11.14 trustees to advance up to £100,000 to the testator’s widow rather than a power to advance all but £100,000 of the estate to her.  3 See Gray v Buss Murton [1999] PNLR 882 (Rougier J) and Earl v Hickson [2000] SKCA 1, (2000) 183 DLR (4th) 45, [2001] WTLR 143 (CA of Saskatchewan). See also Kecskemeti v Rubens Rabin & Co (1992) Times, 31 December where S failed to take adequate instructions to satisfy himself that two properties were held on tenancies in common rather than joint tenancies and then to advise T to sever them. In Carr-Glynn v Frearsons [1999] Ch 326 S was held to be negligent by giving advice that she should obtain the deeds before taking steps to sever the joint tenancy rather than severing the joint tenancy at the same time as executing the will: see 332D–E (Chadwick LJ).  4 Aylwin v Aylwin [1902] P 203 at 204 (Jeune P).  5 See Wintle v Nye [1959] 1 WLR 284, HL, Russell v Fraser (1980) 118 DLR (3d) 733 at 745–6, Morrell v Morrell (1882) 7 PD 68 at 72–3 and Hall v Estate of Bruce Bennett [2003] WTLR 827 (CA of Ontario) at [22] (Charron JA): ‘The law is equally clear that a solicitor who undertakes to prepare a will has a duty to inquire into his or her client’s testamentary capacity’.   6 The SRA Code of Conduct for Individuals 2019 does not contain any direct prohibition. But on 6  May 2014 (updated on 25  November 2019) the SRA issued guidance on the drafting and preparation of wills which states as follows: ‘If you draft a will where the client wishes to make a gift of significant value to you or a member of your family, or an employee of your business or their family, you should satisfy yourself that the client has first taken independent legal advice with regard to making the gift. This includes situations where the intended gift is of significant value in relation to the size of the client’s overall estate, but also where the gift is of significant value in itself. Paragraph 6.1 of each of the Codes requires you not to act if there is an own interest conflict or a significant risk of an own interest conflict. In a situation like this, you will usually need to cease acting if the client does not agree to taking independent legal advice.’ The SRA Code of Conduct 2011, IB(1.9) provided that the following behaviour was indicative of achieving the mandatory outcomes: ‘refusing to act where your client proposes to make a gift of significant value to you or a member of your family, or a member of your firm or their family, unless the client takes independent advice’.  7 See Franks v Sinclair [2006] EWHC 3365 (Ch) (David Richards J) at [59]: ‘It is accepted for Mr Franks that because he was instrumental in taking the instructions for and preparing the 1994 will under which he is a substantial beneficiary and because Mrs Franks did not receive any independent advice, the circumstances are such as to put on him a burden to establish affirmatively that Mrs Franks knew and approved the contents of the will.’   8 See, in particular, the findings of David Richards J in Franks v Sinclair [2006] EWHC 3365 (Ch) (above) at [81]–[88] (where he placed reliance on principle 15.08 of the Guide to the Professional Conduct of Solicitors (1993) which was in force in May 1994 when the relevant will was made).  9 See Hall v Estate of Bruce Bennett [2003] WTLR 827 (CA of Ontario) at [49] (Charron JA) (where the point was conceded). 10 See Hall v Estate of Bruce Bennett (above) at [21] (Charron JA) citing Cullitty J in Scott v Cousins (2001), 37 ETR (2d) 113 (Ont. SCJ) at [71]–[73]. In that case S was held to have discharged his duty to T  by declining instructions. Compare Knox v Till [2000]  PNLR  67 where the Court of Appeal of New Zealand held that in the circumstances it was not reasonable to require S  to investigate T’s mental capacity and make a decision whether to decline instructions. In both cases the court expressed the view that S owed no duty to Bs to decline instructions from T.

11.14 Claims of this nature may face formidable evidential hurdles, however. In order to succeed the claimant must satisfy the court that the testator or testatrix intended to confer a particular testamentary benefit of which he or she has been deprived. Where there is a formal defect in the will or a delay in its execution, this will usually cause no difficulty.1 Where, however, the failure consists in failing to advise the testator to adopt a specific 613

11.14  Wills, estates and trusts testamentary disposition the difficulty is more acute. In cases where there was a valid will, the court will require convincing evidence both that the will did not represent the client’s wishes and that the client’s instructions were not carried into effect. This is a heavy burden and Walker v Medlicott & Son2 provides a good example of the difficulties involved. In that case, the testatrix visited the defendant’s office without an appointment to make a will. The defendant kept a note which she had prepared and made an attendance note of the meeting. The solicitor prepared the will on the basis of those instructions and the testatrix visited the defendant briefly on a second occasion to sign the will. The claimant was able to call a substantial body of evidence that the testatrix had intended to leave her property to the claimant, but his claim was dismissed at both first instance and by the Court of Appeal. The court accepted that the civil standard of proof was appropriate but followed the statement of Chadwick J in Re Segelman3 that ‘the probability that a will which a testator has executed in circumstances of some formality reflects his intentions is usually of such weight that convincing evidence to the contrary is necessary’. Sir Christopher Slade said this:4 ‘As I  have already pointed out, the onus falls on the plaintiff in the present case to prove by convincing evidence that the testatrix instructed Mr Medlicott to include in her will a gift of the house to the plaintiff and that he failed to carry out those instructions in circumstances which constituted negligence. The judge, in the penultimate sentence of his judgment, found that this had not been proved, and I see no sufficient grounds upon which the court would be entitled to interfere with that finding.’ In Gibbons v Nelson5 the issue was whether T was aware of her interest under a trust and, if not, what she would have done with it if she had been. Blackburne J  reached a similar conclusion that there was insufficient evidence of T’s intention. He rejected the argument that the burden of proof was lower where the particular intention which was under challenge was not one which was obvious from a reading of the will (although he accepted that the quality of extrinsic evidence need not be quite so convincing where there was an obvious omission). Nevertheless, the claim failed. It did so because Bs were unable to produce any real evidence that T intended them to benefit.6 Perhaps the most striking example is Sutherland v Public Trustee7 where the relevant will failed to include a gift over in the event of the principal beneficiary’s death. The claim failed because S had advised T of the possibility of intestacy. 1 See also Humblestone v Martin Tolhurst Partnership [2004] EWHC 151 (Ch), [2004] WTLR 343 where Mann J rejected the submission that B had to show that there was positive evidence that T’s intention continued down to the execution of the will: see [33]. 2 [1999] 1 WLR 727, CA. Compare Martin v Triggs Turner Bartons [2009] EWHC 1920 (Ch), [2010] PNLR 3 (Floyd J) (where the claimant was at the relevant meetings at which the client’s instructions were given). 3 [1996] Ch 171 at 184. See [1999] 1 WLR 727 at 731H–732A. 4 At 738A-B. 5 [2000] PNLR 734 at 748D–F.

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The preparation and execution of wills  11.15 6 See 149A–B. In Trusted v Clifford Chance [2000]  WTLR  1219 (Jonathan Parker J) B  also failed to satisfy the court that T intended him to have the benefit claimed. Compare Horsfall v Haywards [1999] Lloyd’s Rep PN  332, CA and Earl v Hickson [2000]  SKCA  1, (2000) 183 DLR (4th) 45, [2001] WTLR 143 (CA of Saskatchewan) at [26]–[42] (Sherstobitoff JA) where it was not in issue that the will failed to give effect to T’s intentions. 7 [1980] 2 NZLR 536, Supreme Court of New Zealand (Jeffries J). See, in particular, the findings at 547–548. Compare also Cancer Research Campaign v Ernest Brown & Co [1998] PNLR 592 (below) at 604G–605A (where Harman J also found that tax avoidance was not an aim which should be attributed to T) and RSPCA v Sharp [2010] EWCA Civ 1474, [2011] STC 553 at [15] (where Patten LJ stated that the aim of tax avoidance should not be accepted as a ‘universal truth’).

(d)  Notification of personal representatives or beneficiaries 11.15 An executor owes no duty to give information or advice to the beneficiaries in relation to the affairs of the estate.1 In the ordinary course, therefore, a solicitor who is instructed to act on behalf of the estate owes no duty to provide information to the beneficiaries either. In Cancer Research Campaign v Ernest Brown & Co2 Harman J  held that a solicitor (who was also the sole remaining executor) was under no duty to notify the residuary beneficiaries of the death of the testatrix, the terms of the will and the material facts about the estate so that they could apply to court for a tax efficient variation of the will. Moreover, where the solicitor’s negligence results in a loss to the estate and the personal representatives refuse to pursue that claim the proper course for the beneficiary is to bring a derivative action on behalf of the estate rather than to assert a duty of care. Derivative claims are considered in the next section. However, there may be exceptional cases in which the court will impose a duty of care on the solicitors to the beneficiary either to notify the personal representatives or the beneficiaries themselves. In Hawkins v Clayton3 Deane J gave the example of a failure by a firm of solicitors to communicate the existence or contents of a will in its custody to a person named as executor and principal beneficiary and expressed the view that this might constitute an actionable breach of duty of care owed to that person in his capacity as a beneficiary. He also gave another example of the failure of a firm of solicitors to disclose the existence of a will causing the assets of the estate to be irretrievably distributed to the next of kin on intestacy or to persons claiming under an earlier will. It is suggested that the court should impose a direct duty of care where the estate is unable to recover the assets and the beneficiary has no claim against the executors. In those circumstances the same lacuna would exist as in White v Jones. There may also be circumstances in which the solicitor assumes a direct responsibility to the individual beneficiaries for discharging these functions. In Martin v Triggs Turner Bartons4 Floyd J held that the solicitors acting for the estate had assumed responsibility to the testator’s wife to advise her in relation to her widow’s pension but not a general duty to give her advice in relation to the contents of the will. 1 See Re Lewis [1904] 2 Ch 656 and Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19. Neuberger J also held that there was no duty owed by the executors to the beneficiaries for losses which accrue to the estate as a result of any delay in proving the will: see [12].

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11.16  Wills, estates and trusts 2 [1998] PNLR 592. See O’Sullivan, ‘Solicitors, executors and beneficiaries: Who can sue and who can be sued?’ (2003) 19 PN 507. 3 (1988) 78 ALR 69 at 99, lines 27–44. 4 [2009] EWHC 1920 (Ch), [2010] PNLR 3 at [93]–[100] at [115]–[118].

3  Claims brought by estates (a)  Losses suffered during administration 11.16 Although the existence and scope of the duty of care owed by a solicitor to the beneficiary of an estate has received the most judicial attention, most cases will inevitably involve the question whether the personal representatives should bring an alternative claim on behalf of the estate. What distinguishes these cases from other cases of negligence is that they often involve a number of anomalies. The losses which the solicitor’s negligence has caused may occur on death rather than during the lifetime of the testator or the testatrix. They may occur before the personal representatives are appointed and they may involve no net depletion of the assets of the estate but losses to individual beneficiaries. The courts have usually overcome these anomalies in the desire to do practical justice although sometimes at the expense of logical coherence. The easiest cases to analyse are those in which the solicitor is engaged by the personal representatives to act in relation to the administration of the estate and the assets of the estate are depleted in the course of administration. In Chappell v Somers & Blake1 the executor of an estate made a claim against her solicitors for failing to take any steps to obtain probate and then to get in and administer the assets. She claimed that as a consequence of the solicitor’s failure to act the estate had lost the income which it would have earned from a number of investment properties during the period of delay. The solicitors applied to strike out the claim on the basis that the executor had no title to sue and that she had not suffered the losses claimed. Neuberger J rejected this argument. The executrix was properly to be regarded as the representative of the owner, the assets did not vest in the beneficiary and the executor was liable to account to the beneficiary for any damages received.2 If the executrix is properly to be regarded as the owner of the property until the due administration of the assets and the distribution to the beneficiaries (and this is the orthodox position under English law) then there is no logical difficulty in relation to the claim.3 In Hawkins v Clayton4 the personal representatives were also able to recover the losses which they suffered in the course of administering the estate. A majority of the High Court of Australia held that it was the duty of the solicitor (who had prepared a will for the deceased and with whom the will had been left for safekeeping) to take reasonable steps to locate and notify the executor of her estate. Because the defendants failed to do so they were found liable to the estate for the losses it suffered both as a consequence of the estate property falling into disrepair and also of a fine levied for late payment of estate duty. 1 [2003] EWHC 1644 (Ch), [2004] Ch 19.

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The preparation and execution of wills  11.17 2 See [21]–[29] and the analysis of the decision by Laddie J in Malkins Nominees Ltd v Societe Financiere Mirelis SA [2004] EWHC 2631 (Ch) at [55]. 3 See also Jemma Trust Co Ltd v Kippax Beaumont Lewis [2004] EWHC 703 (Ch) where Etherton J found that solicitors acted negligently in advising executors to apply to the Court of Protection for consent to a variation where the receiver of one of the beneficiaries was a patient. There was no issue that the executors had title to sue. The decision at first instance was the subject of an appeal (but not on this point): see [2005] EWCA Civ 248, [2005] WTLR 683. 4 (1988) 78 ALR 69.

(b)  Losses suffered on death 11.17 The position is more difficult where the loss which the personal representatives claim to recover occurs on death. In Otter v Church, Adams, Tatham & Co1 the tenant in tail of settled land, who would have become absolutely entitled to the trust property by executing a disentailing deed, received negligent advice from his solicitor that it was unnecessary for him to do so. He died and the property passed to his uncle. His administratrix sought to recover the value of the trust property from the solicitors, who accepted liability, but argued that damages were nominal because the deceased could have avoided the loss by executing the necessary assurance at any time during his lifetime. Upjohn J rejected this argument and awarded damages to the estate for the deceased’s loss of opportunity to execute the deed. He characterised the real issue as the date on which damages should be assessed.2 In McLellan v Fletcher3 Anthony Lincoln J distinguished Otter but nevertheless held that a solicitor was liable to his deceased client’s estate for failing to ensure that a life policy securing a mortgage was in force on completion of a domestic house purchase. However, unlike Otter, the deceased could never have received the proceeds of the policy during his lifetime and they would only have formed part of his estate if the policy had been in force at his death. Phillips J declined to follow McLellan in Lynne v Gordon Doctors and Walton4 on very similar facts because the deceased had suffered no loss himself for which the estate could claim. Neither of these cases involved a claim by the beneficiaries, however, and in Gorham v British Telecommunications plc5 the Court of Appeal met this difficulty by holding that the intended beneficiaries of a life policy had a direct claim against an insurance company for negligent advice because the estate of the insured had suffered no loss. 1 [1953] Ch 280 (Upjohn J). 2 See [1953] Ch 280 at 285 and 289. See also the analysis of Norris J in Vinton v Fladgate Fielder [2010] EWHC 904 (Ch), [2010] PNLR 26, [2010] STC 1868 at [12]. 3 (1987) 3 PN 202. 4 (1991) 135 Sol Jo LB 29. The judge followed the dicta of Kennedy LJ in Griffiths v Fleming [1909] 1  KB  805 at 820–821 which was not cited to Anthony Lincoln J. See also Dunn v Eairs, Blissard, Barnes and Stowe (1961) 105 Sol Jo 932 (Barry J) in which executors sued the deceased’s former solicitors for accepting instructions from her to purchase an annuity at the age of 77 written and sent from the Marie Curie Hospital. The claim was dismissed on the ground that the solicitor had not been negligent. 5 [2001] 1 WLR 2129.

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11.18  Wills, estates and trusts

(c)  Inheritance tax losses 11.18 The recovery of inheritance tax losses has generated a number of decisions in this area. The decision of the Court of Appeal in Daniels v Thompson1 is clear authority for the proposition that personal representatives cannot bring a claim on behalf of the estate of a deceased client to recover inheritance tax which the estate incurs as a consequence of the solicitor’s negligence because the client has suffered no loss during his or her lifetime or has no claim which survives death.2 In Rind v Theodore Goddard3 Morgan J distinguished Daniels on the basis that the claimant was bringing the claim in his capacity as a beneficiary and that there was a lacuna which needed to be filled. In Vinton v Fladgate Fielder4 there were claims by both the personal representatives and the beneficiaries. Norris J  permitted the claim by the beneficiaries to go to trial for similar reasons. However, he also refused to strike out the claim by the personal representatives, distinguishing Daniels on the basis that there was a claim for breach of contract as well as a claim in tort.5 He also permitted the claims in tort by the estate and the personal representatives to go trial on the basis that Otter v Church, Adams, Tatham & Co6 was not cited or considered in Daniels and that the Court of Appeal might wish to give further consideration to this issue after taking into account both Otter and the decision in Carr-Glynn v Frearsons.7 Given the current state of the authorities the safe course is for the personal representatives and the beneficiaries to bring separate claims. If the Court of Appeal is prepared to depart from Daniels there will be no lacuna to be filled. But if Daniels survives there is a strong case for imposing a duty of care in favour of the beneficiaries. 1 [2004]  EWCA  Civ 307, [2004]  PNLR  33 (criticised by O’Sullivan at [2005]  CLJ  29). See para 11.06, above. 2 The reasoning of the majority was that T had suffered no damage since she was not liable for inheritance tax during her lifetime (and the estate could not therefore bring a claim) but the claimant who was her personal representative had suffered no loss either: see [33]–[38] and [48] (Dyson LJ) and [60]–[67] Carnwath LJ). Gray J held that on the assumption that the estate had suffered damage the claim was barred by limitation. It may be that the decision turns to some extent on s 1 of the Law Reform (Miscellaneous Provisions) Act 1934: see Carnwath LJ at [60]. On procedural grounds, the Court also rejected an application for permission to amend to plead a case that S owed T’s personal representatives a duty of care: see [52] and [53]. 3 [2008] EWHC 459 (Ch), [2008] PNLR 24. 4 [2010] EWHC 904 (Ch), [2010] PNLR 26, [2010] STC 1868. 5 See [12]–[19]. 6 [1953] Ch 280. 7 [1999] Ch 326, CA.

(d)  Derivative claims 11.19 In many cases the personal representatives and the beneficiaries or intended beneficiaries are the same. However, it is possible that the personal representatives may refuse to bring a claim against the solicitors and the beneficiaries may be unable to make a claim because the estate or the personal 618

The preparation and execution of wills  11.20 representatives have suffered the loss and therefore have title to sue.1 If the personal representatives refuse to assign the benefit of the cause of action to the beneficiaries or to bring a claim themselves the court may in some circumstances permit the beneficiaries to bring a derivative claim on behalf of the estate. It is not enough, however, for them to show that the personal representatives are unwilling to bring a claim. The circumstances must be sufficiently special to make it just for the beneficiary to have the remedy. The categories are not closed. But the most obvious circumstances in which the court will permit a beneficiary to bring a derivative claim are the fraud, collusion or insolvency of the personal representative or a conflict of interest which would inhibit or prevent them from pursuing the claim.2 As Lord Templeman put it in Hayim v Citibank:3 ‘a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.’4 1 See for instance the facts of Worby v Rosser [2000] PNLR 140, CA. 2 See Hayim v Citibank [1987] AC 730 and Roberts v Gill & Co [2010] UKSC 22, [2011] AC 240 at [45]–[53]. 3 [1987] AC 730 at 748F–G. Special circumstances were not found to exist in that case. 4 Re Field [1971] 1 WLR 555 (which is not a solicitors’ case) is an example of the width of ‘special circumstances’. C was the deceased’s first wife. He had remarried and left his entire estate to his widow. D had employed the deceased and paid the proceeds of certain insurance policies over to the widow. C obtained an order for maintenance out of the estate and brought a claim against D to recover the proceeds of the policies for the benefit of the estate. There was no suggestion of fraud or collusion or of a conflict of interest on the part of the personal representatives. But they had refused to bring a claim. C was the only beneficiary of the claim since the widow (who was entitled to the estate) could hardly be expected to litigate the question. Goff LJ considered that the position was closely analogous to a bare trust and refused to strike out the claim.

11.20 In Roberts v Gill & Co1 the Supreme Court reviewed the authorities and upheld the decision of the judge at first instance refusing permission to a beneficiary to bring a derivative claim against solicitors who had acted in various transactions relating to his grandmother’s estate (of which he was one of three residuary beneficiaries). The claim was originally brought by C in his capacity as a beneficiary, but he applied for permission to amend his case to bring a derivative claim on behalf of the estate after the expiry of the limitation period. The judge refused permission for a number of reasons2 including the following: (1) the administrator had been appointed on C’s application before the expiry of the limitation period; (2) C had neither sought to be appointed administrator nor attempted to take an assignment of the claim; (3) there was no suggestion of fraud, collusion or breach of trust by the administrator; and (4) C was not the sole beneficiary and there was no evidence of the attitude to the claim of the other beneficiaries or HMRC. The claim failed in the Supreme Court because C  could not satisfy the test for amendment after the expiry of the relevant limitation. But the Supreme Court held unanimously that the 619

11.21  Wills, estates and trusts judge had approached the question of ‘special circumstances’ correctly. Before making a derivative claim, then, it is prudent for a beneficiary to make an offer to take an assignment and to indemnify the personal representatives against the costs of the claim. Care should also be taken to ensure that the claim is made in a representative capacity and it will normally be necessary for the action to be brought against both the solicitor and the personal representatives (if they will not agree to be bound by the outcome).3 1 [2010] UKSC 22, [2011] 1 AC 240 at [45]–[53]. For an application of the rule in a professional negligence claim against an investment adviser see Bayley v SG Associates [2014] EWHC 782 (Ch), [2014] WTLR 1315 (David Railton QC). For a case involving derivative claims brought by both a shareholder and a beneficiary see Kallakis v AIB Group plc [2020] EWHC 460 (Comm) (Moulder J). For the beneficiary claim see [70] and [71]. 2 See [74] 3 In Roberts the majority held that in a derivative claim by a beneficiary, the personal representatives should be parties to proceedings from the outset. This was a substantive and not merely a procedural requirement: see [62], [68], [71] and [79]. The reason is that a beneficiary under a will is not in the same position as the equitable assignee of a claim: he or she does not have a beneficial interest in the cause of action, but only a beneficial entitlement to some part of the proceeds of the claim.

4 Damages (a)  General principles 11.21 Where a disappointed beneficiary is deprived of a benefit through a formal defect in the will, the primary loss is the benefit under the will to which he or she would have been entitled if the testator’s instructions had been carried out. In White v Jones1 the Court of Appeal awarded the claimants the full amount of their legacies without deduction for any prospect of a last-minute change of heart although there had been some evidence of this. In Gibbons v Nelsons2 (where the claim failed because B could not establish T’s intention) Blackburne J would have awarded damages by reference to the share in the relevant fund to which B would have been entitled at T’s death. He also accepted that the preparation of a further will between the will which had been negligently drafted and T’s death did not break the chain of causation because on that occasion S was instructed to make specific changes and there was no general change of testamentary intention. In Martin v Triggs Turner Bartons3 where the solicitors drafted a defective power of advancement, Floyd J awarded the amount which would have been advanced to the disappointed beneficiary if the will been correctly drafted, concluding that the will trustees would have advanced 50% of the available capital. The beneficiary had brought rectification proceedings which had been compromised. She was therefore awarded the difference between the capital which the will trustees would have advanced to her and the amount she received on the compromise.4 1 [1995] 2 AC 207 at 228A–E. (This point was not considered by the House of Lords.) 2 [2000] PNLR 734.

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The preparation and execution of wills  11.23 3 [2009] EWHC 1920 (Ch), [2010] PNLR 3. 4 See also Whittingham v Crease & Co (1978) 88 DLR (3d) 353 (where the court awarded the difference between the one-third share and one-fifth share of the residue which the beneficiary should have received and then reduced the award to take account of claim which the testator’s other children could have brought under the family provision legislation in Canada); Gartside v Sheffield, Young and Ellis [1983]  NZLR  37 (where Cooke J  also reduced damages to take account of family provision claims); and Earl v Hickson [2000] SKCA 1, (2000) 183 DLR (4th) 45, [2001]  WTLR  143 (where similar difficulties of assessment arose in relation to income losses). The court also refused to accept the defence of contributory negligence on the ground that T could not be treated as the claimant and his estate had suffered no loss: see [47]–[52]. Although the relevant statutory framework is different, these points seem capable of being taken in an English court.

11.22 The beneficiary must also give credit for any other benefits from the estate which he or she would not have received if the intended testamentary dispositions had taken effect. Where the estate makes a claim the general principles applicable to the assessment of damages should apply (depending on the nature of the assets and losses claimed).1 In Feltham v Freer Bouskell2 the judge held that there was no doubt what T would have done but also expressed the view that damages in a disappointed beneficiary claim should be assessed in accordance with ‘loss of a chance’ principles3 treating T as a third party. If he meant no more than that in order to prove loss B must show that T might have made the gift (if S had not been negligent), this may be inconsistent with the principles considered in this chapter. In order to establish a duty of care at all, it is a prerequisite that B establishes on the balance of probabilities that T  intended to confer upon him or her a particular benefit. Loss of a chance principles may apply, however, to the assessment of damages where the extent to which B  would have benefited from the estate would have depended on the actions of third parties4 or when there is evidence that the testator might subsequently have changed his or her mind. 1 For an example of an estate claim which raised a novel issue, see Whitehead v Searle (sub nom Hibbert Pownall & Newton v Whitehead) [2008] EWCA Civ 285, [2009] 1 WLR 549, discussed in Chapter 12 at para 12.66. The estate brought a claim against a firm of solicitors who had failed to pursue a clinical negligence claim. The deceased had committed suicide and the issue was whether the estate was entitled to recover damages for the future losses which the deceased would have been awarded if the claim had been determined or settled whilst she was still alive. The Court of Appeal dismissed the claim. Laws LJ considered that the loss was not recoverable as a matter of policy: see [20]. Rimer LJ considered that the court could take into account the subsequent losses in assessing damages: see [80]. Rix LJ agreed with both judgments. The separate claim by the deceased’s former husband is considered at para 1.25, fn 7, above. 2 [2013] EWHC 1952 (Ch), [2014] PNLR 2 (Charles Hollander QC): see [96]–[112]. 3 See Chapter 3, paras 3.12 to 3.25. 4 As in Martin and the cases discussed in 11.21, fn 4, above.

(b) Costs 11.23 Many of the authorities relating to wills and estates involve claims for costs which the beneficiaries or personal representatives have incurred in probate or trust proceedings. In order to be recoverable, such costs must be the 621

11.24  Wills, estates and trusts direct and foreseeable consequence of the solicitor’s breach of duty and within the scope of the solicitor’s duty.1 Further, the normal principles applicable to the recovery of costs as damages will apply and the claimant will only be entitled to costs reasonably incurred.2 Where, therefore, the court has disallowed the recovery of costs in earlier proceedings or ordered the claimant to pay the costs of a third party, it is unlikely that the court will find that they were reasonably incurred.3 The same principle does not necessarily apply, however, where the claimant has settled the earlier proceedings on terms that he or she should bear their own costs.4 The court may also order any recoverable costs to be assessed, although the first instance authorities are sharply divided on whether costs should be assessed on the standard basis or the indemnity basis.5 1 See Corbett v Bond Pearce [2006] EWHC 909 (Ch), [2006] WTLR 967 (Rimer J) at [68]–[71]. 2 See The Tiburon [1992] 2 Lloyd’s Rep 26. 3 See Ross v Caunters [1980] Ch 297 at 323F–324G where Megarry V-C rejected a claim for legal expenses because they had been disallowed and Corbett v Bond Pearce [2006] EWHC 909 (Ch), [2006] WTLR 967 (above) where Rimer J refused to award a number of heads of loss (including the executor’s remuneration) but allowed the costs which he had incurred under the second will on the basis that they were to be treated as a pecuniary legacy: see [78], [91] and [92]). 4 See Martin v Triggs Turner Bartons [2009] EWHC 1920 (Ch), [2010] PNLR 3 at [88] where the claimant settled her claim against the charitable beneficiaries on terms that she bore her own costs, but Floyd J considered that those costs were reasonably incurred in mitigating her loss. He also decided what proportion of the costs was attributable to the defendants’ negligence and assessed them himself: see [91] and [92]. 5 Newey J  reviewed all of the key arguments and authorities at first instance in Herrmann v Withers LLP [2012] EWHC 1492 (Ch) at [116]. He held that costs assessed on an indemnity basis were recoverable as damages and declined to follow a number of authorities in which standard costs only had been recovered. For further discussion see Chapter 3, para 3.71.

11.24 In Marley v Rawlings1 the Supreme Court ordered that both parties’ costs of proceedings for rectification of a will (see below) should be paid directly by the insurers of S who had made the error that had given rise to the litigation. The solicitor had drafted mirror wills for a husband and wife but had mistakenly given each the other’s will to sign. C was their adopted son and was the sole beneficiary of the husband’s will (as rectified). One reason for the order was that if the costs were ordered to be borne by the estate, C would be ‘able, in effect, to reconstitute the estate through a claim for damages against the Solicitor’.2 The judgment appears to proceed, however, on the basis that C would have brought a claim in his capacity as a beneficiary rather than as personal representative and on behalf of the estate.3 It is suggested that the situation was analogous to Worby v Rosser4 and that the breach of S’ duty to T had caused the estate to incur the costs of the probate action. But the form of order would have been the same. 1 [2014] UKSC 51. 2 See [11]. The insurers had already accepted liability to pay C’s costs and had required him to bring the proceedings to have the will rectified by way of mitigation of loss. 3 See [10]: ‘given that the respondents’ decision to fight this litigation was not unreasonable, it would be harsh if they had to pay any substantial costs, as explained above. Consequently, there is considerable force in the notion that they should obtain their costs out of the estate. However, if that happened, those costs would be ultimately borne by Mr Marley, because he is entitled to

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The preparation and execution of wills  11.25 the estate, and he would suffer to the extent that it is diminished by the respondents’ costs, and therefore could recover that diminution from the Solicitor.’ From the report at [2015] AC 157, it appears that the defendants had submitted that Mr Marley had a cast-iron claim against the solicitor on the basis of the White v Jones principle. For an analysis of the jurisdictional basis for the costs order, see para 13.82, fn 1, below. 4 [2000] PNLR 140, CA (considered in 11.08 above).

(c) Rectification 11.25 Solicitors’ claims in relation to the preparation of wills also give rise to one specific issue that is not encountered elsewhere. Where a will does not express T’s true intentions it is open to the personal representatives to apply to court for rectification of the will pursuant to s  20 of the Administration of Justice Act 1982.1 Where C  claims damages from S  for failing to record T’s instructions faithfully in a will, he or she must establish all the necessary ingredients of a successful claim for rectification under this section before a claim against S  will succeed. Indeed, C  might well succeed in obtaining rectification of the will where he or she would not succeed in negligence against S. This is precisely what happened in Walker v Medlicott2 where C adduced cogent evidence of T’s intention but the court found that S had not been negligent. The court also held that C had failed to mitigate his loss by commencing proceedings for an order for rectification. The Court of Appeal distinguished the general principle established by Pilkington v Wood3 that a claimant is not obliged to mitigate his or her loss by embarking on uncertain and expensive litigation on the basis that the evidence in both actions would have been precisely the same:4 ‘This is a situation in which, as a general rule, the Courts can reasonably expect the plaintiff to mitigate his damage by bringing proceedings for rectification of the will, if available, and to exhaust that remedy before considering bringing proceedings for negligence against the solicitor, for example, in relation to costs incurred in the rectification proceedings.’ 1 ‘(1) If a court is satisfied that a will is so expressed that it fails to carry out the testator’s intentions, in consequence – (a) of a clerical error; or (b) of a failure to understand his instructions, it may order that the will shall be rectified so as to carry out his intentions. (2) An application for an order under this section shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out.’ 2 [1999] 1 WLR 727. See, in particular, 738B–D (Sir Christopher Slade). See also Kerridge and Brierly, ‘Mistakes in wills: rectify and be damned’ (2003) 62 CLJ 750 (where the authors argue that the case was wrongly decided). 3 [1953] Ch 770 (Harman J). 4 [1999] 1 WLR 727 at 739F–G (Sir Christopher Slade). In Giles v RNIB [2014] EWHC 1373 (Ch) S (who was also the administratrix of T’s estate) brought proceedings for rectification of a deed of variation which she had drawn up but which failed to alter the provisions of T’s will in order to reduce inheritance tax. She appears to have realised the problem herself although proceedings had been threatened by a number of charities who were the ultimate beneficiaries (because T’s sister, who was the principal beneficiary, had died shortly after T himself). It seems doubtful whether S owed any duty to the sister or the charities as beneficiaries of her estate.

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11.26  Wills, estates and trusts 11.26 In Horsfall v Haywards1 the general application of this proposition was tested for the first time. In that case, the defendants admitted that they had failed to draft the testator’s will in accordance with his instructions. The court did not, however, find that the claimant ought to have commenced rectification proceedings, for three principal reasons: first, on the facts, the judge doubted whether a claim for rectification would succeed. Secondly, the principal asset of the estate was the testator’s house and the principal beneficiary, whose share was increased as a consequence of the defendants’ negligence, had moved to Canada and the proceeds of sale were remitted to her there. Rectification proceedings would have been costly and time-consuming and ‘would not have resulted in any material recovery of the funds to compensate the plaintiffs for the loss of their interest under the will’. Thirdly, and perhaps most importantly, the defendants had acted for the claimants in relation to the grant of probate and had not advised them to take rectification proceedings either before the principal beneficiary moved to Canada or before the time limit for bringing the proceedings had expired. Horsfall v Haywards should, therefore, be regarded as an exception to the general rule and where a disappointed beneficiary becomes aware that the solicitor has failed to record the testator’s instructions before the expiry of the time limit, he or she ought, in the first place, to bring proceedings for rectification. Indeed, even where the beneficiary becomes aware of the error after the six-month period has expired, it would be sensible to make an application for permission under s 20(1)(b) to bring rectification proceedings out of time before contemplating an action against the negligent solicitor.2 1 [1999]  PNLR  583, CA. The leading judgment was delivered by Mummery LJ who was a member of the court in Walker v Medlicott. 2 In Cowan v Foreman [2019] EWCA Civ 1336, an application to disapply the six-month time period under the analogous provisions of the Inheritance (Provision for Family and Dependants) Act 1975 was granted, reversing the decision of the judge below. The Court of Appeal emphasised at [46] that there was no disciplinary element to the time limit and that unlike the provisions of the CPR, it was not to be enforced ‘for its own sake’. In an appropriate case, an application under s 2 of the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision from the estate of the deceased may provide another route by which a disappointed beneficiary can mitigate the consequences of a solicitor’s failure to draft a will in accordance with the testator’s instructions. However, it will not be a straightforward solution in many cases, for three reasons. First, such an action is only open to certain classes of potential beneficiary (s 1). Second, unless the disappointed beneficiary is a spouse or civil partner, the court can only grant such financial provision as is reasonable for the applicant’s maintenance (s 1(2)(b)). Finally, the jurisdiction does not depend upon the testator’s intention (indeed, the legislation expressly enables the testator’s known intentions to be overridden) and so, although in the scenario with which we are concerned, evidence of the testator’s intention is likely to be put before the court in any application under the 1975 Act, the point that the evidence required in the two actions is likely to be identical will not apply with the same force. Accordingly, scenarios in which a disappointed beneficiary is expected to make such an application are likely to be rare.

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Inter vivos trusts and dispositions  11.27

B  INTER VIVOS TRUSTS AND DISPOSITIONS 1  Claims by trustees 11.27 The general rule is that trustees who hold assets on trust are entitled to bring a claim on behalf of the beneficiaries for damage which they have suffered as a consequence of negligent advice of their trust advisers. The trustees have the benefit of the claim and it is only they (and not the beneficiaries) who are entitled to advance or maintain it.1 If the trustees are not prepared to pursue a claim against the solicitors (or other advisers) who have acted for the trustees and obtain the directions of the court to this effect the beneficiaries are unable to bring a separate claim. The underlying rationale for these rules is that the claim against the trust’s advisers forms part of the trust assets. In general, therefore, the advisers owe a duty of care to the trustees and not to the beneficiaries and the chose in action constituted by a breach of that duty belongs to the trust.2 Only in exceptional circumstances may a beneficiary bring a derivative action in his or her own name on behalf of the trust against a third party in the same way as the beneficiaries of an estate.3 This principle is illustrated by Bradstock Trustee Services Ltd v Nabarro Nathanson4 where the trustees of a pension fund brought a claim against the solicitors who had advised the fund to make certain payments. They decided later not to pursue the claim after they had been advised that the costs on both sides were likely to exceed the fund’s total assets, and they would be exposed to the risk of paying the defendants’ costs personally. Two of the potential beneficiaries of the fund obtained legal aid to enable them to pursue the claim and applied to the court for an order substituting them as plaintiffs. The application was refused. The cause of action belonged to the trustees and their refusal to continue the action did not constitute a failure by them in their performance of their duty to protect the trust estate.5 In any event, the judge considered that beneficiaries suing in a derivative action were entitled to obtain their costs out of the assets of the fund, so allowing the beneficiaries to be substituted as plaintiffs did not answer the concern that the assets of the fund might be wholly depleted by the costs of the action. 1 See Hayim v Citibank NA  [1987]  AC  730, Parker-Tweedale v Dunbar [1991] Ch  12, CA, Malkins Nominees Ltd v Societe Financiere Mirelis SA [2004] EWHC 2631 (Ch) at [43]–[59] (Laddie J), Young v Murphy [1996] 1 VR 279, Webster v Sandersons [2009] EWCA Civ 830, [2009] 2 BCLC 542 at [31] (Lord Clarke MR) and Bayley v SG Associates [2014] EWHC 782 (Ch), [2014] WTLR 1315 (David Railton QC) at [48]–[51]. It is a question of fact whether the chose in action belongs to the trustees or former trustees but the critical question is likely to be whether the retainer arose in the course of the administration of the trust. 2 See Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, PC at 391F (Lord Nicholls). 3 See paras 11.19 and 11.20 (above). 4 [1995] 1 WLR 1405 (HHJ Paul Baker QC) at 1413 B–C (applied in Re Nordea Trust Co (Isle of Man) Ltd [2010] WTLR 1393 (HHJ Deemster Kerruish QC)). 5 In Bradstock the judge drew a distinction between the claim in contract and the claim in tort (at 1411G): ‘Where the action sounds in tort there can be no question of the trustees constituting themselves as trustees of a chose in action right from the moment that they first consulted the solicitors. As I see it the claim cannot be regarded as part of the trust property, though doubtless any damages which may be recovered would be.’ There must be some doubt whether this is

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11.28  Wills, estates and trusts correct or, if it is, whether this distinction is of general application: see para 11.28, fn 1, below. The contractual claim appears to have been barred by limitation.

11.28 However, where the trustees do make a claim they ought to be able to bring any claims which would have been available to their predecessors as trustees of the trust.1 The scope of the losses which the trustees are entitled to recover has also been interpreted generously. They may recover as damages from the defendant not only the physical or financial damage to trust assets but also those losses which have been borne by the beneficiaries.2 Indeed, even where the trustees have suffered no personal loss they may bring a claim to recover losses suffered by a beneficiary. In Shell UK Ltd v Total UK Ltd3 the Court of Appeal rejected the proposition that a legal owner who is a trustee cannot sue for loss suffered by a beneficial owner unless he or she (or the trust estate) has also suffered that loss, but held that there are circumstances in which a trustee can sue for economic loss which not he but the beneficiary has suffered (provided only that the relevant beneficiary is a party to the action so that there is no question of double recovery). 1 See s 40(1) of the Trustee Act 1925. In Bradstock (above) the judge doubted whether a cause of action in tort could be trust property (but this may be because no damage had been suffered): see [1995] 1 WLR 1405 at 1411G (set out above). Lord Nicholls did not identify this limitation in Tan. 2 Chappell v Somers & Blake [2003] EWHC 1644 (Ch), [2004] Ch 19 (approved by the Court of Appeal in Shell UK Ltd v Total UK Ltd [2010] EWCA Civ 180, [2011] QB 86 at [139]–[142]). In Chappell the loss was suffered by the beneficiary because the estate ought to have been distributed earlier and the beneficiaries would have avoided the income losses claimed. 3 See [138] and [141]. Waller LJ also referred to the well-established principle that a trustee can sue in contract and recover damages for the loss suffered by the beneficial owner where the other party to the contract knew that the first party was a trustee, citing Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1988] 2 Lloyd’s Rep 505 (affirmed at [1989] 1 Lloyd’s Rep 568): see [138].

11.29 Where there has been a breach of duty or breach of trust by a solicitor who is also a trustee, the solicitor may, as a trustee, seek to recover trust money that has been lost as a consequence.1 This may include a claim against the solicitor. The fact that a solicitor is also a trustee (or the director of a trust company) should not affect the scope of his or her duties to the trust2 although it will not be easy for the solicitor to establish that there were any limitations on the scope of the retainer. Moreover, where a solicitor acts for a trust he or she is likely to be required to achieve the standard of a specialist.3 One issue which may arise is whether the solicitor ought to have given advice which also fell within the expertise of another adviser (such as an accountant). If a tax or legal issue arises, it is suggested that the solicitor must owe a duty (at the very least) to satisfy himself or herself that the client has taken advice on the relevant issue and, if not, to ensure that the client does so.4 1 In Pulvers v Chan [2007] EWHC 2406 (Ch), [2008] PNLR 9 a dishonest employee of a firm of solicitors had assisted in a series of mortgage frauds the consequence of which was that lenders’ money was paid out of the firm’s client account in breach of trust. The firm, rather than the lenders, brought proceedings for (inter alia) knowing receipt and dishonest assistance in a breach of trust against the employee and borrowers in an attempt to reconstitute the trust funds. The judge concluded at [380] that the firm as trustee was entitled to claim equitable compensation on behalf of the beneficiaries. For further discussion, see Chapter 4, para 4.13, fn 3.

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Inter vivos trusts and dispositions  11.30 2 See Bayer v Balkin (1995) 31 ATR  295 at 305–6 (Cohen J, Supreme Court of New South Wales) and AMP General Insurance Ltd v Macalister Todd Phillips Bodkins [2006] WTLR 189 (overruled on a different point by the Supreme Court of New Zealand [2006] NZSC 105). 3 See para 2.07, above. For examples of claims by trustees see Bonham v Blake Lapthorn Linnell [2006] EWHC 2513 (Ch), [2007] WTLR 189 (Kitchen J) at [193]–[214] (where Kitchen J held that a solicitor was under no duty to advise trustees to make a Beddoe application to the court for directions in relation to litigation) and Mason v Mills & Reeve [2012] EWCA Civ 498 (where it was held that a solicitor owed no duty to advise the settlor to postpone the settlement until after an operation). 4 See also the comments in Herring v Shorts Financial Services LLP [2016] WTLR 1203 (Leeds County Court) HHJ Behrens expressed the view that solicitors had been negligent for failing to check the effect of a tax-saving transaction with the client’s tax advisers: see also para 11.05, fn 4, above.

2  Claims by settlors 11.30 The principles discussed in para 11.27 to 11.29 (above) are primarily concerned with losses suffered by trustees in exercising their powers and duties over trust assets or in the course of administering the trust or estate. Where, however, the claim arises out of defective advice given by a solicitor or trust adviser in setting up a trust (or trustees resettling trust assets on new trusts) or making another kind of disposition, the position is more complex. The obvious analogy here is the solicitor advising a testator in the White v Jones context. But the obvious difference is that the settlor will usually be alive and able to bring a claim for breach of contract. However, the similarity between the testamentary cases and the inter vivos cases is that the losses are usually suffered not by the settlor but by the trustees or the beneficiaries.1 In cases where a settlor has set up or created a trust with adverse tax consequences which he or she could have avoided if properly advised the settlor has been able to recover not only losses which he or she suffered personally but also losses suffered by the trustees. In Estill v Cowling Swift & Kitchin2 Arden J held that the solicitors were liable for the tax losses suffered by the trustees on the basis that it was foreseeable that they would suffer the loss, advice was sought on their behalf and that the solicitors also owed them a duty of care. In that case both settlor and trustees were parties to the action. In Temair v Turcan Connell3 the principal claim was brought by the settlor alone. He established a series of trusts for the benefit of his children and wider family but he wished the estate which was the subject matter of a particular trust to pass to his eldest son. His solicitors missed a time limit for making an election which made this possible and the trustees had to go through a series of reorganisations with adverse tax consequences to achieve his aims. The settlor’s eldest son paid the tax by taking out a loan which the settlor guaranteed. Lady Smith refused to strike out his claim for the tax and professional fees because it was arguable that they fell within the scope of the defendants’ duty. They had been retained by the settlor for the benefit of the family to achieve a certain outcome and by failing to achieve it exposed the settlor and his family to adverse tax consequences. Again, importance was 627

11.31  Wills, estates and trusts attached to the scope of the duty and the fact that it extended to the trustees and the family as a whole. It may be that the trustees would have been able to bring a claim in tort (as in Estill). But the settlor had a claim in contract and the argument that he was entitled to recover on behalf of the third parties who suffered the loss is consistent with the principles for recovery of damages for breach of contract.4 1 Claims by settlors and beneficiaries are rare because it may be possible to avoid the relevant transaction if the trustees have exercised their powers in a mistaken way. The relevant principles are outside the scope of this book, but the law is authoritatively reviewed in Lewin on Trusts 20th ed (2020) Chapter 30, section 14 at 30-30 to 30-65. Further, a number of offshore jurisdictions have enacted legislation preserving the so-called principle in Re Hastings-Bass [1975] Ch. 25, CA. 2 [2000] Lloyd’s Rep PN 378. 3 [2008] CSOH 183, [2009] PNLR 18 (Lady Smith). 4 The reasoning is consistent with the wider interpretation of the Albazero exception (and may well be consistent with the narrower depending on the circumstances giving rise to the retainer): see Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1  AC  85 and Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518.

3  Claims by beneficiaries 11.31 There may be cases analogous to White v Jones in which the failure by a solicitor to draw up an inter vivos deed of trust, or the failure to do so adequately, causes the intended beneficiaries a real loss. In White v Jones1 Lords Goff and Browne-Wilkinson expressed the view that the donee of an imperfect lifetime gift would not have the right to bring a claim because the donor would be able to put matters right or pursue a claim for damages (provided the defect came to light during the lifetime of the donor).2 That view was adopted by HHJ Moseley QC in Hemmens v Wilson Browne3 where the settlor promised to settle a sum of money on the beneficiary but reneged on that promise after the solicitor had drafted a document which was ineffective to carry out his instructions. He could still have put matters right and had a remedy against the defendant himself for breach of contract. The solicitor had also advised the beneficiary to seek her own legal advice as to the effect of the document. In the circumstances the judge held that it was not fair, just and reasonable to impose a duty on the defendant towards the beneficiary. However, the judge identified one situation in which a beneficiary ought to be entitled to bring a claim, namely, where a settlor has executed an irrevocable deed of settlement which is defective and confers benefits on X rather than Y and the settlor cannot revoke the gift and make the gift to Y.4 1 [1995] AC 207. 2 See 262A–C and 265H and 262D. 3 [1995] Ch  223. A  more forensic rationale for the decision is suggested by O’Sullivan, ‘Professional liability to third parties for inter vivos transactions’ (2005) 21 PN 142 by analogy with the testamentary cases considered in paras 11.04 to 11.10, above. She suggests that it cannot be right to allow a beneficiary to claim in circumstances where the solicitor’s breach of contract has apparently been waived by the client. Note that this was not the same argument rejected by the judge at 237G–H (that the scope of any duty to the intended beneficiary that

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Inter vivos trusts and dispositions  11.33 arises at the time of the retainer can be retrospectively circumscribed by the client’s subsequent change of mind). O’Sullivan’s analysis does not necessarily preclude the imposition of a duty of care in favour of the intended beneficiary in an inter vivos case. Indeed, it suggests that a duty may be owed, but the beneficiary will not be able to enforce it in these circumstances. 4 [1995] Ch 233 at 236C–F.

11.32 In Hughes v Richards,1 by contrast, a claim by the beneficiaries of a failed inter vivos transaction was allowed to proceed to trial. H (an accountant) advised Mr and Mrs R  to set up a series of complex offshore trusts for the benefit of their children to avoid tax. These arrangements had the reverse effect and most of the investment was used up in tax and fees. A claim was brought against H in the name of the children as beneficiaries and H applied to strike it out on the basis that he owed them no duty of care. (There was also a claim by the parents, but this faced limitation difficulties which did not affect the children’s claim.) The judge dismissed the application and that decision was upheld on appeal. Although Peter Gibson LJ expressed the view that H had a strongly arguable case that he owed the parents and not the children a duty of care, he considered the law to be uncertain. He also considered the examples given by Lord Goff in White v Jones (such as the situation which arose in Hemmens v Wilson Browne) to be distinguishable because the gift was not imperfect or misdirected and the consequences only became apparent several years after the scheme had been implemented.2 In a short concurring judgment, Jacob LJ suggested that there was a contractual retainer between the children and the solicitors because the parents had been acting on their behalf.3 1 [2004] EWCA Civ 266, [2004] PNLR 706. 2 See [27] and [28]. See also O’Sullivan, ‘Professional liability to third parties for inter vivos transactions’ (2004) 21 PN 142. 3 At [31].

11.33 In Joseph v Farrer & Co LLP1 HHJ Purle QC declined to impose a duty of care towards the intended beneficiary of a lifetime gift and rejected the argument that S owed her a contractual duty. C had formed a relationship with an extremely wealthy financier, B, much of whose wealth was held in discretionary trusts of which there were other beneficiaries. B wished to make substantial provision for C  by a lump sum payment of £5m but his trustees refused to make a distribution from the trust to enable him to make such a payment. Agreement in principle was reached with the trustees whereby they would make a series of smaller payments to him over a five-year period and B  signed a letter of wishes to that effect. B  was terminally ill and it would have been possible to enlarge the class of beneficiaries to include C in order to ensure that she received the remaining payments after his death. Two payments were made but a dispute arose before B’s death and the trustees refused to make any further payments to B. C claimed that S owed her duties (in contract and tort) to ensure that all of the payments were made. The judge rejected the claim for a number of reasons. But they included the fact that B and not C had been S’s client, that their interests were not necessarily aligned and that there was a clear potential for them to diverge. He also held that if a duty had arisen, 629

11.34  Wills, estates and trusts it would have been limited to the letter of wishes alone and S had not been negligent in relation to its preparation. The reason why the gift failed was that the trustees had changed their minds about making the payments. 1 [2017] EWHC 2072 (Ch), [2018] PNLR 1. See, in particular, [41] and [42].

11.34 Where, then, does that leave the disappointed beneficiary of a failed inter vivos gift? There are a number of factors which make it difficult for such a claim to succeed. First, there is the potential conflict of interest which does not arise in testamentary cases. In both Hemmens and Joseph there was a potential conflict although, arguably, a unilateral decision by the parents of infant children to confer a benefit on them falls into a different category.1 Secondly, there is the nature and scope of the duty which C alleges that S has broken. In Joseph C’s case was that S owed a duty to advise her and in Hemmens C had been advised to seek her own advice. But in Joseph there was no document which S could have drafted which would have ensured that she received the payments (which it was not in B’s power to give her without the consent of the trustees). Neither case is authority for the proposition that a duty of care can never be owed as between a donor’s solicitor and the intended beneficiary of a gift and there may be circumstances where the settlor has reached a clear intention to enter into a transaction and the solicitor is instructed to give effect to it in the execution of the document. Thirdly, there is the question of loss. In Hughes the gift from the parents to the trust was not defective. It was always their intention to transfer the funds into the trust. The problem was that it did not achieve the anticipated tax savings. It was suggested that the parents could recover damages on behalf of the children. But the law in this area is uncertain2 and there are cases in which a direct claim by the beneficiaries has succeeded.3 Fourthly, there may be circumstances in which it is open to the donor to pursue S  but he or she chooses not to do so for reasons unrelated to a change of heart. Whether such a claim by the beneficiary would succeed in circumstances where the client has declined to make a claim must be very doubtful. 1 See also O’Sullivan, ‘Professional liability to third parties for inter vivos transactions’ (2005) 21 PN 142. 2 See the decisions of the House of Lords in Linden Gardens Trust v Lenesta Sludge Disposal [1994] 1 AC  85 and Alfred McAlpine Construction Ltd v Panatown Ltd. [2001] 1 AC  518, Temair v Turcan Connell [2008] CSOH 183 and Estill v Cowling Swift & Kitchin [2000] Lloyd’s Rep PN 378, discussed in para 11.30, above. 3 In Yudt v Leonard Ross & Craig [1998] ITELR 53 it was held that the solicitors owed a duty of care to the beneficiaries. The decision is analogous to a misdirected gift claim but the claim ultimately related to the costs of litigation. Again this was a claim involving a trust for the benefit of a number of family members. The article by O’Sullivan (see note 1 above) also argues that the absence of a lacuna in an inter vivos context is not necessarily determinative.

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Chapter 12

Litigation

12.01 In this chapter we consider first the removal of advocates’ immunity from suit, and the revised doctrine of abuse of process by collateral attack on previous decisions of the court. We then examine the standard of care which solicitors owe their clients in conducting litigation. Thirdly, we look at causation and the assessment of damages, including damages for the loss of a chance. Fourthly, we consider the types of damage recoverable and mitigation of loss. For the issue of solicitors’ reliance on counsel, see Chapters 2 and 13.

A  ADVOCATES’ FORMER IMMUNITY, AND ABUSE OF PROCESS 1  Advocates’ former immunity 12.02 Before the House of Lords’ decision in Arthur JS Hall & Co v Simons,1 advocates, including solicitor advocates, enjoyed immunity from suit by their clients in relation to work done in court or intimately related to such work.2 The House of Lords held in Hall that the immunity was no longer appropriate in relation to either civil or criminal cases, and no longer existed.3 In Awoyomi v Radford4 Lloyd Jones J held that the effect of Hall v Simons was retrospective, and that by 1991 the immunity no longer existed. 1 [2002] 1 AC 615. 2 Rondel v Worsley [1969] 1 AC 191, HL; Saif Ali v Sydney Mitchell & Co [1980] AC 198, HL. 3 The majority was 7–0 as to the immunity in civil cases but only 4–3 as to the immunity in criminal cases. It appears that the immunity as to the work of criminal advocates still exists in Scotland: Wright v Paton Farrell [2007] PNLR 7. Since Hall, it has been held that the immunity remains in Australia (D’Orta-Ekenaike v Victoria Legal Aid [2005] 214 ALR  92), but not in New Zealand (Chamberlains v Lai & Lai [2006]  NZSC  70, [2007] 2  NZLR  7). In Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, the Supreme Court held that expert witnesses had no immunity from suit in relation to evidence given in court. 4 [2007] EWHC 1671 (QB), [2008] QB 793.

2  Abuse of process 12.03 Also in Hall, the House of Lords considered the doctrine of abusive collateral attack on previous decisions. In Hunter v Chief Constable of West Midlands Police,1 Lord Diplock said that: 631

12.04 Litigation ‘The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending [claimant] which has been made by another court of competent jurisdiction in previous proceedings in which the intending [claimant] had a full opportunity of contesting the decision in the court by which it was made.’ Hunter was not a claim that the earlier decision had been wrong on account of the negligence of defendant lawyers, but the principle was applied in subsequent cases where lawyers were sued for negligence in the conduct of the original action. The rule was the subject of various exceptions which we considered in the first edition of this book.2 1 [1982] AC 529, HL. 2 See 10.13ff of the first edition (1999).

12.04 In Hall, on the issue of abuse of process Lord Hoffmann’s speech had the support of the majority.1 He said that the court’s power to strike out cases which sought to relitigate issues previously decided should be exercised if such relitigation would be manifestly unfair to a party or would bring the administration of justice into disrepute.2 In applying those principles, Lord Hoffmann distinguished between the position in criminal and civil cases respectively. 1 Lords Steyn, Browne-Wilkinson, Hutton and Millett. 2 [2002] 1 AC at 702H–703A. Lord Hoffmann was agreeing with what Lord Diplock had said in Hunter: [1982] AC 529 at 536B.

(a)  Criminal cases 12.05 Lord Hoffmann said that, leaving aside professional negligence actions, it was easier to challenge the result of criminal as opposed to civil cases. In criminal cases as compared with civil cases: •

the scope for re-examination was greater;

•

fresh evidence could more easily be admitted;

•

a conviction could be set aside, in an appeal against conviction, if the accused had been prejudiced by ‘flagrantly incompetent advocacy’; and

•

after appeal, a case might be referred back to the criminal courts for re-consideration by the Criminal Cases Review Commission.

Lord Hoffmann’s conclusion as to professional negligence actions alleging that, in a criminal case, the accused had been convicted due to the negligence of the claimant’s lawyers was as follows:1 ‘… in my opinion it would ordinarily be an abuse of process for a civil court to be asked to decide that a subsisting conviction was wrong. This applies to a conviction on a plea of guilty as well as after a trial. The 632

Advocates’ former immunity, and abuse of process  12.07 resulting conflict of judgments is likely to bring the administration of justice into disrepute … The proper procedure is to appeal, or if the right of appeal has been exhausted, to apply to the Criminal Cases Review Commission under section 14 of the 1995 Act. I say it will ordinarily be an abuse because there are bound to be exceptional cases in which the issue can be tried without a risk that the conflict of judgments would bring the administration of justice into disrepute. Walpole v Partridge & Wilson [1994] QB 106 was such a case. Once the conviction has been set aside, there can be no public policy objection to an action for negligence against the legal advisors.’ 1 [2002] 1 AC at 706D–F.

12.06 Three points may be made in relation to criminal cases. First, Lord Hoffmann did not in terms state why Walpole was an exceptional case which would not amount to an abuse of process. His discussion of Walpole earlier in the judgment explained that the Court of Appeal had held that there was no abuse of process where the claimant had been convicted of an offence relating to preventing a veterinary officer from inspecting his pigs. The claimant had arguable grounds for success on appeal but his solicitors had negligently failed to lodge an appeal in time.1 Coulson LJ explained the basis on which Walpole was exceptional in Day v Womble Bond Dickinson:2 ‘Walpole was genuinely an exceptional case because there it appeared that, through the inadvertence of the defendant’s solicitors, the Crown Court had made an error of law which had gone uncorrected. That was the public policy reason why the subsequent claim was permitted to continue: that the law should not be left in an uncorrected state.’ Thus, if a litigant is convicted and, due to his or her lawyers’ negligence, loses the opportunity to defend himself or herself by an argument of law that was not put to the convicting court, a professional negligence claim against the lawyers may not be an abuse of process if the claimant has lost all possibility of redress through the criminal law system. If, on the other hand, following the conviction the claimant was able to engage a completely new legal team and to appeal to the criminal division of the Court of Appeal then the collateral attack doctrine will prevent the claimant from suing his/her solicitors who conducted the initial trial. This is because the claimant will have had the opportunity to appeal on the legal issue in the Court of Appeal, so that the exception based on Walpole will not apply.3 1 [2002] 1 AC 703F–H. 2 [2020] EWCA Civ 447 at [57]. 3 See the result in Day, and compare Smith v Linskills [1996] 1 WLR 763 (CA).

12.07 Secondly, it is clear both from the passage quoted and from later in his speech1 that Lord Hoffmann considered that a professional negligence action 633

12.08 Litigation alleging that the claimant had pleaded guilty on account of his or her lawyers’ negligence would ordinarily amount to an abuse of process. One commentator has suggested, however, that as a matter of criminal law it is much harder to appeal following a guilty plea than after conviction, so that the rationale, if not the conclusions, of Lord Hoffmann’s speech ought to mean that a claim that a party’s lawyers negligently induced a guilty plea will not necessarily amount to an abuse of process.2 This too is yet to be resolved in case law, and may turn on detailed consideration of the means in criminal law whereby a party who has pleaded guilty and been convicted may challenge the conviction on the ground that it was based on his or her lawyers’ mistake. It might also require a finding that parts of what Lord Hoffmann said in Hall, admittedly obiter, were incorrect. 1 [2002] 1 AC at 705G. 2 Simpson (ed) Professional Negligence and Liability, §15.57–15.58. As noted there, under the preceding law it had been held that such a claim was an abuse of process, in Somasundaram v Melchior [1988] 1 WLR 1394, and that case was not overruled in Hall.

12.08 Thirdly, it is no answer to a claim being barred on the basis that it amounts to a collateral attack on the decision of a criminal court for the claimant to say that they have served their sentence and that their purpose is not to say that their conviction was wrong, but only to claim damages for professional negligence. Such a claim is barred as a collateral attack whatever the claimant’s motive or purpose.1 1 Workman v Deansgate 123 LLP [2019] EWHC 360 (QB), [2019] PNLR 18 (William Davis J).

(b)  Civil cases 12.09 In relation to civil cases, in Lord Hoffmann’s view there was, unlike in criminal cases, little public interest in ensuring that the correctness of a first judicial decision was not impugned. He said that:1 ‘I can see no objection on grounds of public interest to a claim that a civil case was lost because of the negligence of the advocate, merely because the case went to full trial. In such a case the plaintiff accepts that the decision is res judicata and binding upon him. He claims however that if the right arguments had been used or evidence called, it would have been decided differently. This may be extremely hard to prove in terms of both negligence and causation, but I see no reason why, if the plaintiff has a real prospect of success, he should not be allowed the attempt.’ Taken on its own, that argument might be said to apply equally to some professional negligence actions challenging criminal convictions. But Lord Hoffmann added that:2 ‘… in civil (including matrimonial) cases, it will seldom be possible to say that an action for negligence against a legal adviser or 634

Advocates’ former immunity, and abuse of process  12.12 representative would bring the administration of justice into disrepute. Whether the original decision was right or wrong is usually a matter of concern only to the parties and has no wider implications. There is no public interest objection to a subsequent finding that, but for the negligence of his lawyers, the losing party would have won.’ Thus, in relation to civil cases where it was alleged that the result would have been different if the lawyers had not been negligent in the conduct of the litigation, re-litigation would not generally amount to an abuse of process. 1 [2002] 1 AC at 705H–706C. Applied: Feakins v Burstow [2005] EWHC 1931 (QB), [2006] PNLR 6 at [95] (Jack J). Cf BTI  (2014)  LLC  v PriceWaterhouseCoopers [2019]  EWHC  3034 (Ch), [2020] PNLR 7 (Fancourt J). 2 [2002] 1 AC at 706H.

12.10 Lord Hoffmann added that there might be exceptional cases which did amount to an abuse of process, such as the case of defendants who published a highly defamatory article, claimed it was true, and lost a claim for defamation in relation to it. It would be unfair to the claimant in the first action, who had won damages for defamation, if the defendants could sue their lawyers and claim that they lost only because of the lawyers’ negligence.1 1 [2002] 1 AC at 706H–707A.

12.11 After Hall, the Court of Appeal considered the issue of abuse in civil cases in Secretary of State for Trade and Industry v Bairstow.1 Sir Andrew Morritt V-C  gave the only reasoned judgment. Having considered Hall, he summarised the position as to abuse of process in the cases where a party sought to relitigate matters which had formerly been the subject of civil proceedings:2 ‘If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings3 then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute.’ 1 [2003] EWCA Civ 321, [2004] Ch 1. 2 [38]. 3 The relevance of the parties being parties to, or privies of those who were parties to, the earlier proceedings is that if both parties to the later proceedings were also parties, or privies of parties, to the earlier proceedings then the doctrine of res judicata is likely to apply to prevent the second action from proceeding. It is only if res judicata does not apply that it is necessary to consider abuse of process by collateral attack on the earlier decision.

12.12 On the facts of Bairstow, the court rejected the contention that the later civil proceedings were an abuse of process. Mr Bairstow had been a director of Queen’s Moat House plc. He sued the company for wrongful dismissal. 635

12.13 Litigation He lost before Nelson J. The Secretary of State then commenced proceedings against Mr Bairstow under s 8 of the Company Directors Disqualification Act 1986 for a disqualification order on the ground that Mr Bairstow was unfit to be concerned in the management of a company. The Secretary of State relied heavily on findings which Nelson J had made against Mr Bairstow in Mr Bairstow’s action against the company. Mr Bairstow wished to contend that he had not acted in the ways which Nelson J had found. The Secretary of State contended that it would be an abuse of process for Mr Bairstow to seek to re-argue issues which he had lost in the earlier action before Nelson J. The Court of Appeal held that it was not an abuse of process. Mr Bairstow, the defendant to the second action, was only requiring the Secretary of State to prove his case against Mr Bairstow. Factors which weighed heavily with the court were that the Secretary of State’s allegations were serious, and the application was quasi-regulatory in nature and different from standard civil proceedings.1 1 [2003] EWCA Civ 321, [2004] Ch 1 at [41].

12.13 Further, in Simms v Conlon & Harris,1 Simms had gone into partnership as a solicitor with Conlon & Harris. In February 2004 the Solicitors Disciplinary Tribunal (‘SDT’) held that Simms had acted dishonestly and struck him off the roll of solicitors. In March 2005 the Divisional Court rejected an appeal from the SDT. Although the appeal was by way of rehearing, it merely considered the evidence which was before the SDT. The Divisional Court did not hear any oral evidence. Subsequently, Conlon & Harris sued Simms on the basis that he had induced them to enter into partnership with him by fraudulent misrepresentations. Simms sought to defend himself. Conlon & Harris alleged that to do so amounted to an abuse of process, in that it was a collateral attack on the findings of the Divisional Court. Jonathan Parker LJ cited the passage quoted above from Bairstow. He added that there could be no catch-all formula for identifying an abuse of process since every case depended on its own facts.2 He considered it an important factor that Simms had not initiated either of the two cases:3 ‘… in general the court should be slower in preventing a party from continuing to deny serious charges of which another court has previously found him guilty than in preventing such a party from initiating proceedings for the purpose of relitigating the question of whether he is guilty of those charges.’ In a sense, therefore, all that Simms was doing was requiring Conlon & Harris to prove their case. Further, Jonathan Parker LJ was unimpressed by Conlon & Harris’s attempt to introduce all of the SDT’s findings, which he considered it unnecessary to do. 1 [2006] EWCA Civ 1749, [2007] 3 All ER 802. 2 At [141]. 3 At [146].

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Advocates’ former immunity, and abuse of process  12.15 12.14 Ward LJ was concerned that a man facing serious charges of fraud should not be able to defend himself again.1 In Moore-Bick LJ’s view, the court should be particularly cautious before holding that it would be an abuse of process for Simms to challenge findings of fact made in previous proceedings between himself and a person who was not a party to the current litigation. ‘Some additional factor’ had to be present in order to do so. The most obvious candidate from the authorities was a conclusion that, although the earlier proceedings were between different parties, ‘the parties to the current proceedings were both so closely involved in them that they should be required to accept the outcome for better or worse’.2 That did not apply in Simms. Further, although the earlier proceedings were regulatory, they were not formally part of the criminal justice system and did not count as criminal proceedings for the purposes of the rules of abuse of process.3 All three judges rejected the contention that it was an abuse of process for Simms to defend himself.4 1 [2006] EWCA Civ 1749, [2007] 3 All ER 802 at [178]. 2 At [168], [170]. 3 At [173]. 4 Further, in Nesbitt v Holt [2007] EWCA Civ 249, [2007] PNLR 24, the Court of Appeal applied Sir Andrew Morritt V-C’s dictum, quoted above, and emphasised that there was a heavy onus on the party who contended that the subsequent action was an abuse of process ([24]). An important issue for the subsequent proceedings had not been determined in the earlier proceedings. There was no abuse of process.

12.15 In Taylor Walton v Laing,1 however, the Court of Appeal did strike out a claim against a solicitor as abusive re-litigation. The claimant, L, fought a lengthy trial as to the terms of an oral agreement between himself and B, relying in part on evidence from his former solicitors TW, and lost. TW had acted for L on the transaction with B but not in the later litigation against B. After the trial, L issued a second claim in which he sued TW, alleging that the judge at the first trial had been wrong, that the terms of his oral agreement with B had been as he had contended all along, and that TW’s negligence had prevented the agreement from being reduced to writing, so that TW was liable for L having to pay damages to B pursuant to the judgment in the first trial. Buxton LJ said that the general test to be applied in determining whether there was an abuse of process was that:2 ‘The court … has to consider, by an intense focus on the facts of the particular case, whether in broad terms the proceedings that it is sought to strike out can be characterised as falling under one or other, or both, of the broad rubrics of unfairness or the bringing of the administration of justice into disrepute.’ The court accepted that, if L had relied in the professional negligence action on new material which had not been before the trial judge, and had contended that if the trial judge had had that new material he would have reached a different decision, then there would have been no abusive collateral attack on the trial judge’s decision.3 But that was not the position:4 637

12.16 Litigation ‘… everything said to us … in criticism of Judge Thornton’s judgment could have been said to Judge Thornton (and mainly was so said); and could have been deployed in the appeal from Judge Thornton that was never brought. What is sought to be achieved in the second claim is, therefore, not the addition of matter that, negligently or for whatever reason was omitted from the first case, but rather a relitigation of the first case on the basis of exactly the same material as was or could have been before Judge Thornton … I therefore conclude that it would bring the administration of justice into disrepute if Mr Laing were to be permitted in the second claim to advance exactly the same case as was tried and rejected by Judge Thornton. If Judge Thornton’s judgment was to be disturbed, the proper course was to appeal, rather than seek to have it in effect reversed by a court not of superior but of concurrent jurisdiction hearing the second claim … … in order to succeed in the new claim Mr Laing has to demonstrate not only that the decision of Judge Thornton was wrong, but also that it was wrong because it wrongly assessed the very matters that are relied on in support of the new claim. That is an abusive relitigation of Judge Thornton’s decision not by appeal but in collateral proceedings …’ It follows that claims against litigation solicitors, to the effect that due to their negligence the court did not have before it the right evidence, or that a claim was struck out due to their negligence, will not amount to an abuse of process. But if the claimant is not alleging that there is new material in the professional negligence action that was not before the earlier court then it is likely to amount to an abuse of process to contend that the earlier court’s decision was wrong, because the claimant will be alleging that the earlier judge was wrong ‘on the materials before him’.5 Further, abuse may arise in the defamation example given by Lord Hoffmann, or in the examples quoted by Moore-Bick LJ in Simms, where there is a close link between all the parties to the earlier and later litigation. 1 [2007] EWCA Civ 1146, [2008] PNLR 11. See also Michael Wilson & Partners Ltd v Sinclair [2017] EWCA Civ 3, [2017] 1 WLR 2646. 2 At [12]. 3 At [27] (Buxton LJ), [36] (Moses LJ). This is in accordance with the passage from Lord Hoffmann quoted at para 12.08 above, which was referred to at [26]. 4 At [22], [25], [27] (Buxton LJ). 5 Ahmad v Wood [2018] EWHC 996, [2018] PNLR 28 at [27] (per HHJ Eyre QC).

12.16 Two further points should be made in relation to cases that appear to be abusive under the principles set out above. First, a claimant cannot save the claim by contending that, in bringing the professional negligence action, he or she had no intention to bring the administration of justice into disrepute: this aspect of the claimant’s motivation is irrelevant to the application of the abuse 638

Liability  12.17 of process doctrine.1 Secondly, in the pre-Hall cases it was held that a claim which was otherwise an abuse of process would not be an abuse if it was based on fresh evidence which had not been available to the first court and which ‘entirely changed the aspect of the case’.2 This test may not apply in terms after Hall,3 but in practice the requirement for fresh evidence that was not before the first court but which, if available to the first court, would have caused it to decide differently, may be often be difficult to meet. 1 Smith v Linskills [1996] 1  WLR  763 at 771D–E, applied in Workman v Deansgate 123 LLP [2019] EWHC 360 (QB), [2019] PNLR 18 (William Davis J). 2 Hunter [1982] AC 529 at 541H–542D. 3 The point was left undecided in Secretary of State for Trade and Industry v Bairstow [2003]  EWCA  Civ 321, [2004] Ch  1 at 17B, but Buxton LJ’s judgment in Taylor Walton v Laing [2007] EWCA Civ 1146, [2008] PNLR 11 at [25], suggests that this rule may remain. In Ridgewood Properties Group Ltd v Kilpatrick Stockton LLP  [2014]  EWHC  2502 (Ch), [2014] PNLR 31, Arnold J said at [44] that he was doubtful whether this rule should apply in cases where the earlier proceedings were not criminal, and the parties to the earlier proceedings were not the same, or the privies of the same parties. He nevertheless felt bound by Laing to apply what had previously been the rule.

B LIABILITY 12.17 In this section we deal principally with the liability of a solicitor to the solicitor’s own client. Parties to litigation do not generally owe a duty of care to adverse parties in the litigation;1 it is thought that, as a result, in general solicitors do not owe duties of care to opposing parties in litigation, though see the discussion of the exceptional case of Al-Kandari v J R Brown & Co2 in Chapter 1, above. As to solicitors’ liability to their own clients, as in other areas of practice, solicitors are liable for the conduct of litigation which falls below the standard to be expected of a solicitor of ordinary or reasonable competence. The standard of competence is that of the reasonably competent practitioner specialising in whatever area of law the solicitor holds themself out as a specialist.3 In 1992 Sir Leonard Hoffmann, as he then was, suggested that, in reality, it was wrong to suppose that there was a single standard which applied with equal rigour to all areas of a solicitor’s work.4 In particular, he considered that the courts tended to apply lower standards in judging solicitors’ conduct in relation to the handling of litigation than they did in relation to conveyancing. In conveyancing cases, almost any error which prevented the client from obtaining good title would be held negligent, whereas in relation to litigation: ‘I think that the inherently risky and unpredictable nature of litigation is the reason why judges are more generous to solicitors in fixing the standard of care than they are in conveyancing.’ He added that, in the 19th century, the courts had applied lower standards to all aspects of solicitors’ conduct. The standard which the law expected 639

12.18 Litigation of solicitors in conveyancing cases had risen in the 20th century. Although judges did not express the reason for this, it was because solicitors were compulsorily insured, so that a finding of liability would have less disastrous consequences for the individual solicitor than during the 19th century when there was no compulsory insurance. It may be observed, however, that solicitors are insured for litigation as well as conveyancing work. Perhaps it is unsurprising that courts seem increasingly keen to find liability in this area too. 1 Jain v Trent Strategic Health Authority [2009] UKHL 4, [2009] 1 AC 853. 2 [1988] QB 665, CA, discussed at para 1.25 above. 3 Green v Collyer-Bristow [1999] Lloyd’s Rep PN 798 per Douglas Brown J at 809 col 2, and see para 2.01ff, above. 4 The talk was published: (1994) 10 PN 6.

12.18 In the 20 years since the first edition of this book, there has been a steady flow of reported cases concerning claims for the negligent conduct of litigation. It is possible that the removal of advocates’ immunity from suit for negligence in court has encouraged the bringing of claims or that the Civil Procedure Rules’ emphasis on stricter adherence to timetables has caused the courts to raise the standard which they apply in considering whether lawyers have acted in breach of duty. In considering liability issues, there is a distinction between (i) basic issues in relation to which there is generally no defence, such as missing a limitation period in the absence of exceptional circumstances, and (ii) issues of judgment where it is much harder to show breach of duty.1 Basic errors tend to appear in many cases, and there will often be no difficulty in showing breach of duty. Outside that category of error, decisions as to liability may be more fact-specific, or may turn on practice in a particular area of the law. In those areas, it is doubtful how useful it is simply to rehearse the facts of previously decided cases, since they may turn on their own facts. We have tried, however, to draw out themes as to the courts’ general approach to allegations of negligence in the conduct of litigation. 1 See for example the passage from Saif Ali v Sydney Mitchell & Co [1980] AC 198 quoted at para 2.02, footnote 7, above.

12.19 In considering liability issues, reference should also be made to the discussion of the cases on ‘negligence’ in the context of wasted costs, in Chapter 13,1 which are of considerable help in determining the standard of care which applies in an action for professional negligence. It seems likely, though it is undecided, that the principle in Medcalf v Mardell,2 giving the lawyer the benefit of the doubt where privilege is not waived, also applies outside the sphere of wasted costs. It should be noted, however, that a wasted costs order will compensate only lost costs. A client whose case is that, due to a solicitor’s negligence, he or she has wrongly been convicted of an offence or settled a case on bad terms as to quantum of damages will still need to sue for professional 640

Liability  12.21 negligence in order to obtain full compensation, even if they are entitled to claim wasted costs. 1 See para 13.51ff, below. 2 [2002] UKHL 27, [2003] 1 AC 120, discussed at 13.25 below.

1  Basic errors 12.20 In the absence of exceptional circumstances, solicitors who fail to issue claims within the relevant limitation period,1 allow their clients’ cases to be struck out for want of prosecution,2 or allow their clients to be prevented from defending the claim for procedural reasons,3 will be liable in negligence. Exceptional circumstances might include failure of the client to provide funds or instructions, or being instructed by the client to delay even though the client is fully informed of the risks of so doing, or issuing a claim form for all members of a group of claimants even though authority has not been received from all of them.4 A solicitor who is instructed to bring a personal injury claim but fails to appreciate that the limitation period is three years is likely to be held negligent.5 Further, where the limitation period in a personal injury action has expired, and the defendant’s insurer indicates an intention to rely upon limitation, failing to advise the client of the possibility of an application under Limitation Act 1980, s  33 is likely to be held negligent,6 though advice on whether such an application will succeed may involve an exercise of judgment which is much harder to criticise.7 It is arguable that a solicitor whose retainer is terminated shortly before the expiry of the limitation period has continuing duties to advise the client to issue proceedings in time.8 But if a client terminates the retainer shortly before the expiry of the limitation period, knowing of the expiry date and intending to issue a claim form in time, but then chooses not to do so, the client breaks the chain of causation and the former lawyers are not liable for the loss of the claim.9 1 Cf Saif Ali v Sydney Mitchell & Co [1980] AC 198, HL. Failing to advise as to the correct limitation period under European Community law may also be negligent: J J Dent v National Farmers’ Union NLD, 17 June 1999 (Evans-Lombe J); cf Moffat v Burges Salmon [2002] EWCA Civ 1977, [2003] PNLR 13. 2 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229, CA, per Diplock LJ at 256D–E. 3 Godefroy v Jay (1831) 7 Bing 413. 4 Adams v Ford [2012] EWCA Civ 544, [2012] 1 WLR 3211. 5 Bond v Livingstone [2001] Lloyd’s Rep PN 771. 6 Carlton v Fulchers [1997] PNLR 337, CA. 7 Bark v Hawley [2004] EWHC 144 (QB), [2005] PNLR 3. 8 Ensor v Archer [2004] EWHC 1541 (QB), [2005] PNLR 5 at [22]. 9 Kaberry v Freethcartwright [2002] EWCA Civ 1966.

2  Funding and insurance 12.21 Costs law in general is a specialist subject in its own right which is beyond the scope of this book. A solicitor is generally required to discuss with 641

12.22 Litigation a client how the client’s matter is to be funded.1 Further, so far as the regulatory position is concerned, solicitors are required to: ‘ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.’2 But, in relation to earlier regulations governing solicitors’ conduct, the Court of Appeal ‘deprecated’ any attempt to argue that a solicitor’s obligations from a professional negligence point of view were necessarily to be governed by regulatory requirements.3 The extent to which a failure to comply with the passage quoted will amount to negligence therefore remains to be seen. 1 Andrews v Messer Beg Ltd [2019]  EWHC  911 (Ch), [2019]  PNLR  23 at [54] (per Stephen Jourdan QC). 2 SRA Code of Conduct for Solicitors, RELs and RFLs, para 8.7. 3 See Sarwar v Alam [2001] EWCA Civ 1401, [2002] 1 WLR 125 at [51].

12.22 In John Mowlem Construction plc v Neil F Jones & Co,1 specialist construction law solicitors were instructed to act in a fee recovery action. Their client’s claim was met with a threat of a counterclaim for professional negligence from the defendant. The solicitors did not advise their client that this threat might constitute circumstances which should be notified to insurers pursuant to the client’s professional indemnity policy. The client did not notify its insurers at that stage. As a result, the insurers were able to escape having to cover the counterclaim when it was pursued. The Court of Appeal held that the solicitors had not acted in breach of duty in failing to advise the client to notify its insurers of the threatened counterclaim, even though the solicitors’ new client/matter form contained a box which asked ‘is the client insured for the claim or for costs’? A reasonably competent solicitor could have taken the view that it was not necessary to consider insurance cover for the counterclaim when it was first threatened. Further, in Lyons v Fox Williams LLP,2 the claimant was injured in a motorcycle accident. His insurance broker advised that, although he had insurance arranged by his employer, it would not cover his injury. He engaged the defendant solicitors to investigate suing the employers for failing to have adequate Accidental Death and Dismemberment policies in place. The Court of Appeal held that the solicitors’ retainer was limited, and did not extend to advising in relation to long-term disability policies which the employer had taken out for the claimant. Thirdly, in Dowling v Bennett Griffin,3 the Court of Appeal held that it was not negligent for litigation solicitors, acting on a claim against an architect, to fail to guard against the risk that an insured professional being sued for negligence would deliberately decide not to notify his insurers of the claim. 1 [2004] EWCA Civ 768, [2004] PNLR 925. 2 [2018] EWCA Civ 2347, [2019] PNLR 9. 3 [2014] EWCA Civ 1545, [2015] LRIR 522.

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Liability  12.25 12.23 As to public funding, solicitors have an obligation to consider at the start of each retainer whether the client might be eligible for such funding.1 Further, in Beswarick v JW Ripman,2 solicitors who wrongly concluded that the claimant’s half interest in a boat would have to be taken into account for the purposes of calculating her assets in assessing eligibility for public funding were held to have acted negligently. Thirdly, failing to advise a client whose public funding has been revoked as to the consequences of the revocation and the options open to him or her is also likely to be negligent.3 1 David Truex v Kitchin [2007] EWCA Civ 618, [2007] PNLR 33 at [22]. 2 [2001] Lloyd’s Rep PN 698, HHJ Griffiths Williams QC. 3 Casey v Hugh James Jones & Jenkins [1999] Lloyd’s Rep PN 115 (Thomas J).

3  Parties and statements of case 12.24 Solicitors who issue proceedings in the name of A and B, when they know that only B is their client, are likely to be found negligent unless there are special excusing circumstances, though loss may be avoided if A later ratifies the issue of the claim form.1 On the other hand, solicitors may reasonably take the view that it is necessary to sue only one of three possible defendants if they are unaware that the party sued is in financial difficulties.2 Although solicitors will be liable for errors in pleading if they undertake that task, deciding which causes of action to plead is a matter of judgment, and failing to plead a cause of action which is properly arguable does not necessarily amount to negligence.3 Further, ‘legal advisers are not expected to divine every claim that a client may theoretically have’;4 it would appear to follow that a failure to identify every claim which a client might theoretically have will not necessarily amount to negligence. 1 Cf Veasy v Millfeed, at para 13.61, below, and Adams v Ford [2012] EWCA Civ 544, [2012] 1 WLR 3211. 2 Brinn v Russell Jones & Walker [2002] EWHC 2727, [2003] Lloyd’s Rep PN 70. 3 McFarlane v Wilkinson [1997] 2 Lloyd’s Rep 259, CA, per Brooke LJ at 277, and cf Moy v Pettman Smith [2005] UKHL 7, [2005] 1 WLR 581. These cases relate to pleading by barristers, but the principle must be the same in the case of pleading by solicitors. 4 Pritchard, Joyce & Hinds v Batcup [2009] EWCA Civ 369, [2009] PNLR 28, per Sedley LJ at [103].

4  Interlocutory applications 12.25 Failing to apply for an ouster injunction when necessary,1 or to seek committal for contempt of court when an injunction against harassment has been breached,2 may be negligent, as may releasing a father’s passport that allows him to abduct the children of the family.3 Similarly, failing to renew a registration of children’s names with the Passport Agency, which prevented a husband from removing children from the UK, may amount to a breach of duty to a client wife.4 Although it is not decided, it seems likely that advocates 643

12.26 Litigation failing to follow the guidance now set out in Tugushev v Orlov5 when applying for freezing orders will be found to have acted in breach of duty to their clients. Finally, in Martin Boston & Co v Roberts,6 the claimant solicitors acted for the first defendant in an action brought against him by a company, F Ltd. They applied for security for costs against F Ltd. They compromised the application by accepting an unsecured guarantee from A, a director of F  Ltd, at a time when they had only her own assertion as to her financial worth. The majority in the Court of Appeal considered that the solicitors acted negligently in taking the risk that, as ultimately came to pass, the guarantee would be worthless, without at least receiving the client’s instructions to take this risk. 1 Dickinson v Jones Alexander & Co [1993] 2 FLR 521 (Douglas Brown J). 2 Found at first instance and not appealed in Heywood v Wellers [1976] QB 446, CA. 3 See the discussion of AI-Kandari v JR Brown & Co [1988] QB 665, CA, at para 1.25, above. 4 Hamilton-Jones v David & Snape [2003] EWHC 3147 (Ch), [2004] 1 WLR 924. 5 [2019] EWHC 2031 (Comm) (Carr J). 6 [1996] PNLR 45, CA.

5  Preparation for trial 12.26 Failing to follow advice from counsel to obtain specific varieties of evidence before trial1 is likely to be regarded as negligent, whereas acting in reliance upon counsel’s advice will generally not be so regarded.2 Solicitors who have received advice from counsel and other lawyers that conflicts may be negligent if they fail to resolve the discrepancy by reference to the same or different counsel.3 Failing to obtain evidence from a witness whom it is reasonable to suppose would not wish to give evidence is not negligent.4 In Balamoan v Holden & Co5 the court was prepared to engage in a thorough analysis of the steps which a small firm of solicitors had taken to prepare a personal injury claim for trial, and did not shrink from findings of breach of duty in that preparation. Further, in general terms, solicitors have a duty to prepare litigation for trial by identifying the key issues and seeking evidence in relation to them; failure to do so may well be held negligent.6 But whether there is a duty positively to instruct counsel to provide an advice on evidence, even in complex cases, is doubtful. In addition, there may be a distinction between completely failing to grasp a key issue and address it, which is likely to be held negligent,7 and identifying an issue, considering it, but deciding after an exercise of judgment not to argue it. The latter is less likely to be held negligent, even if the point omitted later turns out to be the crucial and ultimately successful point in the litigation.8 As mentioned above, it is submitted that a distinction should be drawn between questions of judgment, where it may be hard to show breach of duty, and basic procedural steps, or work of analysis of the claim, needed to prepare a case for trial, where findings of breach of duty are more likely.9 Questions of judgment may include deciding, with counsel, which material the client should rely on at a trial or other hearing such as an inquest.10 Finally, if a litigation solicitor becomes aware of information suggesting that the opposing party is in a difficult financial position, the solicitor may come 644

Liability  12.27 under a duty to act swiftly to bring the matter to trial in order to avoid the risk of a judgment being unenforceable.11  1 Acton v Graham Pearce & Co [1997] 3 All ER 909 (Chadwick J).   2 See the discussion of acting in reliance upon counsel’s advice at paras 2.10ff above and 13.64ff below.  3 Green v Hancocks [2001] Lloyd’s Rep PN 212, CA.  4 Roe v McGregor [1968] 2 All ER 636, CA.   5 (1989) 149 NLJ 898, CA.   6 See for example Browning v Brachers [2004]  EWHC  16 (QB), [2004]  PNLR  28; Feakins v Burstow [2005] EWHC 1931 (QB), [2006] PNLR 6; in the commercial context: Somatra Ltd v Sinclair Roche & Temperley [2003] EWCA Civ 1474, [2003] 2 Lloyd’s Rep 855; in the matrimonial context: Channon v Lindley Johnstone [2002] EWCA Civ 353, [2002] Lloyd’s Rep PN  342; in the criminal context: Acton v Graham Pearce & Co [1997] 3 All ER  909 (Chadwick J). For an example of preparation of a case which was not negligent see Boyle v Thompsons Solicitors [2012] EWHC 36 (QB), [2012] PNLR 370 (application to the Criminal Injuries Compensation Authority).   7 For example, Feakins [2005] EWHC 1931 (QB), [2006] PNLR 6.  8 Firstcity Insurance Group Ltd v Orchard & Gee [2002] EWHC 1433 (QB), [2002] Lloyd’s Rep PN 534 (Forbes J).   9 See also para 2.22ff above. 10 See Shaw v Leigh Day [2018] EWHC 2034 (QB), [2019] PNLR 2 (Andrews J). 11 Pearson v Sanders Witherspoon [2000] Lloyd’s Rep PN 151, CA.

6  Advice on the merits, strategy and settlement 12.27 As to advice given before the start of a claim, in Levicom International Holdings BV v Linklaters1 commercial solicitors who advised their clients as to the merits of potential arbitration proceedings without giving a balanced view of the risks of trying to prove liability, or detailed advice on the difficulty of proving loss, were held negligent. As to the position after litigation has begun, the settlement of an action without the client’s authority and for a sum which is significantly less than he or she would receive at trial is likely to be held negligent.2 Similarly, in matrimonial proceedings, solicitors acting for a wife who failed to undertake proper investigation of the husband’s means, and consequently advised acceptance of a settlement offer which was too low, conceded negligence.3 But in Williams v Thompson Leatherdale4 solicitors specialising in ancillary relief and advising on settlement of such a claim, who had instructed counsel, had no duty to maintain a system to alert them to changes in family law. In Hickman v Blake Lapthorn,5 settlement discussions took place at the court door immediately before trial. Counsel negligently failed to consider whether, on the basis of the medical reports, the claimant’s claim might be for the loss of earnings and lifetime care on the ground that he would never work again. Although the solicitors took a secondary role, they were familiar with the medical reports and should have intervened to point out the possible lifetime claim when it became apparent that counsel was valuing the claim without reference to that; as a result they were held negligent too. On the other hand, the barristers’ liability case of Moy v Pettman Smith6 also concerned settlement negotiations in a personal injury claim at court just before the start of the trial. Counsel had to take a difficult decision in advising 645

12.27 Litigation whether it was likely that medical evidence served late would be admitted in evidence, and whether a settlement offer made at court should be accepted. The latter depended on counsel’s assessment of the former. Counsel advised rejection of the settlement offer. In fact, the medical report was not admitted in evidence and the client had to accept a lower settlement than had been available. The House of Lords, in holding that counsel had not been negligent, emphasised that counsel faced a difficult decision, not of her own making, under time pressure, and that her judgment was within the range of responses which a reasonable barrister could have reached.7 Lord Carswell quoted with approval a passage from the judgment of Anderson J in the Ontario High Court in Karpenko v Paroian, Courey, Cohen & Houston:8 ‘“What is relevant and material to the public interest is that an industrious and competent practitioner should not be unduly inhibited in making a decision to settle a case by the apprehension that some judge, viewing the matter subsequently, with all the acuity of vision given by hindsight, and from the calm security of the Bench, may tell him that he should have done otherwise. To the decision to settle a lawyer brings all his talents and experience both recollected and existing somewhere below the level of the conscious mind, all his knowledge of the law and its processes. Not least he brings to it his hard-earned knowledge that the trial of a lawsuit is costly, timeconsuming and taxing for everyone involved and attended by a host of contingencies, foreseen and unforeseen. Upon all of this he must decide whether he should take what is available by way of settlement, or press on. I can think of few areas where the difficult question of what constitutes negligence, which gives rise to liability, and what at worst constitutes an error of judgment, which does not, is harder to answer. In my view it would be only in the case of some egregious error that negligence would be found.”’ This passage is likely to assist defendants. In contrast with Moy, however, in Griffin v Kingsmill,9 another personal injury claim, there was no great pressure of time. The Court of Appeal was scathing about counsel’s analysis of the claim, which it considered had led to a gross under-settlement, and found that counsel’s instructing solicitor was also in breach of duty in failing to advise rejection of the offer. In the matrimonial context, in Beswarick v Ripman10 the defendant solicitors acted for the mother. They advised a clean break settlement even though they knew that there was a prospect of the children returning to live with the mother. The defendants were held negligent in failing to advise that the settlement should contain a nominal order for periodical payments so that, if the children did return, the claimant could seek increased payments from the husband. In Green v Collyer-Bristow,11 solicitors and counsel were found negligent in advising that specific performance of an agreement between husband and wife might be sought when in fact it was unenforceable by virtue of s 2 of the Law Reform (Miscellaneous Provisions) Act 1989. Finally, the recorder in Edwards v Hugh James Ford Simey Solicitors12 found the defendant 646

Liability  12.28 solicitors negligent for having given inadequate advice about the quantum and type of claim which could be made under the Government’s vibration white finger compensation scheme, though the recorder’s decision is unreported.   1 [2010] EWCA Civ 494, [2010] PNLR 29 at [247]–[253] (Stanley Burnton LJ).  2 Amonoo v Grant, Seifert & Grower (unreported) 18 December 1998 (HHJ Overend sitting as a deputy High Court judge).  3 Dickinson v Jones Alexander & Co [1993] 2 FLR 521 (Douglas Brown J). See also Phippen v Palmers [2002] 2 FLR 415 (Heather Swindells QC), in which the claimant wife had been devastated by the breakdown of a long marriage. No reasonably competent solicitor would have advised a clean break settlement which left the claimant with a shortfall in her income.   4 [2008] EWHC 2574 (QB), [2009] PNLR 15 at [88] (Field J). The solicitors were also entitled to rely on counsel to alert them to changes in the law.   5 [2005] EWHC 2714 (QB), [2006] PNLR 20 (Jack J).   6 [2005] UKHL 7, [2005] 1 WLR 581.   7 For further decisions emphasising the breadth of the range of reasonable responses in matters of judgment, see Luke v Wansbroughs [2003] EWHC 3152 (QB), [2005] PNLR 2 (Davis J), and Walker v Chruszcz [2006] EWHC 64 (QB) (Davis J).   8 (1980) 117 DLR (3d) 383, 397–398 cited in Moy at [59]. See also Ogilvy & Mather Ltd v Rubinstein Callingham Polden & Gale, 20 July 1999 (unreported), CA, referred to below at para 12.52.   9 [2001] EWCA Civ 934, [2001] Lloyd’s Rep PN 716. See further para 2.24 above, and further cases cited there. 10 [2001] Lloyd’s Rep PN 698 (HHJ Griffiths Williams QC sitting as a deputy High Court judge). 11 [1999] Lloyd’s Rep PN 798 (Douglas Brown J). 12 See [2019] UKSC 54, [2019] 1 WLR 6549 at [17]. This is, however, the report of the Supreme Court’s decision, which did not concern liability.

12.28 In considering the extent of a solicitor’s duty to advise litigation clients, the courts have taken into account the general statement of principle in Minkin v Landsberg,1 which is quoted at para 1.17 above, to the effect that solicitors generally have no duty to go beyond the scope of their express instructions, but must report to clients on potentially relevant matters which they come across in the course of carrying out those instructions. In Minkin itself, the claimant and her husband had divorced; she reached an agreement as to financial matters with her husband, and engaged the defendant solicitors simply to turn the agreement into a legal form which the court would approve. It was held that the solicitors had no duty to advise the claimant as to whether the settlement was one which, from a matrimonial law point of view, she should enter into. Further, in Seery v Leathes Prior,2 an experienced businessman engaged solicitors who commenced settlement negotiations with those who controlled the business of which he was a former employee and minority shareholder. The businessman decided on a strategy of seeking an early settlement. He then changed solicitors, to the defendants. It was held that the defendants had no duty to advise him to engage in a fundamental change of strategy, because the claimant gave the appearance of being an experienced businessman who knew his own mind and had direct knowledge of the former employer’s affairs as he had been its financial director. 1 [2015] EWCA Civ 1152, [2016] 1 WLR 1489. 2 [2017] EWHC 80 (QB), [2017] PNLR 14 (Sir David Eady).

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12.29 Litigation 12.29 In Thomas v Hugh James Ford Simey Solicitors,1 the question was not whether the solicitor had duties which went beyond the express scope of the retainer, it was ‘whether the solicitor should fulfil the original retainer, in circumstances where the client has closed down one avenue of enquiry’.2 The case concerned a statutory scheme which had been set up to compensate former miners who suffered from a condition called vibration white finger. The solicitors acted for the claimant in his claim under the scheme. They advised him to claim payments for both general and special damages. The defendants had two meetings with the claimant, during one of which they specifically explored the issue of claiming special damages. The claimant said that he had no evidence to support a special damages claim. The claimant decided to accept a settlement offer relating only to general and not special damages. It was held that the solicitors did not have a duty to go further and to urge the claimant to claim special damages after he had decided, following nonnegligent advice, not to make such a claim. On the other side of the line was Procter v Raley Solicitors,3 which concerned the same compensation scheme. The claimant, who had had no formal education beyond the age of 16, filled in a form for the solicitors which indicated that he might well have a special damages claim. The solicitors did not meet him; they gave him written advice about the special damages claim but the advice was unclear; and there were clear indications that he might not have understood the advice. The claimant accepted a settlement offer which gave him a sum for general damages but not for special damages. It was held that the solicitors had negligently failed to give him sufficient advice about a potential special damages claim. 1 [2017] EWCA Civ 1303, [2018] PNLR 5. 2 Per Jackson LJ at [34]. 3 [2015] EWCA Civ 400, [2015] PNLR 24.

12.30 As to the security of funds paid in settlement, in Agouman v Leigh Day1 the defendant solicitors acted for 30,000 group claimants suing a multinational in relation to pollution by toxic chemical waste in the Ivory Coast. The judge held that the solicitors’ duty was ‘to apply the standard of a reasonably competent firm of solicitors with a department specialising in group litigation for unsophisticated clients arising from events in a poor and unstable African country.’2 The litigation was settled on the basis that the multinational would pay the equivalent of around £30 million in local currency into a bank account in the Ivory Coast at the local subsidiary of a well known French bank. This was done. Subsequently, an Ivorian organisation run by a man of dubious probity obtained a freezing order over the money. The order was upheld on appeal. A settlement was reached with the Ivorian organisation, which allowed release of some of the frozen funds, but at a significant discount which meant that 6,600 claimants went unpaid. The unpaid claimants sued the solicitors for negligence, claiming the sum paid to the Ivorian organisation. The judge held that, in light of information which the solicitors had about the Ivory Coast, they 648

Causation and assessment of damages  12.33 should have realised that they might not be able to protect sums held in a bank account in that country. Although the facts of this case were extreme, it does appear that litigation solicitors may have a duty to consider whether the bank account in which settlement sums are to be held is secure. 1 [2016] EWHC 1324 (QB), [2016] PNLR 32 (Andrew Smith J). 2 See [83].

7 Mediation 12.31 The courts are not keen to impose excessive duties on solicitors representing clients at mediations, for fear of limiting the flexibility of the mediation process. Nevertheless, it is normally the duty of a solicitor at a mediation to advise the client of the nature of the mediation process and as to the status of any agreement reached at the mediation. The first of those duties may be lower in the case of professional litigators such as liability insurers who may be very familiar with mediations.1 Claims based on what happened at mediation may raise issues with regard to legal professional privilege.2 1 Frost v Wake, Smith & Tofields Solicitors [2013] EWCA Civ 772 at [37] (Tomlinson J). 2 See para 14.39 below.

8  At court and on appeal 12.32 Failing to attend counsel at court when necessary,1 failing to appear at court for a hearing when instructed to do so,2 or failing to ensure that witnesses are warned to attend court when required,3 are likely to amount to negligence. Failing to follow clear advice from counsel to appeal on a point of law is likely to amount to negligence.4 1 Hawkins v Harwood (1849) 4 Exch 503. It is thought, though, that proving that loss flowed from such a failure may be difficult. 2 Holden v Holden and Pearson (1910) 102  LT  398. The solicitor’s conduct of the case was hampered by his work as an agent at the general election. 3 Dunn v HalIen (1861) 2 F & F 642, an action by attorneys for their fees. In fact, they won, after Bramwell B had directed the jury that they should have the fees unless their services were ‘wholly useless and valueless’. Compare the wasted costs cases in para 13.57ff, below. 4 Cf Walpole v Partridge & Wilson [1994] QB 106, CA.

C  CAUSATION AND ASSESSMENT OF DAMAGES 1  General principles: loss of legal claims 12.33 The distinction between the balance of probabilities and loss of a chance approaches to the assessment of damages is set out at para 3.12 above. In Perry v Raleys Solicitors1 the Supreme Court approved the use of the loss of a chance evaluation in assessing damages for the loss of legal claims. That case 649

12.34 Litigation concerned the loss of a claim under a statutory scheme to compensate miners who had developed vibration white finger, but it is clear that the same general principles apply to the loss of claims in civil litigation, and the same must apply to the loss of arbitration claims. In the detailed assessment of loss, though, it is necessary to focus on the precise nature of the particular scheme or regime which has been lost.2 In actions for the negligent conduct of civil litigation, the types of loss most commonly claimed are for loss of the opportunity either (i) to proceed with a claim to trial, (ii) to defend a claim, (iii) to obtain a settlement of a claim, or (iv) to obtain a better outcome than was in fact achieved, whether at trial or by settlement. The types of negligence most likely to give rise to items (i) to (iii) are negligence leading to the striking out of the claim or the defence or allowing the limitation period to expire without issuing a valid claim. Similarly, in relation to the negligent handling of criminal litigation, there may be claims for loss of the opportunity either to have the prosecution dropped or to have won an acquittal, or to have received a more lenient sentence. All these varieties of claim require the court trying the professional negligence action to assess what might have happened in the previous litigation, or activities similar to litigation, if there had been no breach of duty. Although this may often be a complicated exercise, it is similar to what lawyers do every day in advising their clients as to the likely outcome of litigation, which they have to do in order to advise on settlement. Thus the features which the court trying the professional negligence action has to consider are likely to be factors which practitioners in the relevant area of law are considering on a daily basis. The judge trying the action may not be an expert in the particular field of law in question, but that is a different problem, and in principle surmountable by reference to specialist textbooks.3 1 [2019] UKSC 5, [2019] 2 WLR 636. 2 See Edwards v Hugh James Ford Simey Solicitors [2019]  UKSC  54, [2019] 1  WLR  6549 (evidence contained in a medical report which would never have been provided in relation to the statutory scheme in question, even if there had been no negligence, was irrelevant in determining the value of the claimant’s lost claim under that scheme). 3 Compare Bown v Gould & Swayne [1996] PNLR 130, CA, and see para 2.21ff, above.

2  What is assessed on the balance of probabilities? 12.34 Perry1 establishes that, if it is necessary to ask whether, absent negligence, the claimant would have made a claim at all, or would have made a particular type of claim, then that question has to be answered on the balance of probabilities. It follows that, in a case where the claimant did not make a claim at all, or did not make a claim of the type which it is suggested would have been made absent negligence, the claimant must prove, on the balance of probabilities, that, absent negligence, they would have begun such a claim. The defendant is entitled to test the claimant’s case on this issue ‘with all the forensic tools available at an ordinary civil trial, and by proof or challenge of alleged facts relevant to that question’.2 That is the position even if the same facts would have been in issue at the notional trial, or in the notional claim, which would have occurred if there had been no negligence.3 It is not open to 650

Causation and assessment of damages  12.35 the claimant to argue that, because the same facts would have been considered at the notional trial, the loss of a chance evaluation rather than the balance of probabilities test applies to the question of whether the claimant would have made such a claim if there had been no negligence. On the other hand, if, at the time of the defendant’s negligence, the claimant has already instigated the kind of claim which it is said has been lost due to the negligence, but the claim is, for example, struck out due to delay, then the claimant need not prove that, absent negligence, they would have started the relevant type of claim: they had already done so before the defendant’s negligence occurred.4 It is, however, open to the defendant to contend that, had there been no negligence, the claimant would not have proceeded with the action, on the ground that the claimant could not have funded the costs of it. In relation to publicly funded claimants, if the defendant can prove that the claimant obtained public funding only by dishonesty then the court will proceed on the assumption that there would have been no public funding. As is normal in relation to proving dishonesty, the court will require more cogent evidence to prove fraud than it would simply to prove negligence.5 1 Above. See also Levicom International Holdings BV  v Linklaters [2010]  EWCA  Civ 494, [2010] PNLR 29 at [284] (Jacob LJ). Where a solicitor advises that a client has a strong case to start litigation, and the client does begin litigation, the usual inference is that the client has relied on the solicitor and would have taken a different course if it had received different advice. 2 Perry, per Lord Briggs at [41]. 3 Ibid. 4 Perry, per Lord Briggs at [33]. 5 Harrison v Bloom Camillin [2000] Lloyd’s Rep PN 89 at 100–101 (Neuberger J).

12.35 Perry also establishes that, in a case where the claimant had not started the relevant kind of claim at the date of the solicitor’s negligence, the claimant must prove on the balance of probabilities not only that, absent negligence, they would have made the relevant kind of claim, but also that, if made, it would have been an honest claim. This is in part because the court’s policy is not to reward dishonest claimants.1 It is suggested that, in light of that policy, it should, at the least, be open to the defendant to assert that the claim would not have been honest even in cases where, before the solicitor’s negligence, the claimant had already started a claim of the type in question. As an example of this type of issue, if the claimant’s claim is for the loss of a right to compensation for personal injury, it will be open to the defendant solicitor to prove that in fact the claimant had dishonestly exaggerated the extent of their personal injuries caused by the defendant to the underlying claim. It appears that the court trying the professional negligence action may allow the preparation of reports from medical experts which address that question. The rationale for allowing such reports to be adduced in the professional negligence action need not be that, absent negligence, such reports would have been available at the notional trial; instead, it is that the claimant must prove that the claim which, absent negligence, they would have made would have been an honest claim.2 1 Perry per Lord Briggs at [25]–[27]. 2 See the discussion of the approach of the county court in Edwards v Hugh James Ford Simey Solicitors [2019]  UKSC  54, [2019] 1  WLR  6549 at [27]–[29]. In that case, the trial judge

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12.36 Litigation decided that the claimant’s claim in the underlying action would have been honest, and there was no appeal from that decision, so the honesty of the lost claim was not a live issue in the Supreme Court.

12.36 Assume that the claimant succeeds on each of the two issues referred to in the previous two paragraphs. In that case, what is the position in relation to the assessment of what the claimant would have done, including what evidence the claimant would have given, at the notional trial which would have occurred if there had been no negligence? Should the claimant’s conduct be assessed on the balance of probabilities, since it is a question of what the claimant, rather than third parties, would have done in the absence of negligence? Or should the claimant’s conduct be assessed, like that of the defendant at the notional trial, on the loss of a chance basis, since in general the court avoids conducting a ‘trial within a trial’? In Dixon v Clement Jones Solicitors,1 the Court of Appeal’s answer was that the claimant’s conduct at the notional trial should be assessed on the loss of a chance, not the balance of probabilities, basis. The claimant had lost the chance of bringing litigation against her former accountants, in which she would have alleged that, absent the accountants’ negligence, she would not have entered into a loss-making transaction. The effect of the Court of Appeal’s decision was that it was not fatal to the claimant’s claim for compensation against the solicitors that, at the notional trial, it would have been decided that, probably, she would have entered into the loss-making transaction even if she had received non-negligent advice from the accountants. The likelihood that she would, in any event, have entered into the loss-making transaction was simply one factor to be assessed, on a loss of a chance basis, in determining the overall value of the claimant’s lost claim against the accountants. In Perry, Lord Briggs observed that, on a strict application of the test set out at para 3.12 above, it might be said that the question of what the claimant would have done at the notional trial should be decided on the balance of probabilities, rather than the loss of a chance, basis, but he then declined to express a view on whether that aspect of Dixon had been correctly decided.2 It therefore appears that Dixon remains good law on this point for the moment, though it may be open to challenge in the Supreme Court. 1 [2004] EWCA Civ 1005, [2005] PNLR 6. 2 See [2019] 2 WLR 636 at [40].

12.37 A justification for the approach in Dixon might be to say that, in a case where the solicitor’s negligence has lost the claimant any chance of having the claim tried, what is being valued is the claim itself, rather as, if the claim had not been struck out, lawyers for either the claimant or defendant might have valued it in advising about settlement. This theme, which it is submitted is correct on the authorities, is considered further below. The argument is that, in giving damages for the loss of a claim which has been, for example, struck out, the court is not trying the underlying claim. Instead, it is asking, essentially, what the settlement value of the underlying claim would have been if it had not been struck out. If the claim was so weak that any judge would have rejected 652

Causation and assessment of damages  12.39 it, it had no settlement value other than possibly a nuisance value, but nuisance value is to be ignored for these purposes.1 If on the other hand it was so strong that any judge would have upheld it, it might have a value of even 100% of the sum claimed. Many claims, however, fall into the intermediate category where some judges might have allowed them and others not. In this latter category, the court assesses the value of the claim by looking at the percentage chance of it succeeding. It would be odd if that percentage chance were applied to all issues in the underlying litigation other than what either the notional trial judge, or the original parties at a notional settlement negotiation, would have decided as to what the claimant would have done if the breach of duty alleged in the underlying litigation had not occurred. Hence, the issue of what the claimant would have done in those circumstances must be considered on a loss of a chance basis rather than on the balance of probabilities.2 1 See para 3.20 above, and Hanif v Middleweeks [2000] Lloyd’s Rep PN 920 (CA). 2 Dixon [2004] EWCA Civ 1005, [2005] PNLR 6 at [42] and [45].

3  Types of case in which damages are awarded for the loss of a chance 12.38 It is submitted that the cases may helpfully be divided into three categories, which we now consider: (a)

cases where due to the solicitor’s negligence the claimant loses any chance of having a particular claim, or a specific part of a claim,1 tried or settled;

(b) cases where the underlying claim was settled but it is alleged that the solicitor’s negligence caused the settlement to be at an undervalue; (c) cases where the underlying claim was tried but it is alleged that the solicitor’s negligence caused the claimant to achieve a worse result. 1 In Perry v Raleys Solicitors [2019]  UKSC  5, [2019] 2  WLR  636, the claimant could have claimed either a general damages award or a services award, or both. He settled for a sum which represented only a general damages award and time for claiming a services award expired. He had therefore lost part of a claim, namely the services award.

(a)  Due to solicitor’s negligence claimant loses any chance of having a claim or part of a claim tried or settled 12.39 Many cases fall into this category. Due to the solicitor’s negligence, either proceedings are not issued within the limitation period, or the claim form is not served within the period of its validity, or the claim is struck out for want of prosecution, or it is struck out or permanently stayed on account of some other procedural default such as failing to serve a statement of claim in time, or there is settlement of one part of a claim but nothing is paid for the other part. The result is essentially the same in each case: the claimant loses all chance of having the claim, or part of it, tried or settled. 653

12.40 Litigation (i)  Loss of a chance evaluation 12.40 General considerations as to the loss of a chance evaluation are set out above at para 3.12ff. In the context of claims against solicitors for negligence leading to the loss of either litigation or rights to bring other types of legal claim, the starting point is a passage from the judgment of Lord Evershed MR in Kitchen v Royal Air Forces Association.1 The claimant’s husband had been electrocuted and killed in his kitchen. She alleged that his death had been caused by faulty wiring in the cooker, which was the responsibility of an electricity company. The defendant solicitors acted for her in relation to her potential claim against the electricity company, but they failed to issue the predecessor of a claim form before expiry of the limitation period. This was negligent. Counsel for the defendants contended that, in relation to damages, the claimant had to show, on the balance of probabilities, that, had there been no negligence, she would have won the action, and that, if there was a lower than 51% chance that she would have won the action, she had failed to satisfy that burden and should recover nothing. The Court of Appeal rejected this, as being the wrong approach to assessing damages in this type of case. Lord Evershed MR said:2 ‘If, in this kind of case, it is plain that an action could have been brought, and, that if it had been brought, it must have succeeded, the answer is easy. The damaged plaintiff then would recover the full amount of the damages lost by the failure to bring the action originally. On the other hand, if it be made clear that the plaintiff never had a cause of action, that there was no case which the plaintiff could reasonably ever have formulated, then it is equally plain that she can get nothing save nominal damages for the solicitors’ negligence. I would add, as was conceded by counsel for the plaintiff, that in such a case it is not enough for the plaintiff to say: “though I had no claim in law, still, I had a nuisance value which I could have so utilised as to extract something from the other side, and they would have had to pay something to me in order to persuade me to go away.” The present case, however, falls into neither one nor the other of the categories which I  have mentioned. There may be cases where it would be quite impossible to try “the action within the action”, as counsel for the second defendants asks. It may be that for one reason or another the action for negligence is not brought until, say, twenty years after the event, and in the process of time the material witnesses, or many of them, may have died or become quite out of reach for the purpose of being called to give evidence. In my judgment, assuming that the plaintiff has established negligence, what the court has to do in such a case as the present is to determine what the plaintiff has lost by that negligence. The question is: has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case it may be that its value is not easy to determine, but it is the duty of the court to determine that value as best it can.’ 654

Causation and assessment of damages  12.42 The trial judge had held that the most the claimant could have recovered at trial would have been £3,000, and reduced it to £2,000 because of difficulties in the action. The Court of Appeal agreed with his approach to assessing damages, though it would have awarded less than £2,000 if there had been an appeal as to quantum. 1 [1958] 1 WLR 563, CA. 2 [1958] 1 WLR 563 at 574–575.

12.41 In the context of a lost litigation claim, the claimant, having dealt with the issues to be decided on the balance of probabilities which are referred to above, must, as part of the loss of a chance evaluation, prove that the lost claim had ‘a real and substantial rather than merely a negligible prospect of success’.1 If the claimant can prove that, then the court moves on to consider the chances of the claimant succeeding at trial. If the court concludes that the claimant had, for example, a 30% chance of winning £100,000 at trial then it will generally award them £30,000 in damages; issues as to costs, which are important, are considered below at para 12.75. As to the rationale for this approach, in Perry v Raleys Solicitors, Lord Briggs said that: ‘… where what has been lost through negligence is a claim with substantial but uncertain prospects of success … it would be absurd to decide the negligence claim on an all or nothing basis [ie by applying the balance of probabilities test], giving nothing if the prospects of success were 49%, but full damages if they were 51% … A further reason why this is a generally unrealistic approach is that most claims with evenly balanced prospects of success or failure are turned into money by being settled, rather than pursued to an all or nothing trial.’2 At this stage of the assessment, the correct approach in assessing loss is3 ‘not to seek to try the original claim, but to measure its prospects of success and assess damages on a broad percentage basis’. In undertaking this task, the court takes into account the principles set out in the next section. 1 See Edwards v Hugh James Ford Simey [2019] UKSC 54, [2019] 1 WLR 6549 at [23] (Lord Lloyd-Jones). This is based on the passage just quoted from Kitchen, and see paras 3.22 above and 12.41 below. 2 [2019] UKSC 5, [2019] 2 WLR 636 at [17]. 3 Phillips & Co v Whatley [2007] UKPC 28, [2007] PNLR 27 at [2], per Lord Mance delivering the opinion of the Board of the Privy Council. He relied on Kitchen, Hanif v Middleweeks [2000] Lloyd’s Rep PN 920, Dixon v Clement Jones [2004] EWCA Civ 1005, [2005] PNLR 6, and Browning v Brachers (Damages) [2005] EWCA Civ 753.

(ii)  Mount principles 12.42 In Mount v Barker Austin,1 two separate firms of solicitors who were acting for the claimant had allowed two successive sets of proceedings to be struck out for want of prosecution. Simon Brown LJ, with whom Ward LJ agreed, set out four principles in relation to assessing loss in cases where 655

12.42 Litigation negligence had caused an action to be struck out. Since these have been applied in most of the subsequent cases, they must be considered in detail. First, it should be emphasised that in Mount these principles were expressly said to relate to the case where the claim had been struck out; hence in principle (1) Simon Brown LJ describes the context as being ‘that of struck-out litigation’. As discussed below, however, the effect of subsequent cases is that the principles apply more broadly. The principles do not apply, however, to those issues, referred to above, which must be decided on a balance of probabilities basis. The principles were:2 ‘(1)  The legal burden lies on the plaintiff to prove that in losing the opportunity to pursue his claim (or defence to counter-claim) he has lost something of value ie that his claim (or defence) had a real and substantial rather than merely a negligible prospect of success. (I say “negligible” rather than “speculative” – the word used in a somewhat different context in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 – lest “speculative” may be thought to include considerations of uncertainty of outcome, considerations which in my judgment ought not to weigh against the plaintiff in the present context, that of struck-out litigation.) (2)  The evidential burden lies on the defendants to show that despite their having acted for the [claimant] in the litigation and charged for their services, that litigation was of no value to their client, so that he lost nothing by their negligence in causing it to be struck out. Plainly the burden is heavier in a case where the solicitors have failed to advise their client of the hopelessness of his position and heavier still where, as here, two firms of solicitors successively have failed to do so. If, of course, the solicitors have advised their client with regard to the merits of his claim (or defence) such advice is likely to be highly relevant. (3) If and insofar as the court may now have greater difficulty in discerning the strength of the [claimant]’s original claim (or defence) than it would have had at the time of the original action, such difficulty should not count against him, but rather against his negligent solicitors. It is quite likely that the delay will have caused such difficulty and quite possible, indeed, that that is why the original action was struck out in the first place. That, however, is not inevitable: it will not be the case in particular (a) where the original claim (or defence) turned on questions of law or the interpretation of documents, or (b) where the only possible prejudice from the delay can have been to the other side’s case. (4)  If and when the court decides that the [claimant]’s chances in the original action were more than merely negligible it will then have to evaluate them. That requires the court to make a realistic assessment of what would have been the [claimant]’s prospects of success had 656

Causation and assessment of damages  12.43 the original litigation been fought out. Generally speaking one would expect the court to tend towards a generous assessment given that it was the defendants’ negligence which lost the [claimant] the opportunity of succeeding in full or fuller measure. To my mind it is at this rather than the earlier stage that the principle established in Armory v Delamirie (1722) 1 Stra 505 comes into play.’ The Court of Appeal approved these principles in Sharif v Garrett,3 where Simon Brown LJ added that he had indicated in Mount that there should be a two-stage approach:4 ‘First, the court has to decide whether the claimant has lost something of value or whether on the contrary his prospects of success in the original action were negligible. Secondly, assuming the claimant surmounts this initial hurdle, the court must then “make a realistic assessment of what would have been the [claimant]’s prospects of success had the original litigation been fought out”. With regard to the first stage, the evidential burden rests on the negligent solicitors: they, after all, in the great majority of cases will have been charging the claimant for their services and failing to advise him that in reality his claim was worthless so that he would be better off simply discontinuing it. The claimant, therefore, should be given the benefit of any doubts as to whether or not his original claim was doomed to inevitable failure. With regard to the second stage, the Armory v Delamirie (1722) 1 Str 505 principle comes into play in the sense that the court will tend to assess the claimant’s prospects generously given that it was the defendant’s negligence which lost him the chance of succeeding in full or fuller measure.’ Note that the reference at the end of the second quotation to the position ‘had the original litigation been fought out’ was not intended to mean that the judge trying the professional negligence action had to put themself in the position of a notional judge trying the notional underlying litigation. Instead, as discussed further below, the judge trying the professional negligence has to assess the overall value of the lost claim.5 1 [1998] PNLR 493, CA. 2 [1998] PNLR 493 at 510D–511C. 3 [2001] EWCA Civ 1269, [2002] 1 WLR 3118. 4 At [38]–[39]. 5 See per Rix LJ in Dixon v Clement Jones [2004] EWCA Civ 1005, [2005] PNLR 6 at [27], and para 12.47ff, below.

12.43 As to Mount principle (1), both Mount and Sharif were cases where the solicitor’s negligence had led to the claim being struck out. Generally speaking, in that context, it will be easy for the claimant to succeed at the first stage and show that he or she has lost something of value. The same may not apply in other categories of case, where the solicitor’s negligence has not led 657

12.44 Litigation to the claimant losing any chance of trial or settlement (see below). In Sharpe v Addison,1 Simon Brown LJ quoted Sir Murray Stuart-Smith:2 ‘“For example, if a case in which a solicitor has advised that there is a reasonable prospect of success is struck out for want of prosecution, it will be difficult or impossible for the solicitor to contend that there was no substantial chance of success, at least in the absence of evidence which completely alters the complexion of the case and effectively torpedoes the claim.”’ As Simon Brown LJ acknowledged, however, Mount itself was a case where, although two separate sets of solicitors had allowed claims to be struck out for want of prosecution, the Court of Appeal found that there was a negligible chance of success if the claims had not been struck out: it was clear from the documents that the claimant’s underlying case was hopeless. So not every case which is struck out merits an award of damages against the negligent solicitor and, as Lord Evershed said in the passage quoted above from Kitchen, a claimant will not be awarded damages on the basis that the lost claim was worthless in law but had a nuisance value. In Sharpe v Addison, the Court of Appeal considered that the claimant had passed the first hurdle of showing that he had a case that had more than a negligible prospect of success, but ultimately assessed its value at 10% of its value on a full liability basis. So it seems that a claim with prospects of success as low as 10% may be considered to have passed Simon Brown LJ’s first hurdle.3 Rix LJ suggested that the test of whether a claim was worthless for loss of a chance purposes was similar to the question of whether it would be struck out under CPR Part 24 as having no real prospect of success; an alternative approach was to ask whether, if the underlying claim had not been struck out, the defendant’s insurers would have made more than a nominal payment into court.4 1 [2003] EWCA Civ 1189, [2004] PNLR 23 at [57]–[58]. 2 In Hatswell v Goldbergs [2001] EWCA Civ 2084, [2002] Lloyd’s Rep PN 359 at [49]. 3 See also Thomas v Albutt [2015] EWHC 2187, [2015] PNLR 29 at [461] (Morgan J), a barrister’s negligence case, and para 3.22 above. 4 [2003] EWCA Civ 1189, [2004] PNLR 23 at [27]–[28].

12.44 As to Mount principle (2), it is possible that solicitors may have advised their client that the claim was hopeless and should be abandoned. In that case, principle (2) might assist the solicitors rather than the claimant. But if they have given no advice as to the merits, and continued to charge their clients for conducting the litigation, the burden on them to show that the case was hopeless will be heavy. It is submitted that whether the application of principle (2) favours the claimant or the defendant solicitors will depend on the facts of the case, though generally it is likely to favour the claimant. 12.45 The effect of Mount principle (3) is that, if the defendant solicitors’ negligence in allowing the claim to be struck out weakens the claimant’s evidence, then that should tell against the defendant solicitors rather than the 658

Causation and assessment of damages  12.47 claimant. But, as Simon Brown LJ made clear in Mount, it is again possible that the facts of a particular case might show that the only prejudice suffered due to the delay was to the case for the other party to the original litigation. In that case, principle (3) might not apply. 12.46 It is easy to see the rationale for principles (2) and (3), although, as we have seen, depending on the facts they may not necessarily favour the claimant. What is perhaps more difficult is to identify the rationale for principle (4) being a free-standing principle in addition to principles (2) and (3). Take a case where, on the facts, principles (2) and (3) do not require assumptions to be made which favour the claimant. Why, in that case, should there be a separate principle (4) which requires generosity toward the claimant even in cases to which the rationales of principles (2) and (3) do not apply in the claimant’s favour, and do not require a generous approach toward the claimant? Suppose that the underlying claim has been struck out due to the defendant’s negligence, but the defendant always advised the claimant that it was a hopeless claim, and the effect of the delay has simply been to make it harder for the defendant solicitors to put forward the evidence which the defendant to the original action would have put forward at the original trial. If, as Simon Brown LJ said, principle (4) is additional to principles (2) and (3), then presumably it requires the court to take a particularly generous view of the claimant’s case even though the defendant has not advised that it is a good claim and the delay has not weakened the claimant’s position. Why, in such a case, should the court take a generous approach to the claimant’s case? 12.47 Simon Brown LJ said that, at the stage of Mount principle (4), the principle of Armory v Delamirie1 should come into play. What does this principle provide? In Browning v Brachers (Damages),2 due to the defendant solicitors’ negligence the claimants had lost their counterclaim because they had served their evidence late and had not been permitted to rely on it. The counterclaim had been struck out when the claimants offered no evidence to support it. So it was a case within the category which we are currently considering. Jonathan Parker LJ stated that the principle of Armory v Delamirie was: ‘a general principle to the effect that, in a case where the defendant has wrongfully deprived the claimant of property of value (be it an item of physical property or a chose in action), the court will, save to the extent that it is persuaded otherwise by the defendant, assess the value of the missing property on a basis which is generous to the claimant … I respectfully agree3 that the principle in Armory v Delamirie is not directed at the legal burden of proof; rather it raises an evidential (ie rebuttable) presumption in favour of the claimant which gives him the benefit of any relevant doubt. The practical effect of that is to give the claimant a fair wind in establishing the value of what he has lost.’4 659

12.48 Litigation The court held that the fair wind was to be applied in the context of Browning because the claimants had succeeded in showing that they had lost something of value due to the solicitor’s negligence, namely their counterclaim. It is submitted, however, that this passage does not answer the question of why a claimant whose case does not fall within Mount principles (2) and (3) should receive the benefit of any doubt. Perhaps it is simply because of the gravity of the solicitor’s error in allowing the claim to be struck out. But this is not altogether convincing either: claimants who prove grave breaches of duty in other areas of the law still have to prove causation without the benefit of rebuttable presumptions that they have suffered loss. Perhaps the best answer is that, if the defendant deprives the claimant of an action in circumstances where the prospects of success in the action cannot be known, then the court will be generous toward the claimant in assessing the value of the claim.5 1 (1722) 1 Stra 505. 2 [2005] EWCA Civ 735 at [205] and [210]. The report at [2005] PNLR 44 is only one page long. For a summary of the facts see the headnote of the first instance decision: [2004] PNLR 28. 3 Sc: with Simon Brown LJ’s statements in Mount and Sharif. 4 Compare Feakins v Burstow [2005] EWHC QB 1931, [2006] PNLR 6, per Jack J at [80]: ‘The reason for a level of generosity is simply that it is the defendant’s negligence which has lost the claimant his opportunity.’ If that is the reason, it is not clear why it applies in lost litigation cases but not in all other cases where solicitors lose clients opportunities. 5 See Philips & Co v Whatley [2007] UKPC 28, [2007] PNLR 27 at [45].

(iii)  Nature of assessment of value of lost claim 12.48 In Hanif v Middleweeks1 the claimant’s counterclaim had been struck out for want of prosecution due his solicitor’s negligence. The claimant had made an insurance claim arising from a fire and the insurers had contended that the claimant’s partner had started the fire. Mance LJ, with whom Roch LJ agreed, held that in assessing the value of the claimant’s lost counterclaim the trial judge should not seek to try out the original action, as if he or she had been the trial judge at a notional trial on the assumption that the counterclaim had not been struck out. He said that:2 ‘if the evidence or the law is so clear that the subsequent court can treat the prospects as overwhelming or negligible, then the claim against the negligent professional may be assessed at 100% or nil … the judge’s role here … was to assess whether there were any, and if so what, significant prospects under the original counterclaim … I  consider that what [the judge] was doing was consistent with the task which he had set himself: working through the material before him with the single aim of coming to an ultimate conclusion as to the prospects of success on a trial in 1995. I think it is wrong to treat him as having assumed the role of deciding on the material before him what was the actual position regarding arson. Furthermore, if he had assumed that role, then I consider that he would, in the light of accepted principle and authority, have been wrong in this case to do so.’ [Emphasis supplied] 660

Causation and assessment of damages  12.49 Note the italicised words: Mance LJ was not saying that the approach set out in Hanif would necessarily be correct in every case. The reason for holding that the judge would have been wrong, on the facts of Hanif, to try the original action as if he were the notional original trial judge was that the material before the judge was much more limited than the material available to a notional trial judge. There was no forensic evidence about causation of the fire, and much of the evidence which the judge did see was contained only in written witness statements without cross-examination, which might have put it in a different light. Further, the insurers might have made a settlement offer, which if accepted would have represented the value of the claim. 1 [2000] Lloyd’s Rep PN 920. See [15], [18] and [29]. Applied: Sharpe v Addison (above), Dixon v Clement Jones [2004] EWCA Civ 1005, [2005] PNLR 6, Philips & Co v Whatley (above). It is open to question whether this approach was applied in Hatswell v Goldbergs [2001] EWCA Civ 2084, [2002] Lloyd’s Rep PN 359, CA. But it appears that Hanif may not have been cited. 2 At [18]–[21].

12.49 Some of the factors suggesting that the professional negligence judge should not behave as if trying the underlying action at the notional trial will not apply in every case, but others, such as the possibility of settlement, probably will. The weight of authority quoted in the previous paragraph suggests that generally speaking a professional negligence judge should not behave as if trying the original action, or even come close to doing so. In Sharif v Garrett1 Tucker J had struck out the original action for want of prosecution on the basis that it would in 1992 have been ‘impossible to investigate’ essential elements of the action. The Court of Appeal held that, in those circumstances, it would have been wrong for the judge trying the professional negligence action to act as if he were trying those same issues in 1999: ‘the judge fell into the error of seeking to try the very issue which Tucker J had held, some seven years earlier, could not be the subject of a fair trial’.2 Instead, applying Mount principle 4, the professional negligence judge had to:3 ‘put a value on the claim. This is not a science, but it is a task which lawyers are used to performing. The judge will obviously need to consider all the relevant material which was available up to the time when the original claim was struck out, including documents disclosed and witness statements exchanged by the other side. If he is asked to hear the evidence which the other side would have called, or expert evidence of the kind called in this case, he may agree to do so but I do not think he should feel bound to do so if he thinks he can otherwise make a fair evaluation. If he does hear such evidence, it would simply be for the purpose of enabling him to form a better broad view of the merits of the claim.’ 1 [2001] EWCA Civ 1269, [2002] 1 WLR 3118. 2 Per Chadwick LJ at [36]. 3 Per Tuckey LJ at [22].

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12.50 Litigation 12.50 In Sharif,1 however, Simon Brown LJ also approved a passage from Harrison v Bloom Camillin,2 where the claimant’s claim had been lost because their solicitor had failed to serve the claim form in time. In Harrison, Neuberger J  indicated that there might be circumstances in which a court would be prepared to look at the prospects of success in considerable detail. This was because there was a considerable volume of evidence and argument available to the judge trying the professional negligence action, the delay since the notional trial was relatively short and some of the delay had been the claimants’ fault. On the other hand, Neuberger J said that:3 ‘… it would be wrong to be too ready to make firm findings as to what the court would have decided in the action on at least some of the issues which have been debated. First, it may be wrong in principle to do so because an issue might well be arguable either way even if I  have a view on it.4 Secondly, the oral and documentary evidence available to me is, I am satisfied, less than would have been available in the action. On witnesses, I did not hear from some witnesses whom I  believe would have been called in the action. Also, a further 2½ years, while not substantial, is a significant period during which memories can be expected to weaken. Some of the documentation which would have been available in the action but was not available to me could be crucial.’ It is submitted that this passage reflects the correct approach. The court will not try the issues as if the professional negligence judge were the judge at the notional trial, but the extent to which the court will consider the issues in detail, as opposed to with a broad brush, will depend on the extent to which the evidence which it has is the same as the evidence which would have been available at a notional trial which would have taken place if there had been no breach of duty. 1 [2001] EWCA Civ 1269, [2002] 1 WLR 3118 at [43]. 2 [2000] Lloyd’s Rep PN 89. 3 At 99. 4 See Rix LJ’s observations to the same effect at [45] in Dixon v Clement Jones [2004] EWCA Civ 1005, [2005] PNLR 6: an issue may strike different judges in different ways.

12.51 In cases where the claimant succeeds in showing that he or she has lost something of real rather than negligible value, after deciding on the extent to which the assessment should come close to holding a trial within a trial, how should the judge make the assessment? In Sharpe v Addison,1 Chadwick LJ suggested that this required the consideration of two factors: ‘First, in what sum would judgment have been given if the earlier proceedings had proceeded to trial? And, second, what discount, if any, should be applied to that sum in order to reflect the uncertainty (inherent in any litigation to a greater or lesser degree) that a claim which has a real prospect of success may nevertheless, in the event, fail?’ 662

Causation and assessment of damages  12.51 In Browning v Brachers (Damages),2 Jonathan Parker LJ described the approach of the trial judge, Jack J, in assessing damages for the loss of a chance in claims against solicitors for lost litigation as ‘an entirely legitimate approach, provided of course that in addressing each of the two stages due regard is had to the Armory v Delamirie presumption’. Jack J’s approach was as follows:3 ‘Where the claimant’s chances of success on liability at the notional trial are in dispute and what he might then have recovered by way of damages at the notional trial is also in dispute, in my judgment the first dispute is to be resolved by determining the chances of success by way of a percentage. The second dispute is to be resolved by determining the figure representing damages which it is most probable that the claimant would have recovered if he had succeeded on liability. By “most probable” I  mean the figure more probable than any other figure. That figure is then reduced by the percentage to reflect the risk of failure on liability. That provides the best estimate, which the court can make, of what the claimant has lost through his solicitor’s negligence. Where there are separate claims or cross-claims, it may be appropriate to carry out the exercise separately in respect of each. It cannot be right to approach the assessment of the chances of success on damages as opposed to liability in the same manner as the assessment of the chances of success on liability. Take as an example a claim for £1 million damages by way of loss of profits. It may become clear that the figure of £1 million is inflated and that the claimant had no chance of recovering that amount. On a percentage basis he would then recover nothing. He might have some chance of getting as much as £800,000, a good chance of getting £600,000 and some chance of getting as little as £400,000, all depending on what view the judge at the notional trial took of the facts and the application of the law to those facts. If it appears that the figure that is most probable is £600,000, then that is to be taken as the figure for damages.’ While it is clear that different approaches may be taken in different cases, it is submitted that this is a helpful way of dealing with cases where there are uncertainties as to both liability and quantum. In the example, if the most probable figure for damages was £600,000, and there was a 10% chance of success on liability, then presumably the total damages award would be 10% of £600,000, so £60,000. On the other hand, Jonathan Parker LJ did not say that this was the only legitimate approach to the assessment of damages. There might be cases in which it was appropriate to award damages for both (i) a 10% chance of being awarded £1m and (ii) a 50% chance of being awarded £100,000. Finally, on the question of how to deal with the inter-play of different percentage chances, see paras 3.23 above and 12.69 below. 1 [2003] EWCA Civ 1189, [2004] PNLR 23 at [45]. 2 [2005] EWCA Civ 735 at [212]. 3 Browning v Brachers [2004] EWHC (QB) 16, [2004] PNLR 28 at [20]–[21].

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12.52 Litigation

(b)  Underlying claim settled but solicitor’s negligence caused settlement at undervalue 12.52 Ogilvy & Mather Ltd v Rubinstein Callingham Polden & Gale1 was a claim in which the claimant alleged that the defendant solicitors’ negligence meant that he had achieved a worse settlement than he would have done in the absence of negligence. Simon Brown LJ, author of the Mount principles, said this: ‘… if courts too readily hold this sort of loss of chance claim established then a large number of professional indemnity claims must be expected to follow. It can often be said that a party’s settlement prospects could and should have been improved and/or accelerated by their solicitor taking some step or another in the proceedings. The reasons why parties settle are many and various. It will seldom be possible to demonstrate any certainties in the matter. The scope for argument will be well-nigh limitless. If satellite litigation is to be kept in check claims like this should be treated with some circumspection.’ This approach is along similar lines to the quotation, relating to proving liability, from the Canadian Karpenko case which appears at para 12.27 above. It suggests that, in this type of case, it may be harder for claimants to demonstrate that the defendant solicitor’s negligence has caused them to lose anything of value. 1 20 July 1999, (unreported), CA. Longmore LJ approved this passage in Langsam v Beachcrofts LLP [2012] EWCA Civ 1230 at [160].

12.53 On the other hand, in Somatra Ltd v Sinclair Roche & Temperley,1 the underlying action was a complicated and well-documented shipping claim against insurers. Somatra’s case was that, as a result of numerous breaches of duty on the part of its litigation solicitors, Sinclair Roche & Temperley (‘SRT’), Somatra had lost all confidence in SRT a matter of weeks before trial. Although it subsequently settled the underlying action, Somatra sued SRT and contended that the settlement had been at a much lower level than it would have been if SRT had not breached its duty. Morison J  found that SRT had breached various duties which it owed Somatra as its litigation solicitors. He therefore had to consider what loss SRT’s breaches had caused Somatra. In doing so, he recorded a submission that Somatra was an unusual case in that, by the time Somatra decided to try to settle because of its loss of confidence in SRT:1 ‘“all the evidence had been exchanged … trial bundles had been agreed and … discussions were taking place between leading counsel on both sides as to speeches, timings and order of witnesses.” Thus, say Somatra, this is not a case where the court is faced with the usual high degree of speculation where a case has been struck out for want of prosecution … “in the present case, the precise arguments in play between the parties and the evidence which would have been 664

Causation and assessment of damages  12.54 relied upon in support of them are all before the court in their final developed form. Very little speculation remains as to what the claim was or, more importantly, as to what would have occurred at trial.”’ Morison J  appears to have accepted this submission, because he concluded that, in the absence of breach of duty, the claim would have settled with a payment to Somatra of 75% of its total claim as opposed to the 66% which the defendant to the underlying claim in fact agreed to pay. Other than the fleeting reference to the position in cases that had been struck out for want of prosecution in the passage quoted, he did not make further reference to the Mount line of authority. He presumably concluded that it was not relevant in a case such as Somatra bearing in mind two factors: first, the claimant had not lost any chance of trial or settlement as a result of the solicitor’s negligence, and secondly he knew so much about what the evidence would have been at trial. Although the case went to appeal, the judgments in the Court of Appeal2 contain no discussion of the Mount line of authority either, so presumably it was accepted by all that Morison J’s approach to this part of the case was correct.3 It is submitted that, if that was Morison J’s approach, then following the analysis of the Mount line of authority above, it was correct: the Mount line of cases does not directly apply where the effect of the solicitor’s negligence is not to cause the client to lose any hope of trial or settlement.4 1 [2002] EWHC 1627 (Comm). See [256]. 2 [2003] EWCA Civ 1474, [2003] 2 Lloyd’s Rep 855. 3 The authorities on loss of a chance were summarised in four propositions at [77] (p 870 col 1 of the report) but there is no reference to the principles in Mount. 4 See also Griffin v Kingsmill [2001]  EWCA  Civ 934, [2001] Lloyd’s Rep PN  716. Negligent under-settlement of personal injury claim; no reference to Mount principles in determining what would have happened in the absence of negligence, though Mount does not appear to have been cited.

12.54 Hickman v Blake Lapthorn1 was another under-settlement case. Mr Hickman had a personal injury claim arising out of a road traffic accident. The negligent driver had no insurance. Mr Hickman instructed the defendants to bring a claim, which they did against the Motor Insurers’ Bureau (‘MIB’). A  trial of liability only was arranged. Just before the trial started, the MIB made a settlement offer. Counsel and solicitors advised that it be accepted, negligently because they ignored the possibility that Mr Hickman might never be able to work again. Mr Hickman sued his solicitors and counsel, and proved negligence and that he had lost something of real value, namely the chance of a better settlement. In assessing loss, Jack J referred to Mount, said that insofar as it was more difficult for Mr Hickman to establish his loss that difficulty should not count against him but rather against his lawyers because their negligence had caused the delay in the trial, and quoted Jonathan Parker’s statement in Browning v Brachers (Damages)2 that the claimant should be given a fair wind in assessing the value of what he had lost. He did not mention that in Mount Simon Brown LJ’s principles were said to apply to cases which had been 665

12.55 Litigation struck out for want of prosecution, whereas Hickman was not such a case: Mr Hickman did have a settlement, but he contended that it was at too low a figure. 1 [2005] EWHC QB 2714, [2006] PNLR 20. See [62]. 2 [2004] EWHC (QB) 16, [2004] PNLR 28.

12.55 The Mount line of authority appears to have been distinguished in Somatra, though only on the basis that in Somatra the judge trying the professional negligence action had almost as much information as if he had been trying the original action. This perhaps provides an explanation for the judge’s approach in Hickman. In Hickman, the question of assessing loss arose only after negligence had been proved. By that stage, therefore, it had been shown that solicitors and counsel had negligently ignored the possibility that as a result of the accident Mr Hickman might never work again. The claim settled for £70,000 even though the defendant solicitors had told the Legal Aid Board that it was worth around £500,000. Before assessing loss, the trial judge had already concluded that solicitors and counsel had acted negligently in ignoring the question of compensation for future loss. One might therefore argue that, as to the part of Mr Hickman’s claim relating to compensation on the ground that he might never work again, the effect of the negligence was to lose Mr Hickman any hope of compensation for it. Hence, as to that part of his claim, the effect of the negligence was similar to allowing a claim to be struck out. If, for example, he had failed to serve expert evidence in relation to his chances of working again, and that part of his claim had been struck out, the effect on him might have been the same. Hence one might say that the case is analogous with the Mount line of authority. Further, part of the effect of the lawyers’ negligence was that the case was settled at a relatively early stage. There was still scope for considerable uncertainty and speculation as to the final evidence on quantum. As a result, there was uncertainty and this was probably the fault of the defendant lawyers. Hence there was a basis for concluding that such uncertainty should count against the defendants rather than the claimant. It is submitted, however, that these considerations will not necessarily be the same in every claim where it is alleged that lawyers undersettled a claimant’s claim: see Somatra. It should not, therefore, be assumed that the Mount principles apply with full force to every such case. Claimants who have proved significant negligence on the part of defendants often find that in practice they have a fair wind on causation, but it is suggested that this has not been elevated into a principle of law which applies in all claims that solicitors have negligently handled litigation.

(c)  Underlying claim tried but solicitor’s negligence caused claimant to achieve worse result 12.56 A similar point may be made in relation to this third category of case. If the contentions suggested above are correct, then, in a case where a claimant alleges that a solicitor’s negligence has caused his or her case to be presented in 666

Causation and assessment of damages  12.57 a weaker way at trial than it should have been, it does not automatically follow that the Mount line of cases applies with full vigour. In Channon v Lindley Johnstone1 the claimant alleged that his response to his former wife’s claim for ancillary relief had been poorly presented before the district judge deciding the ancillary relief claim. The claimant sued his solicitors for negligence, alleging that if his case had been better presented he would have achieved a better result. The judgments in the Court of Appeal contain no mention of Mount or cases following it. Indeed at one point Potter LJ stated that the judge trying the professional negligence action should have assessed an issue ‘as if himself sitting at first instance and apprised of all the facts which should have been before the district judge’. With respect, it is thought that this runs contrary to the cases so far discussed, which do not appear to have been cited. Further, the court in Channon did not appear to give the claimant an especially fair wind in assessing his loss. 1 [2002] EWCA Civ 353, [2002] PNLR 343, CA. See esp [41], though also [45] and [48] for a loss of a chance type of discounting exercise.

12.57 On the other hand, in Feakins v Burstow1 in earlier litigation F had sued IBAP. B was a solicitor who acted for F. IBAP brought a counterclaim against F. The court awarded IBAP summary judgment on the counterclaim. F sued B, contending that a defence to the counterclaim had been raised too late, as a result of which the judge had refused permission to rely on it. The trial judge in the professional negligence action was again Jack J. He said that save as to one point there was no dispute among counsel as to the applicable principles, and then referred to Mount2 and Browning v Brachers (Damages).3 The one point of dispute was as to whether the Armory v Delamirie principle should apply in a case where the solicitor had not advised that the claim had good prospects of success. Jack J held that it should: ‘the reason for a level of generosity is simply that it is the defendant’s negligence which has lost the claimant his opportunity. I refer to the quotation from Mount’. The judge must therefore have accepted that Mount applied to a case which, unlike Mount, did not arise from negligence leading to the striking out of a claim. His reasoning may have been similar to that suggested in para  12.55 above: the solicitors’ negligence led to a particular part of the claimant’s claim being lost. The whole of that part of the claim was lost. Hence it is as if that part of the claim had been struck out for procedural default such as want of prosecution. As a result the claim is analogous to Mount. This approach would explain why the Mount line of cases was applied in Feakins but not in Channon.4 It would suggest that Mount does apply if procedural default means that a claimant loses any opportunity to advance a whole head of loss at trial, but does not apply if the claimant’s contention is simply that his or her case was not presented as well at trial as it could have been. More authority would be helpful in order to clarify whether this is the correct interpretation. 1 [2005] EWHC QB 1931, [2006] PNLR 6, at [78]–[80], [88]–[90]. 2 [1998] PNLR 493.

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12.58 Litigation 3 [2004] EWHC (QB) 16, [2004] PNLR 28. 4 An alternative explanation might be that Mount was not cited in Channon.

12.58 As mentioned above, in relation to the loss of civil litigation, two possibilities are likely to arise: either the case would have been fought to trial, or it would have settled. We now consider these two possibilities, and then the position in relation to criminal litigation.

4  Trial or settlement? 12.59 Assuming, in a civil case, that in the absence of negligence the claimant would have proceeded with the claim, the next question is whether the trial would have fought or settled. As discussed above, however, even if one assumes that the claim would have fought, the exercise of quantifying its value involves a discounting approach which, unless there is evidence specific to the individual case which suggests that it would have settled for unusual reasons, is similar to the exercise which lawyers on either side would be likely to carry out when assessing the value of the claim for settlement purposes. In many cases, therefore, the exercise of working out the figure at which the claim would have settled will be similar to working out its value on the assumption that it would have gone to trial.1 Thus, for example, in Dixon v Clement-Jones, Rix LJ considered first the value of the claim if it had gone to trial and then as a cross-check whether the claim would have been settled at ‘real value’.2 1 Harrison v Bloom Camillin [2000] Lloyd’s Rep PN 89 per Neuberger J at 95–96. 2 [2004] EWCA Civ 1005, [2005] PNLR 6 at [47].

12.60 Although settlements tend be calculated by reference to what the parties think the court would award at trial, there may be subjective factors, specific to the parties, which would have determined their attitudes to a settlement. There may, for instance, be reasons why one party would have been keen to be extricated from the litigation quickly but at a higher price. All will depend on the evidence. In Dickinson v Jones Alexander & Co,1 a claim relating to ancillary relief proceedings, Douglas Brown J  considered that it was very unlikely that the husband would have compromised the wife’s claim, so he ignored the possibility of settlement and looked simply to what the court would have awarded at a hearing. On the other hand, in McNamara v Martin Mears & Co,2 another claim relating to ancillary relief proceedings, Peter Pain J considered that the most likely outcome would have been that the husband would have settled, though at a figure which represented accurately the value of the claim. Thus he concentrated on what would have happened if the case had settled. But in Griffin v Kingsmill,3 which related to the undersettlement of a personal injury claim, Stuart-Smith LJ held that the amount at which the claim would have been settled should be reduced by 5% because the infant claimant’s mother was particularly cautious and would have settled at a lower level than the claim was worth. Further, in Brinn v Russell Jones & 668

Causation and assessment of damages  12.62 Walker,4 where defendants failed to serve a claim form alleging libel within the period of its validity and the claim became statute-barred, if there had been no negligence the claimants would have reduced their settlement requirements because they would have realised that the original defendant had little money; as a result damages for the professional negligence were reduced. 1 [1993] 2 FLR 521, Douglas Brown J See also Cook v Swinfen [1967] 1 WLR 457 (Lawton J). 2 (1982) 127 Sol Jo 69 (Peter Pain J), and see the transcript, pp 16–17. 3 [2001] EWCA Civ 934, [2001] Lloyd’s Rep PN 716 at [105]. 4 [2002] EWHC Civ 2727 (QB), [2003] Lloyd’s Rep PN 70 (Gray J).

5  Civil cases: loss of a trial (a)  Notional trial date 12.61 The first question is when, if there had been no negligence, the trial would have taken place. Note that the date selected may be of significance in relation the evidence which would have been available at trial.

(b)  Evidence which would have been available at trial 12.62 The court must consider what the evidence would have been at the notional trial. A party is not entitled to be awarded, in a professional negligence action for the loss of litigation, sums to which, had there been proper disclosure at the notional trial, he or she would never have been entitled.1 Further, as previously discussed, to the extent that, due to the solicitor’s negligence, it is unclear what the evidence at trial would have been, this is likely to be to the benefit of the claimant and the court will give the claimant the benefit of any doubt. But there is a potential difficulty where it appears that, at the notional trial, the evidence would have been to one effect, but by the time of the professional negligence trial new and different evidence has emerged. For example, the evidence available at the original trial might have shown that the claimant would never work again because of the accident caused by the original defendant, but new evidence at the professional negligence trial may show that in the meantime the claimant has completely recovered. Or the opposite may be the case: the evidence available for the notional trial showed that the original accident had caused relatively little damage but by the time of the professional negligence trial the evidence shows that, due to the negligence of the original defendant, the claimant will never work again. The question is whether, in either case, the professional negligence judge should take account of the new evidence, which is evidence which post-dates the notional trial date and therefore would not have been available at the notional trial which would have taken place if the solicitor had not been negligent. 1 Green v Collyer-Bristow [1999] Lloyd’s Rep PN 798, per Douglas Brown J at 813 col 1. The principle was there expressed to relate only to ancillary relief, which was in issue in the case, but it is thought that it should be of general application.

669

12.63 Litigation 12.63 On one view, the correct answer is that the professional negligence court is compensating the claimant for what he or she lost by losing out on having a trial. If, at the notional trial, there would have been no evidence at all as to the claimant’s miraculous recovery, so that the notional trial judge could not have taken it into account, then in principle it may be argued that the professional negligence judge should ignore it. The claimant might have been over-compensated at the notional trial, but, but for the defendant’s negligence, the claimant would indeed have been over-compensated, and so is entitled to receive that over-compensation as damages for the loss of the original trial. This approach has been taken in Scotland.1 It is suggested that this approach is right in principle, albeit it may produce unattractive results. 1 Campbell (or Pearson) v Imray [2004] PNLR 1.

12.64 The English authorities tend towards a more pragmatic approach. It is clearly thought undesirable that a claimant who has in fact recovered and is now healthy should be compensated as if unable to work for a lifetime, or indeed that a claimant who in fact will not work for a lifetime should be compensated only for a short illness. The courts have thus appeared keen to take account of evidence known about at the time of the professional negligence trial but which might not have been known of at the time of the original trial. First, as indicated above at para 12.35, in a case where the underlying claim was for personal injury, the court may permit evidence as to the claimant’s medical condition at the professional negligence trial in order to assess whether the claimant could honestly have made the alleged claim: did the claimant in fact suffer the injuries for which, absent negligence, he or she would have claimed compensation? There is no difficulty of principle with that, since the evidence is not directed to showing what the judge at the notional trial would have decided. Secondly, there are cases which consider whether medical reports relating to the claimant’s condition, but which were prepared after the date on which, absent negligence, the notional trial would have taken place, should be taken into account in assessing how much in damages would have been awarded at the notional trial. In Charles v Hugh James Jones & Jenkins1 Swinton Thomas LJ said: ‘I  would be prepared to accept that if some entirely new condition which can be attributed to the accident manifests itself for the first time after the notional trial date it may be that it has to be ignored. I would wish to reserve any final opinion in relation to that. However, in contrast, if a condition has manifested itself prior to the notional trial but the prognosis was somewhat uncertain at that trial date, in my judgment the judge is entitled to, and indeed should, take into account what has in fact occurred.’ On the facts of Charles, the Court of Appeal was able to find that a nonnegligent solicitor would have obtained a further report along the lines of the 670

Causation and assessment of damages  12.66 report in fact before the court, so that its views in relation to evidence which would not have been before the notional trial judge were obiter. 1 [2000] 1 WLR 1278, 1290G–H, CA. Robert Walker LJ agreed and Sir Richard Scott V-C reserved his position in the same way as Swinton Thomas LJ.

12.65 Charles was discussed in Dudarec v Andrews.1 Again, the Court of Appeal did not have to deal with the extreme form of the problem. Commenting on Charles, Waller LJ said that it was: ‘… authority for the proposition that if the further evidence which becomes available should, if the solicitors had not been negligent, have been available at the trial to assist the claimant’s case, it can be taken into account to the advantage of the claimant. Swinton Thomas LJ was also clearly of the view (although that view was obiter) that if the medical evidence at the original trial date would only have indicated a strong possibility as to something, and by the date of the negligence action the result was known, the known result should prevail. He was also of that view if the result was to limit the claimant’s damages on the basis that the claimant in that way would recover what he had actually lost as opposed to obtaining a windfall. This is a view with which Robert Walker LJ seemed to agree, but it is less clear whether Sir Richard Scott V-C did.’ Sedley LJ distinguished between facts which were discoverable but unknown at the notional trial date and those which were at that stage both unknown and unknowable. He appeared to concede that facts which were unknowable at the time of the notional trial in the underlying action might have to be ignored in assessing damages for professional negligence, but considered that facts that were unknown but capable of being known could be taken into account, on the basis that they should have been known by the notional trial date. Smith LJ said that unless new evidence ‘relates to some entirely new matter which could not possibly have been known about at the date of the notional trial, the facts as they have since turned out should be taken into account by the trial judge’. 1 [2006] EWCA Civ 256, [2006] 1 WLR 3002. See [33], [57] and [64].

12.66 In Whitehead v Searle1 the problem arose in acute form. A  child was born suffering from spina bifida. The child lived with his mother who cared for him. The mother engaged the defendants, solicitors and counsel, to bring a ‘wrongful birth’ claim on her behalf. The basis of the claim was that, due to the defendant health authority’s negligence, the spina bifida had not been detected before birth; had it been detected, the mother would have had an abortion and would therefore not have incurred the cost of caring for the child. Hence the damages claim included damages to compensate the mother for both past and future costs of the mother caring for the child. In 1995, before trial, the mother committed suicide. The child’s father took over care of the child. He also took conduct of the mother’s claim against 671

12.67 Litigation the health authority, on behalf of the mother’s estate. On the advice of the defendants, that claim was settled for £20,000. The father then brought a claim on behalf of the mother’s estate against the defendants on the basis that they had negligently failed to bring the wrongful birth claim to trial before the mother died; if the wrongful birth action had been tried before the mother’s death, at trial the mother would have been compensated for the cost of her providing the child with many years of future care, whereas what in fact happened was that after she had died there could be no claim for future care. This was because, after her death, it was clear that the mother would not be caring for the child in the future. In a sense, therefore, the mother’s estate’s claim was for the loss of compensation which, as a result of the mother’s death, it should not have been awarded. The Court of Appeal held that even if, absent the defendants’ negligence, the wrongful birth claim would have been tried before the mother died, and even if, at the wrongful birth trial, the mother would have been awarded large sums for the cost of future care, the estate could not recover those sums in the professional negligence action. In assessing the overall justice of the case, the court was entitled to take into account what it knew, which included its knowledge of the mother’s death, even though that had occurred after the date of the notional trial. Laws LJ said that the loss of a judgment which compensated for the future losses was ‘not the kind of loss for which the law offers compensation’.2 We are doubtful as to whether Whitehead provides a principled basis denying recovery: see the next paragraph. 1 [2008] EWCA Civ 285, [2009] 1 WLR 549. 2 At [20]. See also per Rimer LJ at [78]. This appears to be a reference to arguments of the kind arising from SAAMCo, which are considered in chapter 3.

12.67 In Edwards v Hugh James Ford Simey Solicitors,1 the claimant was a former miner who had claimed compensation for vibration white finger under a statutory compensation scheme set up by the Government. Under the scheme it was possible both to claim general damages and to make a ‘service claim’, which was similar to a claim at common law for special damages. The defendant solicitors negligently advised the claimant to accept a settlement which related only to a general damages claim. The claimant sued the defendant on the basis that but for their negligence he would have brought a services claim. Part of a new medical report which was prepared for the professional negligence trial suggested that, in fact, the claimant’s condition was not sufficiently serious to justify an award for the services claim. The Supreme Court was asked to rule on the question of whether the prospects of success of the claimant’s lost claim for compensation under the scheme were ‘to be judged as at the date when the claim was lost or as at the date when damages are awarded [ie the date of the professional negligence trial]’. Answering that question would have involved considering the authorities just mentioned. But the Supreme Court decided that it was not necessary to deal with those authorities. Under the particular rules of the scheme, a medical report such as the new one would never have been used to determine the 672

Causation and assessment of damages  12.68 claimant’s services claim, as the scheme differed from ordinary civil litigation. Hence the new medical report was irrelevant, and was not to be taken into account, regardless of the position in relation to the authorities mentioned above. It is suggested that, in the circumstances, the Supreme Court’s decision is therefore of little assistance on the question of the circumstances in which evidence obtained after the notional trial date should be taken into account in assessing damages in cases which do not concern the vibration white finger compensation scheme. On that question, it is necessary to take into account the reasoning of the Court of Appeal in Edwards,2 which does consider the previous authorities, albeit the Supreme Court did not decide the case in the same way. In the Court of Appeal, Irwin LJ said3 that, if the new evidence suggested fraud, then it could be taken into account since the court would not ‘lend itself to fraud’. It is thought that that is based on a similar policy to the rule, referred to above at para 12.34, that the claimant must show that his notional claim would have been an honest claim. Irwin LJ added,4 by reference to Whitehead v Searle, that, in cases where fraud was not suggested, there would be an exception to normal principle, so that evidence post-dating the notional trial could be taken into account, if there was ‘a significant or serious scale to the consequences of the supervening event’. Such a rule would explain Whitehead, which presumably remains good law, albeit it is difficult to see any justification of principle for such an approach. In our view, the principled answer to this question is that given by the Scottish court and set out at para  12.61 above. It is not easy to see a principled basis for saying that there is one rule for cases in which ignoring new evidence makes a big difference to the total amount of damages awarded and another rule for cases in which it makes less difference. 1 [2019] UKSC 54, [2019]1 WLR 6549. See [19]. 2 [2018] EWCA Civ 1299, [2018] PNLR 30. 3 At [71]. 4 At [73].

(c)  State of law at notional trial date 12.68 In Harrison v Bloom Camillin,1 Neuberger J considered how the court should deal with a pure point of law that might have arisen at the notional trial. He held that issues of law should be assessed on a loss of a chance basis, as with issues of fact, but that in general the court should be far more ready to determine that the claimant would have failed or succeeded on a point of law than on a point of fact or opinion. He assessed damages on the basis of the House of Lords’ decision in SAAMCo,2 even though at the notional trial date SAAMCo had not yet reached the House of Lords. This was on the basis that the House of Lords’ decision was not intended to be a departure from the past, and that it was possible that if damages had not been assessed in accordance with the principles in SAAMCo then either party might have appealed and by the time of the notional appeal SAAMCo would have been decided in the House 673

12.69 Litigation of Lords and applied. It appears that the professional negligence court may be keen to apply the law as it stands at the time of the professional negligence judgment even if this is different from the law as it stood at the time of the notional trial.3 1 [2000] Lloyd’s Rep PN 89 at 98–99. 2 [1997] AC 191. 3 See also Knight v Haynes Duffell, Kentish & Co [2003] EWCA Civ 223, where it was held that the law was clear so that it was inappropriate to apply a discount for the chance that a judge would have misapplied it.

(d)  Interaction of risks 12.69 The court may conclude that the chances of success as to different heads of loss are different, and may therefore apply different discounts to the different heads of damage.1 A different problem arises where the claimant has to overcome two different hurdles in order to succeed. If the claimant has a 20% chance of overcoming the first and a 50% chance of overcoming the second, then one approach is simply to multiply the two chances in order to arrive at a 10% chance of overcoming both.2 But this approach may be too simple if there is a common issue, such as the claimant’s credibility, which may impact on both chances. This was the case in Hanif v Middleweeks.3 The claimant and his partner Mr Sheikh operated a nightclub. It burned down and an insurance claim was made. The insurers sought a declaration that the claimant was not entitled to an indemnity under the policy. They relied on three separate points. Each of the three issues had a common factor, namely the credibility of the claimant. The claimant counter-claimed for an indemnity but the counterclaim was struck out due to the solicitors’ negligence. The Court of Appeal held that it was wrong simply to multiply the claimant’s chances of success on each of the three issues: if the claimant succeeded on the principal issue, he was more likely to succeed on the others. On the general topic of inter-related risks, see further para 3.23 above. 1 Harrison v Bloom Camillin [2000] Lloyd’s Rep PN 89 at 96 col 2. 2 See, eg Harrison v Bloom Camillin (No 2) [2000] Lloyd’s Rep PN 404. 3 [2000] Lloyd’s Rep PN 920, CA.

(e)  Litigation risk 12.70 In Charles,1 the Court of Appeal rejected an argument that in every case there is a risk of failure, so that in every case there should be a deduction from the value of the claim on account of the claimant’s risk of losing. It accepted that such deductions could be made if there was evidence to support them on the specific facts of the case. For a case in which there was such evidence, see Griffin v Kingsmill.2 1 [2000] 1 WLR 1278, CA at 1294–5. 2 [2001] EWCA Civ 934, [2001] Lloyd’s Rep PN 716.

674

Causation and assessment of damages  12.72

(f)  Nominal damages 12.71 In accordance with the approach discussed at paras 12.42 to 12.44 above, if the claim would have been hopeless, or, in Simon Brown LJ’s words, if it would have had a negligible prospect of success, then only nominal damages will be awarded.1 Mount2 itself was a case where there was no real chance of success. Further, as mentioned at para  12.43 above, a claimant should not be awarded damages for the nuisance value of the claim. Similarly, consider a case which in fact settled but where the claimant alleges that it should not have been settled. Further, the claimant alleges that, if it had fought, then more would have been awarded at trial than was achieved in settlement. If, however, no more would have been awarded at trial then only nominal damages will be awarded in the professional negligence action.3 Again, if solicitors negligently fail to advise a claimant as to the claimant’s rights in the event of public funding being withdrawn, the claimant will recover only nominal damages if, had there been no negligence, public funding would not have been reinstated and, had it been reinstated, he or she would have had no real prospect of success at trial.4 Hatswell v Goldbergs5 is a further example of an underlying claim with no real prospect of success; medical records were said to have destroyed the credibility of witnesses who gave oral evidence. Similarly, in Waraich v Ansari Solicitors,6 which concerned immigration law, on the main claim the claimants failed to show a more than a speculative chance that, absent negligence in the underlying claim, they would have been granted leave to remain in the United Kingdom. They therefore recovered only nominal damages for that claim. 1 See, for example, Buckley v National Union of General and Municipal Workers [1967] 3 All ER 767 (Nield J). 2 [1998] PNLR 493, CA. 3 Green v Cunningham John & Co (1995) 46 Con LR 62, CA. 4 Casey v Hugh James Jones & Jenkins [1999] Lloyd’s Rep PN 115 (Thomas J). 5 [2001] EWCA Civ 2084, [2002] Lloyd’s Rep PN 359. 6 [2019] EWHC 1038 (Comm), [2019] PNLR 24 (HHJ Pearce).

(g)  Strong cases 12.72 One might think that even the strongest case is not free from risk, and so one might imagine that it would be a rare case in which the court would award the claimant the full sum which it considers that he or she could have hoped to achieve, at best, at trial. But in Dickinson v Jones Alexander & Co,1 Douglas Brown J  rejected the notion of any discount, on the basis that the husband would not have settled, and that there was no, or only a negligible, risk of the wife obtaining anything less than the proper award. It is thought that this will be the right approach only where there can be very little doubt as to the correct amount of damages. 1 [1993] 2 FLR 521.

675

12.73 Litigation

(h)  Intermediate cases 12.73 It is doubtful whether, once the principles on which loss is to be assessed have been established, the citation of authority can help much, especially in relation to intermediate cases. Each case turns on its facts, so the assessment of the probabilities in any given case will depend on the facts of that case and not of others.1 It would, however, appear to follow from the analysis of general principles above that if cases are to be valued essentially in terms of their settlement value then most cases that come close to trial of the professional negligence action will fall into this intermediate category, where there is something to be said for each side’s arguments. 1 Some examples are: Yardley v Coombes (1963) 107 Sol Jo 575 (Edmund-Davies J) – employers’ liability claim, chance assessed at one third; Gregory v Tarlo (1964) 108 Sol Jo 219 (McNair J) – employers’ liability claim, chance assessed at 75%; Malyon v Lawrance, Messer & Co [1968] 2 Lloyd’s Rep 539 (Brabin J) – road accident in West Germany, assessment of likely damages in German court, 50% reduction for likely contributory negligence finding; Gascoine v Ian Sheridan & Co [1994] 5 Med LR 437 (Mitchell J) – medical negligence claim, chance assessed at 60%.

(i) Appeals 12.74 In some cases the court has to make an assessment of the outcome of not one but two hypothetical further hearings. Thus, in Corfield v DS Bosher & Co,1 the claimant’s case was that the defendant’s negligence had caused him to lose the opportunity to appeal from the award of an arbitrator to the Commercial Court; further, if the appeal had taken place, the Commercial Court would have remitted the matter back for hearing before a fresh arbitrator. Thus the court had to assess the likely outcome of both the appeal hearing and the hearing before the fresh arbitrator, and discount the claimant’s claim for the risk of failure at both stages. While this may be complicated, it is of course similar to the exercise which lawyers have to undertake in advising clients of the likely outcome of an appeal which, if allowed, would lead to the case being remitted for a further hearing. This is difficult but not impossible.2 1 [1992] 1  EGLR  163 (Judge Crawford QC sitting as a deputy High Court judge). Damages awarded on the basis that the claimant would have had a one third prospect of success on appeal. 2 Cf Motor Crown Petroleum Ltd v SJ Berwin & Co [2000] Lloyd’s Rep PN 438, CA (loss of planning appeal). Damages assessed on the basis that the claimant would have had a 40% chance of success on the planning appeal.

(j)  Costs, and weak cases 12.75 The courts seem generally to have ignored the incidence of costs in assessing damages for the loss of a trial.1 In theory, the court should approach the matter in the same way as an advocate advising a client on the prospects of settling the case. If the claim was for a maximum award of £100,000, and 676

Causation and assessment of damages  12.77 there was a 90% chance of success, then there was a 10% chance that the claimant would have lost and had to pay the defendant’s costs. Ignoring for the moment the element of costs which would not be recovered on assessment, if the claimant had won the £100,000 then he or she would have had his or her own costs paid by the defendant. If costs on both sides would have been £10,000 each, then what the claimant has lost is a 90% chance of winning £100,000 and having to pay no costs, but he or she has also escaped a 10% risk of winning nothing and having to pay both sides’ costs (£20,000). The value of what the claimant has lost can be expressed as (90% × £100,000 = £90,000) – (10% × £20,000 = £2,000), giving a total of £88,000 rather than £90,000. Of course, if the prospect of winning £100,000 is only 50%, then the calculation is (50% × £100,000 = £50,000) – (50% × £20,000 = £10,000) = £40,000 rather than £50,000. But even this analysis may be too simple, if the likelihood is that the claimant would have recovered damages in a range between say £60,000 and £80,000, or if there might have been a payment into court which would have been rejected. 1 There is some reference to costs in Corfield v DS  Bosher & Co [1992] 1  EGLR  163 (see para 12.74, above), McNamara v Martin Mears & Co (1982) 127 Sol Jo 69 (see para 12.79, below) and Port of Sheerness Ltd v Brachers [1997]  IRLR  214 (Buckley J) discussed at para 12.79, below.

12.76 Further, in cases where the claimant has the benefit of a conditional fee agreement and after the event insurance it is necessary to take account of the impact of these.1 The result may be that, in a weak case where the claimant had, for example, only a 25% of winning the underlying claim, the costs risk may render the claim of no value to the claimant. An example is the subsidiary claim in Waraich v Ansari Solicitors.2 Due to the negligence of the defendant solicitors, the claimants lost the chance to bring an underlying claim against other defendant solicitors. The claimants did have a good claim in the underlying litigation, but only as to £2,750 in damages; the rest of their underlying claim would have failed at trial. Although the defendant solicitors had caused them to lose the whole claim, it had no value, since, absent negligence, they would have taken the case to trial, lost in relation to most of the claim, and the £2,750 which they would have been awarded would have been swallowed up by their own irrecoverable costs, or possibly an adverse costs order at trial. 1 See Evans, ‘Bungled Litigation and Costs’ (2019) 35 PN 87, where the various possibilities are considered in detail with further example calculations. 2 [2019] EWHC 1038 (Comm), [2019] PNLR 24 (HHJ Pearce).

12.77 Writing extra-judicially,1 Lord Neuberger of Abbotsbury made a similar point with reference to Dixon v Clement Jones.2 He pointed out that, on the facts of the case, the risk of paying the other side’s costs was likely to have wiped out the claimant’s £60,000 in damages. Why, he asked, did the value of the costs risk not have to be deducted from the claimant’s damages for the lost chance of winning at trial? 677

12.78 Litigation ‘The answer to this seems to be that one has to assess the valuation of the claim against the accountants as an asset lost as at the date of the negligence of the solicitors in that case. Carnwath LJ described Mrs Dixon as having lost something of value. In that connection, what she lost was not so much a 30% chance of a successful outcome of her claim against the accountants, but the ability to negotiate a payment from the accountants to buy off the litigation against them.’ This rationale would be consistent with the approach to valuing claims which we considered under the heading of general principles above. But it raises a question as to whether, in some cases, defendants may be paying too much to settle claimants’ claims, by not taking sufficient account of the costs risks to claimants.3 1 ‘Loss of a Chance and Causation’ (2008) 24 PN 206, 213-4. 2 [2004] EWCA Civ 1005, [2005] PNLR 6. 3 Evans, loc cit.

(k) Enforcement 12.78 Where the claim is that, in the absence of negligence, the claimant would have had either a judgment or an agreement to pay from the other party to the lost litigation, it is necessary to consider (i) whether that party would in fact have been able to afford to pay, at the time when he or she would have been asked for the money, and (ii) whether it would have been necessary and possible to enforce the judgment, if the other party had been unwilling to pay.1 1 See pp 16–17 of the transcript of McNamara v Martin Mears & Co (1982) 127 Sol Jo 69 referred to in para 12.79, below.

6  Civil cases: losing a settlement or obtaining a worse settlement 12.79 We have already considered the general principles applicable to this type of case at para 12.51ff, above. By way of example, in McNamara v Martin Mears & Co,1 Peter Pain J considered it most unlikely that, in the absence of negligence, the husband would have wished to go to court for a hearing in relation to ancillary relief. Instead, he would have made a shrewdly judged settlement offer. Thus the questions were when, and in what amount, it was likely that he would have made the offer. The husband had in fact made a much lower settlement offer. Damages thus comprised the difference between the amount of the settlement which was in fact offered, and that which would have been agreed in the absence of negligence, making deductions for the hazards of litigation and costs. Further, there was a deduction because the claimant had been paid earlier than she would have been if there had been no negligence. In Port of Sheerness Ltd v Brachers,2 the defendants negligently advised that, if the claimant dismissed its dockers on the ground of redundancy, the only payments 678

Causation and assessment of damages  12.81 it would have to make would be redundancy payments. The negligence was in failing to mention the risk of unfair dismissal proceedings, which were then brought and settled for a further £10,000 per docker. Buckley J found that, if there had been no negligence: (i) the likelihood was that the claimant would have settled with the dockers for the lower sum of £2,000 per docker; and (ii) there was a 90% chance that proceedings would have been avoided. 1 (1982) 127 Sol Jo 69 (Peter Pain J), and see the transcript. 2 [1997] IRLR 214 (Buckley J).

12.80 In Charles v Hugh James Jones & Jenkins,1 on the other hand, the original claim had been struck out. It was a road traffic accident case. Before the striking out, the claimant’s solicitors had written to accept the defendant’s insurers’ offer of settlement for £20,000, if the money was paid within 21 days. It was not paid within 21 days so there was no binding settlement. In the professional negligence action, the defendant solicitors argued that, if the claim had not been struck out, it would have been settled for around £20,000. The Court of Appeal gave this short shrift. The solicitors had been negligent to advise accepting £20,000. The claim was in fact worth nearly £200,000. Hence the court ignored the possibility of settlement. Further, in Hanbury v Hugh James Solicitors2 the defendants had negligently failed to send materials to a medical expert, as a result of which the claimant lost the opportunity to make a personal injury claim. The professional negligence judge assessed the value of the claim but then deducted a further 20% because she found that the claim would have been highly likely to have settled, and that a further reduction would have been made on settlement. 1 [2000] 1 WLR 1278, CA. 2 [2019] EWHC 1074 (QB), [2019] PNLR 25 (Yip J).

7  Criminal cases 12.81 In Acton v Graham Pearce & Co,1 the claimant was himself a solicitor, who was charged with obtaining money from the Law Society by deception, on the basis that he had submitted public funding forms to the society for payment when he knew that they contained false information. The defendants represented him in the criminal proceedings. He instructed them that responsibility for the operation of the scheme in his office had been delegated to an employee, S, and that S had been forced to leave her previous firm. He further suggested that memoranda written by S, on which the prosecution relied, were not authentic. The defendants negligently failed to submit the memoranda to an expert to check their authenticity, or to take statements from the partners of S’s previous firm. The claimant was convicted. On appeal, the Court of Appeal admitted fresh evidence from both those sources, and quashed the conviction. Having held the defendants negligent, Chadwick J assessed the claim as one for damages for loss of the chances that, if the claimant had been properly represented, either the prosecution would have withdrawn the case, or 679

12.82 Litigation he would have been acquitted at trial. He considered the various events which would have happened, and said:2 ‘The quantification of the value of a chance lost cannot be an exact science. The task is made more difficult when, as in the present case, the value of the chance lost depends on the evaluation of a sequence of chances; each of which contributes to the loss of a favourable outcome overall. I do not think that the task is assisted by over-refinement. The court must make the best estimate it can.’ He assessed the chances that, in the absence of negligence, the claimant would have escaped conviction at 50%. It appears that a broad-brush assessment is to be made in this type of case. 1 [1997] 3 All ER 909 (Chadwick J). 2 [1997] 3 All ER 909 at 935.

D  RECOVERABLE DAMAGE 1  Consequential losses 12.82 In Ahmad v Wood1 the claimant, a husband, alleged that the defendant solicitors had negligently represented him in ancillary relief proceedings against his former wife. He claimed that, as a result, the family law court had ordered him to pay the wife more than he would have been ordered to pay if there had been no negligence. In addition, however, he claimed consequential losses including the costs of an enforcement application which the former wife had made, interest on a bridging loan taken out to fund payments to the former wife, and the equity in a property transferred to the former wife in order to settle enforcement proceedings. The judge held, at an interlocutory stage, that the consequential losses were not recoverable. The claimant could claim for the difference between the actual award which the family court had made and the award which it would have made absent negligence; he could not claim for the consequential losses as they were losses ‘flowing from the effects of the award actually made’, which were outside the scope of the defendant’s duty to the claimant.2 1 [2018] EWHC 996 (QB), [2018] PNLR 28 (HHJ Eyre QC). 2 Reference was made to SAAMCo [1997] AC 191, which is discussed in Chapter 3.

2  Mental distress and psychiatric illness (a)  Mental distress 12.83 The House of Lords reconsidered the law on the recovery of damages for mental distress in Farley v Skinner, which we consider below.1 Farley involved a claim against surveyors. It is thought that, after Farley, the general rule continues to be that damages for mental distress arising out of solicitors’ breaches of duty 680

Recoverable damage  12.84 are not recoverable. In some cases decided before Farley, however, it had been held that, exceptionally, such damages were recoverable against solicitors. These cases were not disapproved in Farley and appear to remain good law. On that basis, if solicitors negligently fail to enforce an injunction to prevent harassment, and the client is harassed further, they may be liable for this further mental distress,2 or if their negligence causes the client wrongly to be convicted of a criminal offence, they may be liable for mental distress caused to the client who perceives himself, wrongly, to be seen as a criminal by his friends, family and acquaintances.3 They may also be liable for mental distress if their negligence causes a client to be made bankrupt.4 Further, if solicitors are aware that the client is suffering from an anxiety syndrome related to the litigation, and that the syndrome will probably terminate as soon as the litigation does, if their negligence causes the litigation to go on longer than necessary they may be liable for the increased period for which the anxiety syndrome is suffered.5 1 [2001] UKHL 49, [2002] AC 732. For the general rule as to solicitors’ claims before Farley see Hayes v Dodd [1990] 2 All ER 815, CA. 2 Heywood v Wellers [1976] QB 446, CA. 3 McLeish v Amoo-Gottfried & Co (1993) 10 PN 102 (Scott Baker J). 4 Rey v Graham and Oldham [2000] BPIR 354 (McKinnon J). 5 Malyon v Lawrance, Messer & Co [1968] 2 Lloyd’s Rep 539 (Brabin J).

12.84 In Farley, the House of Lords held that the test of whether damages were recoverable for a claimant’s annoyance caused by a breach of contract was whether a major or important object of the contract was to provide ‘pleasure, relaxation, or peace of mind’1 or something akin thereto such as freedom from molestation.2 Subsequently, in Channon v Lindley Johnstone3 the Court of Appeal held that a solicitor’s retainer to conduct ancillary relief proceedings did not amount to a contract that fell into this category, so that the claimant was not entitled to damages for inconvenience, distress or disappointment. In Hamilton-Jones v David & Snape,4 Neuberger J suggested that in cases in which the solicitor’s retainer related to a purely business transaction, such as Hayes v Dodd5, damages would generally not be recoverable for mental distress. He considered that Channon should be seen in the same light, because although the context was a matrimonial dispute the negligence in question related to financial issues, namely the quantum of ancillary relief. He contrasted the facts of Hamilton-Jones itself: there, the claimant retained the solicitors because she was concerned that her Tunisian husband, from whom she was separated, might take her children to Tunisia. Due to the solicitors’ negligence the husband was able to take the children to Tunisia for good; the claimant was unable to persuade the Tunisian courts to order their return to her. The question was whether the claimant was entitled to damages for mental distress occasioned by the loss of the company of the children. Neuberger J held that she was:6 ‘… a significant reason for the claimant instructing the defendants was with a view to ensuring, so far as possible, that the claimant retained custody of her children for her own pleasure and peace of mind.’ 1 Per Lord Steyn at [24].

681

12.85 Litigation 2 See per Neuberger J  in Hamilton-Jones v David Snape [2003]  EWHC  3147 (Ch), [2004] 1 WLR 924 at [61]. 3 [2002] EWCA Civ 353, [2002] Lloyd’s Rep PN 342 esp at [56]. 4 Above, at [64]. 5 [1990] 2 All ER 815, CA. 6 At [61]. There was no claim for psychiatric illness as it was statute-barred.

(b)  Psychiatric illness 12.85 In McLoughlin v Jones,1 the claimant’s case was that due to the defendant solicitors’ negligence he had been wrongly convicted of a criminal offence. He claimed that as a result he had suffered psychiatric illness and that the defendants should compensate him for this. After a detailed review of the authorities, the Court of Appeal held that it was arguable that the defendant solicitors owed the claimant a duty to protect him from suffering psychiatric illness if he were wrongly convicted. The matter was remitted for trial. The trial judge found that the claimant’s case as to causation of the psychiatric illness was not proved, so she dismissed the claim.2 Her comments as to foreseeability of psychiatric loss were therefore obiter, and she did not consider the issue in any detail. She considered the Court of Appeal’s review of the authorities but was not satisfied that some degree of psychiatric illness was reasonably foreseeable on the facts. The claimant was a former boxer and Grenadier Guardsman. He was a robust and active builder at the time of his arrest. He had a happy marriage and a stable and supportive family, and an income and assets that should have provided for his family during imprisonment. The charges were not particularly serious. The judge concluded that to award compensation for psychiatric injury would:3 ‘be tantamount to saying that there is a real risk of anyone in the claimant’s position facing a trial on relatively serious charges suffering psychiatric injury if wrongly imprisoned as a result of their solicitor’s negligence’. She rejected that contention. Plainly, on different facts the result might have been different. 1 [2001] EWCA Civ 1743, [2002] QB 1312. 2 McLoughlin v Jones, Espley,& Wish, trading as Grovers [2005] EWHC 1741 (QB) (Hallett J). 3 At [120].

3  Costs and CRU certificates 12.86 A problem arises where a defendant’s negligence causes a claimant to undertake alternative legal proceedings in mitigation, against a third party. If the claimant wins those proceedings, it is likely to be awarded its costs, payable by the third party, but only costs assessed on the standard basis. Those costs might to amount to only say 75% of the claimant’s actual costs. The claimant will therefore be left with a shortfall of, in our example, 25% of the 682

Mitigation  12.87 costs which it has incurred. Or, if the third party is insolvent, the claimant will have to bear 100% of the costs unless compensated by the negligent defendant who caused them to be incurred. There is a debate as to whether, in these circumstances, a defendant who is liable to reimburse the claimant’s costs of the earlier proceedings should pay the costs assessed on the standard or the indemnity basis. Although the issue is not resolved at Court of Appeal level, the better view now appears to be that the defendant must pay those costs on the indemnity basis: see para 3.71 above. It is thought, however, that a different rule may apply where the claimant’s claim is that, absent the defendant’s negligence, its claim against a third party would not have been struck out. In that case, the claimant may allege that, absent negligence, it would have won the action and the third party would have been ordered to pay its costs. In that case, however, in ordinary circumstances what the claimant will have lost is an order that the third party pay its costs assessed on the standard basis. If that is the position, then the claimant cannot claim more as damages than the costs which the third party would have paid, namely costs assessed on the standard basis. Even those costs will not be payable as damages if the third party was insolvent. Finally, in a personal injury claim, if the claimant has lost the chance of being awarded damages that would have been the subject of a deduction of amounts stated in a certificate from the Compensation Recovery Unit (‘CRU’), the claimant’s damages award in the later professional negligence action should be in the net amount which he or she would have recovered after any CRU deduction. This is because, in the absence of negligence, the claimant would have received only the net sum. If the net sum is awarded as professional negligence damages it will provide the correct amount of compensation, because the professional negligence damages will not be the subject of a CRU deduction.1 1 Garrett v Wilson Davies & Co, CA, 2 October 1998, unreported.

E MITIGATION 12.87 If the effect of a solicitor’s negligence is that the claimant loses the opportunity to bring or defend the claim at all, then it will not be possible for the negligent solicitor to contend that the claimant should have mitigated his or her loss by bringing alternative proceedings. There may, however, be cases where such a contention is arguable. We dealt with mitigation in the sense of bringing alternative proceedings in Chapter 3.1 1 See para 3.68ff, above.

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Part 3

Procedure

Chapter 13

Costs orders against solicitors

A  BASES FOR ORDER 13.01 In addition to the risk of being sued for negligence or breach of contract by their own clients, solicitors face the possibility of orders that they pay the costs of proceedings personally. The principal jurisdiction under which the courts may make such orders in civil proceedings is the wasted costs jurisdiction, pursuant to Senior Courts Act 1981, s  51(6). Most of the discussion in this chapter relates to civil proceedings, but provisions relating to criminal proceedings are dealt with at the end of the relevant sections. 13.02 Before examining the rules as to wasted costs in detail, the court’s other powers to make costs orders against solicitors should be mentioned. In Tolstoy-Miloslavsky v Aldington,1 Rose LJ said that there were only three categories of case that could give rise to an order for costs against a solicitor. The first was pursuant to the wasted costs jurisdiction. The others were: ‘… (ii) if it is otherwise a breach of duty to the court such as, even before the Judicature Acts, could found an order, eg if he acts, even unwittingly, without authority or in breach of an undertaking; (iii) if he acts outside the role of a solicitor, eg in a private capacity or as a true third party funder for someone else.’ This was approved by Lord Woolf MR in Hodgson v Imperial Tobacco Ltd,2 where he also made clear that the court should consider making an order under the second head only after it had decided whether to make a wasted costs order. Following Lord Woolf’s approach, in this chapter we first deal with wasted costs orders, and only then look at Rose LJ’s second and third categories of order. 1 [1996] 1 WLR 736 at 745H–746A, CA. 2 [1998] 1 WLR 1056 at 1066H, CA.

13.03 A further power to order costs against solicitors is found in r 44.11(1) (b) of the Civil Procedure Rules (CPR), which gives the court, on an assessment of costs, the power to order a party’s legal representative to pay costs to another party ‘if it appears to the court that the conduct of that party or the party’s legal representative, before or during the proceedings or in the assessment 687

13.04  Costs orders against solicitors proceedings, was unreasonable or improper’. This power is considered at the conclusion of this chapter.

B  WASTED COSTS ORDERS 13.04 Wasted costs orders provide a means whereby solicitors and barristers may be ordered to compensate either their own client, or a party to litigation other than the client for whom they act,1 for costs incurred by that party as a result of acts done or omitted by the solicitors or barristers in their conduct of the litigation. ‘Wasted costs’ are defined in Senior Courts Act 1981, s 51(7), the text of which appears below in para  13.06. The Court of Appeal gave detailed guidance as to most aspects of the subject in Ridehalgh v Horsefield2 (‘Ridehalgh’). In Medcalf v Mardell3 Lord Bingham, delivering a speech which commanded majority support, endorsed what had been said in Ridehalgh subject only to the House of Lords’ decision in Hall v Simons,4 and as to further guidance on the effect of legal professional privilege which we consider below. 1 Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120. 2 [1994] Ch 205. 3 [2002] UKHL 27, [2003] 1 AC 120 at [13]. 4 As to the abolition of advocates’ immunity: see para 12.02ff, above.

13.05 Making an application for a wasted costs order is not straightforward. Two principal points arise: first, the court will grant such an order only in plain cases, which are capable of being dealt with quickly and in summary fashion,1 and secondly, in cases where a party seeks a wasted costs order against another party’s lawyers it is necessary to consider carefully the impact of legal professional privilege.2 Jackson J, who had appeared as counsel in Ridehalgh, referred to these problems in Lady Archer v Williams:3 ‘Despite the best efforts of judges … the true nature of the wasted costs jurisdiction is still insufficiently appreciated. This is a procedure for dealing with relatively straightforward claims which are capable of summary disposal at a proportionate cost. It is not a vehicle for mounting a complex professional negligence action in circumstances where much of the relevant evidence is obscured from the court’s view.’ Or, as His Honour Michael Cook put it, ‘anyone thinking of applying for a wasted costs order should think twice’.4 These and other potential procedural pitfalls are discussed below at 13.18ff, where we also consider cases in which applicants have successfully surmounted them. After that we deal with the substantive rules as to the circumstances in which the court will make an order. But first we look at the scope of the jurisdiction. 1 See para 13.18ff, below. 2 See para 13.24ff, below. 3 [2003] EWHC 3048 (QB) at [63]. 4 Cook on Costs 2007 at [33.7].

688

Wasted costs orders  13.07

1 Scope 13.06 The statutory provision granting jurisdiction to make a wasted costs order is Senior Courts Act 1981, s 51 of which the relevant parts state: ‘51(1)  Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in– (a)

the civil division of the Court of Appeal;

(b) the High Court; and (c)

any county court,

shall be in the discretion of the court… (6)  In any proceedings mentioned in subsection (1), the court may disallow or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with the rules of court. (7)  In subsection (6), “wasted costs” means any costs incurred by a party– (a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal representative or any employee of such a representative; or (b) which, in the light of any such act or omission occurring after they were incurred, the court considers it unreasonable to expect that party to pay … (13)  In this section “legal or other representative”, in relation to a party to proceedings, means any person exercising a right of audience or right to conduct litigation on his behalf.’ Section 52(2A) extends the application of these provisions to civil proceedings in the Crown Court. 13.07 Difficulties have arisen in relation to the meaning of ‘legal or other representative’ pursuant to s 51(13). If a lawyer does not count as a ‘legal or other representative’ for this purpose then there is no jurisdiction to make a wasted costs order against the lawyer, so the definition matters. In Byrne v South Sefton Health Authority1 the claimant had instructed solicitors called Dooley in September 1989 to bring a claim in respect of an injury that had occurred in May 1989. The solicitors obtained legal aid but failed to issue proceedings within the limitation period. Eventually another firm of solicitors was instructed and issued proceedings against the defendant health authority. Those proceedings were struck out on limitation grounds. The health authority sought a wasted costs order against the first firm of solicitors, Dooley. One ground for rejecting the wasted costs application was that it was the other firm 689

13.08  Costs orders against solicitors of solicitors, those who had issued the proceedings, rather than Dooley, which had caused the health authority’s wasted costs. But the Court of Appeal did not rely primarily on that argument in rejecting the wasted costs application. Instead, it interpreted s 51(13) (of the Senior Courts Act 1981) by reference to s 119(1) of the Courts and Legal Services Act 1990. The reason for doing this was that it was the 1990 Act which had, by amendment, introduced the statutory wasted costs jurisdiction by reforming s 51 of the Senior Courts Act 1981. On that basis, a person could be a ‘legal or other representative’ for the purposes of making a wasted costs order only if that person had issued proceedings in court or performed functions ancillary to the issue of proceedings, these being the functions that amount to ‘exercising … a right to conduct litigation’ by virtue of s 119(1) of the 1990 Act. The Court of Appeal held that Dooley had not taken such steps, so that there was no jurisdiction to award wasted costs against it. 1 [2001] EWCA Civ 1904, [2002] 1 WLR 775 at [28]–[29].

13.08 Subsequently, however, in Medcalf v Mardell,1 Lord Bingham, giving the majority speech, rejected the submission that s 51(13) of the Senior Courts Act 1981 was to be interpreted by reference to definitions imported into the 1981 Act and contained in s 119(1) of the Courts and Legal Services Act 1990. This suggests that the reasoning of Byrne on this point should no longer be followed. But Lord Bingham approved the result in Byrne.2 The result of Byrne was that there was no jurisdiction to make a wasted costs order against Dooley because Dooley had not acted in the litigation which ultimately ensued. If the reasoning in Byrne is rejected but the result accepted, what is the rationale for accepting the result? Lord Bingham said that s 51(13):3 ‘was intended … simply to make plain that no liability could attach to any practitioner not involved in the litigation giving rise to the claim.’ Lord Bingham did not explain why he approved of the result in Byrne, but presumably it was because, on his interpretation of s 51(13), s 51(13) does not apply in cases where the solicitor whose conduct is challenged was not at any stage involved in the conduct of the litigation in which the costs were said to have been wasted. On this view, where a solicitor acts unreasonably, improperly or negligently and thereby causes costs to be wasted, if the solicitor ceases to act before proceedings have been issued then the court has no jurisdiction to make a wasted costs order against the solicitor. 1 [2002] UKHL 27, [2003] 1 AC 120 at [20]. 2 See [2003] 1 AC at 134B. See also Lady Archer v Williams [2003]  EWHC  3048 (QB), per Jackson J at [57]. 3 [2003] 1 AC at 133H–134A.

13.09 If, however, solicitors waste costs before proceedings are issued, but proceedings subsequently are issued and the same solicitors conduct the litigation after the issue of proceedings, then the court has jurisdiction to make 690

Wasted costs orders  13.11 a wasted costs order even in relation to the conduct of those solicitors before issue of the proceedings. This follows from the Court of Appeal’s decision in Wagstaff v Colls (Wasted Costs Order).1 Ward LJ accepted that there was no litigation in existence when the impugned conduct occurred, but distinguished Byrne on the basis that: ‘… the solicitors were never exercising the right to conduct litigation. The respondents were here.’2 Hence it appears that the crucial question, in relation to the conduct of solicitors before proceedings are issued which waste costs, is whether the guilty solicitors conduct the litigation after the issue of proceedings: if not, there is no jurisdiction to make a wasted costs order; if so, there is jurisdiction. 1 [2003] EWCA Civ 469, [2003] PNLR 29. 2 At [74].

13.10 In the later case of Radford & Co v Charles,1 Neuberger J suggested that the difference of principle between the two cases was that: ‘… in Byrne, the solicitors were negligent, but not in breach of any duty to the court, whereas in Wagstaff the solicitors had arguably acted improperly, in breach of duty to the court. It is fair to say, however, that on one reading of the judgments in the two cases, the difference is that in Byrne the solicitors did not act in the subsequent litigation, whereas they did so in Wagstaff.’ The answer may be that solicitors cannot fall within the definition of ‘legal or other representative’ for the purposes of a wasted costs order unless proceedings are commenced, because until that point they owe no duty to the court. Once the solicitors are acting in litigation, however, their entire conduct can be considered in that context.2 Neuberger J observed that this rule is open to the objection that solicitors could escape liability for wasted costs simply by suggesting that their retainer be terminated before proceedings are issued and other solicitors be instructed to issue the proceedings and conduct the litigation thereafter, but it appears to represent the law at present. 1 [2003] EWHC 3180 (Ch), [2004] PNLR 25 at [47] and at [55]–[56]. 2 For a rather surprising extension of the wasted costs jurisdiction in respect of the pre-action conduct of solicitors who later acted in litigation, see Banks v Geddes [2012]  NIQB  87, [2013] PNLR 11.

13.11 Does this mean that no order can be made against a person who, not being an authorised or exempt person within the meaning of the Legal Services Act 2007, is not in fact exercising a right of audience or a right to conduct litigation (though may be purporting to do so)? As has been pointed out in the Court of Appeal’s guidance on McKenzie friends1 such persons do not owe an overriding duty to the court. In the light of the rule, accepted in all the authorities cited above, that the wasted costs jurisdiction concerns breaches of duties to the court, it might be thought that it was not available against such persons. In Gempride v Bamrah2 a solicitor’s firm had instructed a firm of costs 691

13.11  Costs orders against solicitors draftsmen to prepare a bill of costs for detailed assessment. The rate claimed for part of the work was exaggerated but the solicitor signed it relying, she said, on the advice of the costs lawyer that this conduct was acceptable. One issue which arose was whether, if the fault was that of the costs draftsman, the solicitor could escape liability to pay costs because the agent had acted outside the scope of his authority. In holding the solicitor liable, the court plainly considered that no such order could have been made directly against the costs lawyers. Hickinbottom LJ said this:3 ‘Although only an extension of the conventional principles of agency into the particular statutory field with which we are concerned, at a time when new business practices mean that solicitors are more frequently subcontracting work out to the unauthorised, it seems to me to be an important matter of principle that solicitors on the record – and other authorised litigators and “legal representatives” for the purposes of the CPR – understand that they remain ultimately responsible for the acts and omissions of those to whom they delegate parts of the conduct of litigation, particularly where those to whom such work is delegated are not authorised. It is only in that way that the supervisory jurisdiction of the court can be effectively maintained. Although an order under CPR rule 44.11 cannot be made against someone who is neither a party nor a legal representative, for the purposes of that rule the conduct of someone who is not an authorised litigator may be attributable to a legal representative on agency principles.’ Where, therefore, a solicitor’s firm subcontracts part of the work of a solicitor to an agent such as a costs lawyer, a wasted costs order is likely to be available against the firm if that agent acts unreasonably, improperly or negligently, even if no such order would be available directly against the agent if he or she is not authorised or exempt. In Malik v Wales,4 however, Judge Mackie QC made a wasted costs order against a claims management company which had been conducting litigation on the claimant’s behalf (albeit through an employee who was an authorised solicitor) whilst the company was neither authorised nor exempt. In MA  Lloyd & Son (In Administration) v PPC  International Ltd,5 by contrast, the application appears to have been made, and the court to have proceeded, on the basis that a wasted costs order could only be made against an authorised person. The claimants had been represented by an entity described as ‘a company limited by guarantee and a charity’ offering ‘legal support’ to members of the public and employing barristers and solicitors. The application was brought, and was granted in part, against the individual solicitor who was said to have conducted the litigation, rather than the company. The solicitor was an authorised person. Finally, in Awuah v Secretary of State for the Home Department6 McCloskey J concluded that the First-tier Tribunal of the Immigration and Asylum Chamber could not make a wasted costs order under s  29(5) of the Tribunals, Courts and Enforcement Act 2007 (which is in identical terms to s  51(7) of the Senior Courts Act 1981) against a Home Office Presenting Officer (HOPO), on the 692

Wasted costs orders  13.13 basis that such a person, being neither an authorised nor exempt person, was not a ‘legal representative’ for that purpose. 1 Practice Note (McKenzie Friends; Civil and Family Courts) [2010] 1 WLR 1881. 2 [2018] EWCA Civ 1367, [2019] PNLR 7. The case concerned an application for an order under CPR r 47.11, which is only available against a party or a party’s ‘legal representative’; it is thought that the reasoning must be equally applicable to the wasted costs jurisdiction. 3 [2018] EWCA Civ 1367, [2019] PNLR 7 at [103]; see generally [97]–[103]. 4 [2012] EWHC 4281 (QB). It does not appear, however, that the judge heard argument directed to the question of whether he had jurisdiction to make such an order given the company’s status. The company represented itself on the wasted costs application. 5 [2016] EWHC 2162 (QB), [2017] PNLR 1. 6 [2017] UKFTT 555 (IAC), [2018] PNLR 7 at [20]–[25]. A second ground for the decision was that a HOPO, being a civil servant, had no identity distinct from the Secretary of State, so that if the Home Office was represented by a HOPO that amounted to an appearance by the Secretary of State as a litigant in person: see at [28]–[29]. If this were not the position, it would surely be questionable whether an HOPO could appear in the Tribunal at all.

13.12 If the position is that a ‘legal representative’ must be a person who owes duties to the court, and hence the jurisdiction cannot be invoked against those who are neither authorised to exercise rights of audience or conduct litigation, nor exempt from the requirement of authorisation, nor acting as agents of authorised persons, it is open to the criticism that the court is thereby deprived of the ability to impose this sanction in precisely the circumstances when the need for it might be thought most likely to arise. In Assaubayev v Michael Wilson and Partners Ltd1 the court was prepared to assume that a person who purported to be, but was not, a solicitor could be ordered to pay costs pursuant to the court’s supervisory jurisdiction over its officers. It is not immediately obvious why the position should be different under the wasted costs jurisdiction – though it is not clear to what extent the court in Assaubayev heard argument on this specific issue – but this does mean that there may be an alternative route to claiming costs from such parties. There are also criminal penalties for acting without such authorisation or exemption; and from the point of view of the other parties to the litigation, it might in some circumstances be possible to obtain a non-party costs order instead (as to which, see further paras 13.81ff below). 1 [2014] EWCA Civ 1491, [2015] PNLR 8 (see para 13.79, below).

2 Procedure (a)  Procedural rules 13.13 An application for a wasted costs order must be made pursuant to CPR r 46.8, which provides: ‘(1)  This rule applies where the court is considering whether to make an order under section 51(6) of the Senior Courts Act 1981 (court’s power to disallow or (as the case may be) order a legal representative to meet, ‘wasted costs’). 693

13.14  Costs orders against solicitors (2) The court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing before it makes such an order. (3)  When the court makes a wasted costs order, it will – (a)

specify the amount to be disallowed or paid; or

(b) direct a costs judge or a district judge to decide the amount of costs to be disallowed or paid. (4) The court may direct that notice must be given to the legal representative’s client, in such manner as the court may direct – (a)

of any proceedings under this rule; or

(b) of any order made under it against his legal representative.’ 13.14 The requirement of a fair hearing is expanded upon in the Practice Direction to Part 46.1 Further, the need for any order made to specify the amount of money to be paid or disallowed (now r 46.8(3)(a)) was introduced by the CPR, and reflects the general approach of those rules in favour of the immediate assessment of the amount of costs, although the court may instead refer the whole matter to a costs judge or a district judge (r 46.8(3)(b)). Thirdly, there is power to order that notice be given to the lawyer’s client (r 46.8(4)).2 1 See para 13.15, below. 2 See also CPR r 44.2.

(b)  Practice Direction 13.15 More rules on the procedure to be followed appear in the Practice Direction to CPR Part 46, the relevant parts of which provide: ‘5.1  A wasted costs order is an order – (a)

that the legal representative pay a sum (either specified or to be assessed) in respect of costs to a party; or

(b) for costs relating to a specified sum or items of work to be disallowed. 5.2 Rule 46.8 deals with wasted costs orders against legal representatives. Such orders can be made at any stage in the proceedings up to and including the detailed assessment proceedings. In general, applications for wasted costs are best left until after the end of the trial. 5.3 The court may make a wasted costs order against a legal representative on its own initiative. 5.4  A party may apply for a wasted costs order – 694

Wasted costs orders  13.15 (a)

by filing an application notice in accordance with Part 23; or

(b) by making an application orally in the course of any hearing. 5.5  It is appropriate for the court to make a wasted costs order against a legal representative, only if – (a) the legal representative has acted improperly, unreasonably or negligently; (b) the legal representative’s conduct has caused a party to incur unnecessary costs, or has meant that costs incurred by a party prior to the improper, unreasonable or negligent act or omission have been wasted; (c)

it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs.

5.6  The court will give directions about the procedure to be followed in each case in order to ensure that the issues are dealt with in a way which is fair and as simple and summary as the circumstances permit. 5.7 As a general rule the court will consider whether to make a wasted costs order in two stages – (a)

(b)

at the first stage the court must be satisfied – (i)

that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii)

the wasted costs proceedings are justified notwithstanding the likely costs involved;

at the second stage, the court will consider, after giving the legal representative an opportunity to make representations in writing or at a hearing, whether it is appropriate to make a wasted costs order in accordance with paragraph 5.5 above.

5.8 The court may proceed to the second stage described in paragraph 5.7 without first adjourning the hearing if it is satisfied that the legal representative has already had a reasonable opportunity to make representations. 5.9 On an application for a wasted costs order under Part 23 the application notice and any evidence in support must identify – (a)

what the legal representative is alleged to have done or failed to do; and

(b) the costs that the legal representative may be ordered to pay or which are sought against the legal representative.’ 695

13.16  Costs orders against solicitors

(c)  Stages of the application 13.16 At the first stage, the court considers essentially whether there is a case to answer, and whether the application is justified bearing in mind the costs involved.1 By this stage the applicant will presumably have complied with para 5.9 of the Practice Direction, so that the respondent will know the allegations made and the quantum of costs claimed. If the applicant wins the first stage, the application proceeds to the second stage of the court’s procedure, as provided for in para 5.7(b). At the first stage, the making of an order that the application proceed to the final stage: ‘… is not something to be done automatically or without careful appraisal of the relevant circumstances. The costs of the inquiry as compared with the costs claimed will always be one relevant consideration. This is a discretion, like any other, to be exercised judicially, but judges may not infrequently decide that further proceedings are not likely to be justified.’2 As to the final stage, the court is not bound to make an order even if improper, unreasonable or negligent conduct, and causation, are made out: ‘but in that situation it would of course have to give sustainable reasons for exercising its discretion against making the order.’3 The exercise of this discretion is considered at para 13.73 below. 1 The court will have proportionality in mind at this stage; see paras 13.18–13.22, below. 2 Ridehalgh [1994] Ch 205 at 239B–C. 3 Ridehalgh [1994] Ch  205 at 239E–F. See also the second passage from Medcalf quoted at para 13.19, below.

13.17 Paragraph  5.8 of the Practice Direction is presumably intended to simplify the procedure in some cases. Paragraph  5.4(b) of the Practice Direction specifically provides that an application may be made orally in the course of any hearing. The effect of these provisions is that it is possible for the court to determine the first stage of the application without holding a separate hearing for that purpose. However, in Regent Leisuretime Ltd v Skerrett,1 Lloyd LJ said that: ‘… although an oral application in the course of the hearing is possible pursuant to paragraph 53, that is only likely to be sensible if the scope of the application to the costs said to have been wasted is narrow and clear; for example, if an adjournment is necessary because of a solicitor’s or counsel’s conduct, as regards the costs thrown away by the adjournment.’ B  v B2 concerned the costs of an appeal on an interlocutory matter; Wall J considered that he had complied with the first stage of the Practice Direction by his judgment on the appeal. In Thames Chambers Solicitors v Miah3 696

Wasted costs orders  13.18 proceedings were brought by a bankrupt without the consent of his trustee in bankruptcy. This issue was raised at an interlocutory hearing in March 2012 and the question of a wasted costs order was also canvassed at that stage. The recorder’s order included an order that the claimant’s solicitors provide a witness statement ‘as to their state of knowledge and that of their counsel as to the financial standing of the claimant since the commencement of these proceedings and whether there are grounds why they or their counsel should not be liable for wasted costs in these proceedings’. A hearing in the case was subsequently listed and directions given which included directions for the filing of evidence in respect of the wasted costs orders sought. At that hearing a wasted costs order was made. The order was upheld on appeal: the case was sufficiently clear that an application under Part 23 was unnecessary; there had been a strong prima facie case at the March 2012 hearing that the solicitors had acted improperly, unreasonably or negligently, so the first stage had been satisfied at that hearing; and the solicitors had been given a more than adequate opportunity to show why the order should not be made. 1 [2006] EWCA Civ 1032, [2006] CP Rep 42 at [36]. 2 [2001] 1 FLR 843 (Wall J). 3 [2013] EWCA Civ 1003, [2014] PNLR 4 at [44]–[50]

(d)  A simple procedure 13.18 The wasted costs jurisdiction is intended to be a reasonably simple and summary form of procedure, to be used only in clear cases, where the issues can be dealt with relatively quickly and without the need for lengthy pleadings or hearings lasting weeks. The general principles of the procedure were set out by Sir Thomas Bingham MR delivering the judgment of the court in Ridehalgh, in a passage which merits quoting in full:1 ‘The procedure to be followed in determining applications for wasted costs must be laid down by courts so as to meet the requirements of the individual case before them. The overriding requirements are that any procedure must be fair and that it must be as simple and summary as fairness permits. Fairness requires that any respondent lawyer should be very clearly told what he is said to have done wrong and what is claimed. But the requirement of simplicity and summariness means that elaborate pleadings should in general be avoided. No formal process of discovery will be appropriate. We cannot imagine circumstances in which the applicant should be permitted to interrogate2 the respondent lawyer, or vice versa. Hearings should be measured in hours, not in days or weeks. Judges must not reject a weapon which Parliament has intended to be used for the protection of those injured by the unjustifiable conduct of the other side’s lawyers, but they must be astute to control what threatens to become a new and costly form of satellite litigation.’ 697

13.19  Costs orders against solicitors In Warren v Warren,3 Lord Woolf MR with whom the other judges agreed, quoted this passage, emphasised the concluding words, and added that, in Warren, it would have been better if the application had never been made. Similarly, in Wall v Lefever,4 the other judges agreed with Lord Woolf, who said: ‘… in relation to a decision of a judge of first instance who has heard the evidence and seen the witnesses, and who had come to the conclusion that a wasted costs order should be refused, great caution should be exercised before launching on an appeal. The wasted costs jurisdiction is salutary as long as it is not allowed to be a vehicle which generates substantial additional costs to the parties. It should not be used to create subordinate or satellite litigation, which is as expensive and as complex as the original litigation. It must be used as a remedy in cases where the need for a wasted costs order is reasonably obvious. It is a summary remedy which is to be used in circumstances where there is a clear picture which indicates that a professional adviser has been negligent etc. If a judge has come to the conclusion that the case is not one which falls within that category, then an appeal will only be justified if there is some point of principle involved which indicates that the judge’s approach was wholly wrong.’5 This approach is now reflected in para 5.6 of the Practice Direction to CPR Part 46, which provides that: ‘the court will give directions about the procedure that will be followed in each case in order to ensure that the issues are dealt with in a way which is fair and as simple and summary as the circumstances permit.’ 1 [1994] Ch 205, CA, at 238G–239A. 2 This appears to be a reference to the service of written interrogatories, and not to crossexamination. See per Underhill P  in Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd [2011] 6 Costs LR 1006 at [27]. There is no absolute bar to cross-examination. One possibility is to allow the parties in the wasted costs proceedings a time limit within which applications to cross-examine each other’s witnesses may be made: see for example in MA  Lloyd v PPC [2016] EWHC 2162 (QB); [2017] PNLR 1 (see para 13.11, above). 3 [1997] QB 488, CA at 494–5. 4 [1998] 1 FCR 605, CA at 614a–d. 5 Parts of this passage were cited with approval by Simon Brown LJ in Fletamentos Maritimos SA v Effjohn International BV [2003] Lloyd’s Rep PN 26, CA at 28 col 1. Further, in TolstoyMiloslavsky v Aldington [1996] 1 WLR 736, CA, Roch LJ said at 747H that the jurisdiction should be exercised only in a clear case. See also Turner Page Music Ltd v Torres Design Associates Ltd (1998) Times, 3 August, CA.

13.19 In Medcalf v Mardell,1 Lord Bingham cited a passage from the Privy Council’s decision in Harley v McDonald.2 Although Harley related to a New Zealand costs jurisdiction, it appears that Lord Bingham, with whom the majority agreed, considered it equally applicable to the wasted costs jurisdiction in England and Wales: ‘“As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the 698

Wasted costs orders  13.20 making of a costs order should be confined strictly to questions which are apt for summary disposal by the court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples. The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified. Wasting the time of the court or an abuse of its processes which results in excessive or unnecessary cost to litigants can thus be dealt with summarily on agreed facts or after a brief inquiry if the facts are not all agreed.” Save in the clearest case, applications against the lawyers acting for an opposing party are unlikely to be apt for summary determination, since any hearing to investigate the conduct of a complex action is itself likely to be expensive and time-consuming. The desirability of compensating litigating parties who have been put to unnecessary expense by the unjustified conduct of their opponents’ lawyers is, without doubt, an important public interest, but it is, as the Court of Appeal pointed out in Ridehalgh v Horsefield, at p 226, only one of the public interests which have to be considered.’ The second paragraph quoted does not, of course, apply to applications by parties against their own lawyers, but most of the reported cases relate to applications against opposing parties’ lawyers, where the passage does apply. In spite of this statement, there are some cases in which wasted costs orders have subsequently been made, which we consider below. They do not all fall into the categories identified in Harley, so it seems that there are circumstances in which wasted costs orders may be made outside those categories. But, in light of this guidance, applying for an order in cases which fall outside the recognised categories may well be risky. 1 [2002] UKHL 27, [2003] 1 AC 120 at [24]. 2 [2001]  UKPC  18, [2001] 2  AC  678. See also Hedrich v Standard Bank London Ltd [2008] EWCA Civ 905, [2009] PNLR 3.

13.20 A clear example of allegations not suitable for the summary procedure of the wasted costs jurisdiction is Re Freudiana Holdings Ltd.1 The applicant’s points of claim seeking the wasted costs order were 40 pages long; there were 35 pages of points of defence on behalf of counsel and 40 on behalf of the solicitors, followed by 20 pages of points of reply. The respondents’ costs of defending the wasted costs application were of the order of £400,000. Skeleton arguments in the Court of Appeal amounted to 100 pages. The Court of Appeal upheld the trial judge’s decision to discharge his earlier order, which had required the respondents to show cause why they should not pay wasted costs. It was quite clear that the case was wholly inappropriate for a summary procedure, and would essentially involving re-trying the original action, as well 699

13.21  Costs orders against solicitors as considering the knowledge of the lawyers who had acted in it. From the point of view of those seeking to apply for wasted costs orders, the importance of the case is as follows. The court considered that the application had been made unsuitable for a wasted costs order by the conduct of the lawyers applying for it: if they had kept their allegations brief, and alleged simply negligence rather than ‘knowing participation in an attempt deliberately to mislead the court and to pervert the course of justice’ then it might well have been possible to deal with the matter under the wasted costs jurisdiction.2 But, once such serious allegations had been made against solicitors and counsel, it was inevitable that they would seek rigorously to defend them, thus increasing the length of the pleadings and issues. Thus the message of Freudiana for those seeking wasted costs orders is to keep the allegations short, and avoid extravagant allegations of bad faith on the part of the lawyers.3 1 (1995) Times, 4 December, CA. 2 See Millett LJ’s judgment. 3 For a recent illustration, see Re Bin Issa Al-Jaber Salfiti [2019] EWHC 3759 (Ch).

13.21 On the other hand, it will be in the interests of those defending such applications to emphasise, in part 1 of the two-stage procedure,1 the extent to which a further hearing will be long and cumbersome, dealing with many issues, and ultimately unlikely to produce a clear conclusion. In addition, under the CPR applicants must bear in mind the principle of proportionality.2 Figures from the Bar Mutual Indemnity Fund suggest that the cost of defending a wasted costs application is often more than the sum in issue.3 Proportionality was a strong factor in persuading the court not to allow the wasted costs application to proceed in Chief Constable of North Yorkshire v Audsley.4 But Audsley was distinguished in B v B,5 a family law case where the issue was relatively straightforward. Wall J  said that the respondent barrister’s argument that the costs of investigating the matter would be disproportionate was: ‘… unattractive and self-serving. The reality is that, on the facts of this case, the costs involved in an unmeritorious defence of the application for a wasted costs order greatly exceed the amount at stake. But that begs the question of the merits of the application. It cannot be right for a respondent to seek to prevent an otherwise wholly meritorious application for wasted costs proceeding merely because the costs incurred in defending it will be substantial.’ While each case must turn on its facts, it is thought that this scepticism about arguments from those responding to wasted costs applications which rely purely on the cost of defending the application is justified. 1 As to which, see para 13.16, above. 2 Re Merc Property Ltd (1999) Times, 19 May, (Lindsay J). 3 See Evans Lawyers’ Liabilities (2nd ed, 2002) 131. 4 [2000] Lloyd’s Rep PN 675 (Keene J). 5 [2001] 1 FLR 843 (Wall J) at [35].

700

Wasted costs orders  13.23 13.22 The wasted costs jurisdiction is unlikely to be appropriate in cases which call for detailed investigations of fact, or in which allegations of dishonesty on the part of lawyers are made.1 In B v Pendelbury,2 the allegations made in support of the wasted costs order were inextricably bound up with questions of fraud and impropriety; Turner J held that in those circumstances it would be wrong to allow the wasted costs application to proceed to the second stage,3 since it could not succeed. In Re Hallewell Bunyard,4 Neill LJ’s prima facie view was that there had been serious negligence on the part of the solicitor, but he considered that a wasted costs order should not be made because it was a matter which required further examination, and, in particular, interrogation of the solicitor. As this was not possible on a wasted costs application, it was not possible to conclude that the case was sufficiently clear to make a wasted costs order. In Kagalovsky v Balmore Invest,5 a wasted costs order was sought against the legal representatives of a defendant who had been found in contempt of court. The hearing to determine the first stage of the application was the third hearing that had been necessitated by the application. The application was supported by nine bundles of documents, an outline submission running to 15 pages and a 13-page schedule of specific allegations, many of which concerned alleged impropriety by practitioners of previously unblemished reputation, and which required the resolution of factual issues concerning conduct which had not occurred in the face of the court. The court held that the issues were plainly unsuitable for the summary jurisdiction. On the other hand, in Wagstaff v Colls (Wasted Costs) Order,6 Ward LJ, with whom the other members of the Court of Appeal agreed, approved the proposition that ‘it cannot be right that a legal representative can escape the consequences of the wasted costs jurisdiction by the mere fact that the litigation in which his conduct is challenged is complex.’ 1 Manzanilla Ltd v Corton Property and Investments Ltd [1997] 3 FCR 389, CA. 2 [2002] EWHC 1797 (QB), [2002] Lloyd’s Rep PN 575 (Turner J). 3 As to the stages of a wasted costs application, see para 13.16, above. 4 (5 June 1996, unreported), CA. 5 [2015] EWHC 1337 (QB), [2015] PNLR 26. 6 [2003] EWCA Civ 469, [2003] PNLR 29 at [59], quoting from the judgment of Peter Gibson LJ in Medcalf v Mardell [2001] Lloyd’s Rep PN 146, CA at 159.

(e)  Appeal against refusal to make order 13.23 The effect of the second passage quoted in para 13.18, above, is that the Court of Appeal is keen to discourage appeals against judges’ refusals to make wasted costs orders. This was underlined by the order which the Court of Appeal made in Wall v Lefever: the appellant had to pay the costs of the appeal taxed on the indemnity basis. Lord Woolf MR said that:1 ‘… this is an area where this court is very unlikely to interfere with a decision, made in the exercise of the discretion of the judge below, unless a very strong case indeed is made out.’ 701

13.24  Costs orders against solicitors Following those indications, parties who fail to obtain wasted costs orders from the judge will wish to appeal to the Court of Appeal only in very strong cases. The Court of Appeal distinguished Wall in Wagstaff v Colls (Wasted Costs Order),2 but on the basis that in Wagstaff the judge below had declined to make a wasted costs order for reasons related to jurisdiction. Appeals will be slightly less risky in cases where it is said that the judge wrongly made a wasted costs order: in those cases, the appellant will be able to rely on Lord Woolf’s indication that such orders should be made only in clear cases and after summary proceedings. In Medcalf v Mardell,3 the original wasted costs order had been made in the Court of Appeal; there was no suggestion in the speeches in the House of Lords that the House should be slow to interfere with the Court of Appeal’s decision. 1 [1998] 1  FCR  605 at 617f, CA. See also Fryer v Royal Institution of Chartered Surveyors [2000] Lloyd’s Rep PN  534 at [39]–[40], and Persaud v Persaud [2003]  EWCA  Civ 394, [2003] PNLR 26 at [41]. 2 [2003] EWCA Civ 469, [2003] PNLR 29, esp at [63]. 3 [2002] UKHL 27, [2003] 1 AC 20.

(f)  The impact of legal professional privilege 13.24 In cases where a party (A) applied for a wasted costs order against another party (B)’s lawyers, it was thought in Ridehalgh that, if B did not waive privilege, this might place B’s lawyers in a very difficult position in responding to the wasted costs application. This was because B’s privilege was absolute, and it was not open to B’s lawyers to waive the privilege if B did not consent. Indeed it was B’s lawyers’ duty to uphold B’s privilege unless B waived it or the court ordered otherwise.1 When the CPR were introduced, CPR r 48.7(3) was intended to deal with this problem. It provided that, for the purposes of a wasted costs application: ‘… the court may direct that privileged documents are to be disclosed to the court and, if the court so directs, to the other party to the application for an order.’ In General Mediterranean Holdings SA v Patel,2 however, Toulson J held that this sub-rule was ultra vires. As a result it was revoked. It has not been replaced. 1 R v Derby Magistrates’ Court, ex p B [1996] AC 487, HL. 2 [2000] 1 WLR 272.

13.25 In that context, in Medcalf v Mardell1 Lord Bingham cited with approval the passage from Ridehalgh2 dealing with the impact of legal professional privilege: ‘Where an applicant seeks a wasted costs order against the lawyers on the other side, legal professional privilege may be relevant both as between the applicant and his lawyers and as between the respondent lawyers and their client. In either case it is the client’s privilege, which he alone can waive. 702

Wasted costs orders  13.25 The first of these situations can cause little difficulty. If the applicant’s privileged communications are germane to an issue in the application, to show what he would or would not have done had the other side not acted in the manner complained of, he can waive his privilege; if he declines to do so adverse inferences can be drawn. The respondent lawyers are in a different position. The privilege is not theirs to waive. In the usual case where a waiver would not benefit their client they will be slow to advise the client to waive his privilege, and they may well feel bound to advise that the client should take independent advice before doing so. The client may be unwilling to do that, and may be unwilling to waive if he does. So the respondent lawyers may find themselves at a grave disadvantage in defending their conduct of proceedings, unable to reveal what advice and warnings they gave, what instructions they received. In some cases this potential source of injustice may be mitigated by reference to the taxing master, where different rules apply, but only in a small minority of cases can this procedure be appropriate. Judges who are invited to make or contemplate making a wasted costs order must make full allowance for the inability of respondent lawyers to tell the whole story. Where there is room for doubt, the respondent lawyers are entitled to the benefit of it. It is again only when, with all allowances made, a lawyer’s conduct of proceedings is quite plainly unjustifiable that it can be appropriate to make a wasted costs order.’ So the other party’s lawyers were entitled to the benefit of any doubt if the other party did not waive privilege. In Medcalf, however, Lord Bingham, delivering a speech with which the majority agreed, felt that that passage from Ridehalgh must be read with ‘extreme care’, and: ‘… should be strengthened by emphasising two matters in particular. First, in a situation in which the practitioner is of necessity precluded (in the absence of a waiver by the client) from giving his account of the instructions he received and the material before him at the time of settling the impugned document, the court must be very slow to conclude that a practitioner could have had no sufficient material. Speculation is one thing, the drawing of inferences sufficiently strong to support orders potentially very damaging to the practitioner concerned is another. The point was well put by Mr George Laurence QC sitting as a deputy High Court judge in Drums and Packaging Ltd v Freeman (unreported) 6 August 1999 when he said, at [43]: “As it happens, privilege having been waived, the whole story has been told. I cannot help wondering whether I would have arrived at the same conclusion had privilege not been waived. It would not have been particularly easy, in that event, to make the necessary full allowance for the firm’s inability to tell the whole story. On the facts known to D3 at the time it launched this application, D3 might very well have concluded

703

13.26  Costs orders against solicitors that the firm would not be able to avoid a wasted costs order, even on the ‘every allowance’ basis recommended by Sir Thomas Bingham MR.”

Only rarely will the court be able to make “full allowance” for the inability of the practitioner to tell the whole story or to conclude that there is no room for doubt in a situation in which, of necessity, the court is deprived of access to the full facts on which, in the ordinary way, any sound judicial decision must be based. The second qualification is no less important. The court should not make an order against a practitioner precluded by legal professional privilege from advancing his full answer to the complaint made against him without satisfying itself that it is in all the circumstances fair to do so. This reflects the old rule, applicable in civil and criminal proceedings alike, that a party should not be condemned without an adequate opportunity to be heard. Even if the court were able properly to be sure that the practitioner could have no answer to the substantive complaint, it could not fairly make an order unless satisfied that nothing could be said to influence the exercise of its discretion. Only exceptionally could these exacting conditions be satisfied. Where a wasted costs order is sought against a practitioner precluded by legal professional privilege from giving his full answer to the application, the court should not make an order unless, proceeding with extreme care, it is (a) satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order and (b) that it is in all the circumstances fair to make the order.’3 1 [2002] UKHL 27, [2003] 1 AC 20 at [23]. 2 [1994] Ch 205 at 237. 3 Medcalf [2002] UKHL 27, [2003] 1 AC 20 at [23]. See para 13.73, below for discussion of the requirement that it is fair in all the circumstances to make the order.

13.26 In light of this, it might be thought that, in cases where A seeks a wasted costs order against B’s lawyers, and B declines to waive his or her privilege, the effect of the passage just quoted would be to make it extremely difficult for A to obtain a wasted costs order against B’s lawyers. There have certainly been cases since Medcalf where this problem has proved an insuperable barrier for the applicant: see for example Lady Archer v Williams,1 in which the respondent paid for the other party to have independent legal advice on whether to waive privilege, Daly v Hubner2 and Dempsey v Johnstone.3 1 [2003] EWHC 3048 (QB), (Jackson J), esp at [48], [53]. 2 [2002] Lloyd’s Rep PN 461 (Etherton J). 3 [2003] EWCA Civ 1134, [2004] PNLR 2.

13.27 In B v B,1 however, counsel had acted on an appeal that was incapable of success and which the judge considered to be an abuse of process. Counsel’s client had not waived privilege. The judge pointed out that the client was publicly funded. The judge appears to have ruled out the possibility that counsel might have advised strongly against the appeal, but been forced by the client to make it. This was because, if that had occurred, it would have 704

Wasted costs orders  13.28 been counsel’s duty to advise the Legal Services Commission that the client was behaving unreasonably, but there was no evidence that the Commission had been advised about the appeal. A wasted costs order was made. It would appear, however, that if the client had been privately funded then this line of reasoning would not have been available. Further, it is open to question whether Wall J’s reasoning is correct in light of the authorities on the relevance of public funding summarised at para 13.67, below, and which either post-date the decision or, it appears, were not cited. 1 [2001] 1 FLR 843 at [42]–[46].

13.28 Further, in Morris v Roberts (Inspector of Taxes),1 Lightman J said that if privilege was not waived in a case where a party sought wasted costs from the other party’s lawyers: ‘… a court should not make a wasted costs order unless satisfied that there is nothing the practitioner could say, if unconstrained, to resist the order. But privilege is not a trump card which will always preclude the making of a wasted costs order: Medcalf v Mardell, supra, at 146 per Lord Hobhouse. The acid test in all cases is whether the conduct of the solicitor permits of a reasonable explanation: see Ridehalgh at 232 and B v B [2001] FLR 482 at [22].’ He proceeded to make a wasted costs order even though it appears that privilege had not been waived. The application concerned the costs of an appeal which the respondent solicitors had commenced but abandoned. Lightman J concluded that the solicitors must have known that the appeal was hopeless and that it was prosecuted for reasons unconnected with success on the appeal. It was the last of a series of acts and omissions on the part of the solicitors and their clients which was ‘designed to evade or delay’ liability to pay tax. Further, the solicitors knew that the clients would not pay any costs or penalties ordered to be paid to the other party, the Inland Revenue. So: ‘At the very least as competent solicitors they should have been aware that the appeal was an abuse of process brought for an illegitimate collateral purpose and that their own actions were calculated to further and did further the inadmissible objectives which their clients were pursuing.’ Although a wasted costs order was made in Morris, it is thought that this was not inconsistent with the passages quoted above from Medcalf: in light of the judge’s findings, Morris was an exceptional case. To conclude, if privilege is not waived then applications against another party’s lawyers may well fail, but it may still be possible to succeed if there is a very strong case against the lawyers. 1 [2005] EWHC 1040 (Ch), [2005] PNLR 41; the quotations are from [53] and [59].

705

13.29  Costs orders against solicitors

(g)  Timing and judge 13.29 Generally speaking applications for wasted costs orders are best made at the end of the trial.1 As to the position before the end of the trial, an example of an exceptional case in which it was appropriate, before the end of the trial, to make a similar order, against the Legal Aid Board rather than lawyers, for the costs of an adjournment, was Kelly v South Manchester Health Authority.2 The court was apprised of all relevant material at the interlocutory stage and so it was appropriate to make the order then. Further, in the family case of B  v B3 it was appropriate to make a wasted costs order before trial because neither of the lawyers involved was still instructed in the litigation and the issue involved would not alter or be affected by the outcome of the litigation. As to the position after the end of the trial, first, it is not mandatory that an application for wasted costs be made at the end of the trial, and there is jurisdiction to make such an order ‘at any stage in the proceedings up to and including the detailed assessment proceedings’.4 It follows that an application for wasted costs may be made even after the final order in relation to the proceedings has been drawn up, though the court may not grant the application if there is no good reason for the delay.5 But if the parties agree a consent order which finally settles all issues of costs then there will be no need for a detailed assessment of costs, so that it will be too late to apply for a wasted costs order after the consent order has been agreed.6 Finally, if a claim is the subject of a stay, it is not necessary to apply for the stay to be lifted before application is made for a wasted costs order.7 1 Para 5.2 of the Practice Direction to Part 46, and compare Ridehalgh [1994] Ch 205 at 238B–D, approving Filmlab Systems International Ltd v Pennington [1995] 1 WLR 673 (Aldous J). 2 [1988] 1 WLR 244. 3 [2001] 1 FLR 843 (Wall J). 4 Para 5.2 of the Practice Direction, and Gray v Going Places Leisure Travel Ltd [2005] EWCA Civ 189, [2005] PNLR 26 at [14]. 5 Gray, above, at [15], citing Melchior v Vettivel [2002] CP Rep 24 (Patten J). 6 Sharma v Hunters [2011] EWHC 2546 (COP), [2012] PNLR 6 (Henderson J). 7 Wagstaff v Colls (Wasted Costs Order) [2003] EWCA Civ 469, [2003] PNLR 29.

13.30 Unless there is a good reason, the application should be dealt with by the judge who dealt with the matter that gives rise to the wasted costs application.1 Good reasons might include the death, retirement or unavailability of the trial judge.1 Further, it appears that if part of the respondent lawyer’s defence to the wasted costs application is that the costs were wasted because the trial judge made an incorrect decision, so that it was the trial judge rather than the lawyer who caused the costs to be wasted, then the trial judge should not determine the wasted costs application. This is because there would be an appearance of bias in a judge ruling on the judge’s own behaviour. Either another judge must hear the application or, if that is not practicable, the application must be dismissed.2 In Mengiste v Endowment Fund for the Rehabilitation of Tigray3 the Court of Appeal held that, exceptionally, in a case where the judge in the course of his judgment had made trenchant criticisms of the claimant’s solicitors, which were expressed in absolute terms and were described by the Court of Appeal 706

Wasted costs orders  13.32 as ‘extreme and unbalanced’, he should have recused himself from hearing the stage one wasted costs application. 1 Re Merc Property Ltd (1999) Times, 19 May (Lindsay J), Gray v Going Places Leisure Travel Ltd [2005] EWCA Civ 189, [2005] PNLR 26, above. 2 R(B) v X Crown Court [2009] EWHC 1149 (Admin), [2009] PNLR 30 (Hickinbottom J). 3 [2013] EWCA Civ 1003, [2014] PNLR 4.

(h)  Court initiating application 13.31 The court has power to initiate an application (Practice Direction para 53.2), but should be slow to do so except in very clear cases, such as failure to appear, lateness, gross repetition or extreme slowness. The reason is that, if the application is lost, the court will not compensate the parties for the wasted costs of the application itself.1 In Re G (Children) (Care Proceedings),2 however, Wall J said that care proceedings were very expensive, each party was ultimately funded by the taxpayer, but costs orders between parties were rare. He added that: ‘In these circumstances, in my judgment, and in clear contrast to commercial or other adversarial civil litigation it is the court which has to be the watchdog over the proper expenditure of public funds.’ He considered that it was therefore entirely appropriate that the court should initiate a wasted costs application. It did, and the order was made. 1 Ridehalgh [1994] Ch 205 at 238D–F. See also Evans Lawyers’ Liabilities (2nd ed, 2002) at 7-03, as to possible human rights objections to judges acting as prosecutor, judge and jury in such cases, though compare the position as to contempt of court. 2 [2000] Fam 104, [2000] 2 WLR 1007 at 1014–5 (Wall J). See further para 13.59, below.

(i)  Applications by non-parties 13.32 Wasted costs orders may be made only in favour of those who are parties to the litigation.1 This led Sedley J  to hold, in R  v Camden London Borough Council, ex p Martin,2 that there was no jurisdiction to make a wasted costs order in favour of the respondent to a without notice application for leave to move for judicial review: until leave was granted, the application was expressed to be ‘ex parte’, and so the respondent was not properly a party. But in the later case of R  v Immigration Appeal Tribunal, ex p Gulsen,3 Buxton J  held that the court did have power to make such an order pursuant to its inherent jurisdiction. Further, in Lubrizol Ltd v Tyndalls,4 Carnwath J held that ex p Martin did not apply in a case where the application for leave to move for judicial review included an application for an interlocutory injunction. In that case, it was established that it was appropriate for the respondent to appear at the oral hearing seeking the injunction, so that the respondent was a party, and there was jurisdiction to make a wasted costs order in its favour. 1 See the definition of wasted costs in Senior Courts Act 1981, s 51(7). 2 [1997] 1 WLR 359.

707

13.33  Costs orders against solicitors 3 [1997] COD 430. 4 (8 April 1998, unreported).

(j) Settlement 13.33 Where the court has decided that there is material which, if unanswered, would lead to a wasted costs order, but the application is subsequently settled, the lawyers involved risk being deprived by the settlement of the opportunity to clear any blot from their reputations. Manzanilla Ltd v Corton Property and Investments Ltd was such a case. Lord Woolf MR said:1 ‘In such a case as this, the court should be prepared to allow a written statement to be placed before the court, so that it can be transmitted to the judiciary who were previously involved, without counsel or other lawyers having to attend, as long as it is first produced to the other parties and they raise no objection to it being submitted. The statement should be short and succinct and not one which goes into unnecessary detail. It would also be desirable that, wherever possible, the statement is agreed by the other parties. However, where no agreement is possible, the position of the other parties can be protected by their also being allowed to submit an equally short statement in response to that of the initiator of the procedure. There it must end because otherwise the costs which I would seek to avoid being incurred would be incurred in producing a multiplicity of lengthy written statements which are not going to assist the court.’ 1 [1997] 3 FCR 389 at 391E–G, CA.

(k)  Interrelationship between wasted costs orders and orders for costs against LSC 13.34 If the case is one in which a wasted costs order should be made, this will normally be a reason for not making an order that the Legal Services Commission pay the costs. But, except in the clearest of cases, a party who applies for costs from the Legal Services Commission is not obliged also to seek an order that other lawyers pay wasted costs. At most, a party seeking costs from the Legal Services Commission need only mention to the court that it is possible that a wasted costs order should be made; if this is done, the court may then choose to inform the Legal Services Commission that it may wish to object to being ordered to pay costs, on the basis that a wasted costs order should be made instead. If the Commission does this, then the court will have to consider the giving of notice to the lawyers in question.1 1 Re O (wasted costs order) [1997] 1 FLR 465, CA. See Lord Woolf MR’s judgment at 472A–D. This case concerned the Legal Aid Board but it is thought that similar principles should apply in the case of its successor the Legal Services Commission.

708

Wasted costs orders  13.37

3  Basic requirements 13.35 The basic requirements for the making of an order are that it be shown that the lawyer has acted improperly, unreasonably or negligently, that this has caused costs to be wasted, and that it is just in all the circumstances that an order be made.1 In the following sections, the first three requirements are considered individually; then there is consideration of various subsidiary issues which arise in relation to those three issues; next, the issue of causation is dealt with, and finally the overall justice of making an order. 1 Practice Direction to CPR Part 46, para 5.5.

13.36 Although it is of some assistance to consider the concepts of improper, unreasonable and negligent conduct separately, nevertheless:1 ‘conduct which is unreasonable may also be improper, and conduct which is negligent will very frequently be (if it is not by definition) unreasonable. We do not think any sharp differentiation between these expressions is useful or necessary or intended.’ 1 Ridehalgh [1994] Ch 205 at 233E.

13.37 In Persaud v Persaud,1 Peter Gibson LJ said that ‘the necessary impropriety must be a very serious one … justifying disbarment, striking off, suspension or other serious professional penalty’ and expressed the view that ‘there must be something more than negligence if the wasted costs jurisdiction is to arise: there must be something akin to an abuse of process if the conduct of the legal representative is to make him liable for a wasted costs order’. In Dempsey v Johnstone,2 however, Latham LJ doubted whether it was necessary to show abuse of process, and Mance LJ considered that it was not; in Isaacs Partnership v Umm Al-Jawaby Oil Service Co Ltd3 Gross J cited Dempsey to reject the proposition that showing negligence on its own was insufficient for the making of a wasted costs order. Finally, in Morris v Roberts (Inspector of Taxes),4 Lightman J said that: ‘The stricter test laid down by Peter Gibson LJ in Persaud v Persaud … was disapproved of in Dempsey and is no longer the law’. However, it is well established that it is not improper to act for a client merely because the client’s case is doomed to fail.5 It is in this context (ie the pursuit of a hopeless case) that mere negligence is considered insufficient to found an application for a wasted costs order: it is suggested that this is because, whilst the pursuit of a hopeless case might (assuming he or she had failed to advise the client that the case was hopeless) be a breach of the lawyer’s duty to his or her client, it would not, without more, be a breach of his or her duty to the court. For further discussion of the relevance of the hopeless case, see paras 13.44ff below. 1 [2003] EWCA Civ 394, [2003] PNLR 26 at [23] and [27]. 2 [2003] EWCA Civ 1134, [2004] PNLR 2 at [24] and [40]–[42]. 3 [2003] EWHC 2539 (QB), [2004] PNLR 9 at [25], proposition 4.

709

13.38  Costs orders against solicitors 4 [2005] EWHC 1040 (Ch), [2005] PNLR 41 at [52]. 5 Chief Constable of North Yorkshire v Audsley [2000] Lloyd’s Rep PN 675, per Keene J at 682 col 1. See further para 13.44ff, below.

4  Improper acts and omissions 13.38

Improper conduct was defined in Ridehalgh1 as follows:

‘The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code.’ 1 [1994] Ch 205 at 232D–E.

13.39 Two points arise. First, it is likely that conduct which is improper will also be unreasonable, so that it is unlikely to be necessary to rely upon this category alone. Secondly, although the passage quoted in para 13.36 suggests an overlap between the three concepts of improper, unreasonable and negligent conduct, note that, in that passage, the overlaps suggested are: (i)

improper conduct may overlap with unreasonable conduct, and

(ii) negligent conduct may overlap with unreasonable conduct. On the other hand the definition of unreasonable conduct, quoted at para 13.42, below, suggests that unreasonable conduct will not necessarily be negligent conduct. It is submitted that it is helpful to consider the cases as falling into two broad categories. The first category, improper/unreasonable conduct, is conduct that tends not to be careless, but rather deliberate or intentional use of legal procedures in a way that is considered unethical or bordering on the unethical. The second category, negligent conduct, is conduct that is careless or based on ignorance, as in the familiar tort of negligence. This division mirrors the familiar distinction between intentional wrongdoing and negligence. However, as there is an overlap between improper and unreasonable conduct, the cases discussed in para 33.42ff, below deal also to some degree with improper conduct. 13.40 The fate of the wasted costs application in Re Freudiana Holdings Ltd1 shows that it is generally undesirable for those applying for wasted costs orders to make extravagant allegations of impropriety against lawyers, except in the clearest circumstances. The more serious the allegation for the respondent lawyer, the more the lawyer is likely to wish to defend the matter vigorously, and the harder it may be for the court to reach the conclusion that the lawyer has plainly acted improperly. In Fontaine v the Home Office2 it was 710

Wasted costs orders  13.42 held that solicitors who deliberately withheld from the other party’s solicitors information that their client had been incarcerated and would be unable to attend trial, thus requiring an adjournment, had acted improperly and should be the subject of a wasted costs order. For a discussion of alleged impropriety in relation to the redaction of documents, see CMCS Common Market Commercial Services AVV v Taylor.3 1 (1995) Times, 4 December, CA, see para 13.20, above. 2 (2 March 1999, unreported), CA. 3 [2011] EWHC 324 (Ch), [2011] PNLR 17 (Briggs J).

13.41 The difficulty in drawing a line between what is improper, in the sense of unethical, and what is ‘merely’ unreasonable is illustrated by HU v SU.1 In that case, the court made a wasted costs order against solicitors who had failed to apply to extend time for compliance with a directions order. The court held that there was no satisfactory explanation for the failure: any reasonably competent family law solicitor should have known that a court order had to be obeyed; that a deadline imposed by the court could not be extended by agreement between the parties; and that any application for an extension of time should be brought before that deadline had expired. It was held that these serial failures were so elementary and inexcusable that they amounted to conduct that was both improper and unreasonable. It seems that the conduct was considered improper because the failures were so blatant that they amounted to a deliberate flouting of the rules of the court. In Thames Chambers Solicitors v Miah,2 the court found that the conduct of solicitors who had accepted instructions from a bankrupt and conducted litigation on his behalf without the consent of the trustee in bankruptcy had acted improperly, unreasonably and negligently. By contrast, in Re Bin Issa Al-Jaber Salfiti3 it was held that where an application was founded on allegations of deliberate and dishonest misrepresentations to the court, those allegations had to be properly particularised: it was not sufficient simply to say that the client and/or his legal representatives had been found to have committed wholesale breaches of their duty of full and frank disclosure in making an application for a freezing injunction. 1 [2015] EWFC 18, [2015] PNLR 20. 2 [2013]  EWHC  1245 (QB), [2013]  PNLR  30. Contrast F  v M  [2015]  EWHC  3239 (Fam), [2016] PNLR 13, where Cobb J found at [11] that in failing to comply with case management directions and to notify the court in good time of a change in the time estimate for a hearing, the solicitors had ‘failed to act with the competence reasonably to be expected of ordinary members of the profession, and this justifies a wasted costs order in this case’. He did not find it necessary to determine whether the conduct was to be characterised specifically as either improper, unreasonable, or negligent. 3 [2019] EWHC 3759 (Ch) (an ex tempore judgment of MH Rosen QC) at [27] of the transcript.

5  Unreasonable acts and omissions 13.42

Again, the key definition was given in Ridehalgh:1 711

13.43  Costs orders against solicitors ‘“Unreasonable” … aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgment, but it is not unreasonable.’ 1 [1994] Ch 205 at 232E–G. See also R (Latchman) v Secretary of State for the Home Department [2004] EWHC 2795 (Admin): solicitors were aware over two months before a hearing that it was academic, but withdrew the claim only four days before the hearing. They had made a number of attempts to contact their client without success, and so had not acted unreasonably.

(a)  Agreeing expert evidence 13.43 This definition has been considered in a number of subsequent cases. Greenhoff v J Lyons & Co1 is a straightforward one. In a personal injury action concerning relatively low levels of damages, the medical experts were in agreement on all points except one. The claimant’s solicitors refused to agree the evidence. Agreement would have avoided the need for the experts to come to court. The recorder held that the claimant’s solicitors ought to have agreed the reports, subject to agreement that their client could raise in evidence the one point on which she disagreed with the defendants’ expert. Their failure to do so did not admit of a reasonable explanation, so it was unreasonable. He ordered the claimant’s solicitors to pay the costs of the doctors’ attendance at court. The Court of Appeal accepted that this conclusion was open to the recorder, and declined to overturn his decision. 1 (CA, 30 June 1998, unreported).

(b)  Abuse of process and hopeless cases 13.44 In two remarkable cases, Tolstoy-Miloslavsky v Aldington1 and Fletamentos Maritimos SA v Effjohn International BV,2 the Court of Appeal found that lawyers’ conduct was vexatious and amounted to an abuse of the process of the court. Before considering the facts of those cases, it is necessary to consider the distinction between merely advancing a hopeless case, which is not improper or unreasonable, and abusing the process of the court, which is:3 ‘A  legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail … Barristers in independent practice are not permitted to pick and choose their clients … solicitors are not subject to an equivalent cab-rank rule, but many solicitors would and do respect the public policy underlying 712

Wasted costs orders  13.45 it by affording representation to the unpopular and unmeritorious. Legal representatives will, of course, whether barristers or solicitors, advise clients of the perceived weakness of their case and of the risk of failure. But clients are free to reject advice and insist that cases be litigated. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved … It is, however, one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application4 or knowingly conniving at incomplete disclosure of documents. It is not entirely easy to distinguish between the hopeless case and the case which amounts to an abuse of process, but in practice it is not hard to say which is which and if there is doubt the legal representative is entitled to the benefit of it.’ 1 [1996] 1 WLR 736, CA. 2 [2003] Lloyd’s Rep PN 26, CA. The case was decided in 1997 and reported late. 3 Ridehalgh [1994] Ch 205 at 233–4. 4 An ex parte application is now known as a without notice application.

13.45 A relatively simple example of abuse of process of this kind appears in Re a Company (No 006798 of 1995).1 The question was whether the court should make a wasted costs order against a solicitor who had sworn an affidavit in support of the winding up of a company, at a time when he believed, contrary to what he swore in the affidavit, that the company was able to pay its debts. Chadwick J said: ‘… a solicitor who, in swearing an affidavit in the short statutory form to support a winding up petition, asserts on oath a belief that a debt is owing and that the company is insolvent acts improperly if he does not have that belief; and acts unreasonably if there are no grounds upon which a competent solicitor could reach that view on the material available to him.’ The background of the case was that it appeared that the winding-up petition was bound to fail, and that the application was launched not in order to wind up the company, but rather for the collateral purpose of putting illegitimate commercial pressure on the company.2 1 [1996] 1 WLR 491 (Chadwick J). See esp 506E. 2 For a case relating to the compromise of an application to wind up a company, which the Court of Appeal considered fell on the other side of the line and did not involve unreasonable or

713

13.46  Costs orders against solicitors improper behaviour, see Philex plc v Golban decided at the same time as Ridehalgh: [1994] Ch 205.

13.46 We have already considered the Court of Appeal’s emphasis that wasted costs orders should be made only in plain cases. The facts of the Tolstoy and Fletamentos cases demonstrate the sort of circumstances which will be sufficiently exceptional to justify a wasted costs order on the basis of improper or unreasonable behaviour. In both cases, the court concluded that the solicitors’ conduct had crossed the line from merely taking hopeless points into abuse of the process of the court. So remarkable are the facts of these cases that it is hard to convey their full import by way of summary, and ideally they should be read in full. In the first, Rose LJ summarised the circumstances which led him to conclude that there had been abuse of process by the solicitors acting for the claimant, Count Tolstoy.1 In particular: this was the second and possibly the third occasion on which Count Tolstoy had sought to defeat Lord Aldington by litigation in relation to the same matters; Lord Aldington had been harassed by the various proceedings; the proceedings were prima facie an abuse as they were a collateral attack on the final decision of a court of competent jurisdiction; the new evidence on which Count Tolstoy relied was extremely weak; Count Tolstoy had not paid Lord Aldington the enormous costs of the first action; he was bankrupt; and there was no prospect of him paying the costs of this action. In Ward LJ’s view the key factors were that: (i)

‘as hopeless cases go, this really was plumbing the depths’;

(ii) given the background of the previous litigation and insolvency of Count Tolstoy, the litigation was vexatious as it ‘heaped fraud and perjury upon the vicious calumny of the allegation of being a war criminal’; (iii) the action was instituted to harass Lord Aldington, and no reasonable solicitor could have considered otherwise.2 1 [1996] 1 WLR 747. 2 See [1996] 1 WLR 736 at 752C–E.

13.47 Similarly astonishing are the facts of Fletamentos. In this case it was significant that the allegedly wasted costs were the costs of an appeal to the Court of Appeal. Thus, the appellants had already had the opportunity to advance their arguments in court, before Morison J. The question was whether the decision to bring the appeal amounted to an abuse, and unreasonable behaviour. Simon Brown LJ analysed each proposed ground of appeal, and showed that each one was extraordinarily weak; some of them were ‘absurd’.1 In relation to the solicitors, Zaiwallas, he concluded:2 ‘I have the clearest impression that Zaiwallas saw their role essentially as one of assisting their clients at all costs to stave off the evil day of judgment, meanwhile taking all possible points in an attempt to disrupt the arbitral process and achieve, if possible, a more compliant 714

Wasted costs orders  13.50 Tribunal … These, in short, were wrecking tactics, designed rather to obstruct than to further the fair disposal of this arbitration. This litigation permitted of no reasonable explanation. It failed the “acid test”. It amounted to an abuse of process.’ Other relevant points were that it was likely that there would be difficulties for the other party in enforcing costs orders against Zaiwallas’ client, and that this was an appeal from an interlocutory rather than a final decision, so that there was less need to appeal. 1 [2003] Lloyd’s Rep PN 26 at 31 col 1. 2 At 36, col 1.

13.48 Morritt LJ too analysed each ground of appeal, and considered them all hopeless. He also inferred that the appeal had been instigated by the solicitor Mr Zaiwalla rather than his clients Marflet. Mr Zaiwalla was motivated in part by his personal feelings in relation to one of the arbitrators involved in the case. This was unreasonable conduct. Mr Zaiwalla had failed to disclose material matters on a without notice application for permission to appeal and this was improper. Morritt LJ added, obiter, that it was possible that it might amount to vexatious conduct to advance a point which, though not utterly hopeless, had some small chance of success, if the conduct in question was intended to harass the other party rather than advance the resolution of the case.1 Waller LJ agreed, for reasons similar to those already set out.2 1 [2003] Lloyd’s Rep PN 26 at 44, col 1. 2 See 44–45.

13.49 In Dempsey v Johnstone1 Latham LJ, with whom Aldous LJ agreed, suggested that, in cases where the allegation was that the legal representative had pursued a hopeless case, the question to ask was ‘whether no reasonably competent legal representative would have continued with the action’. It was possible that a lawyer might have pursued a hopeless case due to being ignorant of an authority that was fatal to the client’s case; in that case the lawyer’s conduct would be negligent. But generally the question was likely to be whether the legal representative had acted unreasonably, which was akin to establishing an abuse of process. In Dempsey a claim was struck out but privilege was not waived. In the absence of a waiver of privilege, the Court of Appeal found it impossible to say whether the solicitors whose conduct was impugned had acted negligently or unreasonably.2 1 [2003] EWCA Civ 1134, [204] PNLR 2 at [28]. 2 See also two cases where the court refused to make wasted costs orders against solicitors whose clients turned out to have weak cases: Gandesha v Nandra [2002] Lloyd’s Rep PN 558 (Jacob J) and Marsh v Sofaer [2006] EWHC 1217 (Ch), [2006] PNLR 35 (David Richards J).

13.50 Finally, in Morris v Roberts (Inspector of Taxes),1 Lightman J stated that, in a case where it was alleged that a wasted costs order should be made against a solicitor on the ground that the solicitor had acted in a hopeless case: 715

13.51  Costs orders against solicitors ‘… it is relevant to consider the ability and/or the willingness of [the solicitor’s] client to: (a) bear the costs consequences of those proceedings, and/or (b) give effect to previous orders made against him in connected litigation…. and the fact that there is some small prospect of success in proceedings or on an appeal does not preclude a finding that the proceedings are abusive and this is most particularly the case where the solicitor knows that his client “cannot or will not pay” … Actual knowledge on the part of a legal representative that the litigation he is conducting is an abuse of process is sufficient to render a legal representative liable for costs. But a legal representative will also be liable to a wasted costs order if, exercising the objective professional judgment of a reasonably competent solicitor, he ought reasonably to have appreciated that the litigation in which he was acting constituted an abuse of process … The circumstances may be such as to impose a duty on solicitors to investigate with the greatest care their clients’ motives for launching proceedings or an appeal … It is no answer for a solicitor who has improperly, unreasonably or negligently lent himself to such an abuse to say that he was instructed to do so …’ We referred to the facts of Morris at para  13.28, above. It was another exceptional case in which the court was prepared to make a wasted costs order against the solicitor partly on the ground that the solicitor was conducting a hopeless case, even though privilege was not waived. In the absence of such exceptional circumstances, however, an order will not be made in this type of case. 1 [2005] EWHC 1040 (Ch), [2005] PNLR 41.

6  Negligent acts or omissions 13.51 In defining negligent conduct for these purposes, as before, the starting point is Ridehalgh:1 ‘… we are clear that “negligent” should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession. In adopting an untechnical approach to the meaning of negligence in this context, we would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence: “advice, acts or omissions in the course of their professional work which no member of the profession who was 716

Wasted costs orders  13.53 reasonably well-informed and competent would have given or done or omitted to do”; an error “such as no reasonably well-informed and competent member of that profession could have made”: see Saif Ali v Sydney Mitchell & Co [1980] AC 198, 218 per Lord Diplock.’ Thus, although technicalities are to be eschewed, the test of negligence is broadly the familiar common law test, as it applies to professionals. 1 [1994] Ch 205 at 233.

(a)  Non-negligent conduct 13.52 It is instructive to consider the Court of Appeal’s application of the test on the facts of the individual cases dealt with as part of the consolidated appeals in Ridehalgh. On the facts of Ridehalgh v Horsefield itself, the court found that the solicitors, acting for a tenant in a possession action, had made a concession to the landlord that should not have been made because it was based upon a misunderstanding of the law. The concession made it easier for the landlord to obtain an order for possession. The court nevertheless held that the solicitors had not been negligent in failing to understand the law correctly. The law was complex. The solicitors consulted textbooks which did not give a clear answer. The county court judge did not intervene to correct the error. The solicitors were not to be treated by the standard to be applied to specialist counsel, nor could they reasonably expect to be paid for prolonged research.1 At first sight it might seem a surprising conclusion that lawyers who failed to understand the law correctly might not have been negligent, but it is submitted that this approach, in relation to a complex area of law being interpreted by high street solicitors, is realistic rather than utopian.2 1 Ridehalgh [1994] Ch 205 at 242. See also paras 2.09 and 2.10, above. 2 See also Warren v Warren [1997] QB 488, CA. The Court of Appeal held that a solicitor had not acted unreasonably in issuing a witness summons against a district judge, even though the judge was not a compellable witness. It is clear from Lord Woolf MR’s judgment that the law as to the compellability of the district judge was, before that judgment, unclear and disorganised.

13.53 The next individual case which the Court of Appeal considered in Ridehalgh was Allen v Unigate Dairies Ltd.1 The claimant had claimed damages for noise-induced hearing loss which he alleged was caused by exposure to a de-crater machine at his workplace. On the first day of trial, the claimant abandoned the claim as it was accepted that the workplace had not been dangerously noisy. The judge ordered the claimant’s solicitors to pay the wasted costs, on the basis that they should have found this out earlier and had negligently failed to so. But the Court of Appeal held that the solicitors had not acted negligently. They had taken the claimant’s instructions and relied upon advice from an expert and counsel, none of whom had adverted to the reason which ultimately led to the case being abandoned. The reason was that there was a solid wall between the claimant and the de-crater. But there was nothing in the defence, the defendants’ expert’s report, or the defendants’ solicitors’ 717

13.54  Costs orders against solicitors correspondence, to suggest the existence or relevance of this wall. Thus it was not negligent of the claimant’s solicitors to have failed to find out about it.2 1 [1994] Ch 205 at 245. 2 See Ridehalgh [1994] Ch  205 at 245–6. See also Gandesha v Nandra [2002] Lloyd’s Rep PN 558 (Jacob J): solicitors whose client lost a trial because her evidence was not believed had not acted negligently.

13.54 A similar case is Wall v Lefever.1 In the course of cross-examination the claimant’s expert made a concession which led to the claimant, on the advice of his solicitors and counsel, abandoning the claim. The defendants sought a wasted costs order against the claimant’s lawyers, presumably on the basis that they ought to have detected this weakness in their case at an earlier stage. The trial judge rejected the application, because there was evidence that counsel and solicitors had prepared the case very carefully. Lord Woolf MR said that his reasons could not be faulted.2 1 [1998] 1 FCR 605, CA. 2 Ironically, in considering the effect of the expert’s concession on the trial, Lord Woolf indicated that it had not meant that the claimant’s case was bound to fail. But if the concession did not mean that the claimant’s case was bound to fail, why was it that, as a result of it being made, the claimant did abandon his case, following the advice of his solicitors and counsel? This would suggest an alternative error on the part of solicitors and counsel, namely, abandoning the case when it was unnecessary to do so. The consequences of such alternative negligence were not explored in the judgment.

13.55 The court’s approach in Sampson v John Boddy Timber Ltd1 was perhaps more surprisingly lenient on the lawyer. Sir Thomas Bingham MR originally thought the conduct in question was negligent, but, as the other two judges disagreed, accepted that it was not a sufficiently plain case for the making of a wasted costs order. In a personal injury action, the defendant’s insurers wrote that they were ‘prepared to negotiate a settlement of the plaintiff’s claim on a compromise basis’. The letter was not marked ‘without prejudice’. No settlement was agreed. The defendants listed the letter in their list of documents. Shortly before trial, the claimant’s barrister told the defendant’s barrister that he proposed to read the letter to the judge. The defendant’s barrister objected strongly, on the grounds that the letter was an offer to compromise that was inadmissible, and warned that, if the letter was read to the judge, he would ask that the trial be adjourned to be heard before a new judge. The claimant’s barrister contended that the letter was admissible because it did not bear the words ‘without prejudice’; the defendant’s barrister made clear that he rejected that view. At trial, the claimant’s barrister nevertheless read the letter to the judge. The defendant’s barrister objected. After argument, the judge adjourned the trial on the ground that he should not have been read the letter and rejected the argument that it was not privileged because it did not bear the words ‘without prejudice’. The question was whether the claimant’s barrister should pay the costs wasted by the adjournment. The Court of Appeal held that he should not. Although the letter was privileged, the contrary was fairly arguable, so that it was not negligent of the barrister to have argued it. This case shows how the rule that wasted costs orders should be 718

Wasted costs orders  13.57 made only in plain cases works in favour of legal representatives, even when the lawyer’s conduct is said only to be negligent rather than improper. The same principles would presumably apply to a solicitor advocate appearing in court. 1 [1995] NLJR 851, (1995) Independent, 17 May, CA.

13.56 In Turner Page Music v Torres Design Associates Ltd,1 the Court of Appeal held that solicitors who declined to reveal to the opposing party in litigation that their client’s insurance cover was limited, or to advise their client to settle, were not negligent. Further, solicitors who are under great pressure to act quickly to seek accommodation for a client who has had to sleep outside the previous night may not be negligent in launching an application which, with careful consideration and hindsight, turns out to have been doomed to fail.2 Solicitors who acted for a company that existed at the start of the retainer but later ceased to exist did not act negligently because, at the later stage, they were unaware of any facts putting them on enquiry as to the status of the company.3 Solicitors who act on the advice of specialist counsel as to difficult procedural questions relating to the mental capacity of a testator may not be negligent even if they fail to act upon warnings from the court as to the inadequacy of the procedure followed.4 Solicitors acting in a personal injury action who failed to show an expert a supplementary, and negative, report of a different expert did not act negligently.5 For a discussion of the duties of solicitors in relation to the disclosure process, and what amounts to breaching those duties and thus negligence, see Hedrich v Standard Bank London Limited.6 Finally, in Fisher Meredith LLP v JH,7 Mostyn J overturned a wasted costs order made against solicitors for a wife in matrimonial proceedings, who had failed to apply for the joinder to the proceedings of parties who claimed to be the beneficial owners of certain assets in the husband’s name, which the wife contended should be treated as matrimonial assets. Although there was guidance, there was no mandatory rule as to the procedure to be followed, and no rule as to whose responsibility it was to apply for joinder. It therefore could not be said that the wife’s solicitors’ conduct had been negligent. 1 (1998) Times, 3 August, CA, and see the transcript. 2 R v Westminster London Borough, ex p Geehan & Butler [1995] COD 204 (Dyson J). 3 Padhiar v Patel [2001] Lloyd’s Rep PN  328 at 334 col 2 (Hilary Heilbronn QC sitting as a deputy High Court judge). 4 Sherman v Fitzhugh Gates [2003] EWCA Civ 886, [2003] PNLR 39. 5 Afzal v Chubb Guarding Services Ltd [2002] EWHC 822 (QB), [2003] PNLR 33 (HHJ Bowsher QC). 6 [2008] EWCA Civ 905, [2009] PNLR 3. As to alleged impropriety of solicitors in redacting documents prior to disclosure, see CMCS Common Market Commercial Services AVV v Taylor [2011] EWHC 324 (Ch), [2011] PNLR 17 (Briggs J). 7 [2012] EWHC 408 (Fam), [2012] PNLR 22.

(b)  Negligent conduct 13.57 In R v Horsham District Council, ex p Wenman,1 Brooke J was unable to make a wasted costs order because the principal errors had occurred before 719

13.58  Costs orders against solicitors the wasted costs jurisdiction came into effect. He nevertheless indicated that, in judicial review proceedings, lawyers should not regard it as unnecessary to write a letter before action merely because they believed it inevitable that the proposed respondent would deny their clients’ claim. Further, judicial review proceedings were wholly inappropriate for cases that bristled with factual disputes. Thirdly, it was wrong to fail to draw the attention of the judge, on the without notice application for leave, to alternative remedies and evidence which told against the applicant’s2 case. Though this case was decided before Ridehalgh, and these comments were obiter dicta, it nevertheless supplies helpful guidance. Further, in Lowline (PSV) Ltd v Direct Aviation Ltd,3 Rix J held that a solicitor who, in acting in relation to an application made without notice for an injunction, had failed to ensure that full and frank disclosure of all material facts was given had acted negligently and should be the subject of a wasted costs order. But Rybak v Langbar International Ltd4 suggests that, while a solicitor preparing witness statements for a without notice application does have a duty not to mislead the court, the solicitor is not negligent if he or she fails to check through the file and correct inaccuracies which are within the client’s direct knowledge but not within the solicitor’s direct knowledge. 1 [1995] 1 WLR 680 (Brooke J). 2 On the facts of Wenman, the solicitors had not acted negligently as they had relied on specialist junior counsel. See below for reliance on counsel. 3 (8 March 1999, unreported). 4 [2011] EWHC 451 (Ch), [2011] PNLR 16 (Morgan J).

13.58 Next, in D Walter & Co Ltd v Neville Eckley & Co,1 a firm of solicitors was advising the claimant, who was the managing director of a company in compulsory liquidation, in an action against the company’s liquidator. They instructed junior counsel who specialised in company law. The liquidator’s solicitors pointed out to the claimant’s solicitors that the action against the liquidator lay in the company, not the claimant, and sent them a copy of a case called Re Embassy Art Products Ltd,2 which they said was relevant. The claimant’s solicitors decided not to refer this to counsel, as they trusted their own judgment that the case was irrelevant. Sir Richard Scott V-C decided that the case was highly relevant, and that the solicitors had been negligent in failing to consider it properly. Further, in counsel’s written opinion he had said that there were grounds for proceeding but that this must be re-considered if further evidence showed that the company’s financial position was worse than thought. The solicitors subsequently received a letter showing that the financial position was much worse, but they failed to consider the effect of this on the application, with or without counsel. This too was negligent. A wasted costs order was made. 1 [1997] BCC 331 (Sir Richard Scott V-C). 2 [1988] 3 BCC 292.

13.59 One relevant factor in the Fletamentos case1 was that the costs in question were the costs of an appeal. The appellant had already had one opportunity to argue his points, and for the most part they had been rejected 720

Wasted costs orders  13.61 in clear but careful terms by the judge at first instance. In Re J (A Minor),2 a barrister was held to have been negligent in advising an appeal where all the supposed grounds of appeal were matters of fact in relation to which the Court of Appeal would not interfere with the judge’s findings. The solicitors narrowly escaped a wasted costs order, on the basis of their reliance on counsel’s advice (see below). But family law solicitors and counsel acted negligently in bringing a hopeless appeal.3 Further, the conduct of lawyers who in care proceedings failed to brief expert witnesses properly or to ensure that two expert witnesses had seen all relevant statements was both unreasonable and negligent within the meaning of Senior Courts Act 1981, s 51(7).4 1 At para 13.47ff, above. 2 (25 March 1997, unreported), CA. 3 B v B [2001] 1 FLR 843 (Wall J). 4 Re G  (Children) (Care Proceedings: Wasted Costs) [2000] Fam 104, [2000] 2  WLR  1007 (Wall J).

13.60 In principle it is irrelevant to the exercise of the wasted costs jurisdiction that a party’s lawyers’ fees are being paid by public funding: those acting for publicly funded clients should be no more at risk of wasted costs orders than those whose clients are privately funded.1 But there are some regulations that apply only to those acting for publicly funded clients, breach of which may be relevant to the exercise of the jurisdiction. In Re Stathams,2 the Court of Appeal held that a solicitor acted negligently when, in breach of his duty under the former civil legal aid regulations, he failed to serve notice of discharge of the legal aid certificate of the claimant, for whom he acted, on the defendants. The defendants were given the false impression that the claimant was legally aided with a full certificate and that, on the appeal in question, if they won they would have the right to claim costs from the Legal Aid Board. In fact he did not have legal aid, there was no prospect of the Board paying the costs, and the claimant himself had no money. If the defendants had known this, they could have applied for security for costs, which they did not do. 1 Ridehalgh [1994] Ch 205 at 234–5, referring to Legal Aid Act 1988, s 31(1), now replaced by Access to Justice Act 1999, s 22(1). 2 [1997] PIQR P464, CA.

13.61 In Veasey v Millfeed & Co Ltd,1 the solicitors in question issued and served a writ in which they named the claimant as a partnership of father and son, when in fact the partnership had already been dissolved, and only the son had instructed the solicitors. The defendants knew that the son was legally aided so that costs would not be recoverable from him, but were given to believe that the father was a party, not in receipt of legal aid, so that he might be able to satisfy a costs order. In truth, the father was not a party and the only claimant was the legally aided son. Had the defendants known the truth they would have settled the case in the sum at which they ultimately settled it when they discovered the truth. The Court of Appeal held that the solicitors had acted negligently in serving proceedings that named the father as well as the son as 721

13.62  Costs orders against solicitors the claimant, when the father was not a party. They were liable for the costs caused by the delay in settlement. 1 [1997] PNLR 100, CA.

13.62 The relevance of public funding arose again in Shah v Singh.1 The claimant’s solicitors applied for an adjournment of the trial, a few days before it was due to begin. The partner dealing with the matter sent a litigation clerk to make the application, but failed to ensure that the clerk emphasised to the court that legal aid for the trial had only recently been granted. The application was rejected and the claimant lost the trial, but, on appeal, a re-hearing was ordered. The Court of Appeal held that it had been negligent of the partner to fail to ensure that the court was told of the recent grant of legal aid; if it had been told, an adjournment would probably have been granted, and the costs of the appeal avoided. Thus the claimant’s solicitors were ordered to pay the costs of the appeal. 1 [1996] 1 PNLR 83, CA.

13.63 Delay in the conduct of litigation may be so great as to amount to negligent conduct, though it may be hard to show that the delay has caused any loss of costs.1 As to a solicitor’s disclosure obligations, see Hedrich v Standard Bank London Ltd.2 Negligence of solicitors for the purposes of a wasted costs order may also depend upon their use of counsel, which we consider next. 1 Kilroy v Kilroy [1997]  PNLR  66, CA, Padhiar v Patel [2001] Lloyd’s Rep PN  328 (Hilary Heilbronn QC sitting as a deputy High Court judge). 2 [2008] EWCA Civ 905, [2009] PNLR 3 at [14].

7  Reliance on counsel 13.64 In Locke v Camberwell Health Authority,1 Taylor LJ stated principles relevant to solicitors’ reliance upon counsel, which, together with their amplification in Ridehalgh, are quoted in Chapter 2.2 In R  v Luton Family Proceedings Court, ex p R,3 the Court of Appeal overturned a decision that a solicitor had not been entitled to rely upon the advice of specialist junior counsel in relation to judicial review. There was no evidence as to the extent of the solicitor’s own expertise in judicial review, nor was counsel’s advice obviously wrong.4 It is thought, however, that it might have been different if there had been evidence that the solicitor was himself an expert in judicial review: that would have made it easier to show that he ought to have taken a different view or pointed out errors in counsel’s approach. As Roth J put it in Langsam v Beachcroft LLP,5 ‘the independent judgment which the solicitor should apply when considering whether the advice of counsel is “obviously or glaringly wrong” is a judgment formed by his or her own specialist expertise.’ 1 [1991] 2 Med LR 249, CA. See also Davy-Chiesman v Davy-Chiesman [1984] Fam 48, CA, and para 2.11ff, above.

722

Wasted costs orders  13.66 2 See para 2.11, above. 3 [1998] CLY 496, CA. 4 See also Reaveley v Safeway Stores plc [1998] PNLR 526, CA and Afzal v Chubb Guarding Services Ltd [2002] EWHC 822 (QB), [2003] PNLR 33 (HHJ Bowsher QC) (reasonable to rely on counsel’s advice as to prospects of success in personal injury action); R v A [2000] PNLR 628, CA (reasonable to rely on criminal barrister’s advice that custody time limit had expired); Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1184, [2007] PNLR 9 (reasonable to rely on counsel’s advice as to distinction between claims of company and of directors). 5 [2011] EWHC 1451 (Ch), at [137]. The decision was unsuccessfully appealed: [2012] EWCA Civ 1230. See per Arden LJ at [139] to similar effect as the quotation from Roth J.

13.65 The solicitors in the slightly earlier case of Re J (a minor)1 escaped by a much narrower margin. Ward LJ held that two barristers who advised appeal from a county court judge’s decision as to a care order were both negligent. There was no evidence from the appellants’ solicitors that they had applied their minds to counsel’s advice on appeal at all. But they escaped a wasted costs order because counsel’s advice was not glaringly wrong. Ward LJ said: ‘It seems [the solicitor] relied blindly on counsel and abdicated his professional responsibility to give independent consideration to whether or not this was a proper appeal. Such a lamentable failure to exercise any judgment at all seems to me to be a negation of professional responsibility. Solicitors and counsel work as a team, and as a team, each has an equally valuable contribution to make. They are lawyers, each of them, and they should be judged as lawyers, not as outdoor clerks. It is, therefore, with considerable reluctance that I find myself grudgingly accepting the submission advanced on behalf of the solicitors that the advice of counsel, also adopted as it was by those advising the local authority, was not so glaringly without some superficial attraction that the solicitors should have rejected or questioned it. I  say begrudge that conclusion because, implicit within it, is an acceptance that the level of competence by which the standard is fixed must be pretty low and such conclusion is, in fact, the antithesis of the regard I have for the solicitors’ profession.’ There is in this passage the germ of an argument that the standard to be applied to solicitors who rely upon counsel should be raised.2 Presumably those trained as solicitor advocates are already subject to a higher standard, as they hold themselves out has having skills in advocacy similar to those of barristers. 1 (25 March 1997, unreported), CA. 2 Compare the discussion of solicitors’ liability for the conduct of litigation in Chapter 12, and see also Dace v Redland Aggregates Ltd [1997] EGCS 123 (Blackburne J). Counsel’s advice that there had been a reasonable prospect of success in asserting the existence of an agricultural tenancy was unreasonable and negligent, and the solicitor had not been entitled to rely on it blindly.

13.66 In the Fletamentos case,1 however, it was no excuse for the solicitor that, on the eve of the doomed appeal, leading counsel had advised by telephone that the application had a fair chance of success. As observed above, 723

13.67  Costs orders against solicitors the circumstances of that case were exceptional. The solicitor had already received advice from two different leading counsel specialising in commercial law to the effect that the appeal was hopeless. He did not formally brief the third leading counsel to advise on the prospects of success. Further, there was a catalogue of other bizarre features. 1 See para 13.47, above.

8  Relevance of public funding and conditional fee agreements 13.67 As long as legal representatives comply with public funding regulations, public funding makes no difference to the likelihood of a wasted costs order being granted, and such legal representatives should not allow their conduct to be tempered by fear that it might.1 In particular, it is inappropriate for privately funded clients to apply for wasted costs orders against those who act for publicly funded clients, simply on the basis that costs cannot be obtained from the publicly funded clients.2 Further, in Afzal v Chubb Guarding Services Ltd3 HHJ Bowsher stressed the following passage from Ridehalgh: ‘“It is incumbent on courts to which applications for wasted costs orders are made to bear prominently in mind the peculiar vulnerability of legal representatives acting for assisted persons… which recent experience abundantly confirms. It would subvert the benevolent purposes of this legislation if such representatives were subject to any unusual personal risk.”’ 1 Ridehalgh [1994] Ch 205 at 234–5. See now Access to Justice Act 1999, s 22(1). 2 See Otton LJ’s observations in Wall v Lefever [1998] 1 FCR 605, CA at 615–6. 3 [2002] EWHC 822 (QB), [2003] PNLR 33 (HHJ Bowsher QC) at [31].

13.68 In cases where privilege is not waived, to what extent may the court infer that, because a client is publicly funded, the client’s lawyers must have given positive advice as to the merits pursuant to the relevant regulations? In Brown v Bennett (No  2),1 Neuberger J  considered that it was unhelpful and even dangerous to try to guess what must have passed between a legally aided litigant’s advisors and the Legal Aid Board in a case where the Board had taken no part in the application. It was not possible safely to deduce what advice the Board had received from the lawyers: it was possible to think of various scenarios in which legal aid might have been extended without such a lawyer’s opinion stating that there was a more than 50% chance of success. In Gandesha v Nandra,2 however, Jacob J appears to have thought, obiter, that it was appropriate to undertake such an exercise. But a different approach was taken in Fryer v RICS, which was not cited in Gandesha. At first instance privilege had not been waived. The judge refused to infer that, because a party had the benefit of legal aid, counsel must have advised that he had more than a 50% chance of success at trial. The Court of Appeal held that this was a 724

Wasted costs orders  13.71 perfectly permissible approach.3 By the time the case reached the Court of Appeal, privilege had been waived. It emerged that counsel had advised that the claim had a 50–60% chance of success.4 The Court of Appeal held that the advice was not negligent. The general tenor of these authorities is to the effect that, where privilege is not waived, it is not appropriate or safe to infer from the existence of public funding that lawyers have given particularly positive advice.5 That accords with Lord Bingham’s statements in Medcalf as to the correct approach where privilege is not waived. 1 [2002] 1 WLR 713 (Neuberger J) at [67]–[68] and [89]. 2 [2002] Lloyd’s Rep PN 558 at 560–1. 3 [2000] Lloyd’s Rep PN 534 at [49]. 4 [2000] Lloyd’s Rep PN 534 at [82]. A different approach, however, appears to have been taken in B v B [2001] 1 FLR 843 (Wall J). 5 To similar effect, see Daly v Hubner [2002] Lloyd’s Rep PN 461 (Etherton J).

13.69 So far as wasted costs orders are concerned, in principle the existence or otherwise of a conditional fee agreement should make no difference to whether the court will make an order, assuming that the solicitors have complied with the applicable regulations. It may be argued that such lawyers are in no different position from lawyers who act for claimants who have legal aid certificates requiring no contribution from the client.1 Such lawyers’ position may, however, be material to applications for non-party costs orders which we consider below at para 13.81ff. 1 Cf Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056 esp at 1066A–C, CA.

9 Causation 13.70

The Court of Appeal stated in Ridehalgh1 that:

‘… the court has jurisdiction to make a wasted costs order only where the improper, unreasonable or negligent conduct complained of has caused a waste of costs and only to the extent of such wasted costs. Demonstration of a causal link is essential. Where the conduct is proved but no waste of costs is shown to have resulted, the case may be one to be referred to the appropriate disciplinary body or the legal aid authorities, but it is not one for the exercise of the wasted costs jurisdiction.’ In Brown v Bennett (No 2),2 Neuberger J held that causation in wasted costs applications should be determined on the balance of probabilities and rejected a submission that the loss of a chance approach should be applied. 1 [1994] Ch 205 at 237E–F. 2 [2002] 1 WLR 713 at [52]–[56].

13.71 As to the application of the test of causation, in Sawrij v Lynx (Helping Abused Animals) Ltd1 the defendant had consistently been in default 725

13.72  Costs orders against solicitors of its obligations with regard to disclosure. The claimant applied at trial for the defence to be struck out on that basis, and two days were spent dealing with the application, at the end of which it was rejected. The Court of Appeal nevertheless accepted that the trial judge had been entitled to find that the making of the application had been caused by the defendants’ defaults in disclosure, so that a wasted costs order against the defendants’ solicitors was justified in relation to those two days. It was not necessary for the claimants to show that they were prejudiced by the failure to give disclosure; all they had to show was that it was reasonable to have made the application.2 On this approach, the test of causation may be relatively favourable to applicants. On the other hand, in Kilroy v Kilroy3 the applicant was unable to show that lengthy delay by solicitors in the conduct of litigation had caused any specific costs to be wasted. In KOO  Golden East Mongolia v Bank of Nova Scotia4 the defendant’s wasted costs application was premature because it related to costs which the claimant had been ordered to pay and had not yet failed or refused to pay. Silber J added that an application for wasted costs was a last resort which should be made only after the party with primary responsibility to pay the costs had failed or refused to do so. It is suggested, however, that there is no absolute rule to this effect; indeed, that a party’s inability or unwillingness to pay may not become apparent until after the conclusion of the detailed assessment proceedings, which pursuant to paragraph 5.2 of the Practice Direction to CPR r 46.8 is the latest stage at which an application can be brought.5 Further, if the applicant for wasted costs has settled with the other party, and waived entitlement to costs from that party, it may be argued that the applicant is precluded by the settlement from claiming wasted costs from the other party’s lawyers. It appears, however, that this depends on whether the settlement agreement is construed as having been intended to give the applicant full consideration for the wasted costs: see Sharma v Hunters.6 1 (21 February 1997, unreported), CA. 2 See Pill LJ’s judgment at p 34 of the transcript. 3 [1997] PNLR 66, CA. 4 [2008] EWHC 1120 (QB), [2008] PNLR 32 (Silber J), see [79]–[82]. 5 See Re Bin Issa Al-Jaber [2019] EWHC 3759 (Ch), in which an application for wasted costs failed at the first stage because, inter alia, the applicant had not provided sufficient evidence that the alleged wrongful conduct had caused the wasted costs said to have been occasioned by it. MH Rosen QC in an extempore judgment doubted that the principle was ‘mandatory’ but nonetheless took into account the fact that there was no apparent reason to suspect that the party primarily liable could not pay. 6 [2011] EWHC 2546 (COP), [2012] PNLR 6 (Henderson J).

13.72

It will be recalled that Senior Courts Act 1981, s 56(7) provides:

‘(7) In subsection (6), “wasted costs” means any costs incurred by a party – (a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal representative or any employee of such a representative; or 726

Wasted costs orders  13.73 (b) which, in the light of any such act or omission occurring after they were incurred, the court considers it unreasonable to expect that party to pay.’ What is the ambit of paragraph (b)? Imagine that I  carefully spend a day preparing a trial and arrive at court the next day to present the trial. You, the barrister or solicitor instructed to appear for the opposite party, sleep in, miss the train, and the hearing has to be adjourned. You acted unreasonably or negligently, and this caused costs to be wasted, but your negligence occurred after I had done the work of preparing. It is submitted that it is this type of case at which paragraph (b) is aimed.

10  Justice in all the circumstances 13.73 As mentioned above, in Ridehalgh Sir Thomas Bingham MR made clear that, if the applicant shows that improper, unreasonable or negligent conduct has caused costs to be wasted, though the court is not bound to make a wasted costs order, it will need to provide sustainable reasons if it decides not to do so. Lord Bingham reiterated the point in the second passage quoted above at para 13.25 from Medcalf. R v Secretary of State for the Home Office, ex p Wong1 was such a case. The solicitor of an applicant for judicial review should have come off the record when legal aid was withdrawn, and should have notified the respondent of the withdrawal. But Schiemann J  decided not to make an order because, if the solicitor had come off the record, then the point that ultimately caused the applicant to win might never have come to light, so that an injustice would have been done because he would have lost a case which he deserved to win. Similarly, in Pelling v Bruce-Williams,2 solicitors had negligently failed to serve an affidavit in support of an application to commit the appellant to prison. But the committal application related only to the appellant’s failure to serve an affidavit of means, and only £200 was at stake. The making of a wasted costs order was not proportionate to the scale of the matter, so no order was made. In R (Hide) v Staffordshire CC3 the respondent lawyer had acted negligently and unreasonably, and this had caused wasted costs. The judge nevertheless declined to make a wasted costs order because there was a significant risk that if an order were made it would lead to the respondent being made bankrupt, and that would be a disproportionate consequence of her unreasonable and negligent behaviour. Finally, in CMCS Common Market Commercial Services AVV v Taylor4 Briggs J indicated that even if the basic requirements for the grant of a wasted costs order had been made out he might have declined to make one since there had been a remedy against the abusive party, namely the respondent solicitors’ client, which had not been pursued. 1 [1995] COD 331 (Schiemann J). 2 (16 December 1998, unreported), CA. 3 [2007] EWHC 2441 (Admin), [2008] PNLR 13 (Wyn Williams J). 4 [2011] EWHC 324 (Ch), [2011] PNLR 17 (Briggs J) at [76]–[79].

727

13.74  Costs orders against solicitors

11  Contribution and indemnity 13.74 Fletamentos also contains some obiter discussion of what should be done if more than one party was to blame for the wasted costs, for instance both solicitors and counsel. Simon Brown LJ considered that, if the court made an order against solicitors, it probably did not have power to go on and make a contribution order in their favour against counsel, if the aggrieved party to the proceedings had not sought an order from counsel.1 Morritt LJ, on the other hand, thought that it might be possible to order one legal representative to indemnify another in respect of payments to the applicant. In his view, however, normally the court would assess the percentage of the wasted costs which each lawyer should pay to the applicant.2 In Gandesha v Nandra,3 however, a wasted costs application was made only against solicitors. The solicitors referred to what Morritt LJ had said and submitted that counsel was partly to blame and that the correct approach was to identify the part of the wasted costs for which the solicitors alone were liable. Jacob J rejected this submission. If solicitors and counsel were both 100% to blame for the costs which had been wasted, then if the wasted costs application was made only against one lawyer, that lawyer had to pay 100% of the wasted costs even if the other lawyer was equally to blame. The absence of a mechanism for contribution in the Act was simply unfortunate for the lawyer receiving the application. The subtext here may be that in practice it is insurers rather than individual lawyers who are likely to have to bear the costs; generally the sums in issue will be relatively low, and the court may feel that insurers simply have to bear them. But it still seems unsatisfactory that there should be no mechanism for claiming contribution. 1 [2003] Lloyd’s Rep PN 26 at 33 col 2 to 34 col 1. 2 [2003] Lloyd’s Rep PN 26 at 43, col 2. 3 [2002] Lloyd’s Rep PN 558 at 562, col 1.

12  Criminal law 13.75 So far we have dealt only with provisions relating to civil proceedings. The Senior Courts Act 1981, s 56 does not relate to criminal proceedings. But those are governed by almost identical provisions, which were introduced at the same time, and appear in Prosecution of Offences Act 1985, s  19A and Costs in Criminal Cases (General) Regulations 1986, regs 3A–3D.1 The wording of these provisions is very similar to the equivalent provisions in civil law, and the Court of Appeal in Ridehalgh expressed the hope that its decision there would be of guidance in criminal cases, while realising that it could not be authoritative. In Re a Solicitor (wasted costs order),2 the criminal division of the Court of Appeal had to consider the meaning of the words ‘improper, unreasonable or negligent’ which appeared in the criminal statute. Giving the judgment of the court, Beldam LJ referred to the definitions suggested in Ridehalgh, and effectively adopted them. The court held that no reasonably competent solicitor would have issued a witness summons for 728

Wasted costs orders  13.76 the recovery of documents unless there was more than a speculative basis for believing that they might be relevant to the case; as there was no such basis, a wasted costs order was made. In R v Mintz,3 the Court of Appeal held that the court should ask (i) whether there had been an improper, unreasonable or negligent act or omission, (ii) whether, as a result, costs had been incurred by a party, and (iii) if the answer to (i) and (ii) was yes, whether the court should exercise its jurisdiction to disallow or order the lawyer to meet the whole or any part of the relevant costs, and if so what specific sum was involved. The standard of proof is the civil one, on the balance of probabilities.4 As in civil proceedings, proving causation is a necessary element of applying for a wasted costs order.5 1 SI 1986/1335, though subsequently amended. Regulation 3 also gives the court power to order that one party pay costs to another party, if the costs have been caused by the ‘unnecessary or improper act or omission’ of the first party. 2 [1996] 1 FLR 40, CA. 3 Times, 16  July 1999, CA. See also Re a Barrister (wasted costs order) (No  1 of 1991) [1993] QB 293, CA. 4 Cf Re Madden [2004] EWCA Crim 754, [2004] PNLR 37. 5 Re Lakha & Booth (6 November 1998, unreported), CA. Cf R v Wood Green Crown Court, ex p DPP [1993] 1 WLR 723, DC, a case relating to an order that another party pay the costs, rather than a wasted costs order.

13.76 The wasted costs jurisdiction under the 1985 Act will apply only if there are criminal proceedings and the solicitor is acting as a legal representative to one of the parties to those proceedings. There is jurisdiction under s  19B of the 1985 Act to make a costs order against a third party, but it can only be exercised if there has been ‘serious misconduct’. In Re Sadhana Sodi (Appeal against a wasted costs order),1 the Court of Appeal overturned a wasted costs order that had been made against a solicitor who had made an application in the Crown Court seeking information in relation to contempt of court proceedings against her former client arising out of a criminal prosecution. The application was made after both the criminal trial and the contempt proceedings had concluded, on behalf of a third party with a view to obtaining evidence to be used in civil proceedings against the former defendant. The Court of Appeal held that the solicitor was not acting on behalf of a party to criminal proceedings. The solicitor’s clients had not been parties to the criminal proceedings against the defendant, and although the application to obtain the material initiated ‘proceedings’ which called for judicial resolution, they were not criminal proceedings. Criminal proceedings ‘involve a formal accusation made on behalf of the State or by a private prosecutor that a defendant has committed a breach of the criminal law, and the State or the private prosecutor has instituted proceedings which may culminate in the conviction and condemnation of the defendant’;2 the application did not fit that description. 1 [2019] EWCA Crim 1304 at [45]–[49]. 2 Per Bingham CJ in Her Majesty’s Commissioner for Customs and Excise v City of London Magistrates’ Court [2000] 2 Cr App R348, 352.

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13.77  Costs orders against solicitors 13.77 Reported cases in relation to wasted costs orders in criminal proceedings tend to be short and to turn on specific aspects of criminal practice. In R  v Basra (wasted costs order),1 a solicitor had applied for a witness summons when there was no proper basis to do so. The criminal division of the Court of Appeal upheld the making of a wasted costs order against the solicitor. But in Neill v Crown Prosecution Service2 no order was granted because the solicitor had not acted improperly when he requested an old-style committal in circumstances where there was good reason to believe that the prosecution case might collapse at that stage. In R v Madden,3 defence counsel called a witness despite indications that his evidence would not favour the defence case. The witness’s evidence was not helpful to the defence. The judge granted defence counsel’s application for the jury to be discharged, but ordered defence counsel to pay the wasted costs. The Court of Appeal upheld the order. In R v Duffy,4 a trial was adjourned due to the late appearance of counsel. It emerged that this was due to a late change in the listing by the court. Counsel had not behaved improperly or unreasonably and so the Court of Appeal held that no wasted costs order should have been made.5 In R  v SVS (Wasted Costs),6 defence solicitors had objected to the evidence of a witness, A, who was in Australia being read out without A  being called to give evidence. In breach of procedural rules, however, the solicitors had failed to serve a statement setting out why the defendant objected to A’s statement being read. A was flown to court from Australia, but by the time he arrived the defendant had changed his evidence and he no longer challenged A’s witness’s evidence. As a result the costs of the flight from Australia were wasted. The Court of Appeal stated that the defendant had been deliberately trying to manipulate the court’s process, and that by insisting on A’s attendance without disclosing the defence case, the defendant’s solicitors had made themselves complicit in that manipulation. The trial judge had been entitled to find that the defendant’s solicitors’ conduct had been deliberate, and also improper, unreasonable and negligent. As to causation, if the defendant’s solicitors had pressed him to serve a statement of his case at an earlier stage, he would probably have withdrawn his requirement that A travel from Australia, as he in fact did at trial. However, in R v X (Wasted Costs Order),7 the Court of Appeal held that although the court held that a practice of not disclosing the details of alibi witnesses to the prosecution until they had provided signed proofs of evidence was wrong and breached statutory requirements, the view that such details should not be disclosed had been widely held, and the solicitors’ failure to make that disclosure had not been improper or unreasonable so as to justify the making of a wasted costs order. In Mark Le Brocq v Liverpool Crown Court,8 the Court of Appeal revoked a wasted costs order made by the trial judge against a defence barrister who had made submissions criticising the judge’s rulings limiting the questions which could be put in advance to the complainant, a minor. The judge discharged the jury and ordered the barrister to pay the wasted costs. The Court of Appeal held that although the barrister’s submissions had been unreasonable in the sense set out in in Ridehalgh, the inappropriate comments could have been ameliorated by a suitable direction 730

Inherent jurisdiction over solicitors  13.78 to the jury: there had been no need to discharge the jury as a result of the barrister’s conduct. 1 [1998] PNLR 535, CA. 2 [1997] COD 171, DC. 3 [2004] EWCA Crim 754, [2004] PNLR 37. 4 [2004] EWCA Crim 330, [2004] PNLR 36. 5 See also R v Qadi [2000] PNLR 137 (solicitor’s clerk negligent in taking instructions within earshot of jury members); R v A [2000] PNLR 628 (solicitors not negligent to rely on counsel’s advice as to custody time limits); R (on the application of the Director of Public Prosecutions) v Cheshire Justices [2002] EWHC 466 (Admin), [2002] PNLR 36 (prosecution solicitor negligent as had to ask for adjournment in order to obtain a legal authority). 6 [2012] EWCA (Crim) 319, [2012] PNLR 21. 7 [2013] EWCA Crim 775, [2013] PNLR 31. 8 [2019] EWCA Crim 1398.

C  INHERENT JURISDICTION OVER SOLICITORS 13.78 Before the introduction of wasted costs orders, the court had an inherent jurisdiction to make costs orders against solicitors. Lord Woolf MR considered the exercise of this jurisdiction, in civil cases, after the introduction of the power to make wasted costs orders, in Hodgson v Imperial Tobacco Ltd.1 He said that ‘this limited jurisdiction is only going to be relevant in a very small minority of cases’. He added: ‘Mr Brennan makes three submissions about this jurisdiction which are not controversial except in one respect. The first is that it is limited to orders against solicitors and does not extend to orders against counsel. The second is that it must be regarded as having been supplanted in circumstances falling within the statutory wasted costs jurisdiction; and the third is that it should not be exercised until after a consideration whether an order should be made under the wasted costs jurisdiction. The point which might be controversial is whether today the courts would take the view that the inherent jurisdiction is limited to orders against solicitors. This is not a point which we have considered and as it does not arise we express no opinion on it.’ It appears that it is indeed now rare for the court to exercise its inherent jurisdiction, particularly if it could make a wasted costs order. In Griffith v Gourgey,2 successive firms of solicitors had acted in proceedings under the Companies Act 2002 in the mistaken belief that they had the company’s authority to do so: costs orders against the company were therefore void as a result of the solicitors’ breach of warranty of authority. It was common ground that in a straightforward case in such circumstances, the court’s inherent jurisdiction could be exercised, but no party invited the court to make an order 731

13.79  Costs orders against solicitors on that basis. Instead, the solicitors were joined as parties for the purposes of an application for wasted costs, which was granted. 1 See [1998] 1 WLR 1056 at 1066E–H, CA. 2 [2018] EWHC 1484 (Ch) (Fancourt J).

13.79 In Assaubayev v Michael Wilson and Partners Ltd1 the Court of Appeal had to consider whether the jurisdiction could be exercised against a BVI company which had provided legal services but was incapable of being an authorised person for the purposes of the Legal Services Act 2007. The issue was whether, in circumstances where (the claimants argued) the court’s supervisory jurisdiction was engaged, the judge below had been wrong to stay the claim in favour of arbitration proceedings brought by the company in relation to a dispute over its fees. The claimants argued that it was contrary to the public interest for matters to be decided in the arbitration when they were also part of the subject matter of the court’s supervisory jurisdiction. The Court of Appeal rejected that submission, so it was unnecessary for it to decide how far the jurisdiction extended, and its comments in that respect are therefore obiter. However, the court considered the question and concluded that the jurisdiction ‘does not extend to anyone or any body who or which (a) is not a solicitor, (b) does not act as one, and (c) does not pretend to be one – for the simple reason that anyone in that category is not, and does not purport to be, an officer of the Court.’ It was, however, prepared to assume that the jurisdiction could be exercised against a person (including a body corporate) who held themselves out as a solicitor, thereby committing an offence under the 2007 Act. 1 [2014] EWCA Civ 1491, [2015] PNLR 8 at [46].

13.80 Thus it appears that the court will rarely make orders under this jurisdiction. In particular, if the facts justify a wasted costs order, then the court will not move on to consider an order under this jurisdiction. In most cases, if the court is not prepared to make a wasted costs order, it will not be appropriate to make an order under this jurisdiction. Neither does the existence of an arguable case for the exercise of the jurisdiction oust the jurisdiction of the arbitrator, who cannot make such an order, to decide a dispute over the solicitor’s fees.1 What, then, are the exceptions? Two examples given by Rose LJ in the Tolstoy case2 were acting without authority, or in breach of an undertaking. These are considered in Chapter 5. In criminal cases, the court also has an inherent jurisdiction to order solicitors to pay the costs of proceedings, but the jurisdiction is exercisable only if there has been a serious dereliction of duty on the part of the solicitor; mere mistake, error of judgment or negligence will not suffice.3 For this reason, it is likely that, in criminal cases as well as civil, the wasted costs jurisdiction will be used more frequently than the court’s inherent jurisdiction. 1 Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491, [2015] PNLR 8. 2 Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, CA. 3 Holden & Co v Crown Prosecution Service [1990] 2 QB 261, CA.

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Non-party costs orders  13.82

D  NON-PARTY COSTS ORDERS 13.81 In Aiden Shipping Co Ltd v Interbulk Ltd,1 the House of Lords established that the court has jurisdiction, pursuant to Senior Courts Act 1981, s 51(1) and (3), to make orders that non-parties pay the costs of proceedings. Such orders are generally called ‘third party costs orders’ or ‘non-party costs orders’; the latter term is adopted here, to avoid any possible confusion with a costs order against a party whose status in the proceedings was that of ‘third party’. In a subsequent decision, the Court of Appeal indicated that it was likely that such an order would be made in circumstances where a non-party had maintained the action, in the sense of:2 ‘wanton and officious intermeddling with the disputes of others in [which] the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse.’ This raised the question of whether solicitors who acted for no fee might be liable for the other party’s costs, pursuant to s 51(1) and (3). The ratio of the Court of Appeal’s decision in Tolstoy-Miloslavsky v Aldington3 is that there is no jurisdiction to award costs against solicitors, pursuant to s 51(1) and (3), merely because they act for no fee. The jurisdiction under s 51(1) and (3) could be exercised against a solicitor only ‘if he acts outside the role of solicitor, eg in a private capacity or as a true third party funder for someone else’.4 1 [1986] AC 965. 2 Murphy v Young & Co’s Brewery plc [1997] 1 WLR 1591, CA per Phillips LJ at 1601, referring to the test which Lord Mustill set out in Giles v Thompson [1994] 1 AC 142 at 164, HL. See also Balcombe LJ’s guidelines in Symphony Group plc v Hodgson [1994] QB 179, CA. 3 [1996] 1 WLR 736. 4 Tolstoy [1996] 1 WLR 736 per Rose LJ at 746A. Ward LJ agreed: 751B. See also Roch LJ at 750D–F. The House of Lords dismissed a petition for leave to appeal: 752G. Further, Lord Woolf MR referred to the decision with approval in Hodgson v Imperial Tobacco [1998] 1 WLR 1056 at 1066H, CA.

13.82 The court in Tolstoy was not suggesting that a solicitor could never be the subject of a non-party costs order. A solicitor could presumably be made the subject of such an order if he or she truly maintained another’s action, in the sense of intermeddling set out above. For instance, solicitors might be liable in this way if they funded a third party’s action in which they were not themselves instructed as solicitors, and in relation to which they had no connection and no reason for such support.1 It will be recalled from the discussion above that, in Tolstoy, the court considered that the solicitors had engaged in considerable meddling and interference in the litigation, for their own personal reasons. Yet, even on those facts, the court did not consider that there was jurisdiction to make a costs order under s 51(1) and (3): instead, the appropriate course was to make a wasted costs order under s 51(6). 1 Further, see Nordstern Allgemeine Versicherungs AG v Internav Ltd [1999] 23 LS Gaz R 33, CA. In that case, an order was made against a solicitor, but he had not been instructed to act

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13.83  Costs orders against solicitors as a solicitor in the proceedings in question. In Globe Equities Ltd v Globe Legal Services Ltd [1999] BLR 232, CA the defendant company had been formed by solicitors to hold the lease of their offices; the solicitors were the guarantors under the lease; it was appropriate to order them to pay costs as they were ‘the real defendants’. In Marley v Rawlings [2014] UKSC 51, at the conclusion of proceedings for rectification of a will, the Supreme Court ordered that both parties’ costs of the proceedings be paid directly by the insurer of the solicitor whose mistake in the drafting of the will had led to the proceedings. Neither the solicitor nor the insurers were parties to the proceedings and the order appears to have been made pursuant to the jurisdiction identified in Aiden Shipping (see para 13.81, above), but the reasoning is not very full: the court appears to have conflated, on the one hand, the solicitor’s role as a ‘causative person’ in that his error led to the litigation (see the categories of persons liable for a non-party costs order identified in Symphony Group plc v Hodgson [1994] QB 179, CA) with the insurers’ own role as funders of his defence. Essentially, the decision was a pragmatic way to avoid further litigation in the form of a claim for damages against the solicitor.

13.83 In the earlier case of Mainwaring v Goldtech,1 the Court of Appeal had been prepared to assume, for the sake of argument, that a solicitor might be liable for the other party’s costs: ‘… if he conducts the litigation in the knowledge that there is no real likelihood of his ever having his costs and expenses reimbursed by or on behalf of the client, save in the event of the litigation being successful.’ But this was not part of the ratio, because the court did not hear argument on it, and counsel for the solicitors was prepared to accept it for the purposes of the appeal. It must now be considered in light of the decision in Tolstoy. In particular, Rose LJ’s judgment in that case emphasised that it was in the public interest, and perfectly proper, for solicitors and counsel to act without fee.2 It is submitted that the passage quoted from Mainwaring was originally obiter and should now be treated as effectively having been overruled by the decision in Tolstoy, especially as Mainwaring was cited in argument in Tolstoy.3 1 (1991) Times, 19 February, CA. 2 [1996] 1 WLR 736 at 746B–D. 3 See [1996] 1 WLR 736 at 738C. Note also that Lord Woolf MR observed in Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056 that the court’s jurisdiction to make an order against solicitors under Senior Courts Act 1981, s 51(1) and (3) would be exercised only in ‘a very small minority of cases’: [1998] 1 WLR 1056 at 1066F.

13.84 The Privy Council took the matter further in Dymocks Franchise Systems (NSW) Pty Ltd v Todd,1 where Lord Brown of Eaton-under-Heywood, giving the judgment of the Board, set out the principles as follows: ‘(1)  Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a 734

Non-party costs orders  13.85 number of different considerations in play, some militating in favour of an order, some against. (2) Generally speaking the discretion will not be exercised against “pure funders”, described in Hamilton v Al Fayed (No  2)  [2003]  QB  1175, 1194 at [40] as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”. In their case the court’s usual approach is to give priority to the public interest in the funded party getting access to justice over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights. (3)  Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation … Nor, indeed, is it necessary that the nonparty be “the only real party” to the litigation in the sense explained in the Knight case, provided that he is “a real party in … very important and critical respects”’. 1 [2004] UKPC 39, [2004] 1 WLR 2807 at [25].

13.85 In Myatt v National Coal Board (No  2),1 the Court of Appeal considered the application of these principles to solicitors in cases where litigation is funded by a conditional fee agreement (CFA) and the issue is as to the enforceability of the CFA. Lloyd LJ, with whom Sir Henry Brooke agreed, considered that the impact of the decision was limited to such cases.2 The costs in question were the costs of an appeal in four test cases as to the enforceability of CFAs. At stake in the appeal for the four claimants was approximately £2,500 each; but for the solicitors who acted for the claimants on the appeal, Ollerenshaw, the sum at stake was over £200,000 in a total of 64 cases: if the CFAs were unenforceable, the solicitors would not be entitled to their profit costs. The claimants lost the appeal. The defendants were entitled to the costs of the appeal from the claimants, but the claimants had no insurance in relation to those costs. The defendants therefore sought an order for costs against the claimants’ solicitors, Ollerenshaw. Dyson LJ held that the court had jurisdiction to make an order for costs under the Senior Courts Act 1981, s  51(3) against a solicitor ‘where litigation is pursued by the client for the benefit or to a substantial degree for the benefit of the solicitor’. The main reason why the appeal had been launched was to protect Ollerenshaw’s claim to its profit costs. Ollerenshaw was ordered to pay 50% of the defendants’ costs of the appeal. Lloyd LJ pointed out that the claimants had no interest in the issue as to Ollerenshaw’s profit costs: whatever the result of the appeal as to 735

13.86  Costs orders against solicitors the profit costs, it would have made no difference to the claimants. It followed that, in relation to the profit costs, ‘the appeal was brought for the solicitor’s sake, not for that of the client’. Ollerenshaw had funded the appeal because it had supplied its own services for free and it had to be assumed that it had paid counsel. Lloyd LJ considered that the solicitors had: ‘acted in respect of the appeal in a dual capacity; acting for their clients, certainly, and with a real interest of those clients to protect, but primarily acting for their own sake … Ollerenshaw were a real party to the litigation at the stage of the appeal, albeit that the claimants were also.’ On that basis, which he considered would probably apply only in cases where the enforceability of a CFA was at stake, there was jurisdiction to make a nonparty costs order against Ollerenshaw even though Ollerenshaw had acted as solicitors in relation to the appeal. He agreed that Ollerenshaw should pay 50% of the defendant’s costs of the appeal. 1 [2007] EWCA Civ 307, [2007] 1 WLR 1559. 2 See [23], [27] and [29].

13.86 In Heron v TNT1 the Court of Appeal rejected the submission that a failure to obtain After the Event (ATE) insurance, and subsequent failure to disclose that failure to the client, was sufficient to render the solicitor the ‘real party’ to the litigation. After reviewing several first instance decisions in which non-party costs orders had been sought against solicitors, the Court of Appeal emphasised that: ‘[a] solicitor is entitled to act on a CFA for an impecunious client who they know or suspect will not be able to pay his own (or other side’s costs) if unsuccessful … As far as the other side is concerned, whether the solicitor has negligently failed to obtain ATE insurance to protect his client (as opposed to not being able to obtain such insurance) does not impact on the costs they will incur unless it is demonstrably provable that the costs would not have been incurred.’ That causal element had, however, been satisfied in Adris v Royal Bank of Scotland plc,2 where solicitors had not only failed to obtain ATE insurance, but had failed to inform their clients of that failure in circumstances where, the court found, if the clients had known they were uninsured they would not have instructed the solicitors to pursue the claims. The court found that in the circumstances the solicitors were effectively acting without instructions.. 1 [2013] EWCA Civ 469, [2013] PNLR 21 at [37]. At [33] the Court emphasised the particular context of the Myatt case and endorsed the limitation identified by Lloyd LJ. 2 [2010] EWHC 941 (QB).

13.87 In Germany v Flatman1 the successful defendants in two personal injury cases applied for orders for disclosure of the funding arrangements 736

Non-party costs orders  13.88 between the claimants and their solicitors for the purpose of considering whether to apply for non-party costs orders. The cases were unconnected but had been conducted by the same firm of solicitors, on CFAs without ATE insurance. Eady J ordered the disclosure sought, holding that if the solicitors had agreed to fund disbursements on the basis that they would not be recovered from the client in the event of failure, they would have become ‘funders’ in the sense of making an investment with a view to making a gain (ie the recovery of their fee – including, under the then current arrangements, a success fee) from the litigation. This rationale was doubted in Tinseltime Ltd v Roberts2 and reversed by the Court of Appeal: the mere funding of disbursements, even on the basis of what is, in reality, only likely to be a notional right of recovery against the client in the event of the failure of the claim, is not sufficient to render the solicitor a ‘real party’ to the litigation.3 In Harcus Sinclair (a firm) v Buttonwood Legal Capital Ltd,4 David Donaldson QC emphasised that both the facts and the outcome in Myatt were unusual, describing it as a case in which ‘the interests – and hence the motivations – of the solicitor and the client are in any significant respect incongruent’ because ‘the solicitor had a substantial and apparently much greater additional interest in a successful appeal in that it would create a binding judicial precedent enabling him to recover his profit costs in 60 other similar cases’. He went on to observe that in most cases ‘the solicitor’s interest is no more than a direct linear consequence of his client’s potential success: he will be paid if his client is paid and not if not’. 1 [2011] EWHC 2945 (QB) at [25]. 2 [2012] EWHC 2628 (TCC) (HHJ Stephen Davies). 3 [2013] EWCA Civ 278, [2013] 1 WLR 2676 at [45]–[47] and [50]. However, by the time of the appeal, facts had come to light in one of the cases which suggested that, as in Adris (para 13.86, above) the solicitors had pursued the case without insurance contrary to the client’s express instructions, which justified disclosure being ordered in the other case on a ‘similar fact’ basis. 4 [2013] EWHC 2974 (Ch) at [15].

13.88 In Willers v Joyce1 the claimant brought, and lost, an action for malicious prosecution in which the main head of damage consisted of a shortfall of at least £2m in legal fees which he had incurred in defending an earlier claim against him which had been discontinued, but in which a substantial portion of his costs were not recovered in the detailed assessment proceedings which followed. The claimant’s lawyers in the malicious prosecution action were the same lawyers to whom fees were owed. The claimant failed to pay the costs ordered against him in the malicious prosecution action, and a s 51 application was made against the lawyers. It was argued that the lawyers (i) had had a substantial personal interest in the outcome of the litigation; (ii) had provided substantial financial support to the claimant in the conduct of the malicious prosecution action both by failing to enforce payment of the sums allegedly due to them in respect of the previous action, and by continuing to provide legal services in connection with the malicious prosecution action without apparently entering into any arrangement whereby they would be able to enforce payment of their fees; and (iii) had a very significant influence over 737

13.89  Costs orders against solicitors the strategy for the conduct of the litigation and, a large amount of control over their client’s ability to settle the action and the terms on which he could do so. Rose LJ dismissed the application.2 Though she said she had found the decision ‘difficult’, the lawyers had not stepped outside the role of lawyers so as to justify the making of a non-party costs order. She cautioned that:3 ‘The nature of the role of the legal representative means that the indicators useful in considering the liability of, for example, a pure funder, such as whether he has been closely involved in making decisions about the conduct of litigation or whether he has a substantial financial interest in the success of the litigation do not work. The legal representative will always be closely involved in taking decisions about the conduct of the litigation and will always have a financial interest in the outcome, particularly where he is working under a conditional fee agreement or because although he is invoicing the client regularly for work done, he knows that in practice he will never be paid unless the client wins the case.’ The key question was whether the fact that the primary head of damage in the malicious prosecution action was the lawyers’ unpaid fees justified the making of a non-party costs order. Rose LJ held that it did not. There were many scenarios in which a claim might include, or even primarily consist of, fees for services provided by the claimant’s lawyers (a claim against solicitors for damages for professional negligence being one such example) and in many such cases it would be more expensive and less efficient for the party to have to instruct new lawyers in order for the present lawyers to avoid a s 51 application. In a case such as the present, where the parties in the malicious prosecution action were the same as the parties in the first set of proceedings, it could also have created a real inequality of arms, since the defendants would have been free to continue to instruct lawyers who were familiar with the proceedings. As a matter of principle, the fact that the fees riding on the success of the claim were not only the fees for work in that claim but also fees outstanding from an earlier claim did not means that the solicitor to whom those fees were owed was acting in the subsequent claim as a ‘real party’ or acting outside the scope of his role as a legal representative. 1 [2018] EWHC 3424 (Ch). The trial followed a preliminary ruling in the Supreme Court extending the tort of malicious prosecution to civil proceedings: Willers v Joyce [2016] UKSC 43. In that decision the Supreme Court rejected a submission that the claim to recover costs was an abuse of process because the damage done by the incurring of the costs had been made good by the costs order in the detailed assessment proceedings. 2 [2019] EWHC 2183 (Ch). 3 At [54].

13.89 In conclusion, then, non-party costs orders will not be made against solicitors simply because they have conducted litigation on a CFA without ATE insurance, or in circumstances where the commercial reality of their arrangements with their client means that they do not expect to be paid unless 738

Court’s powers on assessment of costs  13.91 the claim succeeds, or even if they have provided some of the funds to enable the claim to be pursued. Neither does the fact that the primary subject matter of the claim is the solicitors’ fees in earlier litigation render the solicitor a ‘real party’ or denote that they are acting outside their role as legal representatives. However, where the facts suggest that the main or only reason for the claim being pursued past a certain point is that the solicitors would otherwise have had no prospect of recovering fees, and the client, properly advised, would have abandoned the claim, a non-party costs order may be available. 13.90 In criminal cases, the court has a power by s 19B of the Prosecution of Offences Act 1985 to make a costs order against a third party if:1 ‘(a)  there has been serious misconduct (whether or not constituting a contempt of court) by the third party, and (b) the court considers it appropriate, having regard to that misconduct, to make a third party costs order against him.’ In R v Ahmati2 the Court of Appeal held that such misconduct must require more serious conduct than contemplated under s  19A of the same Act in relation to wasted costs.3 McCombe J  said that misconduct in this context would include deliberate or negligent failure to attend to one’s duties or falling below a proper standard in that regard. It was necessary to consider the responsibilities of the office of the respondent, the importance of the public objects which the respondent served, and the nature and extent of the departure from those responsibilities. A  department of the Home Office had failed to respond to questions from the Court of Appeal on five separate occasions. The misconduct was serious and an order was made. 1 See also the Costs in Criminal Cases (General) Regulations 1986, regs 3E–3I as to the procedure. 2 [2006] EWCA Crim 1826, [2007] PNLR 3. 3 Considered at paras 13.75–13.77, above.

E  COURT’S POWERS ON ASSESSMENT OF COSTS 13.91 Finally, under CPR r 44.11 the court has a power in assessment proceedings to make a costs order against a party’s legal representative where either (a) the legal representative has failed to comply with a rule, practice direction or court order in connection with the assessment proceedings themselves (whether they be summary or detailed assessment proceedings) or (b) ‘it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper’. In Haji-Iannou v Frangos1 the court noted that whilst the word ‘misconduct’: ‘… does not appear in the body of [the rule], it does occur in the title. There is no reason to suppose that the words in parenthesis “(powers 739

13.92  Costs orders against solicitors in relation to misconduct)” limit the court’s jurisdiction but they do point to the nature of the court’s discretion … In other words there will usually have to be a breach of the rule which can properly be categorised as “misconduct”. An inordinate and inexcusable delay which has prejudiced the paying party may well come within this category; excusable, although inordinate, delay may not, especially if it has caused no prejudice. The important point is that, while a noncompliance with a rule, practice direction or court order is the only jurisdictional requirement for the exercise of the power contained in [the current r.44.11(a)], it will usually be appropriate as a matter of discretion to consider the extent of any misconduct which has occurred in the course of such non-compliance.’ In Lahey v Pirelli Tyres,2 the Court of Appeal observed obiter that these powers: ‘include powers that are similar to those available to a judge making a wasted costs order … It is unlikely that the draftsman intended that a legal representative could be ordered to pay costs under [the precursor to r 44.11(1)(b)] in circumstances where a wasted costs order could not be made under section 51(6) of the 1981 Act, as substituted, in respect of costs incurred as a result of “any improper, unreasonable or negligent act or omission on the part of [the] legal representative”: section 51(7) . The word “unreasonable” in section 51(7) of the 1981 Act has been construed quite narrowly. In our view, it should be given a similarly narrow meaning in [r 44.11(1)(b)].’ The Court of Appeal confirmed in Gempride v Bamrah3 that the authorities in relation to the meaning of ‘unreasonable’ and ‘improper’ conduct for the purposes of the wasted costs jurisdiction4 are applicable to an application under r 44.11(1)(b), and in particular, that dishonesty is not a necessary requirement. However, unlike the wasted costs jurisdiction, r 44.11(1)(b) cannot be invoked where the impugned conduct is merely negligent. 1 [2006] EWCA Civ 1663 at [10] 2 [2007] EWCA Civ 91 at [30] 3 [2018] EWCA Civ 1367, [2019] PNLR 7 at [17] and [26]. The facts are set out at para 13.11, above. 4 Discussed at para 13.38ff, above.

13.92 CPR r 44.11(1)(a) applies only to breaches that occur during the conduct of the assessment proceedings, whereas r 44.11(1)(b) applies to conduct ‘before or during the proceedings or in the assessment proceedings’. In Lahey,1 the Court of Appeal rejected the argument that the precursor to r 44.11(1)(b) gave the costs judge jurisdiction to make a wholesale reduction in the amount of costs awarded to the claimant (as opposed to reducing those costs for unreasonableness as a matter of assessment) in circumstances where the assessment was pursuant to a costs order entitling the claimant to 100% of his costs. However, where the misconduct arises in the course of the assessment 740

Court’s powers on assessment of costs  13.92 proceedings the court may disallow all or part of the costs.2 In Andrews v Retro Computers,3 Deputy Master Friston summarised the position as follows: ‘in ordinary circumstances on assessment, CPR, r 44.11(1)(b) is not to be used in such a way as to allow a paying party to adjust or negate his or her liability for costs for reasons that were or could have been addressed at the time that the costs order was made. Put otherwise, a costs judge is bound by terms of the costs order as properly interpreted, and there is nothing in CPR, r 44.11(1)(b) that allows a costs judge to revisit the formulation of that order.’ The above authorities are concerned with applications for costs to be disallowed, rather than for a solicitor to pay costs, and demonstrate that if the paying party wishes to argue that the receiving party should suffer a proportionate reduction to his or her costs because of unreasonable conduct in the substantive proceedings (by the party or by his or her lawyers), those submissions should be made to the judge who is making the costs order, rather than on assessment. It is suggested that similar considerations will apply to applications for a solicitor to pay costs: if, during the proceedings, circumstances come to light which suggest that a wasted costs order is appropriate, that is the application that should be made (usually, as discussed above, at the end of the trial). Indeed, in those circumstances it is hard to see why the party seeking the wasted costs order should want to delay the application in favour of an application on assessment under r 44.11(1)(b), not least because of the availability of a wasted costs order in cases of negligence as well as unreasonable or improper conduct.4 In summary, it is thought that the power to make an order under r 44.11(1)(b) in respect of misconduct that occurs during the course of the substantive proceedings will be exercised only where that earlier misconduct comes to light only in the course of the detailed assessment proceedings. 1 [2007] EWCA Civ 91 at [21] and [23]. The costs order was deemed to have been made as a result of the operation of Part 36 of CPR, but the court made clear at [1] that its observations would apply equally where a costs order had been made by the trial judge. 2 As in GSD Law Ltd v Craig Wardman of St Gobain Building Distribution [2017] EWCA Civ 2144 and Gempride v Bamrah, [2018] EWCA Civ 1367, [2019] PNLR 7, both cases in which the solicitors for the receiving party certified bills of costs which mis-stated the hourly rates to which they were entitled. 3 (16 January 2019, unreported, SCCO) at [80]. 4 In Gempride, Hickinbottom J said a [14] that (in contrast to the wasted costs jurisdiction) ‘it is not necessary to show that the applicant has suffered any loss as a result of the misconduct. It is a jurisdiction intended to mark the court’s disapproval of the failure of a party or of a legal representative to comply with his duty to the court by way of an appropriate and proportionate sanction.’ The application in that case, however, was for disallowance of part of the claimed costs under r 14.11(2)(a). The power to award costs akin to wasted costs is found in r 14.11(2)(b), which empowers the court to order the payment of ‘costs which that party or legal representative has caused any other party to incur’: that appears to require causation to be established.

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Chapter 14

Disclosure and privilege

A  PRE-ACTION DISCLOSURE 1 Introduction 14.01 Contractual or equitable rights to the production of documents or to inspect and copy them are less important than they used to be because of the Professional Negligence Pre-action Protocol and the costs sanctions for non-compliance,1 and also the court’s power to make an order for pre-action disclosure under CPR r 31.16. Nevertheless, there may be circumstances in which a claimant cannot or does not wish to give notice of a claim or to make an application for pre-action disclosure (for instance where the request for disclosure is made as part of a storage or auditing process). There may also be a costs advantage for clients or former clients in invoking their contractual or equitable rights either independently or in conjunction with an application under CPR r 31.16. The general rule is that parties against whom a r 31.16 application is made are entitled to their costs of the application and of complying with the order on the basis that they are entitled to require applicants to satisfy the court that they are entitled to disclosure.2 The same reasoning does not apply, however, where the applicant is asking the court to order disclosure of their own documents. Moreover, the extent of the client’s rights might well be relevant to the scope of the disclosure which a solicitor could be required to give either on an application for pre-action disclosure under CPR r 31.16 or on standard disclosure, particularly, where it is not practical or cost efficient for the solicitor to try and separate out the documents on the file. For these reasons a client’s substantive rights to disclosure or to prevent disclosure remain of relevance. 1 See 14.04, below. 2 CPR r 46.1(2) provides that the general rule is that the court will award the person against whom an order for pre-action disclosure is sought under CPR r 31.16 both (a) the costs of the application, and (b) the costs of complying with any order made on the application. In Bermuda International Securities v KPMG  [2001]  EWCA  Civ 269, [2001] Lloyd’s Rep PN  392 at [31]–[33] Rix LJ indicated that parties may be deprived of the costs of the application (although not of the disclosure exercise) where they resist unreasonably. In SES Contracting Ltd v UK Coal plc [2007] EWCA Civ 791 at [17] Moore-Bick LJ add the gloss that it will not usually be unreasonable for the disclosing party (R) to require the applicant (A) to satisfy the court that he or she is entitled to disclosure. For individual applications of the test see Moduleco v Carillion Construction Ltd [2009] EWHC 250 (TCC) (where Akenhead J  awarded R  only 50% of its costs) and Ackroyd v Hollely [2013] 1 WLUK 168 (where it was held that the judge had not erred in awarding Rs 60% of their costs).

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Pre-action disclosure  14.02

2  Production and inspection of documents (a)  Ownership of a solicitor’s file 14.02 The rights of a client to the production or inspection of documents are based on ownership of the documents.1 This will depend on the terms of the retainer.2 The solicitor also owes a professional conduct obligation to protect or safeguard documents.3 But in practice it is rare for a client care letter to deal in terms with rights of this kind or identify those categories of documents which are owned by the client and those categories of documents which are owned by the solicitor. In the absence of any express terms, the general principle is that the client is the owner of all documents that were created or received by the solicitor whilst acting as his or her agent.4 In a matter involving a transaction this category of documents will include not only the original operative documents through which the transaction took effect (eg contracts, transfers and other deeds) but also drafts of those documents.5 It will also include correspondence passing between the solicitor and third parties and attendance notes of conversations between the solicitor and third parties whilst he or she was acting as the client’s solicitor and agent. It does not, however, include the solicitor’s working papers.6 These documents belong to the solicitor and this category includes not just research or notes but correspondence to and from the client,7 attendance notes of discussions with the client and drafts of letters. The Law Society has produced a practice note which identifies the following seven categories of documents:8 (1) Original documents sent to the firm by the client belong to the client (except where title was intended to pass to the firm). (2)

Documents sent or received by the firm as the client’s agent belong to the client. This will include correspondence with a counterparty or giving and receiving of instructions to or from the client’s other advisers.

(3) Final versions of documents (the production of which was the object of the retainer) belong to the client (eg  agreements or written representations). (4) Final versions of documents prepared by a third party (including the client’s other advisers) during the course of the retainer and paid for by the client belong to the client (eg counsel’s advice and experts’ reports). (5)

Documents prepared for the firm’s own benefit or protection or documents prepared as the means by which the firm discharges its function belong to the firm (eg file copies of letters to the client, notes of time taken or advice to the client for protective purposes, drafts and working papers generally).

(6) Copies of internal emails and correspondence created during the course of the retainer and all emails and correspondence written by the client to the firm belong to the firm. 743

14.03  Disclosure and privilege (7) Accounting records, including vouchers and instructions, belong to the firm. 1 See Hanley v JC&A Solicitors [2018] EWHC 2592 (QB), [2019] PNLR 5 (Soole J) considered in para 14.03, below. It is in theory possible that a non-contractual fiduciary relationship might arise which required a party to disclose documents or records: see Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 (Colman J) at 185D. But it seems unlikely that this will arise in solicitors’ cases where the solicitor will be unable to open a file without a specified client. 2 For example, where a solicitor is contractually obliged to prepare or provide a particular document (eg a particular report), that document will belong to the client. 3 Principle 10 of the SRA Code of Conduct 2011 (version 21 published on 6 December 2018) imposed a mandatory duty to protect client money and assets which includes documents: see the glossary. O(7.4) required solicitors to maintain systems and controls for monitoring the risks to assets entrusted to solicitors by clients and IB(7.1) refers to the safekeeping of documents and assets entrusted to the firm. The SRA Code of Conduct for Individuals, para 4.2 and the SRA Code of Conduct for Firms, para 5.2 (both in force from 25 November 2019) impose an obligation to safeguard client assets (which also include documents). 4 See Leicestershire County Council v Michael Faraday & Partners Ltd [1941] 2 KB 205, CA (architects) at 216 (Mackinnon LJ). See also Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231, CA (receivers) at 1233D–E (Fox LJ). 5 See Ex p Horsfall (1827) 7 B & C 528 cited with approval in Gibbon v Pease [1905] 1 KB 810, CA (architects) at 814 (Cozens-Hardy LJ). 6 See Leicestershire County Council v Michael Faraday & Partners Ltd [1941] 2 KB 205, CA (above) at 216 (Mackinnon LJ) and Chantrey Martin Ltd v Martin [1953] 2  QB  286, CA (accountants) at 292 (Jenkins LJ). Both decisions were cited with approval by Soole J in Hanley v JC&A Solicitors [2018] EWHC 2592 (QB), [2019] PNLR 5 at [68]. Chantrey Martin has also been applied in Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231, CA at 1234G (Fox LJ), Casson Beckman v Papi [1991] BCLC 299, CA (accountants) and Gwelhayl Ltd v Midas Construction Ltd [2008] EWHC 2316 (TCC), 123 Con LR 91 (Coulson J) at [43] (contractor and contract administrators). 7 See Re Wheatcroft (1877) 6 Ch D 97 (Sir George Jessel MR). 8 ‘Who owns the file?’ published on 16 January 2019. In Hanley (above) Soole J generally referred to an earlier edition of the note with approval: see [43], [44] and [68]. But he did not adopt the Law Society’s categories.

(b)  The court’s jurisdiction 14.03 Subject to any lien for fees, the court may order a solicitor to deliver up documents owned by the client under its inherent supervisory jurisdiction.1 Initially, there was some doubt whether the court could exercise the jurisdiction over solicitors outside the conduct of litigation but s 68 of the Solicitors Act 1974 expressly extends its power to do so.2 An application for the production of documents should be made under CPR  Part 8.3 However, in Hanley v JC&A  Solicitors4 Soole J  held that there was no jurisdiction to make orders under the inherent jurisdiction or s  68 requiring a solicitor to provide copies of documents owned by the solicitor. There are a number of decisions relating to fiduciary agents other than solicitors in which the court has held that the agent owed wide duties of disclosure to a principal irrespective of ownership of the documents.5 None of these decisions were cited to the court in Hanley. But they probably do no more than provide a 744

Pre-action disclosure  14.04 number of examples of category (2) (above) where the agent did not act as a professional adviser as well as an agent.6 The one category of documents which is problematic in the light of Hanley is category (7). Although the accounting records belong to the solicitor, the client must be entitled to have copies of the ledger entries which record the transactions or payments which the solicitor has carried out on his or her behalf.7 But a failure to provide copies of this category of documents may be the kind of conduct which Soole J had in mind when he said that it does not follow that solicitors ‘should in all circumstances press their legal rights to the limit’ nor that they can do so with impunity.8 The failure to provide accounting information which provokes an application under CPR r 31.16 is likely to result in the solicitor’s costs being disallowed and in extreme cases an order that the solicitor pay the costs of the application. 1 For the supervisory jurisdiction more generally: see Chapter 5, para 5.40, above. 2 Section 68(1) provides: ‘The jurisdiction of the High Court to make orders for delivery by a solicitor of a bill of costs and for the delivery up of, or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court.’ 3 For various procedural points on the court’s supervisory jurisdiction to police undertakings: see para 5.50, above. These may not be directly applicable to claims for disclosure under CPR Part 8 but may be relevant to the flexibility of the procedure which the court may adopt. 4 [2018] EWHC 2592 (QB), [2019] PNLR 5 at [60] to [75]. 5 See Equitas Ltd v Horace Holman & Co Ltd [2007] EWHC 903 (Comm), [2007] Lloyd’s Rep IR 567 at [95] (Andrew Smith J), Fairstar Heavy Transport NV v Adkins [2013] EWCA Civ 886 at [75] (Mummery LJ): ‘as a general rule, it is a legal incident of [the relationship of principal and agent] that a principal is entitled to require production by the agent of documents relating to the affairs of the principal’ and Amec Foster Wheeler Group Ltd v Morgan Sindall Professional Services Ltd [2015]  EWHC  2012 (TCC) (where Coulson J  held that a building contractor owed a duty to produce documents to a purchaser of the business). In Khouj v Acropolis Capital Partners Ltd [2016] EWHC 2120 (Comm) Knowles J applied both decisions and held that the fiduciary owed the following obligations: (a) a duty to account in relation to transactions and other business conducted on the principal’s behalf (or jointly with another); (b) a duty to keep and maintain proper records of any transaction or other business conducted on his behalf (or jointly with another); (c) a duty upon request to provide the principal with originals or copies of and records of transactions and other business conducted on his behalf (or jointly with another). 6 For example, in Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 Colman J held that underwriting agents owed a duty to provide access to insurers to inspect and copy about 80,000 files that the agents had formerly managed on their behalf and that this duty survived the termination of the contract of agency. 7 The SRA Accounts Rules 2011 did not contain an express obligation to permit a client to inspect or take copies of the solicitor’s accounting records and the new SRA Accounts Rules 2019 do not either. The client would probably be able to piece the transaction together from documents in other categories. 8 See [74].

3  The protocol 14.04 The Professional Negligence Pre-action Protocol imposes a number of obligations to make disclosure upon a potential defendant:1 745

14.05  Disclosure and privilege ‘8.4 The parties should supply promptly at this stage [ie  the investigation stage] and throughout, whatever relevant information or documentation is reasonably requested. 9.2.1 The Letter of Response will normally be an open letter … and should be a reasoned answer to the Claimant’s allegations: … (f) to the extent not already exchanged in the protocol process, key documents should be identified, copied and enclosed. 10.1 The protocol is intended to encourage the early exchange of relevant information, so that issues in the dispute can be clarified or resolved. It should not be used as a “fishing expedition” by either party. No party is obliged under the protocol to disclose any document which a Court could not order them to disclose in the pre-action period. 10.3 This protocol does not alter the parties’ duties to disclose documents under any professional regulation or under general law.’ The obligation of a defendant under the protocol does not extend, therefore, beyond that which he or she would be required to disclose if an application for pre-action disclosure were made. If the Defence differs materially from the Letter of response and the defendant fails to disclose documents upon which he or she later relies, the court may impose sanctions.2 Applications for pre-action disclosure more generally pursuant to CPR r 31.16 are now outside the scope of this work.3 1 See Civil Procedure (2019 ed) Vol 1 at C7A–001. 2 See the Practice Direction – Pre-Action Conduct, §13 to §16 (Civil Procedure (2019 ed) Vol 1 at C1–008). 3 See Hollander, Documentary Evidence (13th edn, 2018) at 1–08 to 1–30.

4  Dual retainers (a)  Joint retainers 14.05 It is a question of fact whether a solicitor is engaged under a joint retainer or separate retainers.1 In most cases the client care letter will provide evidence of the client and whether there is a joint retainer.2 In other cases it will be necessary to examine all of the relevant circumstances in order to determine whether the solicitor was acting for parties jointly. In Re Konigsberg3 (which involved the sale of one property and the transfer and re-mortgage of another by a husband and wife) the solicitor acted at various times under a single separate retainer from the husband and a joint retainer from both husband and wife. The court rejected the ‘broad view of this question’ and refused to hold that ‘throughout the bankrupt and Mrs Konigsberg were the joint clients of the solicitors’.4 By contrast, in BBGP Managing General Partner Ltd v Babcock & Brown Global Partners5 there was no joint retainer and the general partner of a limited partnership was held to be acting as the agent for all of the partners and 746

Pre-action disclosure  14.06 not in its own right or its own interest. The existence of a conflict of interest between the joint clients does not automatically bring the joint retainer to an end.6 1 The term ‘separate retainer’ is used here to describe the situation in which the solicitor is instructed separately by two or more clients but the retainer involves the solicitor in carrying out the same task (or part of the same task) for all of them. 2 See Accident Exchange Ltd v McLean [2018]  EWHC  23 (Comm), [2018] 4  WLR  26 (Sir Andrew Smith) at [76]. 3 [1989] 1 WLR 1257 at 1262–1266 (where Peter Gibson J found that the fact that the wife had funded the advice was not conclusive). Note that the decision on the question whether a trustee in bankruptcy should be treated as a successor in title should be approached with caution: see para 14.10, below. 4 See also The Sagheera [1997] 1 Lloyd’s Rep 160 (Rix J) where it was common ground that solicitors were acting under a joint retainer from the owners of a casualty and their war risk insurers; and Burkle Holdings Ltd v Laing [2005] EWHC 638 (TCC) (HHJ Toulmin QC) where there was no joint retainer from lender and borrower of a private loan made for investment purposes. 5 [2010]  EWHC  2176 (Ch), [2011] Ch  296 at [41]–[44] (where Norris J  took into account an explanation given to the independent directors of the agent, the KYC process, the client care letter, the context of the instructions and the purpose of the retainer). 6 See TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826, CA (discussed immediately below) at [13] (Morritt LJ) and BBGP (above) at [52]–[55].

14.06 Where a solicitor acts for two clients under a joint retainer, the documents falling within the categories discussed in para  14.02, above will be jointly owned by them and both parties must be entitled to inspect and take copies of them (although they may not be entitled to physical possession of them as against each other). Neither client can assert legal professional privilege as against the other in relation to any documents passing between the solicitor and themselves in the course of the retainer. As between themselves and any third party, however, each party can maintain a claim of privilege and the privilege can only be waived jointly. In The Sagheera1 Rix J stated this: ‘Parties who grant a joint retainer to solicitors of course retain no confidence as against one another: if they subsequently fall out and sue one another, they cannot claim privilege. But against all the rest of the world, they can maintain a claim to privilege for documents otherwise within the ambit of legal professional privilege; and because their privilege is a joint one, it can only be waived jointly, and not by one party alone.’ Where, however, a conflict arises between the interests of two clients who have instructed a solicitor under a joint retainer, one client is no longer entitled to have access to confidential communications between the other client and the solicitor even though the retainer has not yet been terminated.2 Where an actual conflict arises between the interests of the two clients, the solicitor should cease to act for both parties immediately.3 But if the endangered client chooses to continue the retainer and to impart confidential information to the solicitor whilst making up his or her mind what to do, the law should protect that confidence. If both clients continue to instruct the solicitor and the solicitor can 747

14.07  Disclosure and privilege continue to act, the position remains as before and neither can assert privilege against the other. 1 [1997] 1 Lloyd’s Rep 160 at 165–166. See also BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2010]  EWHC  2176 (Ch), [2011] Ch  296 (Norris J) at [52]–[55] and R (Ford) v Financial Services Authority [2012] EWHC 2583 (Admin), [2012] 1 BCLC 622 (Burnett J) at [17]. 2 See TSB Bank plc v Robert Irving & Burns [2000] 2 All ER 826, CA where the insured applied to strike out parts of the insurer’s defence in a coverage dispute based on communications between their joint solicitor and the insured after an actual conflict had arisen. The CA held that the insurer was only entitled to see (a) all communications between the insured and the solicitors until an actual conflict of interest had arisen and (b) all communications between them after notification by the solicitors to the insured of such conflict and the lapse of such further time as the insured reasonably required to decide whether to instruct separate solicitors. Hollander, Documentary Evidence (13th edn, 2018) criticises the reasoning because it is based on waiver of privilege: see 23–04 and 23–05. But it appears to have been common ground that the correct way to analyse the rights of clients under a joint retainer was in terms of waiver: see [11]. It is suggested that the proper analysis is in terms of contractual rights: see Winterthur Swiss Insurance Co v AG (Manchester) Ltd [2006] EWHC 839 (Comm) at [74] where Aikens J  analysed TSB  Bank plc v Robert Irving & Burns and Brown v Guardian Royal Exchange Assurance plc [1994] 2 Lloyd’s Rep 325 in these terms. For further analysis see Leech, ‘Acting for the insurer and the insured: dual retainers and conflicts of interest’ (2008) 24 PN 231. 3 See the SRA  Code of Conduct 2011, O(3.5), O(3.6), O(3.7) and O(4.3); the SRA  Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms, para 6.1.

(b)  Multiple retainers 14.07 The position is more complex where a solicitor acts for a number of parties under a multiple retainer. In cases of this kind documents on the solicitor’s file are owned by the client on whose behalf the solicitor was acting when those documents were created or received or by the client to whom the solicitor was discharging his or her duties when the documents were created or received. To take a simple example, solicitors make preliminary enquiries on the purchase of land in discharge of their duties to the purchaser and the replies received in response belong to the purchaser rather than to any lender even though the solicitor may be acting for both at the same time. In Gomba Holdings UK  Ltd v Minories Finance Ltd1 the Court of Appeal applied the principle that the ownership of documents in a multiple retainer depends on the duties which the adviser was discharging when the documents were brought into existence.2 The court held that there were three separate categories of documents which belonged to three different principals:3 ‘The receivers in the present case plainly had a duty to manage the affairs of the companies. All documents which were created or received in pursuance of that duty must be the property of the companies. That would include, for example, the ordinary correspondence sent and received by the companies in the conduct of their affairs. On the other hand (and this is the second group), the receivers had to advise and inform the debenture holders regarding the conduct of the receivership. Documents created for that purpose, while they can 748

Pre-action disclosure  14.08 certainly be said to relate to the affairs of the companies, cannot be the property of the companies. They were not brought into being for the purpose of the companies’ business or affairs and the fact that they were created by or on behalf of persons who are, technically, the agents of the companies cannot be sufficient to create ownership in the companies. Thirdly, there are documents prepared by, or on behalf of, the receivers not in pursuance of any duty to prepare them but simply to enable the receivers to prepare such documents or perform such duties as they were required to prepare or perform for the purposes of their professional duties to the debenture holders or the companies. Such papers are, I think, the property of the receivers.’ Thus documents on a solicitor’s file will fall into three categories: first, documents owned by client A (and which were created or received in discharge of the solicitor’s duties to that client); secondly, documents owned by client B (and which were created or received in discharge of the solicitor’s duties to that client); and, thirdly, documents owned by the solicitor (including working papers and internal emails). It is, however, no answer to an application for preaction or specific disclosure that the solicitor is unable to identify or separate documents owned by one client from the documents belonging to another or from the solicitor’s own documents or that it will be exceptionally burdensome to separate out the various documents. The solicitor must deliver up all of the relevant documents or take the consequences.4 1 [1988] 1 WLR 1231, CA (applied in Pepper (UK) Ltd (t/a Engage Credit) v Fox [2016] NICh 1, [2016] PNLR 27 (Horner J) at [21] and Hanley v JC&A Solicitors [2018] EWHC 2592 (QB), [2019] PNLR 5 (Soole J) at [43]). 2 [1988] 1 WLR 1231 at 1234B. 3 [1988] 1 WLR 1231 at 1234D–F. 4 See Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 (Colman J) at 191H–192A. See also Equitas Ltd v Horace Holman & Co Ltd [2007] EWHC 903 (Comm), [2007] Lloyd’s Rep IR 567 (Andrew Smith J) at [27].

14.08 If documents are brought into existence whilst the solicitor is acting exclusively for client A, client B is only entitled to see them with the express or implied consent of client A. Where client A  has given express consent, there can be no dispute about client B’s access to the documents (even where the relevant documents are confidential or privileged).1 Moreover, in certain circumstances it may also be possible for consent to be implied. In Mortgage Express Ltd v Bowerman2 Millett LJ stated: ‘A solicitor who acts both for a purchaser and a mortgage lender faces a potential conflict of duty. A  solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality 749

14.09  Disclosure and privilege to the buyer and his duty to act in the best interests of the mortgage lender. No such conflict, however, arose in the present case. It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the mortgagee’s solicitor. He has the implied authority to communicate all documents of title to the mortgagee’s solicitors.’ It is suggested that the expression ‘documents of title’ is being used here in the extended sense of all documents copies of which the solicitor could have been expected to receive if he or she had been deducing title for the mortgagee. In the case of a standard conveyancing transaction this will include the replies to preliminary inquiries in the example given above, documents of title, searches and correspondence with third parties, eg the vendor’s or landlord’s solicitors, where that correspondence is material to the mortgagee’s retainer. 1 For an example see Brown v Guardian Royal Exchange Assurance plc [1994] 2 Lloyd’s Rep 324, CA discussed by Aikens J  in Winterthur Swiss Assurance Co v AG (Manchester) Ltd [2006] EWHC 839 (Comm) at [74] (and applied in Berezovsky v Hine [2011] EWCA Civ 1089 to the limited waiver of privilege in draft witness statements). 2 [1996] 2 All ER 836 at 844j–845b. This passage was cited with approval by Sir Stanley Burnton in in E.Surv Ltd v Goldsmith Williams Solicitors [2015] EWCA Civ 1147, [2016] 4 WLR 44 at [34]. In that case the solicitors were held liable for the failure to disclose to the lender information which was not confidential so this issue did not arise. See also Bristol and West Building Society v Mothew [1998] Ch  1 at 20D–G. The duties of confidentiality owed to both parties and the consequences of a conflict are considered in detail in Chapter 6, paras 6.32 to 6.41, above.

14.09 Implied consent is likely to be limited to documents which it would be necessary for client A to disclose to client B if they were separately represented and client B will not be entitled to see or take copies of any other confidential or privileged communications passing between the solicitor and client A.1 In Nationwide Building Society v Various Solicitors (No  3)2 Blackburne J  held that a borrower was entitled to maintain privilege in all confidential communications to or from his or her solicitor even though the solicitor had been authorised to reveal certain information to the lender for the purpose of carrying out the solicitor’s duty to the lender to report on title. He said this:3 ‘The question in each case is whether the communication in question is confidential; and, if it is, what information contained in the communication the borrower has authorised the solicitor to disclose to the lender? The reason why, in the Bowerman case, the solicitor has the borrower’s implied consent to communicate the documents of title to the lender and to hold them, as solicitors for the lender, and not just as solicitors for the borrower, was because deducing title involves showing the person to whom title is to be deduced the very documents of title themselves. The position is different where the implied consent concerns only the provision of information.’4 Each client is, therefore, only entitled to disclosure of documents which would have been received by the solicitor if he or she had been acting exclusively 750

Pre-action disclosure  14.10 for that client. Client A will not be entitled to disclosure of any confidential and privileged documents created in the course of the separate retainer from client B or any working papers which the solicitor has created in the course of that retainer. Moreover, the position ought to be the same whether client A chooses to rely on contractual or equitable rights of ownership or to make an application for pre-action disclosure under CPR r 31.16. To meet this point, many mortgage application forms now contain an express term in which the borrower consents to disclosure of the entire file to the lender and in a number of cases terms of this kind have been held effective.5 1 For the privilege attaching to a solicitor’s file generally see para  14.20, below. For further discussion of specific categories of documents on the file: see para 14.24, below. 2 [1999] PNLR 52 (Blackburne J). 3 [1999]  PNLR  52 at 71G–72D. This passage was approved by Males LJ in Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2020] EWCA Civ 11 at [44] and [66]. In that case solicitors gave a formal confirmation to a bank that they had irrevocable instructions to transfer funds to an escrow agent if an escrow agreement was signed within 30 days. A dispute arose about the scope of their obligations once that period had expired and the bank sought disclosure of the relevant communications between the solicitors and client. The Court of Appeal held that the client had not waived privilege by instructing the solicitors to give the confirmation. The court distinguished Conlon v Conlons Ltd [1952] 2 All ER 462, CA on the grounds that in that case the client had put the instructions in issue in the proceedings: see [61]. 4 The searches and enquiries which the solicitor is required to report under the provisions of the UK  Finance Mortgage Lenders Handbook provide a useful guide to which parts of the file relate to work done for the lender. It should be noted that section 5.3.1 expressly provides that the solicitor has no implied authority to report information or provide documents to the lender where an actual conflict has arisen. It is suggested that this provision assumes that the solicitor will terminate the retainer and cease to act. If the solicitor continues to act, however, it is likely that the court will find that this does not discharge the duty of disclosure: see Chapter 4, para 4.40, above. 5 See Mortgage Express v Sawali [2010]  EWHC  3045 (Ch), [2011]  PNLR  11 (HHJ  Simon Brown QC). The relevant clause read: ‘We irrevocably authorise my/our conveyancer to send their entire file relating to the whole transaction (not just the loan) to you at your request.’ See also The Mortgage Business plc v Oliver & Co [2013] EWHC 3240 (QB) (HHJ Lambert) and Capital Home Loans Ltd v Bennett Griffin LLP [2013] EWHC 2613 (Ch) (Stuart Isaacs QC).

(c)  Joint interest privilege 14.10 Parties will usually rely on joint or common interest privilege as a reason for refusing to give disclosure of documents.1 But joint or common interest privilege may also be relied upon as a ‘sword’ as well as a ‘shield’ and third parties may be entitled to disclosure of privileged documents from a solicitor on the basis that they shared a joint interest with the client.2 This issue often arises where a solicitor has acted for a company or corporate entity and advice is given to the directors or shareholders. In R (Ford) v Financial Services Authority3 Burnett J made it clear that it is not enough for an individual director or shareholder to show that he or she has a personal interest in the advice. It is necessary to demonstrate that all those sharing the privilege and the lawyers concerned knew (or from the objective evidence ought to have known) that the individual shared the legal professional privilege with the others. He held 751

14.10  Disclosure and privilege that it was necessary for an individual director or shareholder to satisfy the following criteria: (1) That the individual communicated with the lawyer for the purpose of seeking advice in an individual capacity. (2) That the individual made clear to the lawyer that he or she was seeking legal advice in an individual capacity rather than only as a representative of a corporate body. (3) That those with whom the joint privilege was claimed knew or ought to have appreciated the legal position. (4) That the lawyer knew or ought to have appreciated that he or she was communicating with the individual in that individual capacity. (5) That the communication with the lawyer was confidential. The categories of joint interest which will give rise to a right to disclosure of privileged documents are not closed.4 But there are a number of factual situations in which joint interest privilege has been held to exist. In particular, it has been held to exist between a company and its shareholders,5 partners in a limited partnership,6 trustees and the beneficiaries of a trust,7 the owner of property and a successor in title,8 assignor and assignee,9 co-venturers,10 a charity and an employee11 and between liquidator and funder.12 It has also been held to exist between insurer and insured13 and to insurer and re-insurer.14 But it is unclear whether these cases give rise to any general principle and the better view may be that the issue depends on the terms of the policy or any other contractual terms agreed between the parties.15   1 In this section and the section on waiver (below) we are concerned only with joint interest privilege rather than common interest privilege which is of wider application: see the classic statement by Lord Denning in Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223 at 243. For further discussion of common interest privilege in the context of litigation (which is outside the scope of the book): see Hollander, Documentary Evidence (13th edn, 2018), Chapter 19.  2 See Winterthur Swiss Assurance Co v AG (Manchester) Ltd [2006]  EWHC  839 (Comm) (Aikens J) at [78] and [79]. For the historical development of joint privilege see DawsonDamer v Taylor Wessing LLP [2020] EWCA Civ 352 at [26]–[38].   3 [2012] EWHC 2583 (Admin), [2012] 1 BCLC 622 at [40]. Hollander, Documentary Evidence (13th edn, 2018) is doubtful about the practical application of this test: see 19–03. But it was followed without comment by Sir Andrew Smith in Accident Exchange Ltd v McLean [2018] EWHC 23 (Comm), [2018] 4 WLR 26 at [76].  4 See Winterthur Swiss Assurance Co v AG (Manchester) Ltd [2006] EWHC 839 (Comm) at [2006] EWHC 839 (Aikens J) at [80].  5 See CAS (Nominees) Ltd v Nottingham Forest plc [2001] 1 All ER 954 (Evans Lombe J) at [19] and Arrow Trading & Investments v Edwardian Group Ltd [2004] EWHC 1319 (Ch), [2005] 1 BCLC 696 (Blackburne J) at [24].  6 See BBGP  Managing General Partner Ltd v Babcock & Brown Global Partners [2010] EWHC 2176 (Ch), [2011] Ch 296 (Norris J).  7 For recent authorities (which summarise the effect of the older authorities): see Lewis v Tamplin [2018] EWHC 777 (Ch) (HHJ Mathews) at [59] and Dawson-Damer v Taylor Wessing LLP [2020] EWCA Civ 352 at [48]–[53] (setting out the English law position as it applies to discretionary trusts). See also Twin Benefits Ltd v Barker [2017]  EWHC  177 (Ch), [2017]

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Pre-action disclosure  14.11 4 WLR 42 (Arnold J) at [31] (where it was conceded that there was joint interest privilege between beneficiaries of the same trust).  8 See Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 (Goff J) and Surface Technology plc v Young [2002] FSR 25 (Pumfrey J). In Leeds v Lemos [2017] EWHC 1825 (Ch), [2018] Ch 81, HHJ Hodge QC declined to follow Re Konigsberg [1989] 1 WLR 1257 (Peter Gibson J) and held that the so-called ‘Crescent Farm principle’ had no application to a trustee in bankruptcy after Shlosberg v Avonwick Holdings Ltd [2016]  EWCA  Civ 1138, [2017] Ch 210.  9 See Winterthur Swiss Assurance Co v AG (Manchester) Ltd [2006]  EWHC  839 (Comm) (Aikens J). 10 See CIA Barka de Panama SA v George Wimpey & Co Ltd [1980] 1 Lloyd’s Rep 598, CA (where the joint interest privilege arose under a buy-out and co-operation agreement). 11 See Winters v Mishcon de Reya [2008] EWHC 2419 (Ch) (Henderson J). 12 See Singla v Stockler Brunton [2012] EWHC 1176 (Ch) (Briggs J) (where the joint interest privilege arose out of the conduct of earlier proceedings). 13 See Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027, CA. 14 See Svenska Handelsbanken v Sun Alliance and London Insurance plc [1995] 2 Lloyd’s Rep 84 (Rix J) and Commercial Union v Mander [1996] 2 Lloyd’s Rep 640 (Moore-Bick J). 15 See Accident Exchange Ltd v McLean [2018]  EWHC  23 (Comm), [2018] 4 WLR  26 (Sir Andrew Smith).

5  Solicitors’ rights of disclosure (a)  The position in the absence of client consent or waiver 14.11 In principle, the duty of confidentiality owed by a solicitor to a client or former client is absolute.1 Where the relevant documents also attract legal professional privilege, the privilege belongs to the client and not the solicitor and it is also absolute.2 It may be overridden by statute3 (and a solicitor’s statutory obligation to comply with notices issued by the SRA is considered in more detail below). But once legal professional privilege has attached to a communication it remains privileged unless and until the privilege is waived or overridden and the privilege does not cease to exist simply because there is no legal person capable of asserting it.4 A solicitor also owes a duty to assert privilege and defend any application for disclosure even if the client has no continuing interest in resisting disclosure and has given no instructions to do so.5 It follows, therefore, that a solicitor may only disclose confidential or privileged communications to third parties where the client or former client has waived privilege. This was confirmed in Quinn Direct Insurance Ltd v Law Society,6 where Sir Andrew Morritt C  emphasised that privilege was a fundamental human right and said:7 ‘I do not accept that an insured solicitor under any form of “claims made” policy is either entitled or bound to disclose to his insurer, either on inception, renewal or notification, confidential and privileged documents or information of the client without the client’s consent. The documents and information are held by the solicitor subject to the right and privilege of the client requiring them to be kept confidential … If the client will not waive his privilege to enable a 753

14.12  Disclosure and privilege proper notification to be made by the solicitor either before inception or during the currency of the policy then the solicitor will no doubt so inform the qualifying insurer. The solicitor is not entitled to ignore the client’s privilege.’ It is important to understand the implications of the decision in Quinn. Solicitors or firms may not disclose confidential or privileged information to their own insurers or to their own solicitors (or to solicitors appointed by their insurers) even for the purpose of taking their own advice unless there is an express term in their standard terms or conditions or they obtain the consent of the client or there is a waiver of privilege. This problem is particularly acute where a claim is made by a third party and the client is unwilling to permit disclosure or just cannot be found. The solicitor will have to resist disclosure unless or until the court makes an order for disclosure (eg on iniquity grounds). 1 See Chapter 6, para 6.12, above. For discussion of the relationship between confidentiality and privilege see paras 6.02 to 6.04, above. 2 In Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49, (2002) 213 CLR 543 at [9] (Gleeson CJ, Gaudron, Gummow and Hayne JJ), the High Court of Australia treated legal professional privilege as a substantive right. In Three Rivers DC v Bank of England (No 6) [2004] UKHL 48, [2005] 1 AC 610 at [25] and [26] Lord Scott rejected this analysis but confirmed the absolute nature of privilege. 3 See R  (on the application of Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2002] UKHL 21, [2003] 1 AC 563. 4 See Addlesee v Dentons Europe LLP  [2019]  EWCA  Civ 1600, [2019] 3  WLR  1255, [2020] PNLR 4 where the Court of Appeal held that privilege did not cease to exist because of the dissolution of the client company and the disclaimer by the Crown of any interest in the company’s documents did not amount to a waiver. The decision related to legal advice privilege. In a subsequent decision, Addlesee v Dentons Europe LLP [2020] EWHC 238 (Ch), Master Clark ordered disclosure under the fraud or iniquity exception: see paras 14.26 and 14.27, below. 5 See Nationwide BS  v Various Solicitors (No  3) [1999]  PNLR  52 (Blackburne J) at 69B–C: ‘I  take the view that whether or not the client has any recognisable interest in continuing to assert privilege in the confidential communications, the privilege is absolute in nature and the lawyer’s mouth is “shut for ever”. I further agree with Mr Davidson that it follows from this that it is the lawyer’s duty to claim the privilege on behalf of the client, or former client, whose privilege it is, at any rate where it is at least arguable that the privilege exists.’ This statement was approved by Lewison LJ in Addlesee v Dentons Europe LLP  [2019]  EWCA  Civ 1600, [2019] 3 WLR 1255, [2020] PNLR 4 (above) at [59]. For a recent application of the principle (decided before Addlesee) see Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2019] EWHC 3 (Comm) (Moulder J) at [20]–[22]. 6 [2010] EWCA Civ 805, [2011] 1 WLR 308 referred to in paras 6.04 and 6.53, above. 7 At [23].

14.12 The absolute nature of the duty of confidentiality and to respect or preserve privilege also presents difficulties for solicitors dealing with their regulator. Both the SRA  Codes of Conduct 2019 impose duties of confidentiality.1 They also impose obligations upon the individual and the firm to disclose information and misconduct to the regulator.2 In the absence of any term of the retainer to the contrary, both solicitors and firms will be unable to comply with their disclosure obligations if this involves revealing confidential or privileged material. The decision of the Court of Appeal in Quinn provides 754

Pre-action disclosure  14.12 clear authority for the proposition that there are no exceptions to the duty of confidentiality even if it would be reasonable to expect a solicitor to report information to insurers or the regulator. For this reason, it is also important that a firm’s standard terms and conditions should expressly permit both the firm and the individual to comply with its disclosure obligations to the regulator and to notify insurers of potential claims and to comply with any requests by insurers for information. In the absence of express terms to this effect, a solicitor or firm will only be entitled to disclose information to the SRA under compulsion and to insurers and their advisers where there has been an express or implied waiver of privilege. Section 44B of the Solicitors Act 1974 (which is considered in detail in Chapter 163) confers a statutory power upon the SRA to issue a notice requiring a solicitor to provide information or documents.4 It is our view that such a notice may override the duty to preserve legal professional privilege.5 The SRA may also serve a notice under s 44BA requiring a solicitor to attend for interview.6 By parity of reasoning a notice under s 44BA should also override privilege. Unless a firm’s standard terms permit disclosure or the client consents, therefore, a solicitor may not disclose confidential or privileged information to the SRA except in response to a s  44B or s  44BA notice. In practice, solicitors and firms will have to make an anonymised disclosure and engage early with the SRA in order to provide sufficient information to enable the regulator to decide whether to serve a statutory notice. 1 See the SRA Code of Conduct for Individuals 2019, para 6.3 and the SRA Code of Conduct for Firms, para 6.1: ‘You keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents.’ O(4.1) was in similar terms. 2 See the SRA Code of Conduct for Individuals 2019, para 7.4: ‘You respond promptly to the SRA and: (a) provide full and accurate explanations, information and documents in response to any request or requirement; and (b) ensure that relevant information which is held by you, or by third parties carrying out functions on your behalf which are critical to the delivery of your legal services, is available for inspection by the SRA. See also the SRA Code of Conduct for Firms, paras 3.9 and 3.10: ‘3.9 You report promptly to the SRA or another approved regulator, as appropriate any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (including you). If requested to do so by the SRA, you investigate whether there have been any serious breaches that should be reported to the SRA. 3.10 Notwithstanding paragraph 3.9, you inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.’ Compare O(10.4) of the SRA Code of Conduct 2011: ‘O(10.4) you report to the SRA promptly, serious misconduct by any person or firm authorised by the SRA, or any employee, manager or owner of any such firm (taking into account where necessary your duty of confidentiality to your client)’. We also consider in Chapter 6 recent guidance on the circumstances which would justify such a disclosure. 3 See Chapter 16, paras 16.28 to 16.30, below. 4 ‘(1) The Society may by notice require a person to whom this section applies– (a) to provide information, or information of a description, specified in the notice, or (b) produce documents, or documents of a description, specified in the notice.’ 5 See para 16.30. There is no authority on s 44B itself but in Parry-Jones v the Law Society [1969] 1 Ch 1, the Court of Appeal held that a notice under r 11 of the Solicitors’ Account Rules 1945 overrode privilege. For many years the basis for that decision remained controversial. However, Sports Direct International Plc v Financial Reporting Council [2020]  EWCA  Civ 177 (a

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14.13  Disclosure and privilege decision on the Statutory Auditors and Third Country Auditors Regulations 2016 (SI 2016/649)) has now resolved this argument. For further discussion see paras 16.28 to 16.30, below. 6 ‘(1) The Society may, by notice, require a person to whom a notice is given under section 44B (or a representative of the person) to attend at a time and place specified in the notice to provide an explanation of any information provided or document produced pursuant to the notice.’ This provision is also considered in detail in Chapter 16: see para 16.26, below.

(b)  When does the client waive privilege? 14.13 Waiver of privilege is considered in detail in paras 14.31–14.39, below, but the discussion of the scope of waiver is also relevant to the extent to which the solicitor is released from the duty of confidentiality by any pre-action waiver (and, in particular, whether there has been a waiver of privilege in relation to other files or transactions). There is no authority that addresses the date at which any implied waiver of privilege becomes effective.1 But it is suggested that, unless the issue is governed by an express contractual term in the client care letter, the earliest point at which a waiver can be said to have taken place is the service of a Preliminary Notice under the Professional Negligence Preaction Protocol.2 The protocol requires the claimant to adopt a ‘cards on the table’ approach and invites the solicitor to give notice of the claim to his or her insurers. It can be plausibly argued that this amounts to an implied waiver.3 There is no authority to this effect. But bearing in mind Quinn, it is difficult to see any justification for the view that a solicitor may disclose the contents of his or her file to third parties (including insurers and advisers) where the client has not given notice of a claim.4 For instance, if a solicitor advises a client to take independent advice on the grounds that the client may have a potential claim against the solicitor, it is suggested that the solicitor is not entitled to disclose confidential information or privileged communications to his or her insurers in notifying the circumstances of the claim unless the client gives notice of a claim under the protocol.5 The right to disclose this information must, therefore, be the subject of express agreement with the client (or any new solicitors).6 Given that third parties may apply for disclosure under CPR Part 57 it is suggested that the latest point at which an implied waiver could take place must be when the defendant files an acknowledgement of service.8 1 The difficulty with the formulation of the principle of implied waiver by Lord Bingham MR in Paragon Finance plc v Freshfields [1999] 1 WLR 1183 at 188D–F (see para 14.34, below) is that its justification is based on a voluntary decision to expose the relationship between the solicitor and the client to public scrutiny in court proceedings. This would tend to suggest that any waiver takes place when proceedings are taken and a claim form is formally issued and served on the solicitors. Compare the formulation of the principle in NRG Holding NV v Bacon & Woodrow [1995] 1 All ER 976 at 986c–f (see para 14.32, below) where Colman J spoke of the client ‘asserting that the solicitor has acted in breach of duty’. However, more recently Gloster LJ adopted the Paragon v Freshfields formulation in Eurasian Natural Resources Corp Ltd v Dechert LLP [2016] EWCA Civ 375, [2016] 1 WLR 5027 at [54]. 2 See section 5.1 ( ‘Preliminary Notice’), the Supreme Court Practice (2020 edn) Vol 1 at C7–005: ‘B1.1 As soon as the claimant decides there is a reasonable chance that he will bring a claim against a professional, the claimant is encouraged to notify the professional in writing. 5.2 This letter (the “Preliminary Notice”) should contain the following information: (a) the identity of the claimant and any other parties (b) a brief outline of the claimant’s grievance against the

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Pre-action disclosure  14.14 professional (c) if possible, a general indication of the financial value of the potential claim. 5.3 This letter should be addressed to the professional and should ask the professional to inform his professional indemnity insurers, if any, immediately.’ 3 The Protocol appears to assume that this will amount to a waiver of privilege: see, in particular section 12 ( ‘Alternative Dispute Resolution’) which states that court proceedings should be a last resort and identifies mediation, arbitration, early neutral valuation, adjudication and Ombudsmen schemes. But unless there has been an express or implied waiver of privilege, none of these methods will work. 4 In Hakendorff v Countess of Rosenborg [2004]  EWHC  2821 (QB) Tugendhat J  held that a solicitor was entitled to rely on privileged documents in a claim against her former client for the recovery of fees and an application for a freezing injunction. The judge gave a number of reasons for reaching this conclusion. But one of them was that the principle of implied waiver extended to claims of this kind: see [81]. It is suggested that this is very doubtful authority for the proposition that a solicitor may deploy confidential or privileged documents in advance of notice of a claim, at least if the client is challenging the solicitor’s entitlement to be paid. 5 For notification of circumstances under the Minimum Terms and Conditions of Professional Indemnity Insurance see Chapter 17, paras 17.08 to 17.12 (and, especially, para 17.11), below. 6 It is suggested that consent to disclosure should be sought as a matter of course when the solicitor advises the client to seek independent advice. 7 CPR r 5.4C(1) provides: ‘The general rule is that a person who is not a party to proceedings may obtain from the court records a copy of– (a) a statement of case, but not any documents filed with or attached to the statement of case, or intended by the party whose statement it is to be served with it; (b) a judgment or order given or made in public (whether made at a hearing or without a hearing), subject to paragraph (1B).’ Rule 5.4C(2) also enables a non-party to obtain copies of documents filed with a statement of case (with the court’s permission). 8 CPR r 5.4C(3) provides: ‘A non-party may obtain a copy of a statement of case or judgment or order under paragraph (1) only if– (a) where there is one defendant, the defendant has filed an acknowledgment of service or a defence; (b) where there is more than one defendant, either– (i) all the defendants have filed an acknowledgment of service or a defence; (ii) at least one defendant has filed an acknowledgment of service or a defence and the court gives permission; (c) the claim has been listed for a hearing; or (d) judgment has been entered in the claim.’ There is also an inherent jurisdiction to allow non-parties to inspect witness statements, experts’ reports, documents in relation to which confidentiality has been lost, skeleton arguments, written submissions read by the court (provided that there was an effective hearing at which they were deployed) and any specific documents which it is necessary for a party to inspect in order to meet the principle of open justice: see Cape Intermediate Holdings Ltd v Dring [2018] EWCA Civ 1795, [2019] 1 WLR 479 and [2019] UKSC 38, [2019] 3 WLR 429.

(c)  What is the scope of the waiver? 14.14 It is also necessary to consider whether any waiver either at the preaction stage or by the issue of proceedings is limited or complete, that is to say, whether the client has waived confidentiality in the documents either for a limited purpose or for all purposes. This may be particularly relevant where there are other potential parties such as accountants or barristers. The general principle is that a client may waive privilege for a limited purpose.1 There is no clear authority on the question whether the issue of proceedings amounts to a waiver for all purposes. But in Eurasian Natural Resources Corp Ltd v Dechert LLP2 Gloster LJ suggested that the waiver is limited to the claim against the solicitors and could not be deployed in other proceedings (even between the same parties). However, it was not necessary for the Court of Appeal to decide this question generally because the case concerned detailed 757

14.15  Disclosure and privilege assessment proceedings and there was an existing line of authority for the proposition that a waiver for the purposes of a costs assessment is limited only. The court followed that line of authority and held that a waiver for detailed assessment proceedings was limited, temporary and extended only to the opposing party and the judge. The court also held that it had been proper to order the proceedings to take place in private under CPR r 39.2(3).3 At the preaction stage, the scope of the waiver is likely to be even more limited. Where there is an express or implied agreement that the waiver is limited to specific parties or individuals, the court will give effect to that agreement.4 Where there is no express agreement, it is suggested that any pre-action waiver will be limited to a solicitor’s insurers and any solicitors instructed by the solicitor or insurers unless the client has expressly authorised disclosure to third parties. The critical point is that a waiver of privilege is implied because it is necessary to enable solicitors to defend themselves and that no waiver should be implied beyond what is necessary to give effect to that purpose. 1 See B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736 at [66]–[71] (Lord Millett). The passage was cited in full and applied by the CA in Eurasian Natural Resources Corp Ltd v Dechert LLP [2016] EWCA Civ 375, [2016] 1 WLR 5027 at [48] and [49]. 2 See [56] and [57]. She relied on the decision of Lindsay J in National Westminster Bank plc v Bonas [2003] EWHC 1821 (Ch). 3 For the detailed reasons see [49]–[57]. 4 For the general principles see USP  Strategies plc v London General Holdings Ltd [2004] EWHC 373 (Ch) (Mann J) at [21] citing Gotha City v Sotheby’s [1998] 1 WLR 114; Berezovsky v Hine [2011] EWCA Civ 1089 at [28]–[30] (Lord Neuberger MR); and FM Capital Partners Ltd v Marino [2017]  EWHC  3700 (Comm) (Leggatt J) at [10]: ‘The principle that I  derive from those cases is that, if a privileged document is provided by A  to B, the mere provision of that document, as is perhaps obvious, does not necessarily amount to a waiver of privilege. The extent to which there is any such waiver depends on to what extent there is an express or implied restriction on subsequent use of the document.’

(d)  Who can waive? 14.15 One added difficulty which may also arise at the pre-action disclosure stage is presented where a potential claim is notified by one of two parties for whom the solicitor has acted under a joint retainer or a third party who was not the client but closely connected with the client. The obvious examples are where a shareholder or beneficiary asserts a claim against a solicitor but not the company or the trustees or the estate. If there was a joint retainer under which the solicitor acted for both a shareholder and a company or for both trustees and beneficiaries, neither client can assert privilege against each other. But equally neither client can waive privilege without the consent of the other.1 Again, although parties may be entitled to the disclosure of documents where there is joint interest privilege,2 they may not be entitled to waive privilege without the consent of all of the other parties with whom it is shared. In Winterthur Swiss Insurance Co v AG (Manchester) Ltd3 Aikens J held that an assignee of a claim was entitled to waive privilege on the basis of a contractual term which imposed an obligation on the assignor ‘to do all such things as may be necessary or required by the Company for the purpose of enforcing any rights and remedies’. But in 758

Standard disclosure  14.16 Accident Exchange Ltd v McLean4 Sir Andrew Smith distinguished Winterthur on the basis that the rental hire agreements which he was considering did not contain any similar wording and that there was no general principle that one privilege holder can waive common or joint interest privilege alone. Executors and trustees may waive privilege and although one executor may waive privilege on behalf of the estate, trustees may only act unanimously.5 However, a trustee in bankruptcy has no power to waive privilege because the bankrupt’s right to assert privilege is not vested in the trustee under the Insolvency Act 1986.6 Finally, if the solicitor mistakenly hands over the entire file to one client at the expense of another or to a third party or permits copies to be made, the solicitor cannot recover the documents without the authority of the client whose privilege it is, whatever liability the solicitor may incur for breach of confidence.7 This is not because there has been a waiver of privilege or confidentiality but because only the client and not the solicitor has a right of action to recover them. 1 See the passage from the judgment of Rix J  in The Sagheera [1997] 1 Lloyd’s Rep 160 at 165–166 quoted in para 14.06, above. 2 See para 14.10, above. 3 [2006] EWHC 839 (Comm) at [136]: ‘In my view, that wording gives NIG the right to require the TAG Claimant to waive any privilege that it may have in documents if that is necessary or required by NIG for the purpose of enforcing claims against third parties if it is entitled to bring such claims upon paying an indemnity under the policy.’ 4 [2018]  EWHC  23 (Comm), [2018] 4 WLR  26 at [88]–[96]. He rejected an argument based on US and Australian authorities that one privilege holder could waive joint or common interest privilege alone. For possibly the only example in which the court has restrained one joint interest holder from waiving privilege: see GE Capital Commercial Finance Ltd v Sutton [2004] EWCA Civ 315, [2004] BCLC 662 (explained by Sir Terence Etherton MR in Shlosberg v Avonwick Holdings Ltd [2016] EWCA Civ 1138, [2017] Ch 210 at [81]). In that case privilege was asserted by a shareholder against whom a debenture holder had brought a claim under a guarantee and the court restrained the debenture holders from using documents which had been handed to them by administrative receivers. Chadwick LJ accepted that the shareholder would have been entitled to restrain the use of privileged documents if he had made out a case for joint interest privilege (or common interest privilege as it was described): see [58]. However, the primary basis of the decision was that the company had not lost its privilege (because the receivers had not acted within their powers): see [43]. 5 See Re Molloy [1997] 2 Cr App Rep 283, CA (executors) and Birdseye v Roythorne & Co [2015] EWHC 1003 (Ch), [2015] WTLR 961 at [27]–[38] (executors) where Newey J explained the difference between executors and trustees. The case also illustrates the difficulty which beneficiaries who have a claim under the beneficiary principle (see Chapter 11) may have in obtaining access to the solicitor’s file. 6 See Shlosberg v Avonwick Holdings Ltd [2016]  EWCA  Civ 1138, [2017] Ch  210 at [80] (overruling Re Cook [1999] BPIR 881 (Stanley Burnton QC) which was cited in earlier editions of this book as authority for the proposition that a trustee in bankruptcy could waive privilege). 7 Nationwide v Various Solicitors (No 2) (1998) Times, 1 May (Blackburne J).

B  STANDARD DISCLOSURE 1 Introduction 14.16 CPR Part 31 governs disclosure in civil proceedings. However, since 1  January 2019 Practice Direction 51U which contains a disclosure pilot 759

14.17  Disclosure and privilege scheme has applied to all claims issued in the Business and Property Courts in England and Wales and will apply to most claims involving solicitors. The Practice Direction imposes continuing ‘Disclosure Duties’ upon both parties and their legal representatives in relation to the preservation and disclosure of documents.1 The pilot scheme dispenses with standard disclosure and requires a party to give ‘initial disclosure’ of ‘key documents’2 when serving their statements of case but permits a party to request ‘extended disclosure’.3 Where a party requests extended disclosure, the pilot scheme also requires the parties to discuss and agree a ‘list of issues for disclosure’.4 In many cases the solicitor’s file will provide most of the key documents on which the parties rely and the other relevant documents which explain the case which they have to meet. In other cases where the claimant is an institution, each party will have a file and the forensic inquiry will be limited to an analysis of the two files. The most difficult disclosure issues in solicitors’ claims usually arise where the defendant has acted for the claimant on other transactions or for a third party whose conduct is central to the claim. The issues that most commonly arise are, first, whether the conduct of other transactions is sufficiently relevant to the issue between the parties to justify disclosure; secondly, the extent to which the documents relevant to the transaction in question or other transactions are privileged; thirdly, whether the claimant may rely on the fraud or crime exception to obtain an order for production of privileged documents; and, fourthly, whether the claimant may be taken to have waived privilege in relation to other transactions in which the defendant or other solicitors acted on his or her behalf, or in relation to the conduct of counsel in the instant case. 1 See PD51U, §3. For a general discussion of the approach which the court is likely to take to disclosure applications under the pilot scheme: see UTB LLC  v Sheffield United Ltd [2019] EWHC 914 (Ch) (Sir Geoffrey Vos C), [2019] 3 All ER 698 at [75]–[86] and [110]–[112] and McParland & Partners Ltd v Whitehead [2020] EWHC 298 (Ch) (Sir Geoffrey Vos C). 2 See PD51U, §5. 3 See PD51U, §6 which offers a choice of models. See PD51U, §8. 4 See PD51U, §3.

2  Relevance of other transactions 14.17 In civil cases the court will not order disclosure of documents which go solely to credit and more often than not evidence of what occurred on other occasions goes purely to the credibility of the evidence of one or other of the parties about the facts in issue. If one party’s behaviour on another occasion was wholly inconsistent with the account which he or she now gives, this earlier behaviour will cast doubt on his or her credibility. The policy of the law is to limit the forensic inquiry to evidence which is logically probative of the facts in issue and, unless the evidence is compelling, to exclude more prejudicial material. In Thorpe v Chief Constable of Greater Manchester Police1 the court refused to order disclosure of documents relating to earlier convictions or disciplinary findings against two police officers who were the subject of a claim 760

Standard disclosure  14.18 for damages for assault and false imprisonment. It was held that evidence of this kind would be likely to be directed solely to cross-examination as to credit. 1 [1989] 1 WLR 665, CA. For a recent application of the principle see Tesco Stores Ltd v Office of Fair Trading [2012] CAT 6 (Lord Carlile of Berriew QC) at [31].

14.18 On the other hand, evidence of other, similar, transactions will be admitted in civil cases, as in criminal cases, if that evidence does not go solely to credit but is probative of the facts in issue. In O’Brien v Chief Constable of South Wales Police1 Lord Phillips laid down a simple test for admissibility and a wider discretion in deciding whether to admit similar fact evidence. Similar fact evidence is admissible if it is potentially probative of a fact in issue.2 However, at the second stage the court should consider a range of factors in deciding whether to admit such evidence: ‘I would simply apply the test of relevance as the test of admissibility of similar fact evidence in a civil suit. Such evidence is admissible if it is potentially probative of an issue in the action. This is not to say that the policy considerations that have given rise to the complex rules of criminal evidence that are now to be found in ss 100 to 106 of the 2003 Act have no part to play in the conduct of civil litigation. They are policy considerations which the judge who has the management of the litigation will wish to keep well in mind. CPR  1.2 requires the court to give effect to the overriding objective of dealing with cases justly. This includes dealing with the case in a way which is proportionate to what is involved in the case, and in a manner which is expeditious and fair. CPR 1.4 requires the court actively to manage the case in order to further the overriding objective. CPR 32.1 gives the court the power to control the evidence. This power expressly enables the court to exclude evidence that would otherwise be admissible and to limit cross-examination … Evidence of impropriety which reflects adversely on the character of a party may risk causing prejudice that is disproportionate to its relevance, particularly where the trial is taking place before a jury. In such a case the judge will be astute to see that the probative cogency of the evidence justifies this risk of prejudice in the interests of a fair trial. Equally, when considering whether to admit evidence, or permit cross-examination, on matters that are collateral to the central issues, the judge will have regard to the need for proportionality and expedition. He will consider whether the evidence in question is likely to be relatively uncontroversial, or whether its admission is likely to create side issues which will unbalance the trial and make it harder to see the wood from the trees.’3 There is no rule or principle that claimants who wish to rely on evidence of other transactions as similar fact evidence should plead those facts in their statements of case. But it is obviously in their interests to do so and any application for disclosure of files is likely to stand a greater prospect of success 761

14.19  Disclosure and privilege if this exercise has been undertaken and the court can test the relevance of the similar facts by reference to the applicant’s pleaded case.4 Likewise, if the claimant has pleaded similar facts, the defendant should consider whether to challenge this at the earliest opportunity. The court has a discretion to exclude similar fact evidence at an interim stage and in plain and obvious cases the relevant parts of the statement of case can be struck out pursuant to CPR r 3.4(2) or the inherent jurisdiction. In JP  Morgan Chase Bank v Springwell Navigation Corpn5 the Court of Appeal struck out allegations of similar fact evidence on the basis that the transaction which was the subject matter of the litigation was well documented and that the similar facts were likely to be heavily disputed.6 The same principles should also apply to defendants who wish to rely on similar fact evidence, subject to one qualification. If the similar fact evidence on which a solicitor wishes to rely is his or her conduct of other transactions on behalf of the claimant, the solicitor will not be able to plead or rely on this evidence unless the court is satisfied that there has been an express or implied waiver of privilege. If the claimant refuses to provide an express waiver, the defendant must apply to the court for specific disclosure under CPR r 31.12 before pleading the similar facts. 1 [2005] UKHL 26, [2005] 2 AC 536 at [53]–[55]. Compare the traditional test applied by Lord Denning MR in Mood Music Publishing Co Ltd v De Wolfe Publishing Ltd [1976] Ch  119 at 127. 2 It is unnecessary to establish that similar fact evidence is logically probative of a fact in issue without recourse to other evidence. Similar fact evidence is logically probative of a fact in issue if, when taken with that evidence, it renders the fact in issue more likely: see JP Morgan Chase Bank v Springwell Navigation Corpn [2005] EWCA Civ 1602 at [70]–[73] (Brooke LJ). 3 See also the guidance given by Lord Bingham at [6]. 4 See, for instance, Cheshire Building Society v Dunlop Haywards (DHL) Ltd [2007] EWHC 403 (QB) (Tugendhat J) where the failure to plead the relevant allegations appears to have been decisive. The application was one for pre-action disclosure and it also involved allegations of fraud. 5 [2005] EWCA Civ 1602 at [76]–[82] (Brooke LJ) where the evidence was excluded because the transaction in issue was an orthodox one and heavily documented and the evidence of other transactions threatened to overburden what was already likely to be a long trial. 6 For examples see Silversafe Ltd v Hood [2006] EWHC 1849 (Ch) at [37] (where Peter Smith J permitted the claimant to amend to rely on a number of other instances of alleged VAT fraud: see [37]) and Signia Wealth Ltd v Vector Trustees Ltd [2018] EWHC 1774 (Ch) (where Chief Master Marsh admitted the evidence at a case management hearing but Marcus Smith J  did not consider it to be of any probative value at trial: see [462]–[502]). For a similar case before the introduction of the CPR see Bradford & Bingley Building Society v Boyce Evans Shepherd [1998] PNLR 250 (Neuberger J) at 255F–256A (upheld on this point by the Court of Appeal (6 July 1998, unreported)).

14.19 Evidence of other transactions may also relate to other claims brought by the claimant against the defendant. In Maes Finance Ltd v Leftleys,1 a lender’s claim against solicitors, the judge gave leave for a number of actions against the defendants involving allegations of negligence and breach of fiduciary duty in relation to a number of transactions to be tried together on the grounds that the evidence in each action would be relevant evidence in the other claims. Evidence of other transactions may also be directly relevant to questions of causation and reliance even if there is no striking similarity. 762

Standard disclosure  14.20 In Lillicrap v Nalder & Son2 the defendant admitted negligence for failing to advise his clients of the existence of a right of way over land which they later purchased but argued that they would have proceeded with the transaction even if properly advised. The court held that evidence of their conduct in six other transactions in which the defendants had acted for them was directly relevant to the defendants’ defence. Dillon LJ stated:3 ‘I  do not regard this as a strict case of similar fact evidence. It is merely a question of trying the issue in civil proceedings of whether, on the balance of probabilities, the plaintiffs would or would not have resiled from the transaction, or taken some other course other than they did, if they had been properly advised about the rights of way, the presence of one and the absence of another.’ The court did, however, reserve the right of the trial judge to exclude the evidence on grounds of prejudice in the exercise of his discretion. At the interim stage, however, the defendants were entitled to plead the transactions and obtain disclosure of the relevant documents. The critical point here is that evidence of other transactions may not only be relevant to the hypothetical question whether the client would have withdrawn from the transaction if properly advised but may also be the most cogent evidence by which the court can assess the answer. Even so, the court will not admit evidence of all other transactions. In Lillicrap v Nalder & Son the six transactions had all taken place prior to the transaction which was the subject matter of the claim. In Nyckeln Finance Ltd v Edward Symmons & Partners4 by contrast the court ordered disclosure of one transaction which had taken place prior to the transaction in question on the ground that it was relevant to reliance and contributory negligence but refused to order disclosure of a number of transactions which post-dated the transaction which was in issue in the action. They threw no light on the state of mind of the client’s officers at the relevant time. 1 [1998] PNLR 193 (Jacob J). Upheld on appeal (1998) Times, 13 November, CA. 2 [1993] 1 WLR 94, CA. Dillon LJ delivered the leading judgment in both this case and Thorpe. 3 [1993] 1 WLR 94 at 100F–H. 4 [1996] PNLR 245, CA.

3  Legal advice privilege 14.20 In most cases involving claims against solicitors no issues of privilege will arise over the contents of a solicitor’s file because the assertion of the claim will involve a waiver by the client of both legal professional privilege and the solicitor’s duty of confidentiality in relation to the relevant transaction. The assessment of what documents on the file are privileged from production usually arises, therefore, in cases where a third party brings a claim against a solicitor, in lenders’ claims where the solicitor has acted under a dual retainer, or where an application for third party disclosure is made against the solicitor under CPR r 31.17. A detailed discussion of the recent developments in the law 763

14.20  Disclosure and privilege of legal professional privilege and, in particular, litigation privilege is outside the scope of this book.1 However, what can be attempted is a brief discussion of the principles which should be applied in determining which documents are privileged on a transaction file (which is likely to form the subject matter of a solicitor’s claim). The traditional view is that almost all communications passing between a solicitor and his or her client are privileged. In Balabel v Air-India2 disclosure was sought of all communications between the defendant and its solicitors (apart from those seeking or giving legal advice), drafts and working papers, attendance notes and memoranda of the defendant’s solicitors and internal communications of the defendant. The Court of Appeal refused to order disclosure of any of these categories of documents. Taylor LJ gave the following guidance about the scope of the privilege:3 ‘[T]he test is whether the communication or other document was made confidentially for the purpose of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client. The negotiations for a lease such as occurred in the present case are only one example. Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A  letter from the client may end with such words as “please advise me what I should do.” But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context. It may be that applying this test to any series of communications might isolate occasional letters or notes which could not be said to enjoy privilege. But to be disclosable such documents must be not only privilege-free but also material and relevant. Usually a letter which does no more than acknowledge receipt of a document or suggest a date for a meeting will be irrelevant or non-disclosable. In effect, therefore, the “purpose of legal advice test” will result in most communications between solicitor and client in, for example, a conveyancing transaction being exempt from disclosure, either because they are privileged or because they are immaterial or irrelevant.’ In practical terms, therefore, Balabel was treated as providing a rule of thumb that apart from certain well settled categories of document a party was not 764

Standard disclosure  14.20 required to disclose any communications between solicitor and client (either because they were part of the ‘continuum’ of communications or because they were unlikely to be of any relevance at all if they were not). Blackburne J applied the dicta of Taylor LJ in Nationwide v Various Solicitors (No 3):4 ‘I take the decision of the Court of Appeal in that case to mean that in an ordinary conveyancing transaction communications passing between the solicitor instructed in the matter and the client, being confidential communications made in connection with the matter, will be privileged if, although advice is not specifically sought or given in relation to any particular communication, the communication is made with the view, albeit unspoken, to legal advice being given if appropriate; or, as Peter Gibson J tersely put it in Re Konigsberg (a bankrupt) [1989] 1 WLR 1257, 1263:5 “Privilege attaches where information is passed by the solicitor or client to the other in the course of keeping each other informed so that advice may be sought and given as required.” ’

Applying this test he found that the following classes of document were privileged as part of the ‘continuum’ of communications: (a) letters passing between solicitor and client (although the letters from the client contained no express request for advice and all but one of the letters from the solicitor contained no formal advice); (b) letters passing between the client’s agent and the client sent to the solicitor by the client for his information; and (c) completion statements and their earlier drafts.6 1 For definitions of legal advice privilege and litigation privilege and their basic parameters: see Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2018] EWCA Civ 2006, [2019] 1 WLR 791 at [61]–[66] (Sir Brian Leveson PQBD). Although these definitions differ, it should be borne in mind that legal professional privilege is a ‘single integral privilege’: see WH Holdings Ltd v E20 Stadium LLP [2018] EWCA Civ 2652 at [10] (Sir Terence Etherton MR). 2 [1988] Ch 317, CA. 3 [1988] Ch 317 at 330D–331A. This passage was approved by the House of Lords in Three Rivers District Council v Bank of England (No 6) [2004] UKHL 48, [2005] 1 AC 610 at [38] (Lord Scott), [58]–[60] (Lord Rodger), [62] (Lady Hale) and [111] (Lord Carswell) and followed by the Court of Appeal in Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd (above) at [65] (Sir Brian Leveson PQBD) and Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2020] EWCA Civ 11 at [35] and [36]. Males LJ also provided this useful gloss at [37]: ‘For present purposes, the cases emphasise that in order for a communication to attract legal advice privilege, two conditions must be satisfied. First, the communication between solicitor and client must be confidential. Second, the communication must be “for the purpose of legal advice” (or, which is the same thing, it must occur in a “relevant legal context”). However, if these two conditions are satisfied, communications between solicitor and client will be privileged notwithstanding that some of them may not themselves be concerned either to seek or to provide legal advice.’ 4 [1999] PNLR 52 (Blackburne J). 5 In Leeds v Lemos [2017] EWHC 1825 (Ch), [2018] Ch 81 HHJ Hodge QC declined to follow Re Konigsberg on the question whether the right to claim privilege vested in a bankrupt’s trustee in bankruptcy: see para 14.10, above. The quotation set out above was not challenged. 6 For further discussion in relation to individual classes of documents see para 14.24, below.

765

14.21  Disclosure and privilege 14.21 Both Balabel and Nationwide involved conveyancing files. NRG  Holding NV  v Bacon & Woodrow1 provides a good example of the scope of legal advice privilege outside the conveyancing context. The claim concerned due diligence work done by actuaries and accountants for NRG in relation to the sale of a number of insurance companies. In the course of the action a bill was disclosed containing a description of the work undertaken by NRG’s solicitors. It was conceded that there was no privilege in documents written or copied by the solicitors to NRG’s other advisers (including the actuaries and accountants), notes of meetings with the non-legal team (save to the extent that those notes contained advice in addition to what was said at the meeting) or notes of meetings with the vendors (save to the extent that they contained the views of the solicitors on what had passed).2 But the accountants also sought production of the legal advice given by the solicitors and NRG’s foreign lawyers on two grounds: first, that the advice was commercial and not legal and, secondly, because it was not confidential or privileged. The judge rejected both submissions. He said this:3 ‘As Taylor LJ observed, a solicitor’s professional duty or function is frequently not exclusively related to the giving of advice on matters of law or, in the context of this kind of case, on drafting or construction of documents. It not infrequently relates to the commercial wisdom of entering into a given transaction in relation to which legal advice is also sought.’ He also rejected4 the second submission on the ground that it was implicit in the retainer of the solicitors that they had the authority to disclose the legal advice which they had given to their client to the other advisers in the team to the extent that they thought necessary. But this did not mean that they owed no duty of confidentiality to their client. Far less did it mean that there was no duty of confidentiality in relation to the advice which the solicitors had given to the client and which had not been disclosed to the rest of the team. 1 [1995] 1 All ER 976 (Colman J). 2 [1995] 1 All ER 976 at 981h–j. 3 [1995] 1 All ER 976 at 983j. 4 [1995] 1 All ER 976 at 984b–f.

14.22 The decision of the Court of Appeal in Balabel proceeded on the basis that a wide view should be taken of what is considered to be legal advice in the context of a standard conveyancing transaction.1 In Three Rivers DC v Bank of England (No  6)2 this view was accepted. However, in that case the claimants sought to argue that legal advice privilege should be limited to those cases in which the purpose of the lawyer/client relationship was obtaining advice and assistance in relation to the client’s legal rights and obligations (as was the case in Balabel).3 The House of Lords rejected this argument.4 In the course of their speeches the members of the House of Lords expressed the view that, provided there was a relevant ‘legal context’, legal advice privilege should extend to all communications between solicitor and client relating to 766

Standard disclosure  14.23 the relevant transaction. Lord Carswell (with whom the other members of the House agreed5) stated this:6 ‘I  agree with the view expressed by Colman J  in Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (a firm) [1995] 1 All ER 976 at 982 that the statement of the law in Balabel v Air India does not disturb or modify the principle affirmed in Minter v Priest, that all communications between a solicitor and his client relating to a transaction in which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client.’ In the normal case, therefore, the practical guidance given in the authorities before Three Rivers (No 6) in relation to the contents of a solicitor’s transaction file should continue to be followed.7 However, care should still be taken to establish that the relationship between lawyer and client was a legal one and not a business or commercial one.8 1 See, for example, R  v Manchester Crown Court, ex p Rogers [1999] 1  WLR  832, CA at 839C–D (Lord Bingham of Cornhill MR): ‘It is in my judgment important to remind oneself of the well-established purpose of legal professional privilege, which is to enable a client to make full disclosure to his legal adviser for the purposes of seeking legal advice without apprehension that anything said by him in seeking advice or to him in giving it may thereafter be subject to disclosure against his will. It is certainly true that in cases such as Balabel v Air-India [1988] Ch  317 the court has discountenanced a narrow or nit-picking approach to documents and has ruled out an approach which takes a record of a communication sentence by sentence and extends the cloak of privilege to one and withholds it from another.’ 2 [2004] UKHL 48, [2005] 1 AC 610. 3 See [2004] UKHL 48, [2005] 1 AC 610 at [35] (Lord Scott). 4 See [2004] UKHL 48, [2005] 1 AC 610 at [37] and [38] (Lord Scott), [60] (Lord Rodger), [61] (Baroness Hale) and [112] (Lord Brown). 5 See [2004] UKHL 48, [2005] 1 AC 610 at [45] (Lord Scott), [49] (Lord Rodger), [61] (Baroness Hale) and [119] (Lord Brown). 6 [2004] UKHL 48, [2005] 1 AC 610 at [111]. 7 In Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2020] EWCA Civ 11 where solicitors gave a formal confirmation to a bank that they had instructions to deal with client funds in a particular way, the Court of Appeal rejected the argument that there was no legal context and the solicitors were doing no more than acting like a bank: see [69]–[75] (Males LJ). 8 For guidance where a solicitor occupies the position of a ‘trusted adviser’ who attends business meetings and gives commercial advice see Three Rivers (No 6) (above) at [38] (Lord Scott) and [62] (Baroness Hale). For guidance where the solicitor may occupy different roles at different times or more than one role: see R (Jet2.com Ltd) v Civil Aviation Authority [2020] EWCA Civ 35 at [69] (Hickinbottom LJ). For examples see USA v Philip Morris Inc [2004] EWCA Civ 330 at [80], Kerman v Akhmedova [2018] EWCA Civ 307, [2018] 4 WLR 52 at [43] (Sir James Munby P) and UTB LLC v Sheffield United Ltd [2019] EWHC (Ch) at [90]–[97] (where Sir Geoffrey Vos C refused disclosure of documents even though a foreign lawyer had acted both as a lawyer and a business adviser).

14.23 Nevertheless, there are a number of issues which solicitors and their advisers need to consider carefully even if the Balabel test continues to apply. In Three Rivers (No 5)1 the Court of Appeal decided that communications between 767

14.24  Disclosure and privilege an employee of a corporation and the corporation’s lawyers could not attract legal advice privilege unless the employee was tasked with seeking and receiving such advice on behalf of the corporate client. The decision was a reflection of the general principle that communications between solicitors and third parties are not protected by legal advice privilege (although they may be protected by litigation privilege).2 The Court of Appeal took a very narrow view of the ‘client’ for the purposes of legal advice privilege but the House of Lords refused permission to appeal and in Three Rivers (No  6)3 they declined to reconsider the issue. In Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd4 a strong Court of Appeal refused to depart from Three Rivers (No 5) although they would have been in favour of doing so if that option had been open to them. In R (Jet2.com Ltd) v Civil Aviation Authority5 a different constitution of the Court of Appeal also reached the same conclusion. Until this issue is resolved by the Supreme Court, therefore, care must be taken to ensure that legal advice privilege is only claimed for those communications passing between the solicitor and those officers and employees of a company who are authorised or instructed to take legal advice.6 In Jet2 the Court of Appeal also decided one issue left open in Eurasian and held that the dominant purpose test also applies to legal advice privilege as well as litigation privilege.7 They also provided detailed guidance in relation to ‘multi-addressee communications’ (eg an email sent to a number of parties including lawyers and non-lawyers).8 1 Three Rivers DC v Bank of England (No 5) [2003] EWCA Civ 474, [2003] QB 1556. 2 See Kerman v Akhmedova [2018] EWCA Civ 307, [2018] 4 WLR 52 where the Court of Appeal applied Three Rivers (No 5) to communications between the solicitor and third parties generally: see [48]–[53] (Sir James Munby P). 3 [2004] UKHL 48, [2005] 1 AC 610 at [20]–[22], [46] and [47] (Lord Scott); [72] and [118] (Lord Carswell). 4 [2018]  EWCA  Civ 2006, [2019] 1 WLR  791 at [123]–[130] (Sir Brian Leveson PQBD, Sir Geoffrey Vos C and McCombe LJ). Although it was unnecessary for them to do so, the court also concluded that the ratio decidendi of Three Rivers (No 5) was as set out in the text (above): see [81] and [123]. For the application of the test: see [133]. For detailed discussion of this issue see Higgins, ‘Too much and too little secrecy in the law of corporate privilege’ (2019) 38 CJQ at 145–167. 5 [2020] EWCA Civ 35 (Patten, Jackson and Hickinbottom LJJ). See [47]–[58] (Hickinbottom LJ). 6 For further discussion of the client issue in an unusual context (whether the Lord Advocate should be treated as a client and, if so, whether he could give instructions and take advice through a third party): see Whitehouse v Lord Advocate [2019] CSOH 38 (Lord Brodie). 7 See [70]–[96] (Hickinbottom LJ). 8 See [100] where Hickinbottom LJ set out eight numbered points which should all be considered. In point (vi) he gave the following general guidance: ‘Where there is a multi-addressee email seeking both legal advice and non-legal (e.g. commercial) advice or input, if regarded as separate communications, those to and from the lawyer will be privileged: otherwise, they will not be privileged, unless the real (dominant) purpose of a specific email to/from non-lawyers is that of instructing the lawyer. If it is not for that purpose, in most cases, the email as a whole will clearly not have the dominant purpose of obtaining legal advice.’

14.24 Communications between solicitor and client (or officer or employee of the client tasked with seeking and receiving advice) should be treated as privileged, therefore, unless they were not created in a legal context at all or 768

Standard disclosure  14.24 they do not ‘involve a communication of information on which legal advice may be sought or given as appropriate’.1 This ought to cover most letters and emails between the solicitor and the client and most attendance notes of calls or meetings with the client. However, a number of categories of documents have received separate treatment: (1) Client care letters: are not privileged if they contain no more than a record of the terms agreed between the parties.2 (2) Time records: are not privileged (whether recorded on a computerised billing system or in attendance notes).3 (3) Client account ledgers: are not privileged either.4 (4) Client working papers: may be privileged. In Three Rivers (No  5)5 Longmore LJ accepted that documents created by the client and intended to be put before the lawyer (even if they are not in fact put before the lawyer) were privileged. (5)

Lawyers’ working papers: are usually privileged. Again, in Three Rivers (No 5) Longmore LJ accepted this in principle.6 In Re RBS (Rights Issue Litigation)7 Hildyard J held that interview notes were only privileged as lawyers’ working papers if they betrayed the tenor of the legal advice which had been given. In Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd8 it was submitted that he was wrong to add this additional test and that all that was required was that they were confidential documents created by a lawyer for the purpose of giving legal advice. But it was unnecessary for the Court of Appeal to decide this point.

(6) Completion statements: are privileged (as are drafts).9 (7) Fee notes: have been held to be privileged.10 But it is suggested that this goes too wide and that fee notes or invoices will not be privileged unless they may demonstrate or indicate the nature of the advice given. It is suggested, therefore, that the appropriate course is to redact the privileged parts of the document (which may often include the entire narrative).11 (8) Communications with third parties (such as accountants or valuers): will ordinarily remain privileged if they were intended to be kept confidential and set out advice which has been given to the client.12 The rationale is that the client is entitled to assert privilege over internal and external documents which contain or record legal advice even if the documents were not created for that purpose.13 (9) The identity and contact details of the client: will be privileged if they were provided to the solicitor for the purpose of giving legal advice.14 (10) Attachments to emails: are not to be regarded as privileged because the covering email is privileged and will only be privileged if they are privileged communications themselves.15  1 See Nationwide v Various Solicitors (No 3) [1999] PNLR 52 (Blackburne J) at 64D–E.

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14.24  Disclosure and privilege  2 See Dickinson v Rushmer [2002] 1 Costs LR  128 (Rimer J) at [13]: ‘It is possible that, in any particular case, the client care letter will reflect or contain advice or other material which would serve to clothe it with privilege. It is not, however, suggested that the letter produced to the judge was privileged on that basis. In principle, I cannot see why a letter merely setting out the terms on which the solicitor is to act for the client should be privileged.’ The decision was followed in Behague v Revenue and Customs Commissioners [2013] UKFTT 596 (TC), [2014] WTLR 187 (Judge Mosedale).  3 See R v Manchester Crown Court, ex p Rogers [1999] 1 WLR 832, CA at 839E–F (Lord Bingham of Cornhill MR): ‘The record of time on an attendance note, on a time sheet or fee record is not in my judgment in any sense a communication. It records nothing which passes between the solicitor and the client and it has nothing to do with obtaining legal advice. It is the same sort of record as might arise if a call were made on a dentist or a bank manager. A  record of an appointment made does involve a communication between the client and the solicitor’s office but is not in my judgment, without more, to be regarded as made in connection with legal advice.’  4 Nationwide v Various Solicitors (No 3) [1999] PNLR 52 (Blackburne J) at 76B–D. The decision was applied by Moulder J in Raiffeisen Bank International AG v Asia Coal Energy Ventures Ltd [2019] EWHC 3 (Comm) at [26] and [27] (upheld on appeal at [2020] EWCA Civ 11).  5 See Three Rivers DC v Bank of England (No 5) [2003] EWCA Civ 474, [2003] QB 1556 at [21].  6 See [30].   7 [2016] EWHC 3161 (Ch), [2017] 1 WLR 1991 at [98]–[128]   8 [2018] EWCA Civ 2006, [2019] 1 WLR 791 at [141]–[142] (Sir Brian Leveson PQBD).  9 See Nationwide v Various Solicitors (No 3) (above) at 64B–C and 64G–65A. 10 See Dickinson v Rushmer [2002] 1 Costs LR 128 (above) at [13] (where Rimer J set out the relevant authorities). 11 See Hollander, Documentary Evidence (13th edn, 2018) at 16–13. 12 See R (Jet2.com Ltd) v Civil Aviation Authority [2020] EWCA 35 at [47] (Hickinbottom LJ). For examples see USP Strategies Plc v London General Holdings Ltd [2004] EWHC 373 (Ch) (Mann J) at [20] (advice of Manx lawyers privileged in the hands of English lawyers) and Financial Reporting Council Ltd v Sports Direct International plc [2018] EWHC 2284 (Ch), [2019] 2 All ER 974 (Arnold J) at [56] (auditors): ‘By sending privileged documents to GT for the purposes of audit, SDI did not waive privilege against the FRC. I cannot see that the FRC stands in any better position with respect to privileged documents which were sent to GT for other purposes.’ This point was not the subject of appeal. 13 See The Good Luck [1997] 2 Lloyd’s Rep 540 (where Savile J held that internal bank memos considering whether to lend to ship owners referring to legal advice were privileged). Note that in Australia the rationale appears to be different. In Pratt Holdings Pty Ltd v Comr of Taxation (2004) 136 FCR 357, 207 ALR 217 the Full Federal Court of Australia held that a briefing paper prepared by accountants for the client for the dominant purpose of taking advice was privileged. This document would not be privileged under Three Rivers (No 5) or The Good Luck. 14 See JSC  Bank v Ablyazov [2012]  EWHC  1252 (Comm) and SRJ  v Persons Unknown [2014] EWHC 2293 (QB) (Eady J). In both cases the court distinguished the criminal cases in which the contrary had been held on the basis that the solicitor had not been provided with the contact details as part of the continuum of giving and receiving advice: see, eg, R (Howe) v South Durham Magistrates’ Court [2004] EWHC 362 (Admin), DC at [20] (David Clarke J). In Wall v Royal Bank of Scotland plc [2016] EWHC 2460, [2017] 4 WLR 2 Andrew Baker QC held that there was an inherent jurisdiction to order a party to disclose his or her funder for the purposes of a security for costs application. 15 See Sports Direct International Plc v The Financial Reporting Council [2020] EWCA Civ 177 at [52]–[61]. Note Rose LJ’s observation at [56] which bears on how the disclosure process should be managed: ‘The ordinary civil procedure process requires the disclosure of all freestanding documents which are relevant to the pleaded issues in dispute between the parties, regardless of whether they have been attached to emails at any point. A party does not have to disclose more than one copy of each document. This means that if a pre-existing document is simply handed over as part of that disclosure process, the receiving party might never find out that that document or a copy of it had at one time been sent to the legal adviser.’

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Standard disclosure  14.25 14.25 When a client sends copies of documents to his or her solicitors the question whether those copies are privileged can often be critical in a solicitor’s claim, especially where the client is not available and neither party has access to the original documents. Copies of documents supplied by the client may be privileged under the rule in Lyell v Kennedy (No 3)1 because they may tend to betray the trend of legal advice. Copies of pre-existing documents obtained by a solicitor from a third party for the purpose of litigation may also be privileged under the rule in The Palermo2 under which copies of documents given by the client to the lawyer are privileged although there is no privilege in the originals (or original copies). The rule has also been applied to translations.3 It is sometimes not easy to apply these principles to emails or attachments. But the general rule is that original emails and attachments which were not brought into existence for the purpose of obtaining legal advice will not be privileged even if they are later forwarded to a solicitor. They will be privileged if the selection of emails or attachments would tend to betray the legal advice.4 Where there is real doubt whether a document is privileged a party may apply to court to decide whether a claim for privilege should be upheld5 and for the purpose of deciding such an application the court may require the person seeking to withhold disclosure or inspection of a document to produce that document to the court.6 The court has a general discretion to inspect documents in order to see whether the test for privilege has been correctly applied although it should be cautious about doing so. Among the factors which will be relevant are (a) the nature of the privilege claimed, (b) the number of documents and (c) their potential relevance.7 1 (1884) 27 Ch D 1, CA. For recent consideration of all the relevant authorities see Re RBS (Rights Issue Litigation) [2016] EWHC 3161 (Ch), [2017] 1 WLR 1991 (Hildyard J) at [98] to [128]. The application of the rule to interview notes or the ‘lawyers papers’ category of privileged documents remains controversial: see 14.24, above. For an example see Nationwide v Various Solicitors (No 3) [1999] PNLR 52 (Blackburne J) at 64E (copy of a letter from an estate agent to the solicitor was privileged). 2 (1883) 9PD 6, CA. 3 See Sumitomo Corporation v Credit Lyonnais Rouse Ltd [2002] 1 WLR  479 (where the CA rejected the argument that the Lyell v Kennedy exception applied to translations of the client’s own documents as opposed to third party documents but held that translations made by the clients were not privileged just because the lawyers selected the documents for translation). The decision was followed by Roth J in Royal Mail Group v DAF Trucks Ltd [2018] CAT 19. It remains controversial: see Hollander, Documentary Evidence (13th edn, 2018) at 16–04. 4 See Sports Direct International Plc v The Financial Reporting Council [2020] EWCA Civ 177 at [52]–[61]. It is important to note that the applicant did not rely on Lyell v Kennedy (No 3): see [54]. This issue is only likely to be of relevance therefore if the original emails have not been stored and cannot be retrieved by the client. 5 A claim for privilege must be made in accordance with CPR r 31.3 which requires a party to state in writing (a) that he has a right or duty to withhold inspection of a document and (b) the grounds on which he claims that right or duty. 6 See CPR r 31.19(6). 7 See WH Holdings Ltd v E20 Stadium LLP [2018] EWCA Civ 2652 at [40] (Sir Terence Etherton MR) overruling West London Pipeline & Storage Ltd v Total UK Ltd [2008] EWHC 1729 (Comm) (where Beatson J adopted a test which required the court to be ‘reasonably certain’ that the test for privilege had been misapplied before it would undertake inspection). See also UTB LLC v Sheffield United Ltd [2019] EWHC (Ch), [2019] 3 All ER 698 at [72] and [73] (where Sir Geoffrey Vos C pointed out that the relevant test for disclosure under the pilot scheme was necessity).

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14.26  Disclosure and privilege

4  The crime or fraud exception 14.26 It is also well established that the client may not continue to assert privilege in relation to documents which were brought into existence for the purpose of furthering a criminal or fraudulent purpose.1 In Kuwait Airways Corporation v Iraqi Airways Corporation (No  6)2 Longmore LJ stated the principle in the following terms: ‘[L]egal professional privilege (at least of the legal advice kind) does not attach to communications between lawyer and client if the purpose of the client in seeking advice is to further or facilitate crime or fraud. This exception was authoritatively laid down by the Court for Crown Cases Reserved in R v Cox and Railton and is known as “the fraud exception”.’3 There is some doubt about the limits of the exception. In Ventouris v Mountain4 Sir Thomas Bingham MR used the term ‘iniquity’ and the Court of Appeal adopted this term in Barclays Bank plc v Eustice5 (where the defendant was ordered to produce privileged documents relating to a transaction in fraud of creditors within s 423 of the Insolvency Act 1986). Doubts have been raised about the decision6 but it has been followed.7 In BBGP Ltd v Babcock & Brown Global Partners8 Norris J concluded that the exception had been held to apply where ‘the wrongdoer has gone beyond conduct which merely amounted to a civil wrong and had indulged in sharp practice or something of an underhand nature where the circumstances required good faith, something which commercial men would say was a fraud or which the law treats as contrary to public policy’.9 1 Again, this is an issue which usually arises in the context of dual or multiple retainers. In lenders’ claims, for instance, it is reasonably common for a lender to assert that the solicitor owed a duty to report fraudulent conduct by the borrower (or conduct which might have led a reasonably competent solicitor to suspect fraud) or to cease to act. In those circumstances, the lender is also likely to apply for disclosure of the entire file on the basis that privilege has been lost. 2 [2005] EWCA Civ 286, [2005] 1 WLR 2734 at [14]. 3 The leading criminal authority is R v Cox and Railton (1884) QBD 153, CA and the leading civil authority in this context is O’Rourke v Darbishire [1920] AC 581 (HL). 4 [1991] 1 WLR 607 at 611E. In Gamlen Chemical Co (UK) Ltd v Rochem Ltd [1983] RPC 1, Goff LJ gave the following guidance about the exception in civil cases: ‘For servants during their employment and in breach of their contractual duty of fidelity to their master to engage in a scheme, secretly using the master’s time and money, to take the master’s customers and employees and make profit from them in a competing business built up to receive themselves on leaving the master’s service, I would have thought that commercial men and lawyers alike would say that that is fraud.’ However, he also stated: ‘The court must in every case, of course, be satisfied that what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards and must bear in mind that legal professional privilege is a very necessary thing and is not lightly to be overthrown, but on the other hand, the interests of victims of fraud must not be overlooked. Each case depends on its own facts.’ 5 [1995] 1 WLR 1238, CA at 1248H–1250D. 6 In McE v Prison Service of Northern Ireland [2009] UKHL 15, [2009] 1 AC 908 Lord Neuberger left open the question of whether Eustice had been correctly decided: see [109]. In Kerman v Akhmedova [2018]  EWCA  Civ 307, [2018] 4 WLR  52 it was submitted that the principle

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Standard disclosure  14.27 was limited to dishonesty alone and that Eustice was in conflict with Gamlen (above). But the Court of Appeal found it unnecessary to decide these points. Sir James Munby P also pointed out that even if the test was dishonesty and not iniquity, it did not follow that Eustice was wrongly decided: see [54]–[57]. In Curless v Shell International Ltd [2019] EWCA Civ 1710, [2020] ICR 431 the same point was taken but, again, it was unnecessary for the Court of Appeal to decide it. The decision is more important on the question of the anonymity of parties. 7 See Brent LBC  v Kane [2014]  EWHC  4564 (Ch) (where Simon Monty QC held that the deliberate decision to alienate a property in order to obtain local authority funding amounted to iniquity). 8 [2010]  EWHC  2176 (Ch), [2011] Ch  296 (Norris J), at [62]. In X  v Y  Ltd [2019]  IRLR  516 at [57]–[60] Slade J applied BBGP in ordering disclosure of an email which she described as follows: ‘The email does not record any advice on neutral selection criteria for redundancy. It concentrates exclusively on how the redundancy can be used to rid the Respondent of ongoing allegations of discrimination by the Claimant and of underperformance which he stated are related to his disability and failure to make reasonable adjustments.’ 9 He also held that the court should not exercise its power to inspect the relevant material to decide whether the exception was engaged unless there was ‘some exceptional factor of real weight (the nature of which has yet to be ascertained)’: see [72]. See also Holyoake v Candy [2017] EWHC 52 (QB) at [96]–[100] (where Warby J also refused to inspect the documents). However, these decisions on inspection have to be read in the light of WH Holdings Ltd v E20 Stadium LLP [2018] EWCA Civ 2652: see para 14.25, above.

14.27 A  client does not lose the protection of privilege, however, in ‘the ordinary run of cases’1 where the facts are hotly contested and even where he or she is alleged by the opposing party to be putting forward untruthful evidence or misleading the court. This is a difficult line to draw and in JSC BTA Bank v Ablyazov2 Popplewell J had to consider where to do so. In that case, the bank sought disclosure of privileged documents where the defendant had systematically misled the court and ignored its orders. He reached the conclusion that privilege should not normally be lost where the solicitor is acting in the ordinary course of their professional engagement but only where the client’s iniquity puts the advice or conduct outside the normal scope of that engagement or renders it an abuse of that relationship. He also stated that the deception of the solicitors (and therefore the abuse of the normal solicitor/ client relationship) will often be the hallmark of iniquity which prevents the client from relying on the privilege.3 The iniquity exception also applies where the client was used as an ‘innocent tool’ by a dishonest or fraudulent third party.4 In Accident Exchange Ltd v McLean5 Sir Andrew Smith accepted in principle that the exception could apply in a claim brought by a credit hire company against a number of solicitors and expert witnesses for systematically inflating the costs of replacement vehicles in personal injury claims. He found the distinction adopted by Popplewell J in Ablyazov to be particularly useful in a case of this kind and on the facts he found that the individual clients had not been used as ‘tool’ or that there was anything out of the ordinary in their relationship with the solicitors.6 1 See R v Snaresbrook Crown Court, ex p DPP [1988] QB 532, CA at 537–538 (where Glidewell LJ stated that the exception did not cover ‘the ordinary run of cases’). 2 [2014] EWHC 2788 (Comm). He rejected the argument that on the facts the case before him was in the ordinary run of cases. 3 See, in particular, [75], [76] and [93].

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14.28  Disclosure and privilege 4 See R v Central Criminal Court, ex p Francis & Francis [1989] 1 AC 346 where the House of Lords held that privilege was lost in a criminal case where a firm of solicitors was used to purchase properties with the proceeds of crime. 5 [2018] EWHC 23 (Comm), [2018] 4 WLR 26. 6 See, in particular, [39] and [49].

(a)  Legal advice privilege 14.28 The claimant may seek production of the privileged material on the grounds that the original transaction of which he or she complains was fraudulent or tainted by iniquity. In Birmingham Midshires Mortgage Services Ltd v Ansell1 the judge held that the exception did not apply where a borrower misled a lender about the purpose for which he required a remortgage. Blackburne J  refused to follow Ansell in Nationwide v Various Solicitors (No 3)2 and held that: ‘Deceiving a person into lending money in circumstances where, if no deception had been practised, no loan might well have been forthcoming is, in my respectful view, at least as iniquitous as entering into a transaction for the purpose of putting one’s assets beyond the reach of one’s creditors or otherwise prejudicing the interests of those creditors. The fact that the motive was to relieve financial pressure does not seem to me to matter.’ Furthermore the judge held that in order to invoke the exception it was not necessary for the applicant to satisfy the court that the solicitor was a party to the crime or iniquity in the sense that he was engaged to assist his client to further that purpose or knew that his involvement would be of such assistance.3 Indeed, in Barclays Bank plc v Eustice4 the Court of Appeal accepted that the exception might be invoked even if the client and solicitor shared the view that the scheme designed to put assets out of the reach of creditors was lawful (although doubt has been cast on the correctness of the decision in that case5). 1 [1998] PNLR 237 (Jonathan Parker J). 2 [1999] PNLR 52 at 73G. The two cases can be distinguished on the basis that the solicitor in Ansell was not involved in assisting the borrower to commit a fraud. 3 See [1999] PNLR 52 at 74A. 4 [1995] 1 WLR 1238, CA at 1252C–D. 5 See para 14.26, n 5, above.

14.29 In Eustice1 the Court of Appeal left open the question whether it was necessary for the applicant to establish a prima facie case of iniquity or a strong prima facie case. In Nationwide Building Society v Various Solicitors2 Blackburne J  accepted that it was only necessary to establish a prima facie case.3 More recently, the formulation ‘a strong prima facie case’ has been preferred.4 Solicitors are often placed in a difficult position when applications for disclosure of documents are made against them on the grounds that the exception applies and the documents were brought into existence to further 774

Standard disclosure  14.30 or facilitate the crime or fraud of the client. There is no clear authority that a solicitor is permitted to disclose documents voluntarily and without a court order especially where the applicant cannot demonstrate more than a prima facie case, or even a strong prima facie case, which the client might dispute if he or she were willing or available to give instructions. It is suggested that the proper course, therefore, is for the solicitor to indicate that he or she is prepared to disclose the documents under CPR r 31.17 subject to a court order and will not contest the application (except for the purposes of correcting any factual inaccuracies in the evidence or failures to draw the court’s attention to the relevant authorities). Even if the solicitor is a party to proceedings, it is difficult to justify the solicitor actively defending the application (unless the application is clearly misconceived and the evidence of fraud is very weak). Moreover, if a solicitor chooses to contest an application for disclosure there is a risk of an adverse costs order.5 1 [1995] 1 WLR 1238 at 1241H. 2 [1999] PNLR 52 at 74D–E. 3 He adopted the view expressed by Viscount Finlay in O’Rourke v Darbishire [1920] AC 581 at 606 (whilst recognising that there was little between the two formulations). 4 See Group Seven Ltd v Allied Investments Corporation Ltd [2013] EWHC 1423 (Ch) (Norris J) at [24] and UTB LLC v Sheffield United Ltd [2019] EWHC (Ch), [2019] 3 All ER 698 at [71] (Sir Geoffrey Vos C). 5 In Mortgage Express v Sawali [2010]  EWHC  90181 (Costs), [2011] 2 Costs LR  288, HHJ Simon Brown QC considered that solicitors had acted reasonably in raising issues as to the extent of the client’s privilege and made no order as to costs. In Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255, [2020] PNLR 4 Lewison LJ considered this approach to be correct: see [92]. He expressed the following view at [93] (which is consistent with the view we express in the text): ‘It is perfectly true that there are circumstances in which a person is unwilling to release information without a court order; and requires the court order as a form of protection against any complaint by the person whose information is sought. In such cases the person holding the information may choose not to defend the application. But that is a matter of choice. I do not say that solicitors must always participate in contested proceedings for disclosure; merely that they may do so without overstepping the limits of their duty. If they do so in the absence of indemnity from their client or former client, they will be personally at risk as to costs if they are unsuccessful.’

(b)  Litigation privilege 14.30 A party may also rely on the fraud exception to allege that privilege has been lost for documents which would otherwise attract litigation privilege. For instance, one party may allege that the way in which evidence has been gathered involves fraud or iniquity. In Dubai Aluminium Co Ltd v Al Alawi1 there was a strong prima facie case that Dubai, the claimant, had obtained details of the defendant’s bank, credit card and telephone accounts from inquiry agents who had made ‘pretext calls’ impersonating the defendant. These calls involved both fraudulent misrepresentations and criminal offences under the Data Protection Act 1984 and Swiss banking legislation. The defendant sought disclosure of the reports and other documents relating to the investigation. The judge held that criminal or fraudulent conduct undertaken for the purposes 775

14.31  Disclosure and privilege of litigation is no different from advising on, or setting up, a fraudulent or criminal transaction and ordered disclosure.2 In Kuwait Airways Corporation v Iraqi Airways Corporation (No 6) an application was made for disclosure of the legal advice which the defendant had received during an earlier action in which false and perjured evidence had been given on its behalf. It was argued that the fraud exception applied only to legal advice privilege and that Dubai Aluminium Co Ltd v Al Alawi had been wrongly decided. The Court of Appeal rejected this argument and ordered disclosure. Longmore LJ stated this:3 ‘I would therefore summarise the position thus: (1) the fraud exception can apply where there is a claim to litigation privilege as much as where there is a claim to legal advice privilege; (2) nevertheless it can only be used in cases in which the issue of fraud is one of the issues in the action where there is a strong (I would myself use the words “very strong”) prima facie case of fraud as there was in Dubai Aluminium v Al-Alawi and there was not in Chandler v Church4; (3) where the issue of fraud is not one of the issues in the action, a prima facie case of fraud may be enough as in Hallinan5.’ 1 [1999] 1 WLR 1964 (Rix J). For an example where fraud was not really in issue and the court ordered disclosure see Group Seven Ltd v Allied Investment Corporation Ltd [2013] EWHC 1423 (Ch) (Norris J). Compare Holyoake v Candy [2017]  EWHC  52 (QB) at [72]–[85] (where Warby J held that there was no prima facie case of unlawful surveillance under s 55 of the Data Protection Act 1998). 2 [1999] 1 WLR 1964 at 1970A–B: ‘Ultimately, it seems to me that criminal or fraudulent conduct undertaken for the purposes of litigation falls on the same side of the line as advising on or setting up criminal or fraudulent transactions yet to be undertaken, as distinct from the entirely legitimate professional business of advising and assisting clients on their past conduct, however iniquitous.’ He did not, however, consider that searching dustbins and copying material found in them amounted to criminal or fraudulent conduct for the purposes of the rule: see 1968B. 3 [2005] EWCA Civ 286, [2005] 1 WLR 2734 at [42]. 4 Chandler v Church (1987) 177  NLJ  451 (Hoffmann J) where it was accepted in principle that litigation privilege could be lost by the conduct of the proceedings themselves although disclosure was refused. 5 R  (on the application of Hallinan Blackburn Gittings & Nott (a firm)) v Crown Court at Middlesex Guildhall [2004] EWHC 2726 (Admin), [2005] 1 WLR 766, DC where there was a conspiracy to pervert the course of justice. Rose LJ stated at 771E (in a passage quoted by Longmore LJ at [28]): ‘Where … there is evidence of specific agreement to pervert the course of justice, which is free-standing and independent, in the sense that it does not require any judgment to be reached in relation to the issues to be tried, the court may well be in a position to evaluate whether what has occurred falls within or outwith the protection of legal professional privilege as explained in R v Cox and Railton 14 QBD 153.’

5  Implied waiver of privilege (a)  The defendant’s files 14.31 In order to pursue a claim against a former solicitor, it is always necessary for the client impliedly to waive privilege in relation to that solicitor’s file for the transaction which is the subject matter of the claim. Otherwise it would be impossible for the client to establish that the defendant solicitor gave 776

Standard disclosure  14.32 the wrong advice or failed to give advice with skill and care.1 When, however, the defendant seeks to obtain disclosure of documents that demonstrate how the client behaved on other occasions, for example when the claimant received legal advice from the defendant in relation to similar transactions or when he or she received independent advice from another solicitor in relation to litigation with third parties, the client may assert privilege in those documents despite their relevance to the proceedings. In principle a client who commences proceedings against his or her former solicitor will be found to have impliedly waived privilege in the defendant solicitor’s own files to the extent necessary to enable the court to adjudicate on the claim fully and fairly. In Lillicrap v Nalder & Son2 the Court of Appeal also held that there had been an implied waiver of privilege in relation to six other transactions. Dillon LJ stated:3 ‘Thus, the client has the right to insist on his professional legal privilege and it is for him to choose whether or not to waive it. But it is accepted that the waiver may be implied and that there is an implied waiver when the client brings proceedings against the solicitor … The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence. There is no waiver for a roving search into anything else in which the solicitor or any other solicitor may have happened to have acted for the clients. But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action if he has one. Thus, it would extend to matters under earlier retainers, as in the hypothetical example I had given3 which established that the experience of the client was, to the knowledge of the solicitor, such that the solicitor was not in breach of the duty as alleged.’ [Emphasis added.] The reference to earlier retainers was a reference to earlier retainers by the client of the defendant solicitor. 1 The more difficult issue, which is explored in para 14.13, above, is when the waiver first occurs. 2 [1993] 1 WLR 94 at 98B and 99A–E, CA. In Paragon Finance v Freshfields [1999] 1 WLR 1183, CA, it was accepted that the implied waiver extended to earlier transactions handled for the claimants by the same defendants: see 1190H. 3 [1993] 1 WLR 94 at 98C–H.

14.32 The claimant will not, however, be taken to have impliedly waived privilege simply by bringing proceedings against other parties or advisers who were not the claimant’s solicitors in relation to a particular transaction. It is only by bringing proceedings against his or her former solicitors that the claimant will be held to have waived privilege. In NRG Holding NV v Bacon & Woodrow1 the defendants sought to argue that the claimant had waived privilege over advice given by its legal advisers in relation to a share purchase by taking proceedings against its other advisers, who were accountants and actuaries. Colman J, after citing Lillicrap v Nalder, said this: 777

14.33  Disclosure and privilege ‘The true analysis of what the courts are doing in such cases of socalled waiver of privilege is, in my judgment, to prevent the unfairness which would arise if the plaintiff were entitled to exclude from the court’s consideration evidence relevant to a defence by relying upon the privilege arising from the solicitor’s duty of confidence. The client is thus precluded from both asserting that the solicitor has acted in breach of duty and thereby caused the client loss and, to make good the claim, opening up the confidential relationship between them and at the same time seeking to enforce against that same solicitor a duty of confidence arising from their professional relationship in circumstances where such enforcement would deprive the solicitor of the means of defending the claim. It is fundamental to this principle that the confidence which privilege would otherwise protect arises by reason of the same professional relationship between the parties to the litigation. The underlying unfairness which the principle seeks to avoid arises because the claim is asserted and the professional relationship opened for investigation against the very party whose duty of confidence is the basis of the privilege. It is against the unfairness of both opening the relationship by asserting the claim and seeking to enforce the duty of confidence owed by the defendant that the principle is directed.’ He held that by commencing proceedings against the non-legal advisers the claimant had not waived privilege in relation to confidential legal advice. 1 [1995] 1 All ER 976 at 986c–f.

(b)  Other solicitors 14.33 Although the views expressed by Colman J suggested that the principle was confined to dealings between the claimant and the defendant, both Lillicrap v Nalder and N R G v Bacon & Woodrow left open for decision the question whether a client who sues one solicitor would be taken to have waived privilege in relation to advice which he or she had received from another firm of solicitors. A number of conflicting first instance decisions then followed.1 1 See Kershaw v Whelan [1996] 1 WLR 358 (Ebsworth J) (in which disclosure of the files of other solicitors was ordered); Banque Bruxelles Lambert SA v Simmons & Simmons (24 November 1995, unreported) (Blackburne J), transcript, p 40 (where the implied waiver was held to extend only to ‘communications between the client and the solicitor whom he is suing’); Hayes v Dowding [1996] PNLR 578 (Jonathan Parker J) at 589C–F (where disclosure of a solicitor’s file was ordered even though the claim was not against a firm of solicitors but against parties to a compromise agreement); and Burdge & Burdge v John Hodge & Co (11  March 1996, unreported) (Longmore J) (where it was held that the implied waiver did not extend to privileged documents in the hands of another solicitor instructed after the act of negligence which was the subject matter of the action).

14.34 This conflict of authority was resolved by the decision of the Court of Appeal in Paragon Finance plc v Freshfields.1 In that case the claimants, 778

Standard disclosure  14.34 a group of mortgage lenders, syndicated their mortgage books by selling the loans to special purpose vehicles and issuing a series of loan notes to investors. Two insurers guaranteed the loans on terms that the lenders met certain lending criteria which were then specified in the mortgage guarantee policies. The lenders suffered heavy losses. The insurers refused to indemnify the lenders against the losses, because of the lenders’ failure to comply with the lending criteria. The lenders sued the insurers. This litigation was compromised and the lenders then commenced proceedings against Freshfields, solicitors who had advised them on the terms of the insurance policies. Freshfields sought production of the communications between the lenders and their new solicitors, Slaughter and May, and counsel in the actions against the insurers. It was common ground that these documents were relevant to the proceedings but the Court of Appeal refused to order disclosure. Lord Bingham MR who delivered the judgment of the court made this important statement of principle:2 ‘When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communications between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor use of materials relevant to his defence. But, since the implied waiver applies to communications between client and solicitor, it will cover no communications to which the solicitor is not privy and so will disclose nothing of which he is not already aware. Thus, on the present facts, by bringing these proceedings the plaintiffs impliedly waived any claim to legal professional privilege in relation to confidential communications between them and Freshfields concerning the transaction briefly described above, up to the moment when Freshfields ceased to act. That is not in issue. The question is whether the plaintiffs have also impliedly waived any claim to legal professional privilege in relation to confidential communications between them and Slaughter and May relating to the pursuit and settlement of claims arising from those transactions. Approaching this question as one of pure principle, we conclude that they have not. The plaintiffs have not 779

14.35  Disclosure and privilege sued Slaughter and May. They have not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter and May, and so have not brought that confidential relationship into the public domain. They have done nothing to release Slaughter and May from the obligation of confidence by which they are bound. They have chosen to subject their relationship with Freshfields to public scrutiny, but not their relationship with Slaughter and May. They are not seeking to pick and choose among the confidential communications passing between themselves and Slaughter and May: none of them is (so far) in the forensic arena. It is open to Freshfields, by way of defence, to rely on any communication passing between themselves and the plaintiffs; to hold that the plaintiffs have impliedly waived privilege in relation to confidential communications between themselves and Slaughter and May would be, not to enable Freshfields to rely on communications of which they are already aware, but to disclose to them communications of which they have no knowledge.’ The court restricted the application of Lillicrap v Nalder to former transactions handled by the defendant, approved both N R G v Bacon & Woodrow and BBL v Simmons & Simmons but disapproved Ebsworth J’s reasoning in Kershaw v Whelan and overruled Hayes v Dowding.3 1 [1999] 1 WLR 1183. 2 [1999] 1 WLR 1183 at 1188D–1189C. 3 There has been some debate in the authorities about the extent to which Paragon overruled Hayes v Dowding: see Farm Assist Ltd v Secretary of State for Environment, Food and Rural Affairs [2008] EWHC 3079, [2009] PNLR 16 (Ramsey J) and Glenn v Watson [2016] EWHC 3259 (Ch), [2017] 4 WLR 48 (Nugee J) at [16]–[30]. A number of issues were dealt with in Hayes v Dowding and whatever the position in relation to the other issues, it is suggested that the decision on implied waiver did not survive Paragon.

(c)  The extent of implied waiver 14.35 The implied waiver of the client by bringing a negligence claim against his or her solicitors extends only ‘so far is necessary for the just determination of the claim’ and the client only releases the solicitor ‘to that extent’ for the obligation of confidence. In Eurasian Natural Resources Corp Ltd v Dechert LLP1 Gloster LJ emphasised that this language used by Lord Bingham in the passage from Paragon set out (above) supports the concept of a limited waiver of privilege only and does not open up the entire relationship to public scrutiny for all purposes. There is no implied waiver in subsequent proceedings against a third party even where the claimant has put in issue a state of mind to which the privileged communications would be relevant.2 There is no implied waiver either in subsequent proceedings between the same parties involving different issues.3 Moreover, the principle only applies to communications to which the solicitor was privy and not to communications between the client and third parties.4 1 [2016] EWCA Civ 375, [2016] 1 WLR 5027 at [54].

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Standard disclosure  14.36 2 See Farm Assist Ltd v Secretary of State for Environment, Food and Rural Affairs [2008] EWHC 3079, [2009] PNLR 16. In that case the claimant sought to set aside a settlement agreement on grounds of duress and the legal advice which it received would have been directly relevant to the claim. But Ramsey J refused disclosure. See also Digicel (St. Lucia) Ltd v Cable & Wireless plc [2009] EWHC 1437 (Ch). In that case various witnesses in a conspiracy action expressed their views about whether they thought that their actions were unlawful. Nevertheless, Morgan J  refused to order disclosure. He stated (at [52]): ‘The fact that the legal advice is relevant to an issue does not result in a waiver of privilege. Relevance is a necessary precondition for disclosure but it is not itself a sufficient condition for a finding of waiver. The position is the same even where the legal advice is “highly” relevant, rather than relevant to a lesser extent, and even where an investigation of the issue may be hampered by the absence of the privileged material. The position is the same again even when the issue is as to a person’s state of mind. Equally, in my judgment, it makes no difference that the alleged state of mind relates to a matter of law rather than to a matter of fact.’ 3 See National Westminster Bank plc v Bonas [2003] EWHC 1821 (Ch) (Lindsay J). In that case the solicitor brought proceedings to recover its fees and the client defended on the basis that the solicitor had been negligent. Those proceedings were compromised. It was held that any waiver of privilege only extended to those proceedings and not to subsequent proceedings in which the client brought proceedings for negligence and breach of confidence in relation to a bank guarantee. The decision is criticised in Hollander, Documentary Evidence (13th edn, 2018) at 24–18. It may appear unfair because the two sets of proceedings appear to have been closely connected. 4 See also Westminster International BV  v Dornoch Ltd [2009]  EWCA  Civ 1323 at [37]–[44] (where Etherton LJ rejected the argument that the defendant had impliedly waived litigation privilege by raising a particular defence).

(d) Counsel 14.36 In Paragon Lord Bingham left open the possibility that there may be factual situations in which a client who sues his or her solicitor may be taken to have waived privilege in the advice of other lawyers in relation to the same matter (such as counsel or tax lawyers).1 in Hellard v Irwin Mitchell2 it was conceded that the implied waiver of privilege extended to the solicitors’ attendance notes of conferences with counsel and to the deliberations of the solicitor (including those with counsel).3 The claimant was ordered to disclose the entirety of counsel’s papers (including those documents which the solicitors had not seen and to which they were not parties) on the following basis:4 ‘Having waived privilege in relation to counsel’s advice, the claimant cannot, in my judgment, pick and choose which bits of counsel’s advice or deliberations can properly be withheld from the court. The waiver, as a matter of fairness, must extend to the entirety of counsel’s recall — working papers and notes — and not just to the bits of it that the claimant may hereafter choose to reveal or the bits of it which he has already chosen to reveal by referring to counsel’s advice in the pleadings.’ 1 See [1999] 1 WLR 1183 at 1192F. 2 [2012] EWHC 2656 (Ch), [2013] PNLR 8 (HHJ Purle QC). 3 See [4]. 4 See [12].

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14.37  Disclosure and privilege

(e)  Limitation defences 14.37 Where the claimant’s claim is barred by a primary limitation period, he or she may need to rely on Limitation Act 1980, s 14A or s 32. In Kershaw v Whelan1 the defendant pleaded that the claimant’s claim was statutebarred both in contract and tort. In reply the claimant relied on Limitation Act 1980, s 32 and alleged that he did not and could not with due diligence have discovered the facts upon which his claim was based before April 1985 because they had been deliberately concealed from him by the defendant. It was held that this plea involved an implied waiver of the privilege in legal advice relating to the concealment and discovery of his claim.2 In Paragon the Court of Appeal left open the question whether the case had been wrongly decided although it disapproved the reasoning of the judge.3 But in the light of the authorities in para 14.35, above it is clear that Kershaw v Whelan was wrongly decided and that no order for disclosure should have been made. That said, in order to prove their case at trial, claimants who rely on either s 14A or s 32 will have to establish when they first received advice about the claim and may also have to reveal the terms of that advice.4 This will normally require a conscious decision to waive privilege and a decision whether to waive privilege is best taken as soon as the defendant raises a valid limitation defence.5 1 [1996] 1 WLR 358 (Ebsworth J). 2 It appears that Ebsworth J ordered disclosure not only of the litigation files of the claimant’s former solicitors but also of his current solicitors: see the headnote at 359B–D. However, this is not entirely clear: see the form of the summons and order at 360D–F and 370H–371A. 3 [1999] 1 WLR 1183 at 1192B–1193B. 4 See Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006]  EWHC  2017 (Ch), [2007] PNLR 5 (Mann J) at [307] discussed in para 14.38, below. 5 Although the wording of Limitation Act 1980, s 33 is different to that of s 32 the position should in principle be the same and there should be no implied waiver of privilege by relying on s 33.

(f) Damages 14.38 A similar problem arises for a party who claims as damages the costs of abortive litigation or other legal costs. In Burdge & Burdge v John Hodge & Co1 the claimants claimed as damages the costs of litigation on which they had embarked to extricate themselves from the consequences of the defendant’s negligence. These proceedings ultimately proved fruitless. Consistently with Paragon, the judge held that the files of the solicitors who had handled the proceedings were relevant but privileged. He added, however, that although there was no implied waiver, it was likely that the claimants would be obliged to consent to waive privilege if they wished to prove a causal connection between the negligence and the costs. In Fulham Leisure Holdings Ltd v Nicholson Graham & Jones2 the claimant claimed the costs of taking legal advice. The claimant chose not to waive privilege and although the claimant recovered some of the fees the balance of the claim failed. Mann J stated this:3 782

Standard disclosure  14.39 ‘The Claimants have chosen to be coy about what counsel was being asked to do. It appears on the authorities that making a claim for the fees does not waive privilege (see Paragon Finance plc v Freshfields [1999] 1 WLR 1183) but that does not mean that the Claimant can get away with some inadequate level of evidence if it chooses to make that claim. The Claimant has a choice. If it wishes to claim the legal fees, it must adduce a sufficient level of evidence to prove its claim and demonstrate that the fees are properly recoverable as damages. If that involves a waiver of privilege then so be it. If it chooses to limit its disclosure in the interests of preserving its privilege (which is clearly what has happened here) then it runs the risk of not having proved its case. That is the position in this case. In fact, not only is there inadequate evidence of various matters, there are also certain limited positive matters which cast doubt on some of the claim … I do not think it is appropriate for me to indulge in guesswork in relation to these fees.’ 1 (11 March 1996, unreported) (Longmore J). 2 [2006]  EWHC  2017 (Ch), [2007]  PNLR  5. The decision was reversed in part: see [2008] EWCA Civ 84 but no doubt was cast on the proposition in the text. 3 At [307].

(g)  Settlements and compromises 14.39 In Biggin & Co Ltd v Permanite Ltd1 it was held that a claimant who sought to recover as damages the amount which he had paid to compromise a claim had to satisfy the court that the settlement was a reasonable one. In a number of cases2 disclosure of legal advice has also been sought on the grounds that by relying on a compromise with a third party and asserting that it is reasonable, a party has waived privilege in relation to the legal advice which he received. We consider that Paragon has resolved this issue too. Even if the legal advice is relevant to the reasonableness of the claimant’s conduct, he or she cannot be ordered to disclose it.3 The claimant is free to choose whether to waive privilege and introduce evidence of the legal advice which he or she received. But he or she cannot be compelled to do so and may choose to rely exclusively on the terms of the settlement and open correspondence by themselves.4 1 [1951] 2 KB 314, CA, a sale of goods case. 2 Oceanic Finance Co Ltd v Norton Rose (26  March 1997, unreported) (Moore-Bick J), The Society of Lloyds v Kitson Environmental Services Ltd (1994) 67 BLR 102 (HHJ Havery QC, ORB) and DSL Group Ltd v Unisys International Services Ltd (1994) 67 BLR 117 (HHJ Hicks QC, ORB). 3 In both Oceanic Finance and DSL (see n 2, above) it was held that the advice was not relevant because the test of reasonableness was an objective one. In Oceanic Finance MooreBick J  distinguished the decision in Muller v Linsley & Mortimer [1996] 1  PNLR  74, CA, in which Hoffmann LJ adopted a subjective test in ordering disclosure of without prejudice communications. The decision has generated a significant judicial debate about the exceptions to ‘without prejudice’ privilege which falls outside the scope of this book. All of the relevant

783

14.39  Disclosure and privilege authorities were analysed in detail by Fancourt J in Biggs v Clay [2019] EWHC 102 (Ch) at [42]–[74]. The case was unusual because it was a professional negligence claim in which there was an implied waiver of privilege in relation to other legal advice and ‘without prejudice’ negotiations between the same parties. Fancourt J arrived at the same conclusion as in Oceanic Finance, namely, that the negotiations were not relevant to the reasonableness of a settlement because the test was an objective one: see [104] and [105]. 4 If the claimant has settled previous litigation with a third party, he or she cannot waive ‘without prejudice’ privilege without the consent of the third party in any event: see Cumbria Waste Management Ltd v Baines Wilson (a firm) [2008] EWHC 786 (QB) (HHJ Frances Kirkham) (documents created for the purposes of a mediation).

784

Section B

Professional Regulation and Discipline

Chapter 15

The regulation of solicitors

A INTRODUCTION 1 Scope 15.01 In Section B of this book we deal with the regulation of solicitors under the Legal Services Act 2007 and the enforcement of professional standards by the SRA as regulator and before the SDT.1 On 25 November 2019 the SRA Standards and Regulations 2019 came into force and for the first time introduced separate regimes for individual solicitors and firms. The principal standards are now the Principles, the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. One of the objects of the new standards was to shorten and simplify the SRA  Handbook which had been in force since 2011 and in this edition we concentrate on the new regime. We recognise, however, that the SRA Code of Conduct 2011 will remain relevant for some time to come. Where the new codes have introduced substantive changes, we have tried to draw attention to them below and the case law on misconduct will continue to remain relevant to our discussion of disciplinary proceedings. Where we have referred to conduct rules in other parts of this work, we have referred to the rules in force both before and after 25 November 2019. 1 Broadly speaking, Chapter 15 deals with regulation and Chapter 16 deals with enforcement from investigation by the SRA to the hearing of a complaint by the SDT.

2 Terminology 15.02 On 25  November 2019 the SRA introduced a number of other regulations apart from the two codes of conduct. Where we refer to the SRA Standards and Regulations 2019 we mean the entire body of rules and where we refer to the SRA  Code of Conduct for Solicitors 2019 and the SRA Code of Conduct for Firms we intend to refer only to the individual code in question. Both codes contain a number of regulations which are similar and, in some cases, identical. We discuss those rules primarily in the context of the code for individuals because of their universal application. But we also footnote the corresponding rule for firms and, unless we state otherwise, the rule is in identical terms. The SRA Glossary also contains detailed definitions of the terms used throughout the new regime and because it is easily accessible 787

15.03  The regulation of solicitors online1 we have not set out those definitions below unless it is particularly helpful to the point being made. Where, therefore, we use a defined term, reference should be made to the definition in the SRA Glossary. 1 See https://www.sra.org.uk/solicitors/standards-regulations/glossary/.

B FRAMEWORK 15.03 Four principal statutes have governed the regulation of solicitors: the Solicitors Act 1974, the Courts and Legal Services Act 1990, the Access to Justice Act 1999 and the Legal Services Act 2007 which provides the modern basis for regulating most forms of legal services in England and Wales.1 1 For judicial descriptions of the way in which the statutory scheme has evolved in relation to the conduct of litigation see Ndole Assets Ltd v Designer M&E Services UK Ltd [2018] EWCA Civ 2865 at [24]–[34] (Davis LJ) and Blavo v Law Society [2018]  EWCA  Civ 2250, [2019] 1 WLR 1977 at [44]–[68] (Moylan LJ).

1  Legal Services Act 2007 (a)  ‘reserved legal activity’ 15.04 The concept of the ‘reserved legal activity’ lies at the heart of the 2007 Act.1 There are six reserved legal activities: the exercise of a right of audience, the conduct of litigation,2 reserved instrument activities, probate activities, notarial activities and the administration of oaths.3 It is an offence for a person to carry on a reserved legal activity unless that person is entitled to do so (s 14).4 A person is entitled to carry on a reserved activity if he or she is either authorised or exempt (s 13).5 A person is authorised to carry on a reserved legal activity if that person is authorised by an approved regulator or authorised for certain purposes as a licensed body (s 18(1)). An ‘approved regulator’ is designated under the 2007 Act as able to authorise certain reserved legal activities and the Legal Services Board has ultimate oversight over all approved regulators.6 Solicitors may also be authorised by different regulators to carry out a number of different activities or functions.7 1 See s 12 of and Sch 12 to the Legal Services Act 2007. 2 In Ndole Assets Ltd v Designer M&E Services UK Ltd [2018] EWCA Civ 2865 the Court of Appeal held that the service of a claim form falls within the conduct of litigation and is a reserved legal activity. However, the court drew a distinction between a person who performed an administrative or mechanical function in connection with the service of documents (who was not required to be authorised or exempt for the purposes of the Act) and those who had undertaken or assumed legal responsibility with regard to the service of documents (such as a law firm). Acting as a McKenzie friend is not a reserved legal activity but is regulated by the common law: see Re Baggaley [2015] EWHC 1496 (Fam) at [19]–[28] (Sir James Munby PFD). 3 See Sch  2 to the Legal Services Act 2007 for the definitions of the various reserved legal activities. In a consultation paper dated 23  April 2012, ‘Enhancing consumer protection, reducing regulatory restrictions: will-writing, probate and estate administration activities’, the

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Framework  15.05 LSB suggested that the number of reserved legal activities might be increased but this increase has still not taken place by early 2020. 4 It is also an offence for a person to pretend to be entitled to carry on a reserved legal activity when that person is not so entitled: see s 17. For wider discussion of the consequences where a corporate body holds itself out as conducting litigation on behalf of a party see Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491, [2015] PNLR 8. 5 S 13 does not limit the power of an individual to appear before the First-tier Tribunal to authorised or exempt persons because there was no restriction on the right of audience before the Legal Services Act 2007 came into force: see Porter & Co v HMRC [2018] UKFTT 0264 (TC). 6 The Law Society, the General Council of the Bar, the Council for Licensed Conveyancers, the Association of Law Costs Draftsmen (which has delegated its functions to the Costs Lawyers Standards Board) and the Chartered Institute of Patent Agents are all approved regulators. However, it should be noted that where a solicitor delegates the conduct of litigation to an unauthorised person, he or she remains responsible for their conduct to the court: see Bamrah v Gempride Ltd [2018] EWCA Civ 1367, [2019] 1 WLR 1545 at [26] (Hickinbottom LJ). In that case the solicitor signed a bill which was misleading but delegated the conduct of costs proceedings to a firm of costs consultants and draftsmen who had not been authorised to conduct litigation. 7 S  52(1) requires approved regulators to make reasonable provision to prevent regulatory conflicts between two sets of regulatory arrangements and s 52(4) provides that where there is a conflict between the regulatory arrangements of the entity regulator and the arrangements which apply to the individual, then the entity requirements prevail.

15.05 It is also a criminal offence for an employer to carry on a reserved legal activity through an employee when not entitled to do so (s 16). Section 15 also contains various provisions by which an employer is deemed to be carrying on a reserved legal activity through an employee.1 Where the employer is itself an authorised person (eg a recognised or licensed body) s 15 is unlikely to present any difficulties. It is more likely to be of significance, however, where the employer is not an authorised body but employs individual in-house solicitors.2 Where an in-house solicitor carries on a reserved legal activity by providing legal services to his or her employer, the employer will not be treated as carrying on that activity itself unless the employee provides the service to the public or a section of the public as part of the employer’s business.3 Where the employer is not an authorised body care may need to be taken to avoid offering legal services directly to members of the public (eg where the employee works for an insurer and may be asked to give advice to an insured or an in-house lawyer provides pro bono services).4 1 The explanatory notes to the section state that: ‘when a person carries on a reserved legal activity through an employee or manager, the person and the employee or manager are all considered to be carrying on the reserved legal activity and must all be entitled to carry on the reserved legal activity.’ 2 According to the SRA’s guidance dated 25  September 2019 headed ‘Supporting in-house solicitors’, 31,000 solicitors practise in-house out of a total of 192,000. 3 See s 15(4) and (5). 4 Rule 4 of the SRA  Practice Framework Rules 2011 used to govern the regulation of in-house solicitors and their ability to provide services to the public. For instance, Rule 4.10 permitted an in-house solicitor to conduct work on a pro bono basis for clients other than his or her employer (subject to certain restrictions) and Rule 4.13 permitted a solicitor employed by an insurer to act on behalf of the insured where that insurer was subrogated to the rights of the insured (subject to certain other conditions). The SRA’s new guidance (above) states that freelance solicitors are regulated by the SRA  Code of Conduct for Individuals 2019 whoever they are and wherever they work and that they may provide unreserved legal services to the public from an unregulated

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15.06  The regulation of solicitors business. Where they carry on a reserved activity, s  15 will, however, continue to apply. On 23 July 2019 the SRA issued guidance for unregulated organisations about giving information to clients: see https://www.sra.org.uk/solicitors/guidance/ethics-guidance/unregulated-organisations--giving-information-to-clients.

15.06 Carrying on a reserved legal activity when not entitled to do so has a number of consequences in addition to the risk of committing a criminal offence under either s  14 or s  16. For example, the activity may be treated as a contempt of court: see s  14(4) and s  16(4).1 Further, where the person carrying on the activity is not authorised, the client may not be able to claim legal professional privilege for communications passing between the client and the representative.2 The Law Society may also apply for an injunction to restrain a person from carrying on a reserved legal activity.3 1 See Re Balli [2011] EWHC 1736 (Ch) (HHJ Barker QC). 2 See s 190 which ordinarily confers privilege on such communications between an authorised person and his or her client even if they are not a solicitor or barrister. See also Atrium Medical Corporation v DSB Invest Holding SA [2011] EWHC 74 (Pat), [2011] RPC 24 (where Lewison J held that a patent attorney litigator was an authorised person for the purposes of the Legal Services Act 2007, the relevant regulations being the CIPA  Higher Courts Qualification Regulations 2007 made by the Chartered Institute of Patent Agents). 3 See Law Society v Shah [2014] EWHC 4382 (Ch), [2015] 1 WLR 2094 (Tim Kerr QC).

(b)  The Law Society 15.07 The Law Society is one of the approved regulators under the Legal Services Act 2007. It was incorporated by Royal Charter in 1845. The Charter provides the constitutional basis for the Society’s governance via its Council,1 supplemented by general regulations, byelaws and various codes and protocols.2 In theory, the Law Society is the regulator of solicitors. But there is a separation of powers within the Law Society under which the regulatory functions are exercised by the SRA and the representative functions by the Society. This separation reflects the concern that it was inappropriate for professional bodies to regulate themselves3 and ss 29 and 30 of the Legal Services Act 2007 now impose a statutory requirement for the separation between its representative functions and its regulatory functions.4 The Law Society is designated under the 2007 Act as an approved regulator in respect of five of the six reserved legal activities5 and it has delegated those regulatory powers and its other regulatory functions to the SRA and asked it to exercise those powers independently and in the public interest.6 1 Section 79 of the Solicitors Act 1974 makes provision for the discharge of the Council’s functions by committees and sub-committees. 2 See https://www.lawsociety.org.uk/about-us/our-constitution/ 3 See the White Paper ‘The Future of Legal Services: Putting Consumers First’ at p 23: ‘consumers do not have enough confidence in the current system. They are not reassured by bodies that act as both the team manager and the referee’. For the history of the reforms to the legal services market and the introduction of the Legal Services Act 2007: see http://www.legalservicesboard. org.uk/about_us/history_reforms/index.htm and M Davies, ‘Solicitors – the last 20 years of selfregulation?’ (2005) 21(1) JPN 3 for a comprehensive account of the history of self-regulation of the solicitors’ profession.

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Framework  15.09 4 See s 27: ‘(1) In this Act references to the “regulatory functions” of an approved regulator are to any functions the approved regulator has– (a) under or in relation to its regulatory arrangements, or (b) in connection with the making or alteration of those arrangements. (2) In this Act references to the “representative functions” of an approved regulator are to any functions the approved regulator has in connection with the representation, or promotion, of the interests of persons regulated by it.’ 5 See Pt 1 of Sch 4 to the Legal Services Act 2007. The Law Society is not designated in respect of notarial activities. 6 See the section entitled ‘Our Legal Status’ at http://www.sra.org.uk/sra/legal.page.

(c)  The SRA 15.08 The SRA does not have separate legal existence. Its full title is the ‘Solicitors Regulation Authority Board’ and it is one of six boards that are deemed to be committees of the Council of the Law Society and therefore able to exercise powers granted to the Council.1 The terms of reference for the Solicitors Regulation Authority Board are set out extensively in the Law Society’s General Regulations and include the exercise all monitoring, regulatory, investigative, adjudication, disciplinary, intervention, enforcement, supervisory, admission, authorisation, licensing, civil litigation and cost recovery powers and functions vested in the Society or the Council.2 For convenience, we refer to the regulator of solicitors as the SRA although it is technically more accurate to say that it is the Law Society. 1 See s 79(1)(a) of the Solicitors Act 1974. 2 See, in particular, reg 26.

(d)  Regulatory objectives 15.09 Section 28 of the Legal Services Act 2007 provides that in discharging their functions approved regulators such as the SRA must act, so far as is reasonably practicable, in a manner which is compatible with the Act’s regulatory objectives. Those objectives are defined in s 1(1) as follows: (a)

protecting and promoting the public interest;

(b) supporting the constitutional principle of the rule of law; (c)

improving access to justice;

(d) protecting and promoting the interests of consumers; (e)

promoting competition in the provision of legal services;

(f)

encouraging an independent, strong, diverse and effective legal profession;

(g) increasing public understanding of the citizen’s legal rights and duties; and (h) promoting and maintaining adherence to the professional principles.1 Section 28(3) also requires an approved regulator to have regard to the principles under which regulatory activities should be transparent, accountable, 791

15.10  The regulation of solicitors proportionate, consistent and targeted only at cases in which action is needed, and any other principle appearing to it to represent the best regulatory practice.2 1 The Pepper v Hart notes to section 1 state that the regulatory objectives were put at the beginning of the Act because of their importance across the whole regulatory framework. They are key principles which underpin the rest of the Act: see Hansard, Public Bill Committee, 1st Sitting, 12 June 2007, col 25. The explanatory notes also state that the Act does not rank the objectives in order of importance and that approved regulators will be best placed to consider how competing objectives are to be balanced in a particular instance. 2 S 1(3) also identifies five ‘professional principles’: ‘(a) that authorised persons should act with independence and integrity, (b) that authorised persons should maintain proper standards of work, (c) that authorised persons should act in the best interests of their clients, (d) that persons who exercise before any court a right of audience, or conduct litigation in relation to proceedings in any court, by virtue of being authorised persons should comply with their duty to the court to act with independence in the interests of justice, and (e) that the affairs of clients should be kept confidential.’

2  Conduct rules 1999 to 2019 (a)  The Guide to the Professional Conduct of Solicitors 15.10 Until 2007 the conduct rules for the solicitors’ profession were contained in the Solicitors Practice Rules 1990 and The Guide to the Professional Conduct of Solicitors.1 1 The eighth edition was published in 1999 and it was later published online and regularly updated: see http://www.lawsociety.org.uk/professional/conduct/guideonline.law. For a brief introduction to the earlier history of solicitors’ professional ethics see the three articles by Humphries in the Law Society’s Gazette dated 23 and 30 November and 7 December 2009.

(b)  Solicitors Code of Conduct 2007 15.11 Between 1  July 2007 and 5  October 2011 the Solicitors Code of Conduct 2007 regulated the conduct of solicitors. It was substantially amended with effect from 31 March 2009 in order to coincide with statutory amendments introduced by the Legal Services Act 2007. During the same period other regulations and rules also governed the conduct of solicitors, the most significant of which were the Solicitors’ Accounts Rules 1998, the Solicitors’ Compensation Fund Rules 1995 and 2009 and the Solicitors’ Indemnity Insurance Rules 2000 to 2010.1 1 Archived versions of the code itself and the other rules of regulations which formed part of the framework during this period may be found at https://www.sra.org.uk/solicitors/guidance/ change-tracker/rules-regs/.

(c)  The SRA Handbook 15.12 With effect from 6 October 2011 the rules and regulations applicable to the conduct and practice of solicitors of England and Wales (and other 792

Framework  15.13 regulated persons) were contained in the SRA  Handbook.1 It contained the following materials: (1)

SRA Principles (consisting of ten mandatory principles which applied to all regulated persons);

(2)

the SRA Code of Conduct 2011 (consisting of mandatory Outcomes and supportive Indicative Behaviours);

(3) the SRA Accounts Rules 2011; (4) authorisation and practising requirements (containing the SRA  Authorisation Rules for Legal Services Bodies and Licensable Bodies 2011, the SRA  Practice Framework Rules 2011 and SRA Practising Regulations 2011); (5) a client protection section (containing the SRA  Indemnity Insurance Rules 2011 and the SRA Compensation Fund Rules 2011); (6) a disciplinary proceedings section (containing the SRA  Disciplinary Procedure Rules 2011 and the SRA Cost of Investigations Regulations 2011); (7) a specialist services section (containing rules applicable to certain forms of legal services, such as the SRA Property Selling Rules and the SRA European Cross-border Practice Rules); and (8) a Glossary (defining the terms used in the SRA Handbook). The SRA Handbook was supplemented by a substantial number of SRA policy statements and guides which played an important role in understanding the SRA’s approach to the implementation of the regulatory objectives and the enforcement of standards. A  similar approach has been adopted to the new standards and regulations. The concept of ‘outcomes-focused regulation’ was at the core of the reforms introduced in 2011.2 The new standards and regulations have moved away from this focus on outcomes and reverted to a more rules-based regulation, although they share a number of the features of the SRA Handbook. 1 For the version in force immediately before 25  November 2019 see https://www.sra.org.uk/ solicitors/handbook/welcome/. 2 For detailed discussion of ‘OFR’ see the third edition of this book at paras 15.31 to 15.34.

3  The SRA Standards and Regulations 2019 15.13 On 25 November 2019 the SRA Standards and Regulations came into force. The principal purpose of these reforms was to introduce shorter rules which were simpler to apply but nevertheless focused on high professional standards. The new standards place more emphasis upon the judgment of the individual solicitor and the COLP of a firm. They are also intended to be flexible and adaptable to new ways of working (and, in particular, solicitors 793

15.13  The regulation of solicitors practising on a freelance basis).1 The standards and regulations which are most relevant to practitioners are as follows: (1) the SRA  Principles (consisting of seven fundamental tenets of ethical behaviour which the SRA expect all those whom it regulates to uphold);2 (2) the SRA  Code of Conduct for Solicitors, RELs and RFLs (which we refer to as the SRA Code of Conduct for Individuals 2019);3 (3) the SRA Code of Conduct for Firms 2019;4 (4) the SRA Accounts Rules 2019;5 (5) the SRA Authorisation of Firms Rules 2019;6 (6) the SRA Authorisation of Individuals Regulations 2019;7 (7) the SRA Regulatory and Disciplinary Procedure Rules 2019;8 (8) the SRA Transparency Rules 2019;9 (9) the SRA Compensation Fund Rules 2019;10 (10) the SRA Indemnity Insurance Rules 2019 (including the SRA Minimum Terms and Conditions of Professional Indemnity Insurance);11 and (11) the SRA Glossary.12 These provisions are supplemented by a series of key guidance notes which have been updated and collected together on the SRA’s website.13 They are also underpinned by the SRA’s enforcement strategy which is an important document setting out when and how the regulator expects individuals and firms to report their concerns and its approach to enforcement.14   1 See the commentary at https://www.sra.org.uk/newregs/.  2 See https://www.sra.org.uk/solicitors/standards-regulations/principles/. The new seven principles are as follows: ‘You act: (1) in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice; (2) in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons; (3) with independence; (4) with honesty; (5) with integrity; (6) in a way that encourages equality, diversity and inclusion; and (7) in the best interests of each client.’   3 See https://www.sra.org.uk/solicitors/standards-regulations/code-conduct-solicitors/.   4 See https://www.sra.org.uk/solicitors/standards-regulations/code-conduct-firms/.   5 See https://www.sra.org.uk/solicitors/standards-regulations/accounts-rules/.   6 See https://www.sra.org.uk/solicitors/standards-regulations/authorisation-firms-rules/.  7 See https://www.sra.org.uk/solicitors/standards-regulations/authorisation-individualsregulations/.  8 See https://www.sra.org.uk/solicitors/standards-regulations/regulatory-disciplinaryprocedure-rules/.   9 See https://www.sra.org.uk/solicitors/standards-regulations/transparency-rules/. 10 See https://www.sra.org.uk/solicitors/standards-regulations/compensation-fund-rules/. 11 See https://www.sra.org.uk/solicitors/standards-regulations/indemnity-insurance-rules/. For detailed commentary on the rules and the Minimum Terms see Chapter 17. 12 See https://www.sra.org.uk/solicitors/standards-regulations/glossary/. See para 15.02, above. 13 For the full package of guidance see https://www.sra.org.uk/solicitors/guidance/guidance/. 14 For the enforcement strategy see https://www.sra.org.uk/sra/strategy-2017-2020/substrategies/sra-enforcement-strategy/. For the supporting material see https://www.sra.org.uk/

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Framework  15.14 sra/strategy-2017-2020/sub-strategies/enforcement-practice/. In May 2014 the SRA issued a policy statement about enforcement which was updated on 26 November 2015. This policy statement formed the basis for the new enforcement strategy which was first issued on 7 February 2019 and then updated on 25 November 2019.

4  Regulated firms and individuals (a) Terminology 15.14 In 2009 the SRA moved towards a firm-based approach to regulation.1 It wished to improve its ability to regulate the firm as well as its employees and principals. At the same time, the rules had to be modified to address the range of different entities in which solicitors now practised: as sole practitioners, in a partnership, in a limited liability partnership or through a limited company. It was also necessary to redefine the concept of a ‘principal’ to distinguish between persons responsible for the management of a firm (ie ‘managers’) and the firm’s owners (‘interest holders’). The legislative term used to describe the different entities regulated by the SRA is ‘authorised body’. An authorised body is one that has been authorised by the SRA to practise either as a ‘licensed body’ (an alternative business structure or ‘ABS’) or a ‘recognised body’ (the more traditional form of solicitors’ firm). In turn, a licensed body is either a ‘licensable body’ which has been licensed2 or a ‘legal services body’ which is a recognised body meeting certain criteria. Such bodies can be incorporated as companies or unincorporated associations.3 The legislative term used to describe the individuals regulated by the SRA is ‘authorised person’. An authorised person is a person who has been authorised by the SRA or another approved regulator to carry on one or more reserved legal activities. Finally, the term ‘regulated person’ occurs in a number of different places in the legislation. It is used in the context of ‘licensed bodies’.4 It also appears in the SRA Regulatory and Disciplinary Procedure Rules 2019 where the term means both individuals and entities subject to the disciplinary powers available to the SRA and the SDT. In that context, it includes individual solicitors, recognised and licensed bodies, their employees, managers and interest-holders.5 1 This change was introduced in March 2009 by amendment to the Solicitors Act 1974 and Administration of Justice Act 1985 by the Legal Services Act 2007. 2 See s 72 of the Legal Services Act 2007. 3 See s 9 of the Administration of Justice Act 1985. 4 See para 15.18, below. 5 The SRA Glossary defines the expression ‘regulated person’ as follows: ‘(i) in the SRA Indemnity Rules has the meaning given in section 21 of the LSA; (ii) means, in the SRA  Disciplinary Procedure Rules: (A) a solicitor; (B) an REL; (C) an RFL; (D) a sole practitioner in a recognised sole practice; (E) a recognised body; (F) a manager of a recognised body; (G) a licensed body; (H) a manager of a licensed body; (I) an employee of a recognised body, a licensed body, a solicitor, or an REL; or (J) to the extent permitted by law, any person who has previously held a position or role described in (A) to (I) above; (iii) for the purposes of the SRA Cost of Investigations Regulations means the persons at paragraph (ii) (A) to (I) above and also includes a person who has an interest in a licensed body and, to the extent permitted by law, any person who has previously held an interest in a licensed body.’

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15.15  The regulation of solicitors

(b) Solicitors 15.15 The Solicitors Act 1974 defines a ‘solicitor’ as ‘a solicitor of the Senior Courts’ (s 87). All solicitors of the Senior Courts are recorded on a list kept by the Society (‘the roll’) (s 6), a person can only be entered on the roll if he or she has been admitted as a solicitor (s 7), and a person will only be admitted if the Society is satisfied that the relevant training regulations have been completed and the applicant is of satisfactory character and suitability. Section 31 of the Solicitors Act 1974 permits the SRA to make rules for the professional practice, conduct and discipline of solicitors. A solicitor who fails to comply with such rules may be the subject of complaint to the Solicitors Disciplinary Tribunal (‘SDT’) (s  31(2)).1 The SDT has disciplinary powers over solicitors, including striking off the roll, suspension from practice, payment of an unlimited penalty and payment of costs (s 47(2)). The SRA may also exercise disciplinary powers in respect of a solicitor, including giving the person a written rebuke or a direction to pay a penalty (not exceeding £2000) (s 44D).2 It may also require its investigation costs to be paid (s 44C). 1 Complaints are almost always initiated by the SRA but s  31(2) of the Solicitors Act 1974 provides that ‘any person’ may make such a complaint. 2 The section also authorises the SRA to publish details of any action taken.

(c)  Recognised bodies 15.16 The term ‘recognised body’ broadly corresponds to a traditional firm of solicitors and includes partnerships, limited liability partnerships and companies. The term has its origins in s  9 of the Administration of Justice Act 1985 which provided that the Law Society (and now the SRA) could make rules prescribing the circumstances in which it would recognise a ‘legal services body’ as suitable to undertake the provision of solicitor services or other relevant legal service.1 The SRA may make rules in respect of the management and control of recognised bodies and the requirements that they must satisfy at all times if they are to remain recognised.2 It may also make rules that can provide for any provision of the 1974 Act to have effect in relation to managers and employees of recognised bodies.3 The SRA may exercise certain disciplinary powers in respect of recognised bodies, their managers or employees insofar as they have failed to comply with a requirement imposed on them under the Administration of Justice Act 1985 or rules made under s  9 of the Administration of Justice Act 1985.4 Those powers are to give a rebuke, direct payment of a penalty of up to £2,000 and publish details of such actions.5 A  complaint may be made to the SDT in respect of a failure by a recognised body to comply with any requirement imposed on it by the 1985 Act or rules made under s 9 of the 1985 Act.6 The SDT’s powers with respect to recognised bodies, their managers and employees include revocation of recognition, a direction to pay a penalty and an order for costs.7 1 A legal services body may be either ‘corporate or unincorporate’: see s 9A(1).

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Framework  15.18 2 See s 9(1). For the new rules see the SRA Authorisation of Firms Rules 2019. Rule 6.1 sets out the restrictions on services provided by a recognised body: ‘If you are a recognised body or recognised sole practice, your business may consist only of the provision of: (a) professional services of the sort provided by individuals practising as solicitors and/or lawyers of other jurisdictions; and (b) the services set out in annex 2 (whether or not they are also included in paragraph (a)), and if you have a notary public as a manager or employee, then professional services of the sort provided by notaries public.’ Annex 2 sets out a list of professional services including alternative dispute resolution, financial services, estate agency, management consultancy, acting as a parliamentary agent and practising as a lawyer of another jurisdiction. The previous rules were the SRA Authorisation Rules for Legal Services Bodies and Licensable Bodies 2011 and the SRA Practice Framework Rules 2011. 3 See s 9(2)(fb). 4 See Administration of Justice Act 1985, Sch 2, para 14B. 5 See para 14B(2) and (3). 6 See Sch 2, para 16(1). A complaint may also be made in respect of a manager or employee of a recognised body: see Sch 2, para 16(1A). 7 See Sch 2, paras 18 and 18A.

(d)  Licensed bodies 15.17 Part 5 of the Legal Services Act 2007 makes provision for new alternative business structures as a vehicle for providing legal and other advice and services. It enables lawyers and non-lawyers to form legal partnerships and companies as vehicles for the provision of reserved legal services. Where non-lawyers are managers of (or have an interest in) such a body, the body must become a licensed body and be licensed and regulated by a licensing authority. A licensed body is a ‘licensable body’ which holds a licence1 and a body (‘body A’) is a licensable body if either (1) a non-authorised person is a manager or has an interest in it or (2) another body (‘body B’) is a manager or has an interest in body A and nonauthorised persons are entitled to exercise (or control the exercise of) at least 10 per cent of the voting rights in body B. The SRA is a designated licensing authority2 and the ownership of licensed bodies is restricted in a number of ways.3 1 See s 71. 2 An approved regulator can be designated as licensing authorities: see s 73 and Pt 1 of Sch 10 to the 2007 Act. 3 See Pt 1 of Sch 13 to the 2007 Act.

15.18 Section 176 of the Legal Services Act 2007 provides that a solicitor who becomes an employee or manager of a licensed body remains bound to comply with the SRA Standards and Regulations (so far as they apply to individuals).1 Employees, managers and interest-holders in a licensed body are also bound by a duty not to do anything which causes or substantially contributes to a breach by either the licensed body itself or an employee or manager (who is an authorised person) of their duties under s 176.2 The licence issued to a licensable body must include a condition which requires the managers, employees and interest holders to comply with these obligations and the licensing authority’s other regulatory arrangements.3 The Head of Legal Practice and Head of Finance and Administration also owe duties to take all reasonable steps to ensure that 797

15.19  The regulation of solicitors the licensed body, its managers and employees comply with their duties.4 The SRA Authorisation of Firms Rules 2019 apply both to authorised and licensed bodies and set out the general conditions of practice and the approvals required.5 The SRA has a much greater disciplinary jurisdiction over licensed bodies. It may impose a penalty on a licensed body, its managers or employees of up to a maximum of £250m for the body and £50m for the individual.6 The licensing authority may also disqualify persons from holding the position of compliance officer, manager or employee of a licensed body.7 1 See s 176 of the Legal Services Act: ‘(1) A person who is a regulated person in relation to an approved regulator has a duty to comply with the regulatory arrangements of the approved regulator as they apply to that person. (2) A person is a regulated person in relation to an approved regulator if the person– (a) is authorised by the approved regulator to carry on an activity which is a reserved legal activity, or (b) is not so authorised, but is a manager or employee of a person who is so authorised.’ 2 See s 90. 3 See s 85(4). 4 See s 91(3) and s 92(1). A licensed body must have a Head of Legal Practice (‘HOLP’) and a Head of Finance and Administration (‘HOFA’): see Sch 11, paras 11 and 13. They are equivalent to the roles of Compliance Officer for Legal Practice (‘COLP’) and Compliance Office for Finance and Administration (‘COFA’) for recognised bodies. 5 See Rules 6 to 12. The SRA has issued guidance which summarises the different types of authorised bodies and the requirements for authorisation: see https://www.sra.org.uk/solicitors/ guidance/ethics-guidance/firm-authorisation/. 6 See s 95. The maxima are set by art 2 of the Legal Services Act 2007 (Licensing Authorities) (Maximum Penalty) Rules, SI 2011/1659. This does not mean, however, that the SRA will not prosecute serious misconduct before the SDT. But it does mean that it has greater power to impose financial penalties. 7 See s 99.

(e) Managers 15.19 The Legal Services Act 2007 introduced a uniform definition of ‘manager’ into the Solicitors Act 1974 and Administration of Justice Act 1985 which is widely used. Section 207 of the 2007 Act provides that a ‘manager’ in relation to a body means a person who: (a)

if the body is a body corporate whose affairs are managed by its members, is a member of the body,

(b) if the body is a body corporate and paragraph (a) does not apply, is a director of the body, (c)

if the body is a partnership, is a partner, and

(d) if the body is an unincorporated body (other than a partnership), is a member of its governing body’.1 In a few instances the SRA  Standards and Regulations continue to use the terms ‘principal’2 and ‘partner’.3 1 The definitions section is subject to an express power to modify: see 207(5). There has been no modification to any of the definitions used in this chapter.

798

Conduct rules and civil liabilities  15.22 2 The definition in the SRA Glossary is a long one reflecting the different business structures in which a solicitor may practise. But it includes the sole practitioner of a recognised sole practice, a partner in a partnership and a director or beneficial owner of the shares in a company. The term is primarily used in the SRA Indemnity Insurance Rules 2019. 3 The term is only used in the Minimum Terms and Conditions of Professional Indemnity Insurance (the ‘MTC’) made under the SRA Indemnity Insurance Rules 2019. The MTC are the subject of detailed commentary in Chapter 17.

(f) Employees 15.20 The Solicitors Act 1974 also provides that rules made by the SRA may have effect in relation to employees of solicitors.1 The SRA has powers to make (or to apply to the SDT for it to make) control orders against persons who are not solicitors and who are or have been ‘involved in a legal practice’.2 The grounds on which the SRA may make or apply for such an order are that the person has been convicted of a criminal offence or guilty of conduct which would make it undesirable for him or her to be involved in a legal practice.3 A person subject to a control order commits a criminal offence if he or she then accepts employment from a solicitor, and a solicitor who employs such a person in the knowledge that such an order has been made can be the subject of a complaint to the SDT.4 1 See s 34A(1). 2 See s 43(2). 3 See s 43(1). 4 See s 44(1) and s 44(2).

(g)  Interest holders 15.21 Finally, the SRA Standards and Regulations also use the term ‘interest holder’ which the SRA Glossary defines as ‘a person who has an interest or an indirect interest, or holds a material interest, in a body (and “indirect interest” and “interest” have the same meaning as in the LSA), and references to “holds an interest” shall be construed accordingly’.1 1 See para 3 of Sch 13 to the Legal Services Act 2007 for the definition of ‘material interest’; ‘indirect interest’ is defined at s 72(5) and ‘interest’ at s 72(3).

C  CONDUCT RULES AND CIVIL LIABILITIES 1 Introduction 15.22 There are four main ways in which this regulatory framework may potentially affect solicitors’ civil liabilities. •

First, there is the question of the extent to which conduct rules, or regulatory guidance, may either determine the content of a solicitor’s 799

15.23  The regulation of solicitors common law duties, create statutory duties that are directly actionable by the client, or create terms to be implied into the client retainer. One may include in this category the occasions where the conduct rules do not create duties but rather influence judicial perceptions of the content of those duties, and the impact of conduct rules and guidance on claims for breach of trust. This group of issues is considered below. •

Secondly, the regulatory framework may create forms of direct and indirect client redress (‘regulatory redress’), thereby creating a parallel compensatory system to the civil courts.1

•

Thirdly, the conduct rules may make it more likely that a civil claim will be brought, as opposed to creating or affecting the underlying liability: see, in particular, the duties to ‘put matters right (if possible) and explain fully and promptly what has happened and the likely impact’ where ‘things go wrong’ and clients suffer loss as a result.2

•

Finally, the disciplinary process, including SRA investigations, may encourage civil claims either by requiring regulated persons to bring misconduct to the attention of the SRA,3 by forcing regulated persons to explain themselves during an investigation or disciplinary proceedings, by giving publicity to misconduct and thereby attracting potential claimants, by allowing the disciplinary process to be used as a dry run for civil proceedings,4 or by giving encouragement to clients to bring civil proceedings following an adverse outcome to the disciplinary process.

Many of the above issues have been covered elsewhere in this book. Accordingly, this section concentrates on the first category, namely, how the conduct rules and regulatory guidance may influence or determine the content of solicitors’ duties. Even in relation to that category, however, issues relating to rules about conflicts are dealt with in chapter 6 and are therefore not covered here. We have subdivided the topic by reference to common law duties, statutory duties and claims for breach of trust. 1 See paras 15.33 to 15.39, below. 2 See the SRA Code of Conduct for Individuals 2019, para 7.11 and the SRA Code of Conduct for Firms 2019, para 3.5 considered in paras 15.38 and 15.39, below. 3 See the SRA Code of Conduct for Individuals, para.7.7, the SRA Code of Conduct for Firms, para.3.9. For further discussion see Chapter 16, para 16.20. 4 Sometimes a client may seek to make a conduct complaint as a prelude to a civil claim.

2  Common law duties (a)  Duty of care 15.23 Conduct rules and materials may be read as representing the distillation of a profession’s views on what amounts to acceptable practice and what risks should be foreseen and met by that profession.1 At a practical level this means that guidance or conduct rules may influence common law duties of 800

Conduct rules and civil liabilities  15.24 care in three main ways. First, they may create an environment where varying practices over time tend to converge upon a uniform, prescribed standard. The existence of such a standard will then often be taken to define the manner in which common law duties ought to be discharged.2 Secondly, they may have an inhibitory effect on the range of arguments that can be deployed in defence of a claim, for it will be a bold professional who refuses to accept under crossexamination that their failure to comply with some conduct rule did not amount to negligent discharge of their duties. Thirdly, the courts often look to conduct rules as relevant evidence of proper practice. It is suggested that these are all legitimate ways in which conduct rules may be deployed in civil claims. But it is also suggested that the SRA Standards and Regulations 2019 do not give rise to enforceable obligations actionable in a civil claim. 1 In the context of solicitors, this might, perhaps, be better expressed as the distillation of the views of the SRA, the Legal Services Board, the Legal Services Board’s Consumer Panel as to what amounts to acceptable practice. 2 Although adherence to general practice may not be enough where it gives rise to a foreseeable risk: see Edward Wong Finance Co Ltd v Johnson Stokes & Master [1984] AC 296, PC discussed in Chapter 2, paras 2.15 to 2.17.

15.24 We therefore suggest that the general position is that (i) SRA materials will not automatically be treated as determining what amounts to a failure to act with reasonable skill and care, since that would amount to allowing the SRA to take the role of the court in determining the content of common law duties, but (ii) in cases where there exist specific SRA guidance or rules which bear on a particular issue before the court, the court is likely to bear in mind the content of the SRA material. Moreover, if there is no other evidence of good practice, the court may hold that the relevant SRA material reflects the standard of reasonable skill and care in tort or contract. For example, in Johnson v Bingley1 it was held that a firm of solicitors had broken principle 7.05 of the Guide to the Professional Conduct of Solicitors in England & Wales.2 The claimant argued that a breach of the Guide automatically amounted to negligence. The deputy judge rejected that argument as follows: ‘It is I think first of all necessary to consider the true status of the Guide … It is clear that it is a comprehensive Code of Conduct for solicitors. It embraces the conduct to be expected of a normally careful and skilful solicitor by his or her governing body. I have, however, come to the conclusion that a breach of the Guide cannot ipso facto and of necessity be negligence. Negligence is a legal concept embracing duty situation, nature of duty and breach of duty. […] In my view neither the Law Society nor any other body can, by rules or edicts, alter the law of the land.’ He then proceeded to consider whether, in all the circumstances including the facts of the case and the existence of principle 7.05, the solicitors had acted in breach of duty and concluded that they were liable.3 It is also suggested that the first instance judge’s reliance upon the Guide in Penn v Bristol & West Building Society4 is best read in the same way. Although he referred to the Guide as 801

15.25  The regulation of solicitors imposing a ‘clear duty’, this should not be read as holding that any breach of SRA materials will automatically amount to a failure to act with reasonable skill and care. 1 [1997] PNLR 392 (Benet Hytner QC) at 404. See also Chapter 2, at para 2.08 and Chapter 9, paras 9.04 to 9.08. 2 For the Guide: see para 15.10, above. The provision in question was concerned with the situation where instructions had been received not from a client but from a third party. Compare para 4.1 of the SRA Code of Conduct for Individuals 2019. 3 See also, to similar effect, Thames Trains Ltd v Adams [2006] EWHC 3291 (QB) at [41] (Nelson J): in relation to solicitors: ‘I am satisfied that a breach of the rules of professional conduct will not in itself give rise to a cause of action …’. 4 [1995] 2 FLR 938, per HHJ Kolbert at 948. The Court of Appeal’s decision did not deal with this issue.

15.25 The courts have taken a similar approach in other contexts. In relation to the duties of banks selling interest rate swap products, the Court of Appeal rejected an argument to the effect that ‘the mere existence of the [Financial Services Authority’s] COB rules give rise to a co-extensive duty of care at common law’.1 In relation to surveyors the mere fact that the professional has breached the rules of their profession does not automatically mean that they are not entitled to recover fees.2 Finally, in the context of litigation, the content and enforcement of the now replaced Bar Code of Conduct ‘are not a matter for the court’.3 1 Green v the Royal Bank of Scotland plc [2013]  EWCA  Civ 6, [2014] Bus LR  168 at [23] (Tomlinson LJ). 2 Picton Jones v Arcadia Developments Ltd [1989] 1 EGLR 43 (Judge J). 3 See Gerevan Trading Co Ltd v Skjevesland [2002] EWCA Civ 1567, [2003] 1 WLR 912 at [42]. For further examples see Chapter 2, paras 2.12 to 2.14.

(b)  Implied terms 15.26 On a number of occasions it has been argued that conduct rules are to be implied as terms into a contract of retainer with the professional. For example, in Larussa-Chigi v CS  First Boston Ltd1 Thomas J  held that the relevant rules (the Bank of England’s London Code of Conduct) were expressly incorporated as terms of the contract. But he also stated obiter that they would have been implied terms in any event on grounds of necessity. In Clarion Ltd v National Provident Institution2 it was argued unsuccessfully that the Securities & Investment Board’s Statements of Principle3 were implied terms of the contract between two companies carrying on investment business. Rimer J rejected this argument on the following basis: ‘Their purpose [that of the Principles] is to impose minimum standards of business practice on those carrying on investment business and they do not look to me like the sort of provisions which would ever ordinarily find their way into a contractual document.’4 1 [1998] CLC 277, 295.

802

Conduct rules and civil liabilities  15.27 2 [2000] 1 WLR 1888. 3 For example: ‘1. A  firm should observe high standards of integrity and fair dealing.’ The Securities and Investment Board promulgated the Principles pursuant to its powers under s 47A(3) of the Financial Services Act 1986. Section 47A(3) provided that: ‘Failure to comply with a statement of principle under this section is a ground for the taking of disciplinary action or the exercise of powers of intervention, but it does not of itself give rise to any right of action by investors or other persons affected or affect the validity of any transaction.’ 4 It is to be noted that there is no express provision in the Solicitors Act 1974 equivalent to s 47A(3) of the Financial Services Act 1986 and it is significant that the purpose of the two codes is to protect the public (an aspect absent in Clarion where the contract was between two companies carrying on investment business). See also Redmayne Bentley Stockbrokers v Isaacs [2010]  EWHC  1504 (Comm) and Wilson v MF  Global UK  Ltd [2011]  EWHC  138 (QB) where the courts rejected arguments that it was necessary to imply into the retainer regulatory requirements imposed on the defendants under the Financial Services and Markets Act 2000.

15.27 More relevantly, in Mastercigars Direct Ltd v Withers LLP1 the claimant sought to argue that there was implied into the contract of retainer between solicitor and client the provisions of the former Solicitors’ Costs Information and Client Care Code.2 The court rejected that argument for a number of reasons including the following: (1) the solicitor was already subject to the requirements of the Code; (2) the nature of the obligations under the Code made them unsuitable for implication as contractual terms;3 and (3) it was unnecessary to give business efficacy to the retainer as the Solicitors Act 1974 afforded clients a remedy in respect of solicitor-client bills under s 37A and Sch 1A.4 While it could be argued that the ratio of Mastercigars is limited to arguments based on solicitors’ obligations to clients in relation to costs, it is suggested that Morgan J’s reasoning is likely to be of general application. As a result, it will rarely be possible to show that the provisions of SRA materials amount to implied terms of solicitors’ retainers. In Reddy v Lachlan5 the Court of Appeal used a principle of professional conduct, relating to solicitors’ undertakings, to construe such undertakings. It is suggested that this is not inconsistent with Mastercigars but an illustration of the principle that it is permissible to have regard to conduct rules in force as part of the factual matrix of construing an undertaking given by a solicitor in that capacity. 1 [2007] EWHC 2733 (Ch), [2009] 1 WLR 881, per Morgan J at [107]–[111]. 2 See now para  8.7 of the SRA  Code of Conduct for Individuals 2019 and para  7.1(c) of the SRA Code of Conduct for Firms 2019. 3 The notes to the Code contemplated that some breaches of the Code would not amount to a breach of the former Solicitors Practice Rules, r 15. 4 The Legal Ombudsman has now replaced the inadequate professional services regime: see paras 15.34 to 15.37, below. 5 [2000] Lloyd’s Rep PN 858, CA. For further discussion see para 5.41, above.

803

15.28  The regulation of solicitors

(3)  Statutory duties 15.28 The solicitors’ conduct rules are made under powers conferred on the Law Society by statute.1 This led the House of Lords in Swain v Law Society to describe them in the following terms:2 ‘The Act of 1974 imposes upon the Society a number of statutory duties in relation to solicitors whether they are members of the Society or not. It also confers upon the Council of the Society, acting either alone or with the concurrence of the Lord Chief Justice and the Master of the Rolls or of the latter only, power to make rules and regulations having the effect of subordinate legislation under the Act. Such rules and regulations may themselves confer upon the Society further statutory powers or impose upon it further statutory duties. The purpose for which these statutory functions are vested in the Society and the Council is the protection of the public or, more specifically, that section of the public that may be in need of legal advice, assistance or representation. In exercising its statutory functions the duty of the Council is to act in what it believes to be the best interests of that section of the public, even in the event (unlikely though this may be on any long-term view) that those public interests should conflict with the special interests of members of the Society or of members of the solicitors’ profession as a whole.’ Whilst this an important statement of principle, it should be noted that the issue in Swain concerned the manner (and, in particular, the capacity) in which the Law Society exercised its powers under s  37 of the Solicitors Act 1974 in arranging the compulsory insurance of solicitors (then made pursuant to a master policy arrangement). The conclusion that the indemnity rules had effect as ‘subordinate legislation’, and that ‘[t]he rules have the force of a statute’,3 was required so that ‘statutory vitality’ could be given to the master policy, with the consequence that the mutual rights and obligations of insurers and individual solicitors had their origins in statute rather than in the narrow contractual remedies dependent on privity of contract.4 1 See for example s 31 of the Solicitors Act 1974; likewise, the Accounts Rules (s 32) and the Indemnity Rules (s 37). 2 [1983] 1 AC 598, per Lord Diplock at 608. 3 Per Lord Brightman at 621. 4 See, in particular, 612 and 622.

15.29 Swain indicates that certain conduct rules may take effect as subordinate legislation but it does not explain that effect. In particular, are the conduct rules actionable as statutory duties? This requires a closer examination of the enabling statutory provisions and the substance of the rules themselves with a view to establishing whether on a proper construction the statutes were intended to confer private rights of action on a class of persons.1 It is relevant in this regard that s 31(2) of the Solicitors Act 1974 provides that: ‘If any solicitor 804

Conduct rules and civil liabilities  15.30 fails to comply with rules made under this section, any person may make a complaint in respect of that failure to the Tribunal.’2 This suggests that the remedy for a breach of a conduct rule lies elsewhere, ie in disciplinary action, a point further supported by the existence of statutory forms of regulatory redress under the Legal Services Act 2007.3 Further, whilst s 176 of the Legal Services Act 2007 imposes on all regulated persons ‘a duty to comply with the regulatory arrangements of the approved regulator as they apply to that person’,4 the section is otherwise silent as regards the consequences of noncompliance with that duty. We would add that some of the conduct rules are worded in a manner which appears inconsistent with the imposition of an actionable duty. In light of the above, we conclude that a breach of a rule in either of the codes is not actionable by a client or third party as a breach of statutory duty. 1 See Clerk & Lindsell on Torts 22nd edn (2018) at 9–18 to 9–30. 2 See also s 32(3) and s 34A(2) of the Solicitors Act 1974. 3 See the discussion in Brown v InnovatorOne Plc [2012] EWHC 1321 (Comm) concerning what was described by Hamblen J as the ‘FSMA Compliance duty’ at [1268]ff and para 15.33, below. S 157(1) of the Legal Services Act 2007 provides as follows: ‘The regulatory arrangements of an approved regulator must not include any provision relating to redress.’ The explanatory notes also state that the Office for Legal Complaints was intended to be the ‘single point of entry’ for complaints. This suggests that rules made pursuant to the Act were not intended to be actionable otherwise. 4 For the use of the term regulated person see para 15.14, above.

15.30 This is not to say that arguments invoking Swain and the statutory force of the conduct rules are irrelevant. There is a substantial line of authority addressing what can be called ‘the prohibitory effect’ which conduct rules may have on substantive legal rights between solicitors and clients and third parties. Where a conduct rule prohibits a solicitor from entering into a certain form of contract with a third party, it would defeat the public interest and the public policy associated with the rule if a third party could enlist the assistance of the court to enforce an agreement which the solicitor is prohibited from making: see Mohammed v Alaga1 and Westlaw Services v Boddy.2 The outcome in both cases was that the contract was void and unenforceable. The precise limits of this principle are however unclear. Both Mohammed and Westlaw Services contain substantial discussion of the policy reasons underlying the prohibition against fee-sharing. It is possible that not all arrangements prohibited by conduct rules will have the same outcome and each one may need to be assessed by reference to the precise wording of the rule and the public policy to which it is addressed.3 1 [2000] 1 WLR 1815 (CA). The contract in question involved fee-sharing between a solicitor and a third party, in breach of the prohibition at r 7 of the Solicitors’ Practice Rules 1990: ‘… A solicitor shall not share or agree to share his or her professional fees with any person except …’. 2 [2010] EWCA Civ 929, [2010] 6 Costs LR 934. This case also concerned fee-sharing agreements in breach of r 7 of the Solicitors Practice Rules 1990. 3 See Westlaw Services at [44] (Etherton LJ). See also (in the context of legal costs) Awwad v Geraghty & Co [2001]  QB  570, and Garbutt v Edwards [2005]  EWCA  Civ 1206, [2006]

805

15.31  The regulation of solicitors 1 WLR 2907, especially at [29]–[42], where Arden LJ concluded that a failure to give a client a costs estimate did not render the underlying funding arrangement unenforceable. For further discussion of these cases see Chapter 2, para 2.12.

(4)  Breach of trust (a)  The SRA Accounts Rules 2019 15.31 Rule 6.1 of the SRA Accounts Rules 2019 imposes a duty to correct breaches of the rules upon discovery.1 The duty is imposed on managers and employees of an authorised body and its managers are jointly and severally liable for ensuring compliance.2 A similar rule has been in place since 1998.3 Rule 6.1 (and its predecessors) is a conduct rule enforceable by disciplinary action and (subject to the discussion immediately below) it does not give rise to a civil liability. But it is a special kind of conduct rule. It imposes a primary obligation upon the firm and its managers to replace funds (if necessary from their own resources) upon discovery of a breach. This is similar in many ways to the equitable duty of a trustee of a traditional trust to restore the trust fund.4 The importance of this duty is reflected in the MTC where the term ‘Claim’ is extended to cover the obligation to replace funds under Rule 6.1.5 1 ‘You correct any breaches of these rules promptly upon discovery. Any money improperly withheld or withdrawn from a client account must be immediately paid into the account or replaced as appropriate.’ 2 See Rule 1: ‘1.1 These rules apply to authorised bodies, their managers and employees and references to “you” in these rules should be read accordingly. 1.2 The authorised body’s managers are jointly and severally responsible for compliance by the authorised body, its managers and employees with these rules. 1.3 In relation to a licensed body, the rules apply only in respect of activities regulated by the SRA in accordance with the terms of its licence.’ 3 Rule 7.1 of the SRA Accounts Rules 2011 was in identical form. Rule 7.2 provided as follows: ‘In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the firm. This duty extends to replacing missing client money from the principals’ own resources, even if the money has been misappropriated by an employee or another principal, and whether or not a claim is subsequently made on the firm’s insurance or the Compensation Fund.’ Rule 7 appeared in the Solicitors’ Accounts Rules 1998 in a very similar form. 4 For detailed discussion of the remedies available for a breach of trust committed by a solicitor (which will usually involve various breaches of the SRA Accounts Rules 2019) see Chapter, 4, section D at paras 4.43 to 4.59. 5 For further discussion see Chapter 17, para 17.07.

(b)  The terms of the trust 15.32 There is authority that the SRA Accounts Rules 2019 are terms of the trust upon which a solicitor holds a client’s money.1 On the other hand, the Supreme Court has also held that the rules are not relevant to the measure of equitable compensation.2 For reasons discussed in Chapter 4 it probably makes little difference whether the rules do form the terms of the trust.3 Breaches of SRA guidance on anti-money laundering measures may, however, be relevant to 806

Redress  15.33 a consideration of whether a solicitor has acted ‘reasonably’ for the purposes of relief from liability for breach of trust pursuant to s 61 of the Trustee Act 1925.4 1 See Various Claimants v Giambrone & Law [2017] EWCA Civ 1193, [2018] PNLR 2 at [65]– [71] (Jackson LJ). The relevant rules then in force were the SRA Accounts Rules 2011. 2 See AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503 at [75] (Lord Toulson). For detailed discussion of this case in the context of the principles for assessment of equitable compensation see Chapter 4, paras 4.43 to 4.52. 3 A solicitor who releases funds in breach of the SRA Accounts Rules 2019 is highly likely to have acted without authority and committed a breach of trust: see para 4.03, above. Likewise, the client will be entitled to require the solicitor to restore the fund if the trust remains in existence or to pay equitable compensation if it has come to an end: see para 4.44, above. 4 See, eg, Purrunsing v A’Court & Co [2016] EWHC 789 (Ch), [2016] 4 WLR 81 (HHJ Pelling QC). Section 61 is discussed in paras 4.66 to 4.70, above.

D REDRESS 1 Introduction 15.33 Between 1991 and 2010 the Solicitors Act 1974 provided a form of statutory compensation where the professional service provided by a solicitor was inadequate.1 The Legal Services Act 2007 created the Office for Legal Complaints2 which appoints the Legal Ombudsman and administers the scheme (which has been in operation since October 2010).3 This scheme was intended to be comprehensive and to provide the only form of independent redress available to clients and members of the public outside civil proceedings.4 However, the Act did preserve the power of approved regulators to require firms to put procedures in place to investigate complaints and provide compensation or redress themselves.5 The SRA has exercised that power by including detailed provisions dealing with co-operation, accountability and complaints-handling in both the SRA Code of Conduct for Individuals 2019 and the SRA Code of Conduct for Firms 2019. Those provisions are discussed below.6 1 See Sch  1A, paras 1 and 2. The schedule was introduced with effect from 1 April 1991 by the Courts and Legal Services Act 1990. The powers in the schedule were later delegated to the Legal Complaints Service. Where there was a finding of inadequate professional service there was power to limit the solicitor’s costs or to require the mistake to be rectified or to direct the solicitor to pay compensation not exceeding £15,000. Inadequate professional service was not ‘confined to cases where the client may have a cause of action against the solicitor for negligence’: see para  2(3) of Sch  1A and R  (on the application of Malik Law Chambers Solicitors) v Legal Complaints Service (The Law Society) [2010] EWHC 981 (Admin). 2 See s 114 of the Legal Services Act 2007. 3 See https://www.legalombudsman.org.uk/. 4 See s 157 which provided that an approved regulator could not provide any other forms of redress and that all forms of redress would cease to have effect (subject to transitional arrangements). For a high level summary of how the new arrangements were intended to work see The Law Society of England and Wales v The Secretary of State for Justice [2010] EWHC 352 (QB) at [1] (Akenhead J). 5 See s 158. 6 See paras 15.38 and 15.39, below.

807

15.34  The regulation of solicitors

2  The Legal Ombudsman (a)  The scheme 15.34 The scheme1 offers a swift and cost-effective means of redress for the clients of solicitors and of persons authorised by other approved regulators under the Legal Services Act 2007. It responds to complaints made by individuals, ‘micro-enterprises’,2 charities and clubs or associations with net annual income less than £1m, and trustees of trusts with asset value of less than £1m.3 Complaints are not limited to negligence4 and may extend to most mistakes made by solicitors, barristers, legal executives and licensed conveyancers. The scheme also has successor rules that provide for practices to be responsible for the errors of prior practices.5 Ordinarily, the time limit for making a complaint is within the later of one year from the act or omission and one year from when the complainant should reasonably have known there was cause for complaint without taking advice from a third party.6 1 For the scheme rules see https://www.legalombudsman.org.uk/wp-content/uploads/2019/03/ Scheme-Rules-1-April-2019.pdf. 2 A  micro-enterprise is an enterprise which (a) employs fewer than 10 persons; and (b) has a turnover or annual balance sheet that does not exceed €2 million: see https://www.handbook.fca. org.uk/handbook/glossary/G2623.html. This was originally an EU term: see Art 1 and Art 2(1) and (3) of the Annex to Commission Recommendation 2003/361/EC. 3 For the complete list of eligible complainants see Rule 2.1. 4 See s 137(5) of the Legal Services Act 2007: ‘The power of the ombudsman to make a direction … is not confined to cases where the complainant may have a cause of action against the respondent for negligence’. 5 See Rule 2.10. 6 See Rule 4.5. These limits can be extended where the Ombudsman considers there are exceptional circumstances: see Rule 4.6. The complainant should also exhaust the solicitor’s complaints procedure first.

(b) Determinations 15.35 The complaint will be determined by reference to what is (in the Ombudsman’s opinion) fair and reasonable in all the circumstances of the case.1 In determining what is fair and reasonable the Ombudsman will take account of (but is not bound by) the decision which a court might make, any applicable conduct rules and what the Ombudsman considers to have been good practice at the relevant time.2 The Ombudsman has the power to order compensation for distress and inconvenience and can also choose not to follow legal precedent where he or she considers it is fair and reasonable in all the circumstances to do so.3 The Ombudsman’s determination may include one or more of the following directions to the solicitor: (a)

to apologise;

(b) to pay compensation for loss suffered; (c)

to pay interest on that compensation; 808

Redress  15.36 (d) to pay compensation for inconvenience and distress caused; (e)

to ensure (and pay for) putting right any specified error;

(f)

to take (and pay for) specified action in the interests of the complainant;

(g) to pay the costs of the complainant; and (h) to limit the solicitor’s fees to a specified amount.4 The total value of compensation payable on the determination of a complaint cannot exceed £50,000 (together with the costs of remedial action).5 That limit does not apply to a direction limiting the regulated person’s fees. The determination must be in writing and state reasons.6 The complainant has a choice whether or not to accept it. But if it the determination is accepted it becomes final and binding on the parties.7 Once a determination becomes binding and final, neither party may start or continue legal proceedings in respect of the subject matter of the complaint.8 The Legal Ombudsman service is free to complainants and orders to pay complainants’ costs are rare.9 Details of a complaint may be published.10 The Ombudsman also has extensive powers to communicate with other regulators concerning any alleged misconduct in respect of the substance of the complaint or the manner in which the regulated person has responded to it.11   1 See Rule 5.37.  2 See R  (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service [2008]  EWCA  Civ 642, [2008] Bus LR  1486, approving R  (on the application of IFG Financial Services Ltd) v Financial Ombudsman Service [2005] EWHC 1153 (Admin), [2006] 1  BCLC  534. These decisions concern the exercise of the Financial Ombudsman’s discretion under s 128 of the Financial Services and Markets Act 2000, ‘A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case’. The wording is nearly identical to that which applies to the Legal Ombudsman (see s 137(1) of the Legal Services Act 2007).   3 See s 137(2)(c) of the Legal Services Act 2007.   4 See Rule 5.38 and s 137(2).   5 See Rule 5.43.   6 See Rule 5.46.   7 See Rule 5.49.   8 See Rule 5.50 and para  15.37, below. If a determination is rejected, it has no effect on the parties’ legal rights: see Rule 5.54. A binding and final determination can be enforced through the courts: see Rule 5.56.   9 See Rule 5.39. 10 See Rule 5.55. 11 See Rules 5.59 and 5.60.

(c)  Investigative powers 15.36 The Ombudsman may by notice require a party to a complaint under the scheme to produce documents or information where he or she considers it is necessary for the determination of the complaint1 subject to the usual safeguards.2 If an authorised person fails to comply with such a notice then the Ombudsman must report that person to the relevant approved regulator.3 The 809

15.37  The regulation of solicitors Ombudsman may also certify the person’s failure to the court and the court may then deal with the person (and, if the person is a body, its managers) as if that person was in contempt.4 1 See s 147(1) of the Legal Services Act 2007. 2 Section147(6) provides as follows: ‘No person may be required under this section– (a) to provide any information which that person could not be compelled to provide or give in evidence in civil proceedings before the High Court, or (b) to produce any document which that person could not be compelled to produce in such proceedings.’ 3 See s 148. 4 See s  149. Deputy Chief Legal Ombudsman v Young [2011]  EWHC  2923 (Admin), [2012] 1 WLR 3227 and Deputy Chief Legal Ombudsman) v French [2012] EWHC 113 (Admin) for examples of the exercise of this jurisdiction. Proceedings are brought under CPR  Part 8 and issued in the Administrative Court and in Young the Court of Appeal gave detailed guidance in relation to the exercise of the jurisdiction.

(d)  Civil claims 15.37 Where a complainant accepts the Ombudsman’s determination it becomes final and binding and he or she may not start or continue legal proceedings in respect of the subject matter of the complaint.1 If no complaint is made and the value of the claim is less than £50,000 a failure to take advantage of the scheme might be relevant to arguments on interest and costs in any civil claim. 1 See Rule 5.50 and s 140(1) of the Legal Services Act 2007: ‘[N]either the complainant nor the respondent, in relation to a complaint, may institute or continue legal proceedings in respect of a matter which was the subject of a complaint, after the time when a determination by an ombudsman of the complaint becomes binding and final in accordance with this section.’ This makes it unnecessary to consider whether the effect of the determination is to extinguish the underlying cause of action through merger: see Andrews v SBJ  Benefit Consultants [2010] EWHC 2875 (Ch), [2011] PNLR 29.

4  Other redress (a)  Co-operation and accountability 15.38 Paragraphs 7.1 to 7.10 of the SRA Code of Conduct for Individuals 2019 imposes detailed obligations upon the individual solicitor to co-operate with the SRA in investigating misconduct. These provisions are discussed in detail elsewhere.1 However, paragraph 7.11 also imposes an obligation upon the solicitor to provide redress and put matters right.2 That obligation is in the following terms: ‘You are honest and open with clients if things go wrong, and if a client suffers loss or harm as a result you put matters right (if possible) and explain fully and promptly what has happened and the likely impact. If requested to do so by the SRA you investigate whether anyone may have a claim against you, provide the SRA with a report 810

Redress  15.39 on the outcome of your investigation, and notify relevant persons that they may have such a claim, accordingly.’ The wording of this paragraph involves a number of changes from the SRA Handbook.3 First, it applies to both current and former clients.4 Secondly, it emphasises transparency and imposes an immediate obligation to put things right.5 Like the obligation to replace client funds, paragraph 7.11 is a conduct rule enforceable by disciplinary action and does not give rise to a civil liability. But it is also special kind of conduct rule. It imposes a primary obligation of candour and an obligation to remedy the mistake not only upon the individual solicitor who was responsible for it but upon the firm and its managers. The enforcement strategy makes it clear that remedial action is a factor which the SRA will take into account in assessing the seriousness of misconduct.6 1 See Chapter 16, para 16.20. Note, in particular, the tension between the obligation to put things right and the obligation to cease acting for the client when an own matter conflict arises. For further discussion of this issue see Chapter 16, paras 16.74 to 16.78. 2 Paragraph 3.5 of the SRA Code of Conduct for Firms 2019 imposes the same obligation on the firm. Paragraph 8.1 provides that the firm’s managers are responsible for compliance with the Code and that this responsibility is joint and with other managers of the firm. 3 O(10.11) provided as follows: ‘when required by the SRA in relation to a matter specified by the SRA, you [must]: (a) act promptly to investigate whether any person may have a claim for redress against you; (b) provide the SRA with a report on the outcome of such an investigation, identifying persons who may have such a claim; (c) notify persons that they may have a right of redress against you, providing them with information as to the nature of the possible claim, about the firm’s complaints procedure and about the Legal Ombudsman; and (d) ensure, where you have identified a person who may have a claim for redress, that the matter is dealt with under the firm’s complaints procedure as if that person had made a complaint.’ 4 The definition of ‘client’ in the SRA  Glossary defines ‘client’ as ‘the person for whom you act and, where the context permits, includes prospective and former clients’. The client in the SRA Handbook 2011 did not extend to former clients. 5 There are analogies here with the power to require a regulated person to carry out a past business review or other remediation step as part of a ‘consumer redress scheme’ under s  404 of the Financial Services and Markets Act 2000. 6 https://www.sra.org.uk/sra/strategy-2017-2020/sub-strategies/sra-enforcement-strategy/. Section 2.2 of the strategy states that personal mitigation will include ‘remedial action taken since the events’. It also states: ‘When assessing the risk of future harm, factors such as the length of time since the events, insight into the conduct or behaviour, and any remedial action taken, are relevant to our decision whether to investigate an allegation and, if so, what action to take.’

(b)  Complaints handling 15.39 Paragraphs 8.2 and 8.3 of the SRA Code of Conduct for Individuals 2019 also imposes obligations to establish and maintain a complaints handling procedure and to ensure that clients are informed about the procedure, their right to complain and of their right to complain to the Legal Ombudsman. If a complaint is not resolved to the client’s satisfaction within eight weeks, para 8.4 imposes an obligation to write to the client informing them of their right to complain to the Legal Ombudsman, the time frame for doing so and full contact details. If a complaint has been brought and the complaints procedure 811

15.39  The regulation of solicitors has been exhausted, it also requires the solicitor to write to the client informing them that the complaint cannot be settled and giving details of an alternative dispute resolution approved body which would be competent to deal with the complaint. It also imposes an obligation to deal with complaints free of charge.1 1 Rule 7.1(c) of the SRA  Code of Conduct for Firms 2019 incorporates all of these same provisions.

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Chapter 16

Disciplinary proceedings

A  THE SRA: DISCIPLINARY ACTION AND INVESTIGATIONS 1  The SRA’s disciplinary powers 16.01 We have briefly described the disciplinary powers of the Solicitors Regulatory Authority (SRA) in Chapter 15 in the context of the different authorised bodies which are subject to its jurisdiction.1 In Part A of this chapter we describe those powers in more detail and the procedure used by the SRA to take disciplinary action. In Part B we discuss the procedural aspect of disciplinary proceedings before the Solicitors Disciplinary Tribunal (SDT), in Part C legal issues arising from the disciplinary rules on topics such as dishonesty and lack of integrity, and in Part D  sanctions. In Part A  we begin with the SRA’s jurisdiction to discipline solicitors (and their employees) under the Solicitors Act 19742 and the jurisdiction to discipline recognised bodies (their managers and employees) under the Administration of Justice Act 1985.3 Although these jurisdictions overlap,4 the effect of the Administration of Justice Act 1985 was to extend the same disciplinary powers to regulated firms as well as individual solicitors. Thereafter, we consider the powers to discipline licensed bodies under the Legal Services Act 2007.5 Again, there is also a considerable overlap between these jurisdictions even though this time they differ.6 Finally, we set out the other powers which the SRA has to control solicitors.7 1 See paras 15.14 to 15.19, above. 2 See para 16.02, below. 3 See para 16.03, below. 4 For instance, with effect from 6 April 2015, para 14B of Sch 1 to the Administration of Justice Act 1985 has applied to a sole solicitor (or any employee) in a recognised sole solicitor’s practice. Both the individual solicitor and his or her employees could already have been disciplined under s 44D of the Solicitors Act 1974. This change was prompted by the move to treat a sole solicitor’s practice as a regulated firm. 5 See para 16.04, below. 6 For example, a solicitor employee of a licensed body is subject to both the jurisdiction under the Solicitors Act 1974 and the jurisdiction under the Legal Services Act 2007. He or she could be subject to a penalty of £2,000 under s 44D of the Solicitors Act 1974 or a penalty of up to £50m under s 95 of the Legal Services Act 2007. The SRA presumably has an unfettered discretion as to which route to pursue. Note too that a solicitor who is an employee of a licensed body is subject to the SRA’s information gathering powers under both disciplinary regimes: see paras 16.22 and 16.23, below. 7 See para 16.05, below.

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16.02  Disciplinary proceedings

(a)  Solicitors Act 1974 16.02 Where a solicitor or an employee of a solicitor has failed to comply with any rules made by the SRA or has been guilty of professional misconduct, s 44D(2) of the Solicitors Act 1974 confers power on the SRA to give the solicitor (or an employee of the solicitor1) a written rebuke or to direct the individual to pay a penalty not exceeding £2,000.2 The term ‘professional misconduct’ is not defined. However, the SRA’s Enforcement Strategy contains detailed guidance stating when the SRA will exercise its powers. It states that the SRA focuses on issues which present an underlying risk to the public interest, ensuring that any decision to investigate a complaint or report is a proportionate response to that risk. It also states that the SRA focuses on serious issues:3 ‘We focus our action on the most serious issues: our codes of conduct confirm that we will take action in relation to breaches which are serious, either in isolation or because they demonstrate a persistent failure to comply or a concerning pattern of behaviour. The concept of “serious breach” is described further below. However, this includes within it matters that can be described as serious “misconduct” – or conduct that is improper and falls short of ethical standards. It also includes other serious breaches of our standards or requirements – for example, those relating to failures of firms’ systems and controls.’ The SRA will not investigate an issue which is within the jurisdiction of another regulator or prosecuting authority unless it also raises an issue which is core to its regulatory role and public interest purpose.4 However, the strategy also states that the SRA is concerned with the impact of conduct outside legal practice ‘including in the private lives of those we regulate if this touches on risk to the delivery of safe legal services’.5 The SRA will always investigate criminal convictions or cautions whether or not these relate to the individual’s practice6 and it will take action against individuals where they are personally responsible but also to ensure that they cannot avoid accountability or repeat similar behaviour by moving firms. This is more likely where the practice is small and may have no separation from its principal or partners.7 1 For the scope of the jurisdiction: see para 15.15, above. A consultant who provided services to a solicitors’ firm is not an ‘employee of a solicitor’ within the meaning of s 44D and the SRA does not have power to impose penalties under that section on such an individual: see Solicitors Regulation Authority v Solicitors Disciplinary Tribunal [2016] EWHC 2862 (Admin) (DC). 2 See s 44D(1). In March 2012 the SRA proposed that its penalty powers in respect of non-ABS individuals and entities should be increased. The proposal was rejected by the Ministry of Justice in October 2012. But on 20 November 2013 the SRA launched a consultation exercise raising the question again. The exercise closed on 21 July 2014 and as yet there has been no statutory increase in the SRA’s penalty powers. The consultation document provides a useful summary of the SRA’s powers: see https://www.sra.org.uk/sra/consultations/consultation-listing/internalfining-powers/#download. 3 See §2.2 at https://www.sra.org.uk/sra/strategy-2017-2020/sub-strategies/sra-enforcementstrategy. It also states that mitigating features of a case which might be indicative of reduced or low future risk include expressions of apology, regret, remorse, no evidence of repetition of the misconduct or, conversely, a pattern of misconduct.

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The SRA: disciplinary action and investigations  16.03 4 See the SRA’s ‘Guidance on Parallel Investigations’ originally issued on 8  August 2016 and updated 25  November 2019 at https://www.sra.org.uk/sra/decision-making/guidance/ investigations-parallel/. 5 See §2.2 at p 13. In R (Pitt) v General Pharmaceutical Council [2017] EWHC 809 (Admin) Singh J rejected an argument that The Standards for Pharmacy Professionals were ultra vires because the GMC had no power to set standards of politeness on pharmacy professionals which were to be applied at all times including in their private life unconnected to their work. The decision is cited in the strategy and clearly informed its scope. In R (Ngole) v The University of Sheffield [2019] EWCA Civ 1127 Irwin LJ suggested a more nuanced response. He stated at [104]: ‘However, a moment’s consideration will lead to the conclusion that the maintenance of confidence will carry very different requirements in different professions, and in different factual contexts. Thus, public expression of firm, political views will be perfectly proper for a lawyer in private practice, but are quite improper for a judge.’ 6 See §2.2 at pp 13–14: ‘At the most serious end of the spectrum are convictions resulting in custodial sentences, particularly those relating to dishonesty, fraud, bribery and extortion; those associated with terrorism, money laundering or obstructing the course of justice (such as perjury or witness tampering) or facilitating or concealing serious or organised criminality by others; or those involving violence, sexual misconduct or child sexual abuse images.’ 7 See §3 at p 16.

(b)  Administration of Justice Act 1985 16.03 Where a recognised body1 or a manager or employee of a recognised body, or a sole solicitor or any employee in a recognised sole solicitor’s practice, fails to comply with any rules applicable to that person by virtue of s 9, para 14B of Sch 2 to the Administration of Justice Act 1985 confers similar powers on the SRA to rebuke the recognised person or the manager or employee and to direct payment of a £2,000 penalty. Unlike s 44D of the Solicitors Act 1974, para  14B does not refer to professional misconduct.2 However, it is suggested that the SRA will exercise its powers in the same way under both provisions. The Enforcement Strategy indicates that the SRA will usually take action against a firm either alone or in addition to taking action against an individual where there is a breach of the SRA  Code of Conduct for Firms 2019 or of the SRA’s other requirements. It also gives a number of examples where it will take action against a firm to ensure that it is responsible as a whole for future compliance and the management of risk: (a)

to mark the firm’s responsibility and to hold it to account for the breach (especially where it is not possible or proportionate to establish individual responsibility);

(b) when the events demonstrate a failure which relates to the culture, systems, supervision arrangements or processes for which the firm as a whole should be held accountable; (c)

to encourage a culture of compliance and management of future risk; and

(d) when firm-specific action is appropriate.3 A  finding against a firm is not a finding of personal misconduct against its partners, managers or employees. Generally, the SRA will only hold managers 815

16.04  Disciplinary proceedings to account for the actions of the firm (as opposed to their own conduct or behaviour) where they had a responsibility for the relevant events (or should have known about them and intervened).4 1 For the meaning of the term ‘recognised body’ see para 15.16, above. 2 The full text of para  14B(1) is as follows: ‘(1) This paragraph applies where the Society is satisfied that— (a) a recognised body, or a manager or employee of a recognised body, or (b) a sole solicitor, or any employee, in a recognised sole solicitor’s practice, has failed to comply with a requirement imposed by or by virtue of this Act or any rules applicable to that person by virtue of section 9 of this Act.’ 3 See §3. Examples of circumstances in which firm specific action is appropriate are as follows: a fine to remove the benefit obtained from the wrongdoing; suspension or revocation of the firm’s authorisation; or firm-based conditions or compliance plans (such as requirements relating to the firm’s governance or oversight arrangements, mandatory remedial action such as establishing compliance systems or providing accounting records, or restrictions to prevent certain work being carried out or funds being held). 4 See §3 at p 17.

(c)  Legal Services Act 2007 16.04 The limits on the SRA’s power to direct the payment of a penalty by a licensed body1 are very different. Section 95 of the Legal Services Act 2007 confers upon the SRA (in its capacity as the licensing authority) the power to impose on a licensed body, its managers or employees a financial penalty not exceeding £250m for a licensed body and £50m for a manager or employee.2 Section 99 also confers on the SRA (in the same capacity) the power to disqualify a person from holding the role of employee, manager or Head of Legal Practice or Head of Finance and Administration of a licensed body. There are two statutory conditions for the exercise of this power: first, ‘the disqualification condition’ must be satisfied and, secondly, the SRA must also be satisfied it is undesirable for the person to engage in the activity the subject of the disqualification.3 The disqualification condition is satisfied if the person either intentionally or through neglect breaches a relevant duty to which the person is subject or causes or substantially contributes to a significant breach of the terms of the licensed body’s licence.4 The SRA Enforcement Strategy does not distinguish between recognised bodies and licensed bodies or their managers and employees and the guidance set out in the preceding paragraph applies equally to them. 1 For the definition of the term ‘licensed body’ see paras 15.17 and 15.18, above. 2 See the Legal Services Act 2007 (Licensing Authorities) (Maximum Penalty) Rules SI  2011/1659. There are additional provisions concerning appeals and recovery of financial penalties: see ss 96 and 97 of the Legal Services Act 2007. 3 See s 99(1). The relevant duties are defined by s 99(4) as: ‘(a) the duties imposed on a Head of Legal Practice by section 91, (b) the duties imposed on a Head of Finance and Administration by section 92, (c) the duties imposed by section 176 on regulated persons (within the meaning of that section), and (d) the duty imposed on non-authorised persons by section 90.’ 4 See s 99(3).

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The SRA: disciplinary action and investigations  16.06

(d)  Other controls 16.05 The SRA’s power as a prosecuting authority to make an application to the SDT is considered in Part B, below. But the SRA also has other enforcement powers which enable it to exercise oversight and control over firms and solicitors. These powers include the power to impose conditions on practice;1 to suspend practising certificates;2 to revoke, suspend or impose conditions on the authorisation;3 to make an order to control the activities of a person who is not a solicitor but is involved in legal practice;4 and the ability to intervene in solicitors’ practices, recognised bodies and licensed bodies.5 1 See rr 7.1–7.6 of SRA Authorisation of Individuals Regulations 2019 for individual solicitors and r 3 of the SRA Authorisation of Firms Rules for firms. 2 See s 13B of the Solicitors Act 1974. 3 The power to revoke is now at rr 4.3 4.4 of the SRA Authorisation of Firms Rules 2019 and the power to revoke in relation to individuals is at r.7.4 of the SRA Authorisation of Individuals Regulations. See also s 102 of the Legal Services Act 2007. 4 See s 43 of the Solicitors Act 1974 considered in para 15.20, above. 5 See s 35 of and Sch 1 to the Solicitors Act 1974 and paras 32–35 of Sch 2 to the Administration of Justice Act 1985. See also s 102 of the Legal Services Act 2007.

(e)  SRA Regulatory and Disciplinary Procedure Rules 2019 16.06 The SRA Regulatory and Disciplinary Procedure Rules 2019 govern decisions made by the SRA in exercise of these powers. Rule 1 imposes a mandatory duty upon the SRA to assess any allegation which comes to, or is brought to, its attention to decide whether disciplinary action should be taken. Rule 1.2 defines matters which fall within the ambit of the rule very broadly.1 Rule 2 provides that the SRA may carry out an investigation and exercise its investigative powers.2 The extent of the obligation imposed on solicitors and firms to report matters which fall within r 1.2 and the scope of the SRA’s investigative powers are considered in detail in section 2, below. But before making a decision under r 3 the SRA must give notice to the person who is the subject of the investigation (a) setting out the allegation and the facts in support, (b) summarising the regulatory or other history relating to that person and (c) where making a recommendation as to the decision to be made under r 3 (and also publication under r 9 and costs under r 10).3 At any stage the authorised decision maker4 may decide to take no further action in respect of an allegation and to close the matter.5 Pending a final decision under r 3 an authorised decision maker may impose conditions on the practising certificate of a solicitor or the authorisation of a body, where satisfied that it is necessary to do so for the protection of the public or in the public interest to do so.6 1 ‘A matter is an allegation in respect of a person for the purpose of these rules if it raises a question that the person: (a) is a solicitor, an REL or RFL and has committed professional misconduct; (b) has committed or is responsible for a serious breach of any regulatory obligation placed on them by the SRA’s regulatory arrangements, section 56 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, or the Money Laundering, Terrorist Financing and Transfer of Funds

817

16.07  Disciplinary proceedings Regulations 2017, the Financial Guidance and Claims Act 2018 or any equivalent legislative requirements that may succeed the same; (c) is a manager or employee of an authorised body and is responsible for a serious breach by the body of any regulatory obligation placed on it by the SRA’s regulatory arrangements; (d) is not a solicitor and has been convicted of a criminal offence, or been involved in conduct related to the provision of legal services, of a nature that indicates it would be undesirable for them to be involved in legal practice; (e) in relation to a licensed body, has committed or substantially contributed to a serious breach of any regulatory obligation of a nature that indicates it is undesirable for them to carry out activities as a HOLP, HOFA, manager or employee of an authorised body; (f) has otherwise engaged in conduct that indicates they should be made subject to a decision under rule 3.1.’ 2 ‘The SRA may carry out such investigations, and in doing so may exercise any of its investigative powers, as it considers appropriate: (a) to identify whether a matter comprises an allegation under rule 1.2, or (b) to the consideration of an allegation under rule 3.’ For the decisions which may be made see para 16.08, below. 3 See r 2.3. The notice must be accompanied by any evidence or documentation which the SRA considers to be relevant to the allegation. The SRA case worker will often notify the person under investigation that he or she recommends a certain decision before the decision maker makes a formal decision and hence the reference to a ‘recommendation as to the decision to be made under r 3’. The SRA may dispense with notice under r 2.3 or 2.4 (below) where: (a) it intends to include a further allegation in a matter already subject to an application or ongoing proceedings before the Tribunal; (b) it intends to make an application to the Tribunal in a case in which it is exercising its powers of intervention as a matter of urgency; or (c) it is otherwise in the public interest to do so. 4 This term is discussed in para 16.08, below. 5 See r 2.4. If so, the authorised decision maker may decide to issue advice to the relevant person, or a warning regarding their future conduct or behaviour. But it must give notice under r 2.3 before doing so. 6 See r 3.2(a). The SRA also has power to suspend or continue the suspension of a practising certificate or registration where an application has been made to the SDT and the solicitor has been convicted of an indictable offence or an offence involving dishonesty or deception: see r 3.2(b).

(f)  Authorised decision makers 16.07 The SRA Glossary defines an authorised decision maker as ‘a person authorised to make that decision by the SRA under a schedule of delegation’. On 25 November 2019 the SRA published a new schedule of delegation.1 This schedule sets out how the disciplinary powers of the SRA are delegated to certain staff, groups and individuals. Adjudication2 may exercise all of the powers in r 2 and r 3.1(a) of the SRA Regulatory and Disciplinary Procedure Rules 2019 set out above (including the power to direct the payment of costs).3 Directors and Heads and Investigation staff4 may also exercise the powers in r 2 to authorise an on-site inspection, to decide that it would not be in the public interest to notify the relevant person or their employer of an investigation or to issue letters of advice under r 2.4 or to suspend a practising certificate.5 Legal staff may authorise disciplinary proceedings before the SDT.6 The power to give notices under s 44B of the Solicitors Act 1974 and s 93 of the Legal Services Act 2007 may be exercised by Adjudication, Investigation and Legal staff;7 The powers to give notices under ss 44BA and 44BB of the Solicitors Act 1974 and s 94 of the Legal Services Act 2007 and to authorise a Statements 818

The SRA: disciplinary action and investigations  16.08 of Agreed Facts, Admissions and Outcomes may be exercised by legal staff;8 but the power to authorise a regulatory settlement agreement may only be exercised by Adjudication and a number of senior officers.9 1 https://www.sra.org.uk/sra/decision-making/schedule-delegation/. 2 The term ‘Adjudication’ is defined as ‘an Adjudicator, the Adjudication Panel and the Chief Adjudicator’. The rules also use the term ‘adjudication panel’ to distinguish it from a single authorised decision maker: see, in particular, rr 8.3–8.8 (see para 16.09, below). 3 See the schedule, paras 24, 29–33 and 37. 4 The term ‘Directors’ includes all Directors, Executive Directors and the Chief Executive of the SRA. The term ‘Heads’ includes all persons described as ‘Head’ of function in their job title. Individual staff also have three categories of authority limits. 5 See paras 29–33. 6 See para 40. 7 See para 43. 8 See paras 41 and 44. For Statements of Agreed Facts, Admissions and Outcomes see para 16.52, below. 9 See para 45.

(g) Jurisdiction 16.08 Where an allegation made under r 1.1 is found to be proved, r 3.1 of the SRA Regulatory and Disciplinary Procedure Rules 2019 provide that the authorised decision maker may decide as appropriate in respect of a relevant person to: (a)

give a written rebuke;

(b)

direct the payment of a financial penalty together with the amount of any penalty;

(c) disqualify a person from acting as a HOLP or HOFA, manager or employee of a licensed body; (d) make an order to control the person’s activities in connection with legal practice; (e)

impose a condition on the practising certificate of a solicitor, registration of an REL or RFL or the authorisation of a body for such period as may be specified;

(f)

revoke or suspend authorisation to practise; and

(g)

make an application to the Tribunal under s 47 of the Solicitors’ Act 1974 for the allegation to be considered.

Rule 4.1 provides that an authorised decision maker may decide to direct the payment of a financial penalty under r 3.1(b) where this is appropriate to: (a) remove any financial or other benefit arising from the conduct; (b) maintain professional standards; or (c) uphold public confidence in the solicitors’ profession and in legal services provided by authorised persons. Rule 5.1 also provides that an authorised decision maker may decide to disqualify a person 819

16.09  Disciplinary proceedings under r 3.1(c) only where they are satisfied that it is undesirable for the person to engage in the relevant activity or activities.1 1 R 4.2 provides that: ‘Where the SRA recommends the imposition of a financial penalty on a relevant person, it may, by notice, require the person to provide a statement as to their financial means which includes a statement of truth, within such period as the SRA may specify (which must be no less than 14 days from the date of the notice).’ R 4.3(b) also permits the authorised decision maker to suspend the penalty.

(h) Procedure 16.09 Rule 8 of the SRA Regulatory and Disciplinary Procedure Rules 2019 deals with the rules of evidence and procedural matters. Rule 8.1 makes it clear that these rules are not prescriptive and that the SRA may vary the procedure which it adopts where it considers that it is in the interests of justice or the overriding public interest to do so. Nevertheless, rr 8.3–8.9 set out the basic rules which the SRA can be expected to follow in the majority of cases: ‘8.3 Before reaching a decision under rule 3, an authorised decision maker or adjudication panel may give directions for the fair and effective disposal of the matter. 8.4 Decisions of an adjudication panel are made by simple majority. 8.5 Where an allegation is being considered by an adjudication panel, the proceedings will generally be conducted in private by way of a meeting. However, the panel may decide to conduct a hearing, which it may decide should be held in public, if it considers it in the interests of justice to do so. 8.6 Where an adjudication panel have decided to consider an allegation at a hearing: (a) the SRA shall send a notice informing the relevant person of the date, time and venue of the hearing, no less than 28 days before the date fixed for the hearing; (b) the relevant person and the SRA shall have the right to attend and be represented; and (c) the panel may, at any time, whether of its own initiative or on the application of a party, adjourn the hearing until such time and date as it thinks fit. 8.7 The civil standard of proof applies to all decisions made under these rules. 8.8 An authorised decision maker may admit any evidence they consider fair and relevant to the case before them, whether or not such evidence would be admissible in a court. This may include regulatory or other history relating to the relevant person, or any associated person, which is relevant to the allegation, including to the question of propensity. 8.9 A certificate of conviction, or a finding by a court or disciplinary or regulatory body, certified by a competent officer of the court, or 820

The SRA: disciplinary action and investigations  16.10 relevant body in the UK or overseas, shall be conclusive evidence of the offence committed or finding reached, and the facts relied upon.’ These rules are supplemented by guidance ‘Decision-making, reviews and attendance procedures’ which was issued on 25 November 2019 at the same time as the rules came into force.1 The purpose of the guidance is to set out how the SRA makes a first instance decision or ‘FID’ and how it deals with an internal review of that decision. The civil standard of proof applies to all decisions made by a decision-maker.2 Rule 8.8 also makes it clear that a decision maker may admit any evidence considered fair and relevant whether or not such evidence would be admissible in a court. 1 https://www.sra.org.uk/sra/decision-making/guidance/decision-making-reviews-attendanceprocedures/. 2 For a recent statement of the law on the civil standard of proof in relation to allegations of dishonesty: see Bank St Petersburg PJSC v Arkhangelsky [2020] EWCA Civ 408 at [45]–[47] (Sir Geoffrey Vos C).

(i)  Paper decisions 16.10 The guidance states that most SRA decisions are made on a paper basis. FIDs may be made by operational unit staff, a single adjudicator or an adjudication panel. FIDs will be referred directly to an adjudication panel where the case is particularly high profile, sensitive or complex, the person under investigation is (or was) an SRA employee or consultant, lay input is desirable or it is otherwise in the public interest for the case to be considered by a panel. The guidance also sets out the procedure which a single decision maker or the adjudication panel will adopt before making a paper decision. The case officer will generally provide the person under investigation with notice: (a)

setting out the allegations and the facts in support;

(b) summarising any regulatory or other history relevant to the person (or any associated person) which is relevant to the allegation; and (c) where appropriate, making a recommendation as to the decision to be made, publication and costs. The case officer will also provide any evidence or documentation which the SRA considers relevant to the allegations. It will also invite the person to respond with written representations within a specified period (which is usually 14 days although the SRA may vary the period if it considers it in the public interest to do so). The decision maker will then make a determination by considering the facts and representations set out in the papers (although he or she may ask for further information either from the relevant person or third parties). Where a decision maker cannot make a final decision, he or she will provide written reasons in a preliminary or ‘stand-over’ decision.1 When 821

16.11  Disciplinary proceedings making a stand-over decision, the decision-maker may give further directions for the fair and effective disposal of the matter. 1 The example of a stand-over decision given in the guidance is that the decision-maker might consider it appropriate to give the relevant person time to complete certain actions or to provide additional information.

(ii)  Meetings and oral hearings 16.11 An adjudication panel will generally consider an application or allegation at a meeting in private and without the person under investigation being present.1 In some circumstances, however, the decision maker (whether a single decision maker or an adjudication panel) may decide to invite the relevant person to attend a meeting before making a final decision. The panel may also decide to conduct a hearing in public if it considers that it is in the public interest or the interests of justice to do so.2 The guidance states that when considering whether to invite the relevant person to a meeting or to conduct a hearing, the decision maker will have regard to all the circumstances of the case. But it also identifies the following factors which may suggest that a meeting or hearing is necessary: (a)

the honesty of the relevant person is being questioned; or

(b) there are important material facts in dispute which, in the opinion of the decision maker, cannot fairly be determined on the documentation alone; or (c) the relevant person advances a significant explanation or mitigation which needs to be heard orally in order fairly to determine its credibility; or (d) the decision maker considers it appropriate and necessary to assist them in making a proper determination; or (e)

a reasonable adjustment is required; or

(f)

there is the possibility that the decision maker may impose a substantial fine; or

(g) there is the possibility of disqualification or revocation under relevant rules or regulations.3 Where an adjudication panel has decided to consider an allegation at a hearing the SRA must send a notice informing the relevant person of the date, time and venue of the hearing no less than 28 days before the date fixed for the hearing and both the relevant person and the SRA are entitled to attend and to be represented.4 If the relevant person does not attend the meeting or the hearing or fails adequately to explain why they did not attend, the decision maker or panel may proceed to consider the matter based solely on the documents available to them. 1 See r 8.5 (above).

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The SRA: disciplinary action and investigations  16.12 2 R 8.5 does not state in terms that a decision maker or panel may hold a meeting as an alternative to an oral hearing at which the relevant person may attend (either with or without a representative): see the text of the rule at para 16.09, above. However, the guidance indicates that a decision maker or panel may take this course and it plainly falls within r 8.3. 3 In R  (Thompson) v Law Society [2004]  EWCA  Civ 167, [2004] 1  WLR  2522 the Court of Appeal dismissed a challenge to a number of disciplinary decisions awarding compensation under s 37A of and Sch 1A to the Solicitors Act 1974 (for which see para 15.33, above). In each case the appeal or review had been conducted by an adjudication panel without an oral hearing but the Court of Appeal refused judicial review on the basis that there was no disputed issue of fact which was central to the adjudication panel’s assessment which could not fairly be resolved without hearing oral evidence or without an oral hearing: see [51]. The court also dismissed an Article 6 challenge on the basis that the process was fair. Clarke LJ stated (at [70]): ‘There may be cases in which a public and oral hearing is required at first instance and other cases where it is not, just as there may be cases in which the potential availability of judicial review will not be sufficient to avoid a breach of article 6(1).’ It is suggested that the list of factors in the guidance (and set out in the text) is consistent with the approach in Thompson but that a decision would be subject to judicial review if the panel failed to direct an oral hearing in circumstances where there was a disputed issue of fact which was central to the adjudication panel’s assessment and which could not fairly be resolved without hearing oral evidence. Thompson has been followed in a number of cases and, most recently, in Yussouf v The Solicitors Regulation Authority [2018] EWHC 211 (Admin) (John Howell QC) (where allegations of dishonesty were remitted for an oral hearing). 4 See r 8.6(a) and (b).

(iii) Findings 16.12 The SRA  Regulatory and Disciplinary Procedure Rules 2019 do not contain any rules about the way in which the decision maker should arrive at his or her findings, particularly, where allegations of misconduct are concerned.1 However, on 25  November 2019 the SRA also issued guidance on ‘How we make decisions and the criteria we apply’.2 The guidance emphasises the objectives in the Legal Services Act3 and its obligation under s 28 to have regard to best regulatory practice and to make sure that its work is transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed. It also sets out a number of principles of decision making including the following under the heading ‘Impartiality’: ‘We make sure decisions are free from bias and discrimination, and any perception of bias, from the point of view of a fair-minded and informed observer. Decision makers must declare any conflict of interest and remove themselves from cases in which they have any personal relationship, or a financial or other interest. This includes, in certain circumstances, separation between those reaching final decisions and front line staff involved in the matter. Each case must be considered on its own merits, on an objective analysis of the facts, and in accordance with our published policies, guidance and criteria. The information available to the decision maker needs to be relevant and sufficient to enable a full and fair decision to be made. We have 823

16.13  Disciplinary proceedings powers to seek information and decision-makers will ask for more information if they consider it necessary.’4 1 The SRA  Disciplinary Procedure Rules 2011 (which the 2019 rules replaced) contained a definition of an SRA finding. But it was no more than a summary of the various decisions which the SRA had jurisdiction to make. 2 https://www.sra.org.uk/sra/decision-making/guidance/make-decisions-criteria-apply/. 3 See para 15.09, above. 4 The guidance states that the SRA may take some decisions without disclosing part or all of the information or grounds in advance. It also states that: ‘These situations will be exceptional and, where possible, the person involved will be informed of any non-disclosure.’

(i) Enforcement 16.13 The SRA’s approach to enforcement is set out in the SRA Enforcement Strategy1 originally published on 7  February 2019 and then updated on 25 November 2019.2 The purpose of the strategy is to explain how the SRA uses its enforcement powers and to provide clarity for the public, regulated individuals and firms. It states that the SRA’s focus is on risk to the public interest and that its actions are not punitive.3 In exercising its enforcement powers the SRA will take into consideration: (a)

the nature of the allegation;

(b) the intent or motivation of the relevant firm person; (c)

the harm and impact of the relevant conduct;

(d) the role, experience and seniority of the relevant firm or person; (e)

the regulatory history of the firm or person and its patterns of behaviour; and

(f)

any remedial action.4

Appendix A to the Enforcement Strategy contains a detailed table of sanctions and controls, the purpose of the relevant sanction or control and the factors for and against their imposition. The sanctions which the SRA may impose are letters containing advice and warnings, a rebuke, the imposition of conditions, a financial penalty and suspension or revocation of the firm’s authorisation. The SRA also adopts a three-stage approach to setting a financial penalty and has issued separate guidance in relation to such decisions.5 This is of particular relevance to licensed bodies given the limit of £2,000 upon the SRA’s ability to impose a financial penalty on solicitors and recognised bodies. It should also be noted that the SDT has its own criteria for the imposition of sanctions which are considered below.6 1 For the guidance in the strategy on when the SRA will take action see para 16.02, above. 2 https://www.sra.org.uk/sra/strategy-2017-2020/sub-strategies/sra-enforcement-strategy. The SRA Handbook was also accompanied by an ‘SRA Enforcement Strategy’, dated 13 January 2011.

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The SRA: disciplinary action and investigations  16.15 3 The strategy cites from Bolton v Law Society [1994] 1 WLR 512, CA (which is still the leading authority on sanctions for misconduct). 4 This will be less relevant where the misconduct involves dishonesty or lack of integrity. 5 https://www.sra.org.uk/solicitors/guidance/ethics-guidance/financial-penalties/. 6 See section D, below.

(j)  Disclosure and publication 16.14 Rule 9.2 of the SRA  Regulatory and Disciplinary Procedure Rules 2019 requires the SRA to publish any decision under r 3.1 or r 3.2 unless it considers the particular circumstances outweigh the public interest in publication. Rule 9.1 also provides that the SRA may disclose or publish any information arising from or relating to an investigation, either in an individual case or a class of case, where it considers it to be in the public interest to do so.1 The SRA has issued guidance in relation to the publication of regulatory and disciplinary decisions which states that it expects to publish all decisions on its website because it is in the public interest to do so.2 However, each decision will be taken on its own merits and all of the relevant circumstances will be taken into account. For instance, the SRA would not publish a decision if satisfied that it would be unable to do so without disclosing confidential or legally privileged information or prejudicing other investigations or legal proceedings or because the impact of publication on the regulated person would be disproportionate.3 1 R 9.3(a) also requires the SRA to notify the LSB of any decision to disqualify a person under r 3.1(c). 2 It was issued on 1 September 2016 and updated on 25 November 2019: see https://www.sra.org. uk/sra/decision-making/guidance/disciplinary-publishing-regulatory-disciplinary-decisions/. In SRA v Spector [2016] EWHC 37 (Admin), [2016] 4 WLR 16 the Divisional Court quashed an anonymity order made by the SDT where a solicitor had been acquitted of a number of charges. Burnett LJ emphasised that the principle of open justice normally required the SRA and the SDT to publish their decisions and that any departure from this policy had to be justified. 3 The guidance gives two worked examples.

(k) Review 16.15 Rule 3.1(b) of the SRA  Application, Notice, Review and Appeal Rules 2019 provides that the SRA may review all or part of any regulatory decision of its own initiative.1 Rule 3.2 provides that it may review all or any part of the regulatory decisions set out in Annex 1 on the application of the person who is the subject of the decision. Annex 1 includes any decision made under r 3.1 of the SRA Regulatory and Disciplinary Procedure Rules 2019, a decision under r 3.2(a) to impose interim conditions and a decision under r 9.2 to publish a decision. An application cannot be made for a review of a decision which has already been the subject matter of a review or appeal or of a decision which has been made under a regulatory settlement agreement.2 Rule 3.5 of the SRA Application, Notice, Review and Appeal Rules 2019 also provides that any application for review of a decision must be made within 28 days of 825

16.16  Disciplinary proceedings notice of the decision being given or the reasons for the decision (if later) and must explain the grounds of the review and provide reasons and evidence in support.3 The SRA’s guidance on ‘Decision-making, reviews and attendance procedures’ also contains guidance on the conduct of reviews.4 1 See https://www.sra.org.uk/solicitors/standards-regulations/application-notice-review-appealrules/. R 3.1(a) preserves the ‘slip rule’ and enables the SRA to correct an administrative error without a review. 2 See r 3.3. 3 R 3.4 also provides that the SRA shall not, save in exceptional circumstances, review a decision more than one year after it was made. 4 For the link to the guidance see para 16.09, above.

(l) Appeal 16.16 A person or authorised body has a statutory right of appeal to the SDT against the SRA’s decisions to exercise its powers to issue a rebuke or to direct payment of a penalty and to publish details of those decisions.1 Such an appeal must be commenced within 28 days from the date of notification of the relevant decision.2 Such an appeal is a true appeal and not a re-hearing.3 1 See s 44E of the Solicitors Act 1974, para 14C of Sch 2 to the Administration of Justice Act 1985, s 96 of the Legal Services Act 2007 and r 5.1 of the SRA Application, Notice, Review and Appeal Rules 2019. 2 See r 5.1. 3 See Solicitors Regulation Authority v Solicitors Disciplinary Tribunal [2016]  EWHC  2862 (Admin) (DC), [2017] ACD 17.

(m)  Costs of investigation 16.17 A decision maker may require a person who is the subject of a decision under r 3.1(a)–(f) to pay the costs of the investigation in accordance with Sch 1 to the SRA Regulatory and Disciplinary Procedure Rules 2019.1 The decision maker has a discretion to charge less if he or she considers that it would be just in all the circumstances to do so.2 1 See r 10.1. The Schedule requires the SRA or its agents to record the time and sets out the following standard charges: under 2 hours £300; 2 hours or more but under 8 hours £600; and 8 to 16 hours £1,350. 2 See r 10.2.

(n)  Regulatory Settlement Agreements 16.18 The SRA  Regulatory and Disciplinary Procedure Rules 2019 make express provision for regulatory decisions to be made by agreement1 and the SRA uses the terms ‘Regulatory Settlement Agreement’ or ‘RSA’ to describe such decisions. The SRA has also issued ‘Guidance on agreeing regulatory and disciplinary outcomes’.2 In all cases where the SRA and the person under investigation agree an RSA, it has the same effect and status as a decision imposed 826

The SRA: disciplinary action and investigations  16.19 by a decision maker. The guidance also states that negotiations will be conducted on a ‘without prejudice’ basis and a typical regulatory settlement agreement will be in writing, describe the relevant facts and identify the admitted failings on the part of the solicitor together with the agreed sanction and any remedial steps. RSAs are subject to the same rules and principles for disclosure and publication as any other decision and are usually published on the SRA’s website. An RSA is limited to the disciplinary powers available to the SRA and could not include, for example, a decision to strike off or suspend a solicitor (which could only be made by the SDT). Given the financial limits on the SRA’s power to impose a penalty, RSAs are, therefore, of limited practical significance to individual solicitors and recognised bodies subject to serious allegations.3 The SRA states that noncompliance with the terms of an RSA is rare but that any behaviour which is inconsistent with the RSA will be treated as a breach of the SRA Standards and Regulations 2019.4 The SRA can reopen the original investigation and act on any new information including a breach of the RSA itself. 1 See r 8.2. 2 See https://www.sra.org.uk/sra/decision-making/guidance/disciplinary-regulatory-settlementagreements/. It was originally issued on 9 August 2016 and updated on 25 November 2019. 3 The Statements of Agreed Facts, Admissions and Outcomes procedure discussed in 16.52, below is more likely to be of greater importance in serious cases. 4 Examples are given in the guidance such as denying breaches which have already been admitted or materially misrepresenting the terms of the agreement.

2  SRA investigations 16.19 The SRA has extensive statutory powers to require authorised persons1 to produce documents and information and provide explanations in connection with investigations into misconduct and non-compliance. These powers are found in ss 44B–44BC of the Solicitors Act 1974 (for solicitors, recognised bodies, their managers and employees) and in ss 93 and 94 of the Legal Services Act 2007 (for licensed bodies, their managers and employees). Rules 1 and 2 of the SRA  Regulatory and Disciplinary Procedure Rules 20192 govern the investigation process and both individuals and firms owe duties to report misconduct and to co-operate with investigations.3 The SRA has also published guidance on ‘Making decisions to investigate concerns’, ‘How we gather evidence in our regulatory and disciplinary investigations’, ‘on-site investigations’ and ‘Parallel Investigations’.4 All of this guidance was originally issued on 8 August 2016 and updated on 25 November 2019 when the SRA Standards and Regulations 2019 came into force. 1 For the use of this term see para 15.14, above. 2 See para 16.06, above. 3 See para 16.20, below. 4 See https://www.sra.org.uk/sra/decision-making/guidance/investigations-decisions-investigateconcerns/ https://www.sra.org.uk/sra/decision-making/guidance/investigations-gathering-evidence/ https://www.sra.org.uk/sra/decision-making/guidance/investigations-on-site/ and https://www.sra.org.uk/sra/decision-making/guidance/investigations-parallel/.

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16.20  Disciplinary proceedings

(a)  Co-operation and accountability 16.20 Principle 2 of the SRA Principles imposes a broad duty to act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons. Paragraph 7 of the SRA Code of Conduct for Individuals 2019 also imposes a series of obligations to co-operate with the SRA and other regulators, to respond promptly to any requests for information and to report promptly any facts or matters which ought to be the subject of investigation: ‘7.3 You cooperate with the SRA, other regulators, ombudsmen, and those bodies with a role overseeing and supervising the delivery of, or investigating concerns in relation to, legal services. 7.4 You respond promptly to the SRA and: (a) provide full and accurate explanations, information and documents in response to any request or requirement; and (b) ensure that relevant information which is held by you, or by third parties carrying out functions on your behalf which are critical to the delivery of your legal services, is available for inspection by the SRA. 7.5 You do not attempt to prevent anyone from providing information to the SRA or any other body exercising regulatory, supervisory, investigatory or prosecutory functions in the public interest. 7.6 You notify the SRA promptly if: (a) you are subject to any criminal charge, conviction or caution, subject to the Rehabilitation of Offenders Act 1974; (b) a relevant insolvency event occurs in relation to you; or (c) if you become aware: (i) of any material changes to information previously provided to the SRA, by you or on your behalf, about you or your practice, including any change to information recorded in the register; and (ii) that information provided to the SRA, by you or on your behalf, about you or your practice is or may be false, misleading, incomplete or inaccurate. 7.7 You report promptly to the SRA or another approved regulator, as appropriate, any facts or matters that you reasonably believe are capable of amounting to a serious breach of their regulatory arrangements by any person regulated by them (including you). 7.8 Notwithstanding paragraph 7.7, you inform the SRA promptly of any facts or matters that you reasonably believe should be brought to its attention in order that it may investigate whether a serious breach of its regulatory arrangements has occurred or otherwise exercise its regulatory powers.’1 The SRA Accounts Rules 2011 used to impose a specific duty to produce to the SRA ‘any records, papers, client and trust matter files, financial accounts and other documents, and any other information, necessary to enable preparation 828

The SRA: disciplinary action and investigations  16.22 of a report on compliance with the rules’.2 There is no equivalent rule in the SRA Accounts Rules 2019 although a failure to produce accounting records would amount to a breach of para 7.3 (above).3 1 Paragraph  3 of the SRA  Code of Conduct for Firms 2019 imposes very similar obligations. Paragraph 8.1 imposes a duty upon the managers of the firm to ensure compliance. 2 R 31.1 and r 31.8 (which dealt with banking records). 3 R 13 of the 2019 rules requires a solicitor or firm to keep accounting records for six years. The term ‘accounting records’ is widely defined in the SRA Glossary.

(b)  Commencing an investigation 16.21 Rule 1.1 of the SRA  Regulatory and Disciplinary Procedure Rules 2019 provides that the SRA shall assess any allegation which comes to (or is brought) to its attention to decide whether it should be considered by a decision maker and r 2.1 provides that the SRA may carry out such investigations as it considers appropriate either to make that initial decision or to decide whether an allegation is proved under r 3.1. The guidance ‘Making decisions to investigate concerns’ explains how the SRA will decide whether to commence an investigation and that it applies a three-stage test called the ‘Assessment Threshold Test’.1  A  complaint or report will only pass this test and be investigated further where the answer to all three stages of the test is positive. This decision is also closely related to the SRA  Enforcement Strategy2 and the SRA will only investigate a potential breach of the SRA  Standards and Regulations 2019 if it is sufficiently serious to justify taking action.3 1 ‘1. Has there been a breach of the SRA’s Standards and Regulations? 2. Is the potential breach or risk sufficiently serious that we would take action? 3. Is the breach or risk capable of being evidenced to the required standard of proof?’ 2 See para 16.02, above. 3 The guidance gives some examples of circumstances in which the SRA will not investigate (eg a dispute over completion of a domestic house purchase and a dispute between partners).

(c)  Production notices 16.22 Section 44B provides that the SRA may by notice require regulated persons to provide information and documents for the purposes of an investigation. The SRA may only give such a notice if it is satisfied that it is necessary to do so for the purpose of investigating whether there has been professional misconduct by a solicitor or whether there has been a failure to comply with the statutory provisions which we have considered above.1 This power has been described as far-reaching and may only be exercised fairly and on proper grounds.2 A notice can be given to a solicitor, an employee of a solicitor, a recognised body, its managers, employees and interest holders3 and can be exercised against such a person even after he or she has ceased to be a solicitor or to occupy the relevant position.4 The power to give a notice is not limited to the solicitor or firm who are the subject of investigation but may be used for gathering information from other firms of solicitors.5 A notice 829

16.22  Disciplinary proceedings may specify the time and place at which, and manner and form in which, the information is to be provided or document is to be produced but it must specify the period within which the information is to be provided or the document produced (and may require the information to be provided or document to be produced to the Society or to a named person specified in the notice).6 The information or documents can be identified in the notice by description7 and this is presumably intended to permit a production notice to identify material by class or category as well as individual documents. The power to require production of documents extends to electronic documents.8 Finally, the current version of the section is not in terms limited to documents within the possession or control of the recipient.9 But it seems unlikely that this was a deliberate change or that the SRA is likely to give a notice requiring the production of documents with which it knows the recipient cannot comply.10   1 See paras 16.02 and 16.03, above. The section was the subject of extensive amendment by the Legal Services Act 2007 which took effect from 31 March 2009. The full text of s 44B(3) now provides as follows: ‘(3) The Society may give a notice under this section only if it is satisfied that it is necessary to do so for the purpose of investigating– (a) whether there has been professional misconduct by a solicitor; (b) whether a solicitor, or an employee of a solicitor, has failed to comply with any requirements imposed by or by virtue of this Act or any rules made by the Society; (c) whether a recognised body, or any of its managers or employees has failed to comply with any requirement imposed by or by virtue of the Administration of Justice Act 1985 or any rules made by the Society and applicable to the body, manager or employee by virtue of section 9 of that Act; (d) whether there are grounds for making, or making an application to the Tribunal for it to make, an order under section 43(2) with respect to a person who is or was involved in a legal practice (within the meaning of section 43(1A)).’  2 See R (Dean & Dean) v The Law Society and their Agents [2008] EWHC 2980 (Admin) at [50] (Pitchford J): ‘The production and intervention powers of the Law Society to investigate suspected malpractice by members of the profession are far-reaching. They are, Parliament has decided, necessary for the protection of the public and of the profession. They must, of course, be exercised fairly and on proper grounds.’ See also Law Society v Sibley [2017] EWHC 1453 (Ch) at [22] (Birss J).   3 See s 44B(2). For these terms see paras 15.14 to 15.21, above.   4 See s 44B(8).   5 This was the case before the amendments made to the section by the Legal Services Act 2007 which took effect from March 2009.   6 See s 44B(4)(a)–(c). Production notices are sometimes served specifying a period of 24 hours and this appears to have been the position in Dean & Dean (above). The obvious reason for such a short time period is where there is a risk of destruction of documents. S 44B(5) also provides that the SRA may pay the reasonable costs incurred by a person in connection with the provision of any information or production of any documents. The guidance ‘How we gather evidence in our regulatory and disciplinary investigations’ suggests that the SRA will pay the reasonable costs of third parties but not individuals or firms under investigation.   7 See s 44B(1)(a) and (b).   8 See para 5A of Sch 1 to the Solicitors Act 1974: ‘a document which consists of information which is stored in electronic form’.   9 In the previous version of s 44B(1), a notice could require production of ‘all relevant documents in the possession of the solicitor or his firm’. However, s 44B(7) now provides that the powers contained in para 9 of Sch 1 to the Solicitors Act 1974 (and certain other provisions of that schedule) apply to notices under s 44B. 10 For reasons which are obscure, s  44B(7) (which deals with documents) excludes paras 9(1) and 9(3) of Sch 1 both of which refer to documents in the possession or control of the

830

The SRA: disciplinary action and investigations  16.23 solicitor. On the other hand, s 44B(6) (which deals with information) excludes para 9(4) but incorporates para  9(3) in a modified form. Birss J  noted the difficulties with reading these provisions together in Sibley (above) at [20]–[22] and the guidance ‘How we gather evidence in our regulatory and disciplinary investigations’ (above) states that by ‘documents’ the SRA generally means ‘papers and electronic documents held in computers’ of the solicitors. It seems unlikely, therefore, that the court would enforce a notice which required a firm or solicitor to produce documents or information which were not within their possession or control and with which they could not comply.

16.23 Paragraph 9(4) of Schedule 1 permits the SRA to apply to the High Court for an order that the person who is the subject of the s 44B notice must produce the specified documents or information.1 There is a similar power to make such an order where the High Court is satisfied that documents specified in the notice have come into the possession or are under the control of some other person.2 The SRA can also apply to court for an order permitting it to enter any premises (using reasonable force where necessary) to search for and seize documents relating to a s 44B notice.3 It is also an offence to refuse, neglect or otherwise fail to comply with a production notice given under s 44B (but only insofar as the notice concerns the production of information).4 Paragraph 9(8) of Schedule 1 does, however, permit the recipient of a production notice under s 44B to apply to the High Court to challenge the notice. But this right may be of limited value because it does not appear to permit the recipient to obtain an order preventing the SRA from taking possession of the documents.5 There is also a very short eight-day time limit for making such an application and the right applies only to the production of documents but not information.6 It is unclear why the right to challenge a production notice should be limited in these ways, particularly, when it is borne in mind that it may be the client rather than the solicitor who objects to disclosure and wishes to challenge the notice.7 To get round these difficulties it may be that a recipient (or more likely the client of the recipient) would have to apply for an injunction restraining the SRA from enforcing compliance with the production notice.8 1 S 44B(6) provides that para 9(4) should be read in the following way for information: ‘The High Court, on the application of the Society, may order a person [required to provide information pursuant to the notice under section 44B to provide the information to any person appointed by the Society at such time and place as may be specified in the order].’ S 44B(7) provides that it should be read in the following way for documents: ‘The High Court, on the application of the Society, may order a person required [to provide documents under section 44B] [to produce them] to any person appointed [by the Society under section 44B] at such time and place as may be specified in the order and authorise him to take possession of them on behalf of the Society.’ See Law Society v Sibley [2017] EWHC 1453 (Ch) at [20]–[21] (Birss J). 2 See para 9(5). This power does not apply to information identified in the s 44B notice. 3 See para 9(6). 4 See s  44B(6) applying para  9(3). The former section (which was repealed with effect from 31 March 2009) provided that it was an offence to refuse, neglect or otherwise fail to comply with a s 44B notice requiring production of documents. However, under the amended section, para  9(3) does not apply to notices requiring production of documents: see s  44B(7). In the previous edition of this book we suggested that the reason for the distinction might be that it was considered appropriate to make non-compliance with a notice requiring production of information a criminal offence because there is no provision for an application to court otherwise to enforce such a notice. However, in Sibley (above) Birss J considered that para 9(3)

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16.24  Disciplinary proceedings applied to both information and documents and granted relief in relation to both on a claim under CPR Part 8. 5 Para 9(8) provides as follows: ‘Subject to sub-paragraph (9) a person upon whom a notice under sub-paragraph (7) is served, on giving not less than 48 hours’ notice to the Society and (if the notice gives the name of the solicitor instructed by the Society) to that solicitor, may apply to the High Court for an order directing the Society to deliver the documents or other property to such person as the applicant may require.’ The paragraph appears to contemplate, therefore, that the recipient will comply with the notice before applying to challenge it. But even if the recipient issues an application immediately and can get it before the court before the time for compliance has expired, the only order which the court can make is to direct that the SRA return the documents or deliver them to a person nominated by the recipient. It is possible that the Court will place a purposive construction on the paragraph but, if construed literally, it is of limited value. 6 See para 9(9). 7 It should be borne in mind that these provisions were taken from a schedule dealing with intervention in a solicitor’s practice (and then modified) and for an example of their use in that context see Law Society v Ete [2019] EWHC 864 (Ch) (HHJ Keyser QC). It may well be that the intention was to give rise to a general right to challenge a production notice but the necessary modifications were not fully carried through. 8 This was the course of action pursued (ultimately unsuccessfully) by the recipient in Mireskandari v The Law Society [2009] EWHC 2224 (Ch): see [26]–[29] (Henderson J). See also the earlier decision relating to the same subject-matter in R  (Dean & Dean) v The Law Society [2008] EWHC 2980 (Admin). In Sibley (above) Birss J was ‘far from convinced that this would be a sensible way of proceeding’: see [25]. However, in that case the application had been made by the SRA rather than the recipient of the production notice.

16.24 A different production regime applies to licensed bodies. Section 93 of the Legal Services Act 20071 provides that the SRA (in its capacity as a licensing authority) may require a licensed body or its managers, employees or interest holders2 to provide information or documents for the purpose of enabling it to ascertain whether the terms of the licensed body’s licence are being, or have been, complied with. The purpose of a s 93 notice is expressed in very different terms to the purpose of a s 44B notice (which is to investigate misconduct and compliance with the conduct rules). However, it is suggested that this difference is unlikely to be material in practice.3 There are also differences between the enforcement of s 93 notices and the enforcement of s 44B notices. Section 94 provides that where a person is unable to comply with a notice, he or she must give notice to the licensing authority stating the reasons and where a person refuses or otherwise fails to comply with a notice, the SRA may apply to the High Court for an order requiring compliance.4 This provides a much simpler regime. If a recipient is unable to comply with a notice, it must write to the SRA explaining why. If the SRA does not accept the reasons, it may apply to court for an order compelling the licensed body to do so. If the court accepts the recipient’s reasons, it can refuse to make the order. Finally, it should be noted that the SRA could serve a production notice on a solicitor, who is also manager, employee or interest holder of a licensed body, under either s  44B of the Solicitors Act 1974 or s  93 of the Legal Services Act 2007. 1 ‘(1) The relevant licensing authority in relation to a licensed body may by notice require a person within subsection (2)– (a) to provide information, or information of a description, specified in

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The SRA: disciplinary action and investigations  16.26 the notice, or (b) produce documents, or documents of a description, specified in the notice, for the purpose of enabling the licensing authority to ascertain whether the terms of the licensed body’s licence are being, or have been, complied with.’ 2 For these terms see paras 15.14 to 15.21, above. 3 The guidance ‘How we gather evidence in our regulatory and disciplinary investigations’ (above) does not suggest that production notices under s 44B and s 93 are intended to have a different reach and it is suggested that most (if not all) licences issued under the Legal Services Act 2007 will contain a condition that the licensed body and its managers, employees and interest holders comply with any conduct rules from time to time in force. 4 ‘(1) Where a person is unable to comply with a notice given to the person under section 93, the person must give the licensing authority a notice to that effect stating the reasons why the person cannot comply. (2) If a person refuses or otherwise fails to comply with a notice under section 93, the licensing authority may apply to the High Court for an order requiring the person to comply with the notice or with such directions for the like purpose as may be contained in the order.’

16.25 Finally, s  44BB of the Solicitors Act 1974 provides that the SRA may apply to the High Court for an order requiring a non-regulated person to provide information or documents.1 However, the court may only make such order where it is satisfied that the information or document is likely to be in the possession, custody or control of the respondent and that there is reasonable cause to believe that the information or document is likely to be of material significance to an investigation.2 A failure to comply is not a criminal offence.3 Again, it should be noted that s 44BB applies to non-regulated persons and not to solicitors at all. If the SRA wishes to obtain information or documents from one solicitor in relation to an investigation against another, it will exercise its powers under s 44B.4 1 ‘(1) The High Court, on the application of the Society, may order a person to whom section 44B does not apply– (a) to provide information, or information of a description, specified in the notice, or (b) to produce documents, or documents of a description, specified in the notice. 2 See s 44BB(2). For an example of a case where an order was made under s.44BB, see SRA v Charles Henry & Co [2015] EWHC 552 (QB) (Elisabeth Laing J). 3 Following the Legal Services Act 2007 a number of provisions of para 9 of Sch 2 also apply to notices under s 44BB. However, para 9(3) does not apply. The provisions of paras 9(7) to 9(12) do apply, although it is difficult to see why, given that an order for production can only be made by the court. It may be that they were intended to deal with the situation in which an order was made without notice. 4 See para 16.22, above.

(d) Explanations 16.26 Section 44BA of the Solicitors Act 1974 also confers on the SRA a power to require a person served with s 44B notice to provide an explanation of any information or documents produced pursuant to that notice. This power can be exercised in respect of the same classes of persons as a s 44B notice and the mechanism for enforcement is in most other respects identical to the information provisions of s 44B. A person who refuses, neglects or otherwise fails to comply with a s 44BA notice is also guilty of an offence.1 Similarly, 833

16.27  Disciplinary proceedings s 93 of the Legal Services Act 2007 confers a power on the SRA to require persons served with a s 93 notice to provide explanations of any information or documents.2 These are the powers which the SRA exercises when it calls individuals for interview and the SRA has provided guidance about the conduct of interviews in its guidance note ‘How we gather evidence in our regulatory and disciplinary investigations’. The SRA expects a person to attend an interview voluntarily and where that person is a solicitor a refusal to do so may be considered a breach of a solicitor’s duty of co-operation.3 The guidance also sets out the procedure which the SRA will adopt. The most important features are that the SRA does not provide questions in advance and that the person being interviewed can be accompanied by a representative but only the person called to interview can answer questions (unless the SRA agrees a different approach). 1 See s 44BA(3)(a)(i) applying para 9(3) of Sch 1. He or she is liable on summary conviction to a fine not exceeding level 3 on the standard scale. 2 See 93(4): ‘The licensing authority may, by notice, require a person within subsection (2) (or a representative of such a person) to attend at a time and place specified in the notice to provide an explanation of any information provided or document produced under this section.’ 3 See para 16.20, above. The guidance note cites the decision of the SDT in Baxendale Walker 9124/2004 at [12.9]: ‘As a matter of professional conduct, it is the Tribunal’s view, that every solicitor has a duty to give an explanation of actions which in the [SRA’s] reasonable opinion give rise to any question related to the proper performance of professional duties.’ The guidance note also states that the power to compel attendance is likely to be used where: ‘the person has refused to talk to us’ or ‘we are concerned that they have not been cooperating or are likely not to cooperate promptly, clearly or at all’.

(e)  Information offences 16.27 Section 44BC of the Solicitors Act 1974 creates two criminal offences associated with production notices.1 First, it is an offence for a person who knows or suspects that a s 44B investigation is taking place to falsify, conceal, destroy or dispose of a document relevant to the investigation.2 Secondly, it is an offence to provide false or misleading information to the SRA in response to a production notice or at interview.3 If found guilty of either offence a person is liable to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both).4 1 The Legal Services Act 2007 introduced s 44BC with effect from 31 March 2009. 2 See s 44BC(1): ‘It is an offence for a person who knows or suspects an investigation into any of the matters mentioned in section 44B(3)(a) to (d) is being or is likely to be conducted– (a) to falsify, conceal, destroy or otherwise dispose of a document which the person knows or suspects is or would be relevant to the investigation, or (b) to cause or permit the falsification, concealment, destruction or disposal of such a document.’ 3 See 44BC(3): ‘It is an offence for a person, in purported compliance with a requirement imposed on the person under section 44B, 44BA or 44BB– (a) to provide information which the person knows to be false or misleading in a material particular, or (b) recklessly to provide information which is false or misleading in a material particular.’ 4 See s 44BC(4).

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The SRA: disciplinary action and investigations  16.29

(f)  Legal professional privilege 16.28 In Chapter 14 we consider the extent to which a solicitor may disclose confidential or privileged communications to advisers, insurers and the court.1 Here we consider the extent to which an authorised person2 may be required to disclose confidential or privileged documents to the SRA. In R  v Derby Magistrates’ Court3 Lord Taylor described legal professional privilege as ‘much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests.’ Ordinarily, therefore, a firm or solicitor cannot be compelled to disclose documents which are privileged from production without the consent or waiver of the client. Indeed, until or unless the client consents to production or waives privilege, it is the duty of the solicitor to assert privilege on the client’s behalf.4 In the Derby Magistrates case, however,5 Lord Taylor identified two exceptions to the absolute nature of privilege: first, privilege may be overridden under the crime or fraud exception where it is being used to cloak iniquity6 and, secondly, it may be overridden by statute. In R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax7 Lord Hoffmann stated that the general words in a statute should normally be construed on the basis that there was no intention to override such a fundamental right and that any intention to override must be expressly stated or clearly appear by necessary implication. Moreover, in that case the House of Lords held that the information gathering powers conferred on the Inland Revenue by the Taxes Management Act 1970 were not sufficient to create the necessary implication that legal professional privilege was intended to be overridden. 1 See paras 14.11 to 14.15 and paras 14.20 to 14.25, above. 2 For this term see para 15.14, above. 3 See [1996] AC 487, HL at 507C cited by Rose LJ in Sports Direct International Plc v Financial Reporting Council [2020] EWCA Civ 177 (below) at [9] where she stated: ‘The privilege is that of the client and only he can waive it. The refusal of the client to waive his privilege for whatever reason, or for no reason, cannot be questioned or investigated by the court.’ 4 See Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255. 5 See 507G. 6 See paras 14.26 to 14.30, above. 7 [2002]  UKHL  21, [2003] 1  AC  563 at [8]. For necessary implication see also [45] (Lord Hobhouse): ‘[it] is a matter of express language and logic not interpretation’; and B v Auckland District Law Society [2003]  UKPC  38, [2003] 2 AC  736 at [56] (Lord Millett): ‘the task of the court is not to decide where the balance should be struck in the particular case, but where Parliament has struck it’.

16.29 Despite the clarity of this test, Lord Hoffman’s speech in Morgan Grenfell generated controversy because of his analysis of the earlier decision of the Court of Appeal in Parry-Jones v Law Society.1 In that case the Law Society had served a notice requiring a solicitor to produce accounts for inspection under r 11(1) of the Solicitors’ Accounts Rules 1945. He resisted disclosure and sought an injunction to restrain the investigation. The Court of Appeal held that the rule overrode both legal professional privilege and the duty of 835

16.30  Disciplinary proceedings confidentiality to the client. In Morgan Grenfell Lord Hoffmann criticised the reasoning but went on to say that the decision could be justified because: ‘In my opinion, this limited disclosure did not breach the clients’ LPP or, to the extent that it technically did, was authorised by the Law Society’s statutory powers.’2 This led to a debate in both textbooks and authorities about whether there was a further ‘no infringement’ or ‘technical infringement’ exception for regulators exercising statutory information gathering powers. In Sports Direct International Plc v Financial Reporting Council3 the Court of Appeal firmly rejected this argument and held that there was no justification for regarding Lord Hoffmann’s observation in Morgan Grenfell as authority for the existence of either exception.4 Rose LJ subjected Morgan Grenfell and the subsequent authorities to an exhaustive analysis and took the opportunity to restate the propositions for which Parry-Jones is authority:5 ‘That case continues to stand, as it has stood for many years, as authority for two propositions: first, that rule 11 of the Solicitors’ Account Rules 1945 conferred on the Law Society a power to compel the production of documents in the hands of the solicitor even though the clients of the solicitor could assert privilege in those documents; and second that rule 11 was not ultra vires the scope of the rule making powers in section 29 of the Solicitors Act 1957. Such a result is entirely consistent with the test for implied override set out by Lord Millett in B v Auckland as the Divisional Court in Simms6 later held.’ 1 [1969] 1 Ch 1, CA 2 See [2002] UKHL 21, [2003] 1 AC 563 at [32]. 3 [2020]  EWCA  Civ 177, a decision on the Statutory Auditors and Third Country Auditors Regulations 2016 (SI 2016/649) which confers on the FRC a power to require certain persons to provide it with information relating to the audit of the accounts of ‘any public interest entity’. 4 See [23] and [24]. 5 See [40]. Given the clear restatement of the position it is unnecessary for present purposes to examine this reasoning in detail. For detailed analysis of the authorities and a critique of Morgan Grenfell see the third edition of this book at paras 16.93 to 16.100. 6 See Simms v Law Society [2005] EWHC (Admin) 408. Simms did not concern s 44B, s 44BA or s 44BB either. In that case the solicitor argued that the Law Society had no power to use against him for the purposes of disciplinary proceedings client privileged documents obtained as a result of the exercise of the Society’s intervention powers into his practice. There is a strong argument that the Law Society’s intervention powers, insofar as they result in the Law Society taking possession of client matters, are fundamentally different to the exercise of s 44B investigative powers. Intervention would be next to impossible if the Law Society could not take possession of client files.

16.30 It follows that there is no direct authority for the proposition that a production notice served on a solicitor under either s 44B of the Solicitors Act 1974 or s 93 of the Legal Services Act 2007 overrides the legal professional privilege of the client. Neither section contains an express power to require an authorised person to produce privileged documents and although ParryJones has long been taken as authority for the necessary implication of such a power, it was a decision on a different provision.1 Given that the function of the rule considered in Parry-Jones was very much the same as s 44B or s 93, we 836

The SRA: disciplinary action and investigations  16.30 take the view that the court is likely to follow it and to hold that both sections (and s 44BA) override privilege and confidentiality as a matter of necessary implication.2 But even if they have that effect, it is now clear that there is no exception (technical or otherwise) which permits the SRA to require an authorised person to disclose privileged or confidential communications in the absence of a statutory production notice. In the past, the SRA may well have taken the view or even assumed that the obligation to comply with its conduct rules3 and accounts rules4 required a regulated person to disclose privileged or confidential communications in reliance on Lord Hoffmann’s observation in Morgan Grenfell (above). Even now, the SRA’s guidance note ‘How we gather evidence in our regulatory and disciplinary investigations’ is not a model of clarity. It states that the SRA has various powers to require individuals and firms to provide information or documents and that it can override privilege for regulatory purposes.5 However, it does not state in terms that a solicitor owes a duty to the client or former client to resist production of privileged documents or information unless the SRA serves a production notice under s 44B or s 93 or requires the individual to attend for interview under s 44BA.6 1 See [1969] 1 Ch 1 at 8A-C (Lord Denning MR): ‘Under the statute the council have made rule 11 (1) of the Solicitors’ Accounts Rules, 1945 , which says: “In order to ascertain whether these rules have been complied with, the council, acting either – (a) on their own motion; or (b) on a written statement or request transmitted to them by or on behalf of the governing body of a provincial Law Society or a committee thereof; or (c) on a written complaint lodged with them by a third party; may require any solicitor to produce” his books, and so forth. In my opinion that rule is a valid rule which overrides any privilege or confidence which otherwise might subsist between solicitor and client. It enables the Law Society for the public good to hold an investigation, even if it involves getting information as to clients’ affairs. But they and their accountant must, of course, themselves respect the obligation of confidence. They must not use it for any purpose except the investigation, and any consequential proceedings. If there should be subsequent application to the disciplinary committee, the information can be used for that purpose.’ 2 The same reasoning does not necessarily apply to s 44BB where the client is served with a notice and wishes to assert privilege over the documents. 3 See, eg, O(10.4) of the SRA Code of Conduct 2011: ‘O(10.4) you report to the SRA promptly, serious misconduct by any person or firm authorised by the SRA, or any employee, manager or owner of any such firm (taking into account where necessary your duty of confidentiality to your client)’. 4 Rule 31 of the SRA Accounts Rules 2011 required regulated persons to produce for inspection by the SRA banking documents and other documents necessary to enable preparation of a report on compliance with those Rules: see r 31.1 and r 31.8. The guidance notes to r 31 stated: ‘The SRA’s powers override any confidence or privilege between you and the client’. However, the guidance notes did not form part of the rules. Somewhat inconsistently, r 42.1 then provided that a solicitor could decline to provide documents requested by a reporting accountant on grounds of client privilege (and if the client so instructed). 5 ‘Our powers are set out in legislation and in our Codes of Conduct and it is important to look at the exact wording of them where necessary. The SRA Code of Conduct for Solicitors, RELs and RFLs and the SRA Code of Conduct for Firms provide that those we regulate: give full and accurate explanations, information and documentation in response to any requests or requirements, make sure that relevant information held by them, or by a third party carrying out functions on their behalf which are critical to the delivery of their legal services, is available for inspection by us. The SRA Code of Conduct for Firms applies to firms, its managers, compliance officers and employees … Any documents and information held by firms are confidential and

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16.31  Disciplinary proceedings are protected by “legal professional privilege”. We can look at them but, if they are protected by that privilege, we can only use them for our regulatory purposes. If it is necessary to refer to them in a case that is being dealt with in public, part of the hearing can be in private and the clients’ identity can be protected by using initials instead of names.’ 6 The examples in the guidance note make it more clear that the only powers which the SRA can exercise to require production of privileged or confidential material are in s 44B and s 93.

(g)  Disclosure to third parties 16.31 The SRA Regulatory and Disciplinary Procedure Rules 2019 and the guidance note provide little assistance in identifying the circumstances in which the SRA may disclose to third parties material which it has obtained in exercise of its powers. Nor do they impose any duty or discretion upon the SRA to preserve confidentiality or privilege. Rule 9.1 provides that: ‘The SRA may disclose or publish any information arising from or relating to an investigation, either in an individual case or a class of case, where it considers it to be in the public interest to do so.’1 The SRA has provided guidance about disciplinary decisions which suggests that the SRA will be sensitive about publishing privileged or confidential material in that context but not about the use of information in investigations.2 The prudent course would be to assume that the SRA will disclose information obtained under a production notice to third parties where it will further the investigation (whether or not the information is privileged or confidential). 1 See para 16.14, above. 2 Compare rr 4.3 and 4.4 of the SRA  Disciplinary Procedure Rules 2011 which provided as follows: ‘4.3 Subject to rule 4.4, the SRA may disclose any information or documents (including the outcome) arising from its discipline investigation: (a) to an informant; (b) to a person who is under investigation; (c) to any person in order to facilitate its investigation and in particular to identify and obtain evidence, comments or information; (d) to other regulators, law enforcement agencies, or other persons, in the public interest. 4.4 The SRA may restrict disclosure of information to protect another person’s right of confidentiality or privilege.’

(h)  The report stage 16.32 The SRA Regulatory and Disciplinary Procedure Rules 2019 make no provision for the preparation of a report or representations on the report from solicitors or firms under investigation. The SRA  Disciplinary Proceedings Rules 2010 and 2011 both contained rules for preparing a report before making a disciplinary decision or issuing proceedings before the SDT.1 But the SRA was not required to prepare a report when making a disciplinary decision or making an application to the SDT.2 Moreover, the report stage was a prominent feature in the SRA’s investigation processes even before those rules came into effect. Despite the absence of formal rules, we expect the SRA to continue to prepare and rely on ‘Forensic Investigation Reports’ both before making disciplinary decisions and as the vehicle for presenting evidence before the SDT. Indeed, it is difficult to see how the SRA could fairly justify a decision to disqualify a person3 or direct payment of a penalty in all but the most simple 838

The SRA: disciplinary action and investigations  16.33 cases without summarising in report form the allegations and supporting evidence and inviting comments of the person or firm under investigation. 1 See r 6.1. 2 The SRA was not required to prepare a report when making a SRA finding or an application to the Tribunal: see r 6.10. Further, even when making a disciplinary decision the SRA could dispense with the report procedure under r 6 where it was just and in the public interest to do so (r 6.11). 3 See para 16.04, above.

(i)  SDT proceedings 16.33 Quite apart from its own disciplinary and investigatory powers, the SRA is the prosecuting authority before the SDT (which is a wholly independent body). The jurisdiction and powers of the SDT are considered in more detail in Part B (below) but s 47(1) of the Solicitors Act provides that any application to strike the name of a solicitor off the roll or to answer allegations1 must be made to the SDT.2 The SDT also has a wide jurisdiction to make other orders apart from striking off a solicitor.3 For instance, the SDT may suspend a solicitor from practice either indefinitely or for a fixed period of time or impose a financial penalty. After investigating an allegation, therefore, the SRA may decide to make an application to the SDT under s 47 for the allegation to be considered.4 However, a decision maker may only decide to make such an application where he or she is satisfied that there is a realistic prospect of the SDT making an order in respect of the allegation and it is in the public interest to do so.5 Further, where an application has been made to the SDT the rules expressly provide that the SRA may carry out further investigations and continue to exercise any of its investigative powers (as it considers appropriate).6 The SRA has published a guidance note on ‘Issuing Solicitors Disciplinary Tribunal Proceedings’.7 It states that the question whether there is a realistic prospect of the SDT making an order is an objective test and that it has to be satisfied that there is a realistic prospect of the SDT making findings that: (a) the conduct under investigation breaches the SRA Standards and Regulations 2019 or meets the requirements for a control order, (b) the evidence proves the conduct alleged8 and (c) the conduct is serious enough for the Tribunal to make an order. Where there is a realistic prospect of the SDT making an order, there is a strong public interest in referring the matter to the Tribunal for an appropriate sanction to be imposed. But the guidance note also states that there may be rare occasions when the public interest weighs against referring a matter to the Tribunal.9 Finally, even if the SRA is satisfied that it is appropriate to issue proceedings, the SDT has its own filter. Unless a member or panel of the tribunal certifies that there is a case to answer, it may refuse or dismiss the application without requiring the respondent to answer the allegations and without hearing the applicant.10   1 The wording of s 47 is curious and may reflect its piecemeal amendment. S 47(1)(a) provides that an application to strike off a solicitor must be made to the SDT but s 47(2) provides that the SDT may make a number of other orders which are, for some reason, not mentioned in s 47(1) (including suspension or a fine). It is suggested that there is no practical difficulty about the SDT’s jurisdiction because s 47(1)(b) also provides that an application shall be made to require

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16.34  Disciplinary proceedings the solicitor to answer allegations by affidavit. But the SRA now has its own disciplinary powers reflected in r 3.1 of the SRA  Regulatory and Disciplinary Procedure Rules 2019. S 47(1)(b) may well have been a portmanteau provision designed to cover allegations leading to the orders in s 47(2) at a time when the SRA did not have its own powers. Nevertheless, because of the curious wording, we have footnoted the provisions in full.   2 See s 47(1): ‘Any application— (a) to strike the name of a solicitor off the roll; (b) to require a solicitor to answer allegations contained in an affidavit; (c) to require a former solicitor whose name has been removed from or struck off the roll to answer allegations contained in an affidavit relating to a time when he was a solicitor; (d) by a solicitor who has been suspended from practice for an unspecified period, by order of the Tribunal, for the termination of that suspension; (e) by a former solicitor whose name has been struck off the roll to have his name restored to the roll; (f) by a former solicitor in respect of whom a direction has been given under subsection (2)(g) to have his name restored to the roll, shall be made to the Tribunal; but nothing in this subsection shall affect any jurisdiction over solicitors exercisable by the Master of the Rolls, or by any judge of the High Court, by virtue of section 50.’   3 See s 47(2): ‘… on the hearing of any application or complaint made to the Tribunal under this Act … the Tribunal shall have power to make such order as it may think fit, and any such order may in particular include provision for any of the following matters— (a) the striking off the roll of the name of the solicitor to whom the application or complaint relates; (b) the suspension of that solicitor from practice indefinitely or for a specified period; (c) the payment by that solicitor or former solicitor of a penalty, which shall be forfeit to Her Majesty; (d) in the circumstances referred to in subsection (2A), the exclusion of that solicitor from criminal legal aid work (either permanently or for a specified period); (e) the termination of that solicitor’s unspecified period of suspension from practice; (f) the restoration to the roll of the name of a former solicitor whose name has been struck off the roll and to whom the application relates; (g) in the case of a former solicitor whose name has been removed from the roll, a direction prohibiting the restoration of his name to the roll except by order of the Tribunal; (h) in the case of an application under subsection (1)(f), the restoration of the applicant’s name to the roll; (i) the payment by any party of costs or a contribution towards costs of such amount as the Tribunal may consider reasonable.’   4 See r 3.1(g) of the SRA Regulatory and Disciplinary Procedure Rules 2019.   5 See r 6.1.   6 See r 6.2. R 16 of the Solicitors (Disciplinary Proceedings) Rules 2019 also provides that an SDT may adjourn an application for up to three months to enable the SRA to carry out further investigations before it considers whether there is a case to answer under r 13 (below).  7 https://www.sra.org.uk/sra/decision-making/guidance/disciplinary-issuing-solicitorsdisciplinary-tribunal-proceedings/. It was originally issued on 21 September 2017 and updated on 25 November 2019.  8 The guidance note refers to proof on the balance of probabilities. The standard of proof before the SDT is now the civil standard: see r 5 of the Solicitors (Disciplinary Proceedings) Rules 2019.   9 The note provides a number of examples. 10 See r 13 of the Solicitors (Disciplinary Proceedings) Rules 2019 and para 16.43, below.

B  PROCEDURE BEFORE THE SDT AND ON APPEAL 1 Introduction 16.34 In this section, we consider the constitution of the SDT, its jurisdiction, and the rules of procedure in the SDT. In general we deal with applications by the SRA against individuals or bodies, rather than by individuals to have themselves restored to the roll or register. The procedural materials to which we refer below are available on the SDT’s website, at https://www. solicitorstribunal.org.uk/constitutions-and-procedures. 840

Procedure before the SDT and on appeal  16.37 16.35 The SDT was created by s  46 of the Solicitors Act 1974 to hear applications and complaints made by virtue of any other provision of that Act. It is a statutory tribunal and independent of the Law Society1 and SRA. It has power pursuant to s 46(9) of the Solicitors Act 1974 to make rules governing its own procedure and practice, such power to be exercisable by statutory instrument. We discuss below the procedural rules made under this provision. 1 See Pine v Law Society, sub nom In Re a Solicitor, QBD, 13 November 2000, reported in the Daily Telegraph on 5  December 2000, per Crane J  at [23]. The SRA was created after this decision.

2 Jurisdiction (a)  Appellate jurisdiction of the SDT 16.36 As mentioned above at para  16.16, a person, recognised body or licensed body may appeal to the SDT against decisions of the SRA to issue a rebuke, direct payment of a penalty or publish details of such a decision.1 Such appeals are subject to the Solicitors Disciplinary Tribunal (Appeals and Amendment) Rules 2011, but, as the vast majority of proceedings before the SRA do not concern appeals, we do not discuss those rules here. Note, though, that this type of appeal is a true appeal, similar to an appeal from the High Court to the Court of Appeal.2 In addition, the SDT has a power to ‘review’ a decision of the SRA to control the activities of a person who is not a solicitor but who is involved in legal practice.3 The procedural rules relating to this power are, however, not the Solicitors Disciplinary Tribunal (Appeals and Amendment) Rules 2011. Instead the Solicitors (Disciplinary Proceedings) Rules 2019, which in general apply to the SDT’s first instance jurisdiction, apply to such reviews.4 Nevertheless, this review, too, is akin to an appeal; further, in carrying out the review, the SDT must treat decisions of the SRA as to the appropriate penalty to impose as ‘an evaluation with which [the SDT] should not readily interfere’.5 This is similar to the approach, in civil appeals generally, of the appeal court to an evaluative decision of a first instance judge. 1 See paras 16.02 to 16.04 above for the power of the SRA to take such decisions. 2 Solicitors Regulation Authority v Solicitors Disciplinary Tribunal [2016] EWHC 2862 (Admin) (DC), [2017] ACD 17. 3 Solicitors Act 1974, s 43(3). This power of the SRA is discussed above at para 15.20. 4 See para.2(a)(ii) of the 2019 Rules. 5 Solicitors Regulation Authority v Solicitors Disciplinary Tribunal, above, per Leggatt LJ at [42]. See also the SDT’s Guidance Note on Other Powers of the Tribunal, 3rd edn (November 2019), at section C.

(b)  First instance jurisdiction of the SDT 16.37 The SRA’s first instance jurisdiction may be seen as falling into two categories: (a) applications to the SDT by the SRA, and (b) applications to the SDT by parties other than the SRA. As to (a), as mentioned at para 16.33, 841

16.38  Disciplinary proceedings above, pursuant to Solicitors Act 1974, s 47, the SDT has jurisdiction to hear a wide variety of applications made by the SRA against solicitors. The SDT also has jurisdiction over complaints by the SRA against persons who are not themselves solicitors but who are employed by solicitors,1 and in relation to recognised bodies.2 1 See Solicitors Act 1974, s 34A. 2 Administration of Justice Act 1985, Sch 2, paras 16–18A.

16.38 As to category (b), the SDT has power to hear applications by solicitors,1 registered foreign lawyers2 and, at the time of writing, registered European lawyers,3 who have been struck off or suspended, for the termination of the period of suspension and restoration to the relevant roll or register. The SDT’s approach to such applications is set out in set out in its Guidance Note on Other Powers of the Tribunal.4 1 Solicitors Act 1974, s 47(1)(d) and (e). 2 Courts and Legal Services Act 1990, s 89(3). 3 European Communities (Lawyer’s Practice) Regulations 2000 (SI 2000/1119), Sch 4, para 24(2). 4 3rd edn, November 2019. See further the discussion of sanctions below at 16.81ff.

(c)  Appeals from the SDT to the High Court 16.39 As regards the SDT’s first instance jurisdiction, for those who have been the subject of a complaint before the SDT there is an unqualified right of appeal from the SDT to the High Court pursuant to Solicitors Act 1974, s 49.1 Section 49 also gives the SRA a right of appeal in most circumstances.2 In cases where there is a right of appeal from the first instance jurisdiction, there is no need to seek permission to appeal. In this respect, therefore, the appeals regime in relation to the SDT is more generous to the appellant than in most civil litigation. Such a right to appeal, however, lies against only a final decision of the SDT;3 if a party seeks to appeal an interlocutory decision, the only possible route is by way of an application for judicial review.4 Turning to the SRA’s appellate jurisdiction, there is also provision for appeal to the High Court.5 The basis on which appeals may be allowed is discussed below at para 16.59. 1 The appeal is to the Administrative Court. See Practice Direction 52D, para.27. 2 See Solicitors Act 1974, s 49(3) for limits on the SRA’s right to appeal. 3 Re A  Solicitor (1994) The Times 4  May (CA), (1994) 144  NLJ  707, (1994) 138  SJLB  100; Maitland-Hudson v SRA [2017] EWHC 3478 (Admin) (Ouseley J). 4 Stokes v Law Society [2001] EWHC 1101 (Admin), per Kennedy LJ at [34]. We suspect that judicial review would be hard to obtain. 5 See s 44E(6) of the Solicitors Act 1974, para 14C(6) of Sch 2 to the Administration of Justice Act 1985, s  96(6) of the Legal Services Act 2007 and art  4 of the Legal Services Act 2007 (Appeals from Licensing Authority Decisions) (No 2) Order 2011 (SI 2011/2863). An appeal under s 96(6) is limited to points of law arising from the decision of the relevant appellate body, and may be brought only with the permission of the High Court. The other statutory appeal routes referred to in this footnote offer an unqualified right of appeal.

842

Procedure before the SDT and on appeal  16.41

3  Procedure in relation to the first instance jurisdiction of the SDT (a)  Solicitors (Disciplinary Proceedings) Rules 2019 16.40 As indicated above at para  16.36, the procedural rules governing the first instance jurisdiction of the SDT, and applications for the review of orders made by the SRA pursuant to Solicitors Act, 1974, s 43, are now the Solicitors (Disciplinary Proceedings) Rules 2019 (SI  2009/1185) (‘the 2019 Rules’). The 2019 Rules came into force on 25 November 2019,1 and replaced the 2007 rules. Since the 2019 Rules are contained in a statutory instrument, they plainly have the force of law. The 2019 Rules have taken from the Civil Procedure Rules the concept of the overriding objective. As in relation to the CPR, the overriding objective of the Rules is ‘to enable the [SDT] to deal with cases justly and at proportionate cost’.2 The SDT will seek to give effect to the overriding objective whenever it exercises any power under the 2019 Rules or interprets any rule or practice direction.3 The parties are required to help the SDT to further the overriding objective.4 Similarly to the CPR, dealing with a case justly and at proportionate expense includes ‘so far as practicable – (a) ensuring that the parties are on an equal footing; (b) ensuring that the case is dealt with efficiently and expeditiously; (c) saving expense; (d) dealing with the case in ways which are proportionate to the nature, importance and complexity of the issues.’5 The 2019 Rules give the SDT the power to regulate its own procedure, to dispense with many requirements where it is just to do so, and to issue practice directions.6 There is discussion of the detailed provisions of the 2019 Rules below, but in general terms it is thought that, although for the most part they deal with the same topics as the 2007 Rules, they helpfully provide some more detail on a number of issues. 1 For applications in which it was certified that there was a case to answer on or before 24 November 2019, the relevant procedural rules remain the Solicitors (Disciplinary Proceedings) Rules 2007. Those are discussed in the third edition of this book. 2 R 4(1). 3 R 4(2). 4 R 4(4). 5 R 4(3). 6 R 6.

(b)  The standard of proof 16.41 The 2007 Rules did not state what was the correct standard of proof to be applied in SDT proceedings, though case law established that it was the 843

16.42  Disciplinary proceedings criminal standard.1 Following a consultation, however, it was decided that the standard of proof applicable in the SDT should be the civil standard of proof, namely proof on the balance of probabilities.2 The 2019 Rules now expressly provide for this.3 This is consistent with the standard applied by most other regulators of professionals. 1 See the third edition of this book, at para 16.169ff. 2 As to the standard of proof in civil proceedings, see Bank St Petersburg PJSC v Arkhangelsky [2020] EWCA Civ 408 at [45]–[47] (Sir Geoffrey Vos C). 3 R 5, as amended by r 7(b) of the Solicitors (Disciplinary Proceedings) (Amendment) Rules 2020.

(c)  Making applications to the SDT – the rule 12 statement 16.42 An application to the SDT, whether by the SRA or a lay complainant, is made by sending an application in the prescribed form, together with a statement in support. The statement in support must set out ‘the allegations, the facts and matters supporting the application and each allegation contained within it and exhibiting any documents relied upon by the applicant’.1 The requirement to exhibit supporting documents did not appear in the 2007 rules. The statement in support must comply with the principle that a defendant is entitled to know the case against them.2 Based on that principle, the case law sets out various requirements for the statement in support: •

It must contain a summary of the facts relied upon, set out concisely and in chronological order. ‘It is the duty of the draftsman (not the reader) of a pleading or a [Rule 12] statement to analyse the supporting evidence and to distil the relevant facts, discarding all irrelevancies’.3

•

The statement should include the minimum, rather than the maximum, number of charges possible.4

•

Where conduct is impugned as a breach of a rule or principle, and especially where conduct is impugned as dishonest, that conduct must be identified and it must be stated with precision in relation to each aspect of that conduct the respects in which it is criticised.5

•

Where it is alleged that a respondent knew or ought to have known certain matters, the facts giving rise to that actual or constructive knowledge should be set out in the following order: first, the primary facts should be pleaded, and then the secondary facts (ie ‘from the facts pleaded above, the respondent knew or ought to have known’).6

•

‘It is not acceptable to lump allegations, with a plethora of “alternativelys”, “further or alternativelys” and “and/ors” and with reference to a variety of different rules, principles and outcomes, into one convoluted and rolled-up charge.’7

That said, it is doubtful whether the SDT will or should strike out an application on the basis only of an inadequate statement in support; the better course may be to direct that defects in the statement be put right.8 As 844

Procedure before the SDT and on appeal  16.43 to supplementary statements in support, applicants may serve those unless more than 12 months have expired since the initial application, or there are fewer than 30 days until the date fixed for the substantive hearing of the application; in either of those cases the permission of the SDT is required for supplemental statements.9 1 R 12(2). 2 Pursuant to Art 6(a) of the European Convention on Human Rights, a defendant has the right ‘to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him’. Article 6(a) applies to disciplinary proceedings: Albert and Le Compte v Belgium (1983) 5 EHRR 533. 3 Thaker v SRA [2011] EWHC 660 (Admin) at [64] (Jackson LJ). 4 SRA v Chan [2015] EWHC 2659 (Admin) at [26] (Davis LJ). 5 Constantinides v Law Society [2006] EWHC 725 (Admin) at [35] (Moses LJ). In relation to dishonesty, see also Williams v SRA [2017] EWHC 1478 (Admin) at [46] (Carr J). That case also discusses the need to cross-examine in relation to dishonesty. See further para 16.53, below. 6 Thaker v SRA, above, at [65] (Jackson LJ). 7 SRA v Chan, above, at [27] (Davis LJ). 8 See Manak v SRA [2016] EWHC 1914 (Admin), at [24] (Thirlwall J). 9 R 14(5).

(d)  Certification of case to answer 16.43 Once the SDT receives an application and supporting statement, but before the documents are served on the respondent, the application must be considered by a solicitor member of the SDT who must decide whether they can certify that there is ‘a case to answer’ in respect of each allegation made in the application.1 The requirement that the test of whether there is a case to answer be applied in respect of each allegation, taken individually, was a new introduction in the 2019 Rules. Thus some allegations may fail the test and others pass it. If the individual solicitor member of the SDT considers that, in relation to any allegation, either there is no case to answer, or the question of whether there is a case to answer is ‘one of doubt or difficulty’, then the question must be considered by a panel of three members of the SDT, two of whom must be solicitors.2 If that panel decides that there is no case to answer in respect of any allegation then it may refuse or dismiss the application, or part of it, without requiring the respondent to answer such allegations and without hearing the applicant.3 We are doubtful as to the extent to which definitions of the phrase ‘a case to answer’ are helpful, but the rationale of these provisions must be that if, from a legal point of view, an allegation is hopeless then it should not be permitted to proceed. The purpose must be to prevent the SDT and respondents from having to spend time and costs dealing with hopeless applications. 1 R 13(1). 2 R 13(3). 3 R 13(4).

845

16.44  Disciplinary proceedings

(e)  Case management, Answers, and procedural applications 16.44 Once it has been certified that there is a case to answer, a clerk to the SDT must (a) serve the documents relating to the application on the respondent,1 and (b) issue and send standard directions to the parties.2 The standard directions ‘may’ specify the date fixed for both the substantive hearing and a case management hearing, the date by which the respondent must provide an Answer to the allegations in the supporting statement,3 and dates for parties to send copies of the documents on which they intend to rely, lists of witnesses, and notifications of intention to rely upon expert evidence. The ‘Answer’ is a document which sets out which allegations in the statement in support are admitted and which denied, and the reasons for denial;4 it is therefore similar to a defence in civil proceedings. Where a respondent fails to serve an Answer, or to give evidence at the substantive hearing or submit to cross-examination, the SDT may draw adverse inferences from the failure to do so.5 Rule 22 provides for the making of procedural applications by the parties; these are made in writing and the SDT must provide written reasons for its decision. Rule 27 gives the SDT power to give directions in relation to applications as to the parties providing lists of agreed matters and lists of issues on which the SDT requires evidence or submissions. Finally, it appears that the SDT has the power summarily to determine an application for lack of merit.6 But, bearing in mind that in order for an application to proceed a member of the SDT must have certified that each allegation discloses a case to answer, it is doubtful how often this power is likely to be exercised. 1 R 13(5). In the case of an application made by the SRA, these include a schedule of the SRA’s costs incurred up until the date on which the application was made. 2 R 20(1). 3 R 20(2)(b). 4 R 20(4)(a). 5 R 33. 6 Law Society v Adcock [2006] EWHC 3212 (Admin), [2007] 1 WLR 1096 at [30].

(f)  Disclosure, and client privilege 16.45 In the majority of cases brought by the SRA, the supporting statement has been drafted by reference to the SRA’s investigation report, to which in turn are appended most of the documents relied upon by the SRA as probative of the charges, most of which of course come from the respondent solicitor’s own files. As indicated above, when it makes an application to the SDT, the SRA must attach to the supporting statement any documents upon which the SRA relies. The SRA is not, at this stage, required to provide the respondent with copies of documents which might detract from the SRA’s case. Similarly, in relation to the respondent, the standard directions ‘may’ require the respondent to provide documents on which the respondent intends to rely.1 If, however, a party (A) wishes to see documents which are in the possession or under the control2 of another party (B), and which might adversely affect B’s case, adversely affect another party’s case, or support A’s case, then A may make an 846

Procedure before the SDT and on appeal  16.46 application for ‘disclosure or discovery of material’.3 That said, it may be that disclosure of documents is unlikely to pose difficulties in many cases, since the allegations against the solicitor will generally arise from, and be confined to, certain transactions which have been investigated by the SRA, and the allegations of misconduct will ordinarily be evidenced solely by the contents of the respondent’s files. This may be why the standard directions, the default procedural position, do not require parties to do any more than supply copies of the documents on which they rely. 1 R 20(2)(c). 2 R 26(2). 3 R 26(1) and (4). The rule is plainly modelled on the definition of standard disclosure in civil proceedings.

16.46 Rule 26(3)1 provides that an order for disclosure or discovery made by the SDT ‘does not oblige the parties to produce any material which they would be entitled to refuse to produce in proceedings in any court in England and Wales.’ We suggest that the effect of this is that solicitor respondents will not be ordered to produce material which is the subject of a client’s legal professional privilege, unless the client consents. It is the duty of a solicitor to uphold such privilege, so long as it is arguable that it exists.2 This may lead to unfairness if, as we suggested at para 16.30, above, the SRA is able to obtain privileged material by the service of notices under either s 44B of the Solicitors Act 1974 or s 93 of the Legal Services Act 2007. In a case where the SRA has, before the application to the SDT, served such a notice and obtained privileged material from the respondent solicitors, solicitor respondents may believe that there is relevant privileged material in other client files which were not the subject of the notice. Clients are unlikely to consent to the disclosure of their privileged material, though it is possible that they may have consented to solicitors’ terms and conditions which permit the solicitors to refer to such material. If, however, there is no client consent for the respondent solicitors to rely upon privileged material in other files, the SRA will be able to rely on privileged material from files which the SRA has chosen, but solicitor respondents will not be able to rely on privileged material from files which the solicitors might wish to refer to. It is suggested that, in light of solicitors’ duties to uphold the privilege of clients and former clients, it would not be appropriate for solicitor respondents to invite the SRA to serve statutory notices, overriding privilege, in such circumstances. On the other hand, solicitors would be entitled, in such circumstances, to point out the problem, and to suggest that, as in relation to the wasted costs jurisdiction,3 as the respondent solicitors are unable to refer to privileged material in their defence, the SDT should make generous assumptions in their favour as to what such material might reveal. It may be that the SRA would not be keen on such a defence and would respond by serving statutory notices to produce relevant privileged material from other files. 1 As amended by r 13(2) of the Solicitors (Disciplinary Proceedings) (Amendment) Rules 2020. 2 Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600, [2019] 3 WLR 1255. 3 See Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120, and 13.24ff above.

847

16.47  Disciplinary proceedings

(g)  Use of the SRA’s investigative powers during proceedings 16.47 The SRA’s extensive investigative powers under ss  44B, 44BA and 44BB of the Solicitors Act 1974, as well as those available in respect of licensed bodies pursuant to ss 93 and 94 of the Legal Services Act 2007, were discussed above at para  16.19ff. The issue for consideration here is the extent to which those powers may or should be exercised once proceedings have commenced before the SDT. Suppose that the SRA did not serve a s 44B notice before the application to the SDT, but wishes to do so after it has commenced proceedings in the SDT. A s 44B notice may be given only where the SRA ‘is satisfied that it is necessary to do so for the purposes of investigating … whether there has been professional misconduct by a solicitor’.1 This suggests that, once the SRA has decided to make a specific allegation (‘allegation A’) the subject of an application to the SDT, generally speaking the investigation will have ended so that the statutory powers should not be exercised in relation to allegation A. There may, however, be cases where, during disciplinary proceedings, the SRA comes across further signs of misconduct on the part of the respondent, in relation to a different potential allegation (‘potential allegation B’), which require the issue of a s 44B notice. The SRA could then decide to issue a statutory notice, during the proceedings in relation to allegation A, to seek documents relating to potential allegation B. There is a risk that it might impose unacceptable demands on a respondent to have to face both ongoing proceedings and the prospect of complying with s  44B notice; such a respondent might have to make an application of its own to the SDT to adjourn the disciplinary proceedings. 1 The trigger under s 93 of the Legal Services Act 2007 is different: ‘for the purpose of enabling the licensing authority to ascertain whether the terms of the licensed body’s licence are being, or have been, complied with.’

(h) Evidence 16.48 The SDT has power to admit any evidence, ‘whether or not it would be admissible in a civil trial in England and Wales’.1 Nevertheless, the Civil Evidence Act 1995 applies,2 so Civil Evidence Act notices must be given in respect of witnesses who will not be called to give evidence. There is provision for the service of witness statements,3 and a party who requires the attendance at the hearing of a witness whose statement has been served must give seven days’ notice that the witness must be produced at the hearing. Any party may apply for a witness summons to compel a witness to attend the substantive hearing, but the application must be made to the High Court;4 if a witness summons is issued, another party may apply to the High Court to set the summons aside pursuant to CPR, r 34.4. On such an application, the party which applied for the summons will have the burden of justifying it; if the evidence of the witness the subject of the summons is irrelevant then the summons will be set aside.5 Rule 15 makes provision for proving criminal convictions, and the findings of professional disciplinary tribunals and civil courts. Rule 30 848

Procedure before the SDT and on appeal  16.50 provides for applications for permission to adduce expert evidence; as expert evidence is not generally permitted in relation to matters relating to solicitors in civil proceedings, and as the composition of the SDT includes solicitors on all panels, it is unlikely that expert evidence will be permitted, or necessary, in most cases.6 Nevertheless, the SDT has the power to admit expert evidence, and it might be helpful in some cases. It is conceivable, for example, that in order to determine whether a solicitor is guilty of misconduct, the SDT would have to consider the niceties of the underlying law and practice relating to that solicitor’s area of expertise, for example, cases involving advice given on taxation, defamation or intellectual property. Guidance from an appropriately qualified expert in that area might assist the tribunal. 1 R 27(2)(a). 2 R 29. 3 R 28. 4 R 28(4). 5 SRA v Naqvi [2019] EWHC 1420 (Admin), [2019] ACD 75 (Freedman J). 6 See Aaron v The Law Society [2003] EWHC 2271 (Admin) at [64] ‘As to principle, the Tribunal is itself an expert body in matters going to the propriety of solicitor’ conduct of their various professional duties, not least in matters of straightforward conveyancing practice. It is for it to consider whether, on any particular issue, it would be assisted by expert evidence whether from within or outside the solicitors’ profession.’

(i)  Subpoena powers 16.49 In the 2007 rules, r 13(9) permitted any party to the proceedings to make an application to the SDT for an order pursuant to Solicitors Act 1974, s 46(11). That subsection permits the SDT to issue ‘writs of subpoena ad testificandum and duces tecum’ requiring any person to produce any document relevant to the proceedings apart from a document which he or she could not be compelled to produce in the trial of an action. The existence of this section gives the SRA the opportunity to obtain disclosure from third parties such as, for example, a mortgage broker whom the respondent solicitor, accused of involvement in mortgage fraud, says played a role which excuses his or her own actions. The section also gives the respondent the opportunity to obtain disclosure from the SRA itself of internal material if such material is relevant and not privileged. In the 2019 Rules, there is no direct counterpart of r 13(9) of the 2007 rules, but s 46(11) remains in force, so it would appear that applications pursuant to s 46(11) may be made pursuant to r 22(3)(h) of the 2019 Rules, which provides for the making of ‘any other procedural application’.

(j) Adjournment 16.50 The SDT has issued a Guidance Note: Adjournments,1 which makes plain that lack of readiness or inability to obtain representation will generally not be considered a good reason for an adjournment. Further, the claimed ill health of an applicant or a respondent will not generally justify 849

16.51  Disciplinary proceedings an adjournment unless supported by the reasoned opinion of an appropriate medical professional. The medical opinion should explain why the applicant or respondent is unable either to represent themselves or to give evidence, as the case may be.2 The existence of criminal proceedings will not generally justify an adjournment unless both (i) the criminal proceedings relate to the same or substantially the same facts as the SDT proceedings, and (ii) there is a genuine risk that a hearing in the SDT may prejudice the criminal proceedings. 1 6 November 2019. 2 See Maitland-Hudson v SRA [2019] EWHC 67 (Admin), [2019] ACD 47 (Green LJ and Carr J); Akhter v SRA [2019] EWHC 2650 (Admin) (Farbey J).

(k) Publicity 16.51 Rule 35(1) provides that the general position is that hearings should take place in public. A person who claims to be affected by an application may apply to the SDT for the hearing to be conducted in private, on the basis of either (a) exceptional hardship or (b) exceptional prejudice.1 The mere facts that most of the allegations against a solicitor are dismissed, and that he is found guilty of only a minor infringement, are not a good reason to displace the ‘open justice’ principle.2 1 R 35(2). 2 SRA v Spector [2016] EWHC 37 (Admin), [2016] 4 WLR 37 (Burnett LJ and Nicol J).

(l)  Agreed outcomes 16.52 Up until 21 days before the substantive hearing of an application, the parties may submit to the SDT an Agreed Outcome Proposal for consideration by the tribunal.1 In effect, the SRA and the respondent reach agreement on a form of ‘settlement’ of the proceedings, but the approval of the SDT, which may be refused, is required. The proposal must contain a statement of facts that are agreed between the parties, set out an agreed proposed penalty, and explain why the penalty would be in accordance with any guidance published by the SDT as to sanctions.2 If the SDT agrees with the proposed outcome then it must make an order in terms of the agreed outcome.3 The SDT may, before reaching its decision on the proposed outcome, hold a hearing in private at which the parties make submissions as to the proposed outcome.4 The reason the hearing is in private is presumably that the agreed outcome is a form of settlement between the parties. If, even after it has heard the parties’ submissions, the SDT is still not prepared to accept the agreed outcome, then it must provide its reasons for the refusal to the parties, who may then submit a revised proposal, which the SDT may then adopt if satisfied with it.5 For example, in SRA  v Locke Lord,6 the second respondent, a firm, had failed adequately to supervise the first respondent over a period of 2½ years during which £21 million had passed through the second respondent’s client account in relation 850

Procedure before the SDT and on appeal  16.53 to transactions which bore the hallmarks of dubious financial transactions. The parties proposed an agreed outcome of a fine of £250,000. The SDT did not accept this. On receipt of its reasons, the parties proposed an alternative of a fine of £500,000, which the SDT accepted. 1 R 25(1). See also Practice Direction Number 1: Agreed Outcomes (6 November 2019). 2 R 25(2). 3 R 25(3). 4 R 25(4). 5 R 25(5). 6 10 November 2017.

(m)  Substantive hearings 16.53 The substantive hearing is likely to involve openings, crossexamination, and closings. We have already addressed, at para  16.42, above, what the statement in support of the written application should contain as to the applicant’s case. Also, as mentioned above at para  16.44, if a respondent fails to give evidence or submit to cross-examination at the substantive hearing, the SDT may draw adverse inferences from that failure.1 If the respondent does submit to cross-examination, then, in general terms, the applicant must put its case to the respondent in that cross-examination, although it is not required mechanistically to put every single aspect of matters in dispute to the respondent. In a case involving multiple allegations, the SRA failed to assert unambiguously in the statement in support that a particular representation, as to the valuation of a property, had been made dishonestly by the solicitor, although it did mention the representation in opening submissions and the solicitor dealt with the representation in his witness statement. But the SRA also failed to cross-examine the respondent about the alleged dishonest representation at all, and failed to mention it in closing submissions. As the case involved numerous allegations, it could not be said that it should have been obvious to the respondent that the SRA was contending that he had made the representation dishonestly. The SDT found that the solicitor had made the representation dishonestly. On appeal, the High Court, however, held that the SDT’s finding on the representation was unfair, due to the combination of: ‘a pleaded case with some ambiguity; a failure to challenge detailed evidence in cross-examination; and no meaningful reference to the substance of the £3.9million representation in the course of closing submissions in the context of a discrete finding of dishonesty, or at all (either by the lawyers, or the Tribunal).’2 This was a fairly extreme case. Nevertheless, it provides a warning for the SRA when alleging dishonesty. 1 R 33. 2 Williams v SRA [2017] EWHC 1478 (Admin) at [99] (Carr J; Sir Brian Leveson P agreed).

851

16.54  Disciplinary proceedings 16.54 At the end of the substantive hearing, the SDT will first make findings as to whether any of the allegations in the application have been substantiated. If there is a finding that any have been substantiated, then the respondent will have the opportunity to make submissions in mitigation in relation to the sanction to be imposed.1 If there is a dispute between the SRA and the respondent regulated party as to the extent of misconduct, the SDT will hear from the parties and decide whether it considers that deciding upon the dispute between them would materially affect the sanction which it imposes. If the SDT considers that deciding the dispute as to the extent of misconduct would make no difference, then it will determine the sanction on the basis of the respondent’s version of events. If, on the other hand, the SDT’s view is that deciding the dispute as to the extent of misconduct would make a difference to sanction, then it will hold a further hearing to enable it to decide whose version of the extent of the misconduct is correct.2 Further, ‘once the factual basis has been established, the respondent will have the opportunity to make representations as to the level of sanction to be imposed before the Tribunal makes its decision’.3 It is plainly helpful to the respondent to know which findings are to be the subject of a sanction, before making submissions as to the level of sanction. Rule 42 provides for the making of Orders that contain the SDT’s decision. Such orders are enforceable as if they were orders of the High Court.4 1 R 41. See also Levy v SRA [2011] EWHC 740 (Admin) at [34]; (Cranston J; Jackson LJ agreed). Sanctions in general are considered below at para 16.81. 2 See paras 12–15 of the SDT’s Guidance Note on Sanctions (7th edn, 2019), which refers to the analogy in the criminal context of R v Newton (1982) 4 Cr App R(S) 388, and Levy, above. 3 Ibid, para 15. 4 Solicitors Act, 1974, s 48(4).

(n)  Costs of hearings in the SDT 16.55 By the Solicitors Act 1974, s 47(2)(i), the SDT has power to order ‘the payment by any party of costs or a contribution towards costs of such amount as the Tribunal may consider reasonable’. Rule 43(1) provides that ‘at any stage of the proceedings, the Tribunal may make such order as to costs as it thinks fit, which may include an order for wasted costs’. As to the amount of costs payable, r 43(2) gives the SDT the power either summarily to assess the costs or to direct that they be assessed by a costs judge of the Senior Courts. Rule 43(4)1 states that the SDT ‘must first’ decide whether to make an order for costs. In deciding those issues, and the amount payable, r 43(4) provides that the SDT will take into account: ‘(a) the conduct of the parties and whether any or all of the allegations were pursued or defended reasonably; (b) whether the Tribunal’s directions and time limits were complied with; (c) whether the amount of time spent on the matter was proportionate and reasonable; 852

Procedure before the SDT and on appeal  16.57 (d) whether any hourly rate and the amount of disbursements claimed is proportionate and reasonable; (e)

the paying party’s means.’

We would suggest that factors (c) and (d) are relevant to the assessment of costs; factors (a) and (b) are relevant to what proportion of the (assessed) costs should be paid by either party in principle; and (e) is relevant to whether, even if a solicitor should in principle pay costs, the solicitor should in fact be ordered to pay them bearing in mind their financial resources. We do not consider the issue of the assessment of costs here, since that is dealt with in standard costs texts. 1 As amended by r 20(a) of the Solicitors (Disciplinary Proceedings) (Amendment) Order 2020.

16.56 There is general discussion of the power to award costs in section E of the SDT’s Guidance Note on Sanctions.1 We suggest that the position is as follows. Dealing first with the question of, in principle, who should pay the costs of a hearing in the SDT, although the wording of the statute and rules are similar to those governing civil procedure, the position in relation to solicitors’ disciplinary proceedings is not the same as in ordinary civil cases. The starting point in relation to applications brought by the SRA is not that costs should follow the event. The starting point is that, in cases where it was reasonable for the SRA to make the application to the SDT, and the application was brought in a reasonable procedural manner, then, even if the SRA loses the hearing, the SRA should not ordinarily be ordered to pay the respondent’s costs. The rationale for this approach is that: ‘For the [SRA] to be exposed to the risk of an adverse costs order simply because properly brought proceedings were unsuccessful might have a chilling effect on the exercise of its regulatory obligations, to the public disadvantage’.2 Bearing in mind that, according the most recently available annual report of the SDT, for 2018, the vast majority of applications by the SRA to the SDT result in some or all of the allegations being upheld, we are doubtful about the evidential basis for the chilling effect which is said to underly this principle, but as the principle is established at Court of Appeal level that doubt is, at least for the moment, of academic interest only. Thus, even if the SRA fails to prove any of its allegations, as long as it was proper for the SRA to make the application, and the SRA behaved in a reasonable procedural manner, it is unlikely that the SRA will be ordered to pay the respondent’s costs. 1 7th edn, November 2019. 2 Baxendale-Walker v Law Society [2007] EWCA Civ 233, [2008] 1 WLR 426 at [39] (Sir Igor Judge P).

16.57 The position appears to be different, however, on the question of whether the respondent should pay the SRA’s costs of bringing unsuccessful 853

16.58  Disciplinary proceedings allegations. On that issue, so long as the solicitor has conducted the proceedings reasonably, and not otherwise behaved unreasonably: ‘in the normal case the SRA should have to shoulder its own costs where it has not been able to persuade the Tribunal that its case is made out. I  do not see that this would constitute an unreasonable disincentive to take the appropriate regulatory action.’1 Of course, in many cases the SRA will succeed on some allegations and the respondent on others. In such cases the SDT will need to consider all the circumstances bearing in mind the principles set out above.2 1 Broomhead v SRA  [2014]  EWHC  2772 (Admin) at [42] (Nicol J). See also SRA  v Wingate [2018] EWCA Civ 366, [2018] 1 WLR 3969 at [133] (Rupert Jackson LJ): ‘If the SRA succeeds before the Solicitors Disciplinary Tribunal, it normally obtains an order for costs against the errant solicitor. If the SRA fails in such a prosecution, the tribunal normally makes no order for costs.’ 2 See for example Williams v SRA [2017] EWHC 2005 (Admin), (Carr J and Sir Brian Leveson P), which concerned a costs appeal following the decision referred to at para 16.53, above. The High Court had to exercise a fresh discretion in relation to costs and ordered the respondent to pay 21% of the SRA’s costs.

16.58 Finally in relation to costs in hearings before the SDT, a solicitor who claims that they cannot afford to pay costs should give disclosure of his/her means before the substantive hearing, and attend the hearing with evidence showing their inability to pay. Rule 43(5) requires the respondent to provide a statement with details of their means and supporting documentary evidence. The tribunal should investigate such evidence before ordering the solicitor to pay. The SDT need not grant an adjournment for those who do not bring such evidence to the hearing.1 1 See generally Broomhead, above, at [32]–[35].

(o) Appeals 16.59 As mentioned at para 16.39, above, appeal from the SDT lies to the Administrative Court, which is part of the High Court. Appeals may relate either to the findings of the SDT, or to the sanction imposed. In either case, the basis on which the High Court may allow an appeal is the same. The appeal is a review, not a rehearing.1 As a result, the High Court will allow the appeal only if the SDT is shown to have been ‘wrong’.2 In relation to findings of fact, the High Court must exercise particular restraint where the SDT has seen and evaluated a witness’s evidence; in relation to the findings of the SDT about solicitors, that rule applies with even greater force than in civil trials, since the SDT is a specialist body on which solicitors sit, so that, depending on the context, it is likely to have greater experience than the courts on the question of what is expected of solicitors. That being the case, in relation to evaluative decisions such as the assessment of the evidence of a witness, or the appropriate level of sanction: 854

Legal issues arising from the SRA Principles and Accounts Rules  16.60 ‘An appeal court should only interfere with such an evaluative decision if (1) there was an error of principle in carrying out the evaluation, or (2) for any other reason, the evaluation was wrong, that is to say it was an evaluative decision which fell outside the bounds of what the adjudicative body could properly and reasonably decide.’3 On the other hand, on issues of law, as to the correct interpretation of the solicitors’ codes, the High Court is likely to exercise less restraint. We consider such issues in the next section. As to the costs of appeals to the Administrative Court, the position is different in the Administrative Court from that before the SDT: ‘When the parties arrive in the Administrative Court, because one or other of them is appealing against decisions made by the Solicitors Disciplinary Tribunal, they are entering a conventional costs shifting regime. They stand on an equal footing. Subject to any special circumstances, the losing party will normally pay the winning party’s costs: see CPR r 44.2.’4 1 CPR, r 52.21(1). 2 CPR, r 52.21(3)(a). 3 SRA v Wingate [2018] EWCA Civ 366, [2018] 1 WLR 3969 at [135] (Rupert Jackson LJ). 4 Bawa-Garba v General Medical Council [2018] EWCA Civ 1879, [2019] 1 WLR 1929 at [67]. Applied to decisions of the SDT in SRA v Dar [2019] EWHC 2831 (Admin) at [40]. See also SRA v Siaw [2019] EWHC 2737 (Admin).

C  LEGAL ISSUES ARISING FROM THE SRA PRINCIPLES AND ACCOUNTS RULES 1 Introduction 16.60 In this section we focus on key issues arising from the case law as to the professional obligations of those regulated by the SRA. First, both the SRA Code of Conduct for Solicitors 2019 and the SRA Code of Conduct for Firms 2019 are subject to the SRA Principles 2019. We deal with the case law and guidance relating to those principles. Secondly, we consider issues arising from the Solicitors Accounts Rules 2019. The SRA materials to which we refer in this section are available in the November 2019 edition of SRA Standards and Regulations or on the SRA website.

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16.61  Disciplinary proceedings

2  The SRA Principles 2019 (a)  Status and content of the Principles 16.61 The Introduction to the SRA  Principles states that the principles comprise ‘the fundamental tenets of ethical behaviour that we expect all those that we regulate to uphold.’1 There are seven principles: ‘You act: 1.

In a way that upholds the constitutional principle of the rule of law, and the proper administration of justice.

2.

in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.

3.

with independence.

4.

with honesty.

5.

with integrity.

6.

In a way that encourages equality, diversity and inclusion.

7.

in the best interests of each client.’

The Introduction also states that, if there is a conflict between the requirements of different principles, then those which safeguard the wider public interest, such as principles 1 and 2, take precedence over the interests of individual clients. The case law which we discuss below deals with what are now principles 1, 2, 4, 5 and 7. We will begin with principles 4 and 5 as there is more case law in relation to those. 1 For the organisation of the SRA Standards and Principles in general, see para 15.13, above.

(b)  Principle 4 – the test for dishonesty 16.62 In considering aspects of the SRA  Principles, we begin with dishonesty,1 since proven dishonesty is ‘the most serious’2 form of breach of the principles or Codes. The Supreme Court settled the definition of dishonesty, for both criminal and civil law purposes, in Ivey v Genting Casinos (UK) Ltd.3 This provides the test to be used before the SDT.4 Ivey confirms that there is a two-stage test to be applied. Following the Court of Appeal’s dicta in relation to the test in Group Seven Ltd v Nasir,5 it may be stated as follows. 1 See also para 4.17ff, above. 2 Bolton v the Law Society [1994] 1 WLR 512, at 518B-C (Sir Thomas Bingham MR). 3 [2017] UKSC 67, [2018] AC 391 at [74]–[75] (Lord Hughes JSC). 4 SRA v Siaw [2019] EWHC 2737 (Admin). 5 [2019] EWCA Civ 614, [2019] 3 WLR 1011 at [57]–[61].

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Legal issues arising from the SRA Principles and Accounts Rules  16.63 (i)  First stage of the test 16.63 At the first stage, the court or tribunal decides what the relevant person accused of dishonesty in fact knew as to the facts which are said to indicate dishonesty. This is a test of the person’s actual subjective state of mind. It appears to include three kinds of knowledge. First, it of course includes the actual knowledge of facts which the accused person is found to have had at the time of the alleged dishonesty. Secondly, it includes ‘blind eye knowledge’. This is knowledge which an accused person is deemed to have had, where (a) the accused person suspects that certain facts may exist, and (b) that person deliberately decides not to investigate whether those facts do exist. Such a person is taken to have had actual knowledge of the facts which they would have discovered if they had investigated the matter, but only if there is the deliberate decision referred to at (b). In other words, suspicion alone is not enough for blind eye knowledge, nor is negligence, however gross it may be.1 Thirdly, however, applying the dicta of the Court of Appeal in Group Seven, the relevant knowledge also includes ‘suspicions which [the accused person] harbours, but which in and of themselves fall short of constituting blind-eye knowledge’.2 The Court of Appeal said that this third type of knowledge would ‘form part of the overall picture to which the objective standard of dishonesty is to be applied’.3 Allowing reference to this third type of knowledge would appear to water down the importance of proving blind eye knowledge, since it has the effect that knowledge is relevant even if it is neither actual nor blind eye knowledge. It would therefore appear that it is relevant for the court or tribunal assessing dishonesty to take into account even a vague suspicion of some dubious feature of a case, though the Court of Appeal added that: ‘The existence of such suspicions, and the weight (if any) to be attributed to them, are then matters to be taken into account at the objective second stage of the test.’4 The implication of this is that the weaker the suspicion, the less weight it will be given in applying the second stage of the test for dishonesty. In Ivey, Lord Hughes JSC stated that, in the context of liability for dishonest assistance for breach of trust, ‘negligence is not sufficient. Nothing less than dishonest assistance will suffice’.5 This suggests that negligence is not dishonesty. We would suggest that care must be taken in equating knowledge which is neither actual nor blind eye knowledge with the knowledge necessary to prove dishonesty; negligently failing to enquire into a particular matter is not the same as deliberately deciding not to make such enquiries. 1 See Manifest Shipping & Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469. 2 See [2019] 3 WLR 1011, at [61], 1039C–D, and [104], 1053F–G. 3 See [2019] 3 WLR 1011, at [61], 1039E. 4 Ibid., at [61], 1039C–D. 5 Ivey (above), at [62].

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16.64  Disciplinary proceedings (ii)  Second stage of the test 16.64 Having completed the assessment of the accused person’s state of knowledge at the first stage, the court moves to the second stage. At this stage, the court or tribunal asks whether, objectively speaking, that is, by the ‘standards of ordinary decent people’,1 someone who had the state of knowledge which the accused person has been found, at the first stage of the test, to have had, should be regarded as having acted dishonestly. The Supreme Court in Ivey rejected the argument that it is necessary to apply a further test and to ask whether, subjectively, the accused person realised that they were behaving in a way which most members of society would consider dishonest. Thus it is no defence for a person to say that, by their own personal moral standards, they considered that they were behaving honestly, if, objectively speaking, they were not. Further, it follows that decisions of the High Court, on appeal from the SDT, about dishonesty which pre-dated Ivey must be treated with care. This is because some of them proceed on the basis that dishonesty does involve a further test of showing that the accused subjectively appreciated that what they were doing was dishonest by the standards of ordinary decent people, yet as a result of Ivey that is no longer the law. Further, it is wrong to add a requirement that it must be shown that the accused person had a dishonest motive.2 1 Ivey, above, at [74]. 2 Siaw, above, at [58].

16.65 It might be objected that the second part of the test in Ivey is couched in very general terms. What are the objective standards of ordinary decent people? After Ivey, the Court of Appeal commented on the definition of dishonesty, in the context of the professional conduct of solicitors, as follows: ‘Honesty is a basic moral quality which is expected of all members of society. It involves being truthful about important matters and respecting the property rights of others. Telling lies about things that matter or committing fraud or stealing are generally regarded as dishonest conduct.’1 In light of that, we suggest that, for the purposes of the SRA Principles, the core of dishonesty involves either an element of deception, or taking the property of others. 1 SRA v Wingate [2018] EWCA Civ 366, [2018] 1 WLR 3969 at [93] (Rupert Jackson LJ; Sharp and Singh LJJ agreed).

(c)  Principle 5 – lack of integrity (i)  Lack of integrity includes conduct other than dishonesty 16.66 In SRA v Wingate,1 the Court of Appeal held that, for the purposes of solicitors’ professional conduct, ‘lack of integrity’ is a different concept from 858

Legal issues arising from the SRA Principles and Accounts Rules  16.67 ‘dishonesty’. At the time when that case was decided, the relevant principles of the SRA referred to ‘integrity’ but not to ‘honesty’. In 2019, however, as set out at para 16.61, above, the principles were altered so as to include requirements to act with both ‘honesty’ and ‘integrity’. That change would appear to support the Court of Appeal’s view that, for present purposes, ‘dishonesty’ and ‘lack of integrity’ are to be regarded as different concepts. The definition of dishonesty has been dealt with above. It seems clear that dishonest conduct lacks integrity. For present purposes, however, if conduct is dishonest then it is already at the most extreme end of the scale, so there is no need to debate whether it also lacks integrity. Where the concept of integrity matters for disciplinary purposes is in cases where dishonesty is not proved. In such cases, what is necessary to prove lack of integrity? What is it, other than telling lies, committing fraud, or stealing, that amounts to acting without integrity? 1 [2018] EWCA Civ 366, [2018] 1 WLR 3969.

(ii)  General definitions of lack of integrity 16.67 In Williams v SRA,1 Sir Brian Leveson P drew a distinction between dishonesty and lack of integrity: ‘Honesty, ie  a lack of dishonesty, is a base standard which society requires everyone to meet. Professional standards, however, rightly impose on those who aspire to them a higher obligation to demonstrate integrity in all of their work. There is a real difference between them.’ On this view, while honesty is a standard expected of all members of society, integrity connotes moral standards which are expected of professionals because of their role as professionals. That is not to suggest that ordinary members of society are not expected to act with integrity, however. Rather, as Rupert Jackson LJ stated in Wingate, ‘an enduring feature of professional codes of conduct is that they set higher standards for their members than the general norms of society’.2 As a result, he continued, in its technical meaning in professional codes of conduct: ‘the term “integrity” is a useful shorthand to express the higher standards which society expects from professional persons, and which the professions expect from their own members … The underlying rationale is that the professions have a privileged and trusted role in society. In return they are required to live up to their own professional standards. I  agree with Davis LJ in the Chan case … that it is not possible to formulate an all-purpose, comprehensive definition of integrity … Integrity connotes adherence to the ethical standards of one’s own profession. That involves more than mere honesty.’3 The reference to dicta of Davis LJ in Chan was to the following passage: ‘As to want of integrity, there have been a number of decisions commenting on the import of this word as used in various regulations. 859

16.68  Disciplinary proceedings In my view, it serves no purpose to expatiate on its meaning. Want of integrity is capable of being identified as present or not, as the case may be, by an informed tribunal or court by reference to the facts of a particular case.’4 The position is therefore that, in professional codes such as the SRA principles, references to a ‘lack of integrity’ are to breaches of ethical standards of the specific profession in question, here the solicitors’ profession, which are higher than the ethical standards expected of ordinary members of society, and include, but go beyond, a duty to behave honestly. Further: ‘A  professional disciplinary tribunal has specialist knowledge of the profession to which the respondent belongs and of the ethical standards of that profession. Accordingly such a body is well placed to identify want of integrity. The decisions of such a body must be respected, unless it has erred in law’.5 As Rupert Jackson LJ recognised in Wingate, however, ‘it is a counsel of despair to say: “Well you can always recognise it but you can never describe it”’.6 He then proceeded to consider various examples of cases which lack integrity. Given the difficulty of providing definitions of lack of integrity, it would indeed appear essential to identify examples of conduct which is not dishonest yet lacks integrity. 1 [2017] EWHC 1478 (Admin) at [130]. Approved by Rupert Jackson LJ in Wingate at [97]. 2 Wingate, above, at [62]. That paragraph also refers to a lecture in which, writing extra-judicially two years before the judgment in Wingate, Sir Rupert had observed at para 5.1(iii) that ‘Since the 1960s the changed perception of professions has had a dramatic effect. The privileged position of the professions now seems to have become an unconscious driver in the opposite direction. It leads courts to extend the liabilities of professionals beyond their natural bounds.’ See ‘The Professions: Power, Privilege and Legal Liability’, a lecture to the Professional Negligence Bar Association on 21  April 2015, at https://www.judiciary.uk/wp-content/uploads/2015/04/ pnbalecture-_2_.pdf. 3 Wingate, above, at [96]–[100]. The reference to adherence to the ethical standards of one’s own profession appears to derive from the decision of the Financial Services and Markets Tribunal in Hoodless v Financial Services Authority [2003] UKFTT 7, which stated at [19] that ‘In our view “integrity” connotes moral soundness, rectitude and steady adherence to an ethical code’. 4 SRA v Chan [2015] EWHC 2659 (Admin) at [48] (Davis LJ; Ouseley J agreed). 5 Wingate, at [103]. 6 Ibid., at [98].

(iii)  Examples of lack of integrity from the pre-Ivey period 16.68 We would suggest the following. Where the conduct described is conduct which falls within the definition of dishonesty, as discussed at paras 16.62 to 16.65, above, then presumably (a) it will automatically lack integrity, since dishonesty lacks integrity, but (b) in such cases, it is hard to see what is to be gained by the SDT making a finding of lack of integrity. This is because dishonesty is generally a more serious finding to make than lack of integrity. It will only be in cases where the behaviour does not count as dishonest that 860

Legal issues arising from the SRA Principles and Accounts Rules  16.69 there will be a purpose in making a finding of lack of integrity. In this context, however, it is important to bear in the mind the change to the definition of dishonesty which was brought about by the Supreme Court’s decision in Ivey.1 Before Ivey, in order to prove dishonesty it was necessary to prove not only that the respondent solicitor’s conduct was dishonest by the standards of ordinary and reasonable people, but also that the respondent solicitor subjectively realised that their conduct was dishonest by the standards of ordinary reasonable people. Applying that test as, before Ivey, it was bound to do, in some cases the SDT found that a solicitor’s conduct was dishonest by the standards of ordinary reasonable people, but that the respondent solicitor did not subjectively realise this, so that the solicitor could not be treated as having acted dishonestly. In such cases, however, the understandable desire of the SDT to find the respondent guilty of something could be satisfied by making a finding of lack of integrity. After Ivey, however, it is no longer necessary, in proving dishonesty, to show that the solicitor subjectively realised that their conduct was dishonest by the standards of ordinary reasonable people. It follows that, after Ivey, in a case where a solicitor’s conduct was dishonest by the standards of ordinary reasonable people, but the solicitor did not subjectively realise this, the solicitor is guilty of dishonesty, so there is no need to fall back on proving lack of integrity. 1 Above, at para 16.62.

16.69 In Wingate, Rupert Jackson LJ gave six examples from the case law of conduct which amounted to lack of integrity.1 But each of the cases referred to had been decided before the Supreme Court changed the definition of dishonesty in Ivey. We would suggest that, if those six cases were to be decided now, much of what was described in those cases as conduct which lacked integrity would give rise to findings of dishonesty, so that it would not be necessary to consider lack of integrity. The cases to which Rupert Jackson LJ referred were: •

SRA v Emeana.2 A solicitor entered into a sham partnership with another, in order to enable the other to practise as a principal when he was not entitled to do so, and to deceive others into thinking that there was a true partnership when there was not. We suggest that such conduct is dishonest, since it amounts to deception.

•

Brett v SRA.3 Lord Thomas CJ stated at [100] that the evidence showed that the respondent had recklessly allowed the court to be misled, by evidence presented at an injunction hearing. Bearing in mind that, as mentioned at para  16.63, above, knowledge, for the purposes of dishonesty, includes ‘blind eye knowledge’, it is hard to see how, if the SRA had alleged dishonesty, such a charge would not have been made out.

•

SRA v Chan.4 Solicitors acted for clients who wished to avoid or mitigate stamp duty land tax. The solicitors made a lot of money out of the 861

16.69  Disciplinary proceedings schemes. They were advised by counsel to mention various risks to both the clients and their lenders. They did not do so. Davis LJ stated at [52]– [53] that: ‘the purchaser clients were (as found by the Tribunal) never properly advised as to the aggressive nature of the various schemes or as to the risk of successful challenge by the Revenue. The obvious inference, overall, is that purchaser clients and lender clients were not informed because the respondents did not wish to deter them from entering into the arrangement. The inevitable inference to be drawn from the Tribunal’s findings, in my judgement, is that the interests of the clients were subordinated to the financial interests of the respondents.’ That was the basis of the finding of lack of integrity, in a case where dishonesty had not been alleged. But, if dishonesty had been alleged, a finding that the solicitors had been advised by counsel to warn their clients of risks, but had decided not to do so because the solicitors wanted to be paid fees for the schemes, would, we suggest, have amounted to dishonest conduct. Failing to give clients advice when one has been told to give them such advice, in order to increase one’s income, amounts to deception. •

Scott v SRA.5 This case involved a solicitor who made improper payments out of his firm’s client account. The only reason the solicitor escaped a finding of dishonesty was that, although his conduct was, objectively speaking, dishonest, it could not be shown that, subjectively, he had realised that his conduct was dishonest by the standards of reasonable people.6 As indicated above at para  16.64, however, since Ivey the subjective test of dishonesty is no longer applied. That being the case, it seems highly likely that, now, Mr Scott would be found to have been dishonest according to the test in Ivey, so that there would be no need to consider whether he had acted without integrity.

•

Newell-Austin v SRA.7 In this case Morris J stated at [57] that the SDT had found that the respondent solicitor had ‘turned a blind eye’ to the risks posed by (i) recruiting partners who were not properly vetted and were recruited not for their skills and abilities but simply to make up the numbers so as to allow the firm to obtain open market insurance, and (ii) failing to control members of staff who had not been admitted as solicitors. As indicated at para  16.63, in assessing dishonesty the tribunal must proceed on the basis that, if a solicitor turns a blind eye to matters, the solicitor is taken to have known what enquiry in relation to those matters would have revealed. If the respondent had known what those enquiries would have revealed, it is hard to see how she could not have been found to have acted dishonestly. But see further para 16.71, below. 862

Legal issues arising from the SRA Principles and Accounts Rules  16.70 •

Williams v SRA.8 As Rupert Jackson LJ said,9 this case concerned allegations of making false representations on behalf of a client. Such conduct, if proved, is dishonest.

1 Wingate, at [100]. 2 [2013] EWHC 2030 (Admin), [2014] ACD 14. Referred to in Wingate at [101]. 3 [2014] EWHC 2974 (Admin), [2015] PNLR 2. Wingate at [101]. 4 [2015] EWHC 2659 (Admin). Wingate at [101]. 5 [2016] EWHC 1256 (Admin). Wingate at [101]. 6 See the SDT’s decision in Scott (SDT website) at 64.54–64.58, and the Administrative Court’s decision at [36]. Holroyde J  at [59] in the Administrative Court decision in Scott expressly proceeded on the basis that a person who escaped a finding of dishonesty purely because they did not subjectively realise that their conduct was dishonest by the standards of ordinary reasonable people would be guilty of lack of integrity. As indicated above, post-Ivey such a person will be found dishonest. 7 [2017] EWHC 411 (Admin), [2017] Med LR 194. 8 [2017] EWHC 1478. 9 Wingate, at [101] (vi).

(iv)  Examples of lack of integrity from the post-Ivey period 16.70 The Court of Appeal’s consideration of the result of the Wingate appeal, however, does give an example, post-Ivey, of the meaning of lack of integrity. Mr Wingate’s firm was desperately short of money. He signed a contract with lenders in order to release a loan of £900,000. Mr Wingate knew that the contract was a sham, in that the parties did not intend that its terms would ever be carried out, but he nevertheless signed it in order to obtain the £900,000. The SRA conceded that he had not acted dishonestly. The Court of Appeal nevertheless found that he had acted contrary to the ethical standards of the solicitors’ profession in signing the contract, so that he had breached the SRA Principles in that he had not acted with integrity.1 Also in Wingate, Rupert Jackson LJ provided another example of lack of integrity. He said that ‘a solicitor conducting negotiations or a barrister making submissions to a judge or arbitrator will take particular care not to mislead. Such a professional person is expected to be even more scrupulous about accuracy than a member of the general public in daily discourse’.2 We would suggest that if a professional person deliberately misleads someone that would appear to amount to dishonesty, since deliberate misleading is dishonest.3 But it appears from the subsequent case of Adetoye that the SDT has interpreted this example to mean that if a solicitor signs a statement of truth on particulars of claim, and the facts in the particulars of claim are not true, then the solicitor is guilty of conduct lacking integrity regardless of whether they acted deliberately, negligently, or even non-negligently.4 It is, however, hard to see how even conduct which amounts to blameless inadvertence could lack integrity, or to the breach of the ethical standards of the solicitors’ profession. 1 Wingate at [122]. See also the SRA’s Guidance – Acting with Integrity (reviewed 25 November 2019). 2 At [100].

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16.71  Disciplinary proceedings 3 Though the decision of the SDT in SRA v Ahmad, 24 January 2018, appears at para 162.14 to proceed on the basis that knowingly misleading the court amounts to acting without integrity. We suggest that such conduct also amounts to dishonesty. 4 See SRA v Inyang, Coker, Adetoye and Wagbaranta, 11 December 2018, available on the SDT website, at para 46.2. Adetoye appealed (Adetoye v SRA [2019] EWHC 707 (Admin)), but only as to sanction.

16.71 The case law provides three further examples of lack of integrity. The first two relate to the Solicitors Accounts Rules. In Ahmad v SRA,1 the solicitor had agreed to be made a partner in a firm with someone called ST, simply in order to prevent ST from having to close down the firm; he had had no intention of actively undertaking his obligations as a partner, and after ST left the firm he allowed ST to have access to the firm’s client account even though he had suspicions about her conduct. £1.2 million of clients’ money, relating to conveyancing transactions, went missing from the firm’s client account. The SDT found that the solicitor had acted without integrity. Secondly, in Zivancevic v SRA,2 the solicitor, who was a consultant to a solicitors’ firm, had asked a client to pay £900 into his personal bank account rather than the firm’s account, and had failed to mention the payment to the firm for four years. The SDT found him guilty of lack of integrity. On appeal against that decision, Walker J  accepted that not every breach of the Solicitors Accounts Rules would amount to a lack of integrity, but held that the SDT had been entitled to find that, in the context of the solicitors’ profession, probity and transparency in relation to money were sufficiently important to justify a finding of lack of integrity. Thirdly, in SRA  v Dar,3 a conveyancing solicitor failed to pay sufficient attention to various hallmarks of fraud when acting on the purported sale of an Islamic community centre. The SDT found him guilty of acting with lack of integrity. The court stated at [54] that the SDT had ‘rejected Mr Dar’s assertion that he was unaware of the risk that the transaction was illegitimate/illegal and found that, aware of that risk, Mr Dar closed his eyes to it’, proceeding on the basis that in those circumstances he had acted recklessly and was thus guilty of acting with a lack of integrity. In our view, however, someone who deliberately closes their eyes to a risk has blind eye knowledge of the risk and is therefore dishonest: see para 16.63, above. Such a person is therefore guilty of the more serious charge of dishonesty, and it is doubtful whether it is necessary to consider lack of integrity. We suggest that the fundamental distinction is one between (a) someone who is dishonest, either because they know facts which, objectively, make their conduct dishonest, or because they deliberately decide not to find out about such facts, and (b) someone who, although not dishonest in the sense mentioned at (a), is grossly negligent in that they care so little about the standards of their profession that they do not take the trouble to investigate whether those standards are being breached in circumstances where there is an obvious and serious risk that those standards are being breached. A person in category (b) acts without integrity. An example might be a manager of a solicitors’ practice, in particular one who has specific responsibility to ensure compliance with regulatory obligations, to 864

Legal issues arising from the SRA Principles and Accounts Rules  16.73 whom warning signs indicating a major risk of money laundering are reported but who does nothing about them. 1 [2018] EWHC 1596 (Admin) (Irwin LJ and Holgate J). The solicitor did not appeal the SDT’s finding of lack of integrity. 2 [2019] EWHC 1950 (Admin) (Walker J). 3 [2019] EWHC 2831 (Admin) (Hickinbottom LJ and May J).

(d)  Principle 2 – Upholding public trust and confidence in the solicitors’ profession 16.72 Principle 2 requires regulated persons to act ‘in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons.’ This principle was also considered in Wingate.1 Rupert Jackson LJ said that there might be many forms of conduct which would undermine public confidence in the legal profession. He approved the case of Iqbal v SRA,2 in which it was said that if a solicitor acted with ‘manifest incompetence’ then that person failed to uphold public trust in the solicitors’ profession. But he emphasised that ‘in applying principle 6 it is important not to characterise run of the mill professional negligence as manifest incompetence’. The facts of Wingate are referred to at para  16.70 above. In considering the position of Mr Evans, a partner of Mr Wingate who had imprudently failed to obtain and read the sham contract mentioned above, since he relied on Mr Wingate for such matters, Rupert Jackson LJ stated that he had not acted with manifest incompetence and therefore was not liable for breach of what is now principle 2. Presumably the reason for emphasising that not every act of professional negligence amounts to ‘manifest incompetence’ is that, if it were otherwise, then every solicitor who was liable in civil law for professional negligence would automatically be in breach of principle 2 and liable to be referred to the SDT. This would conflate the civil law of professional negligence with breach of disciplinary duties and might lead to an avalanche of cases in the SDT. The view that that is the wrong approach might be buttressed by the consideration that the former Principle 5 of the SRA Principles 2011, which read ‘you must provide a proper standard of service to your clients’, has not been retained in the SRA Principles 2019. 1 SRA v Wingate [2018] EWCA Civ 366, [2018] 1 WLR 3969 at [105]-[106], and [130] (Rupert Jackson LJ). See also the SRA’s Guidance – Public Trust and Confidence (25 November 2019). 2 [2012]  EWHC  3251 (Admin) (Sir John Thomas P  and Silber J). See also SRA  v Libby [2017] EWHC 973 (Admin), [2017] ACD 81.

(e)  Principle 1 – Upholding the rule of law and the proper administration of justice 16.73 In SRA v Day,1 the SRA argued that failing, by oversight, to disclose a specific document amounted to a failure to comply with r 1.01 of the Solicitors Code of Conduct 2007, which provided that solicitors must ‘uphold the rule of 865

16.74  Disciplinary proceedings law and the proper administration of justice’. This looks like another attempt to conflate ‘run of the mill professional negligence’ with disciplinary breaches. The court did not consider that there had been any breach of duty by the respondent solicitors, but, at [115], it also quoted with approval the passages from Wingate which are set out at para 16.72 above. Since then, what is now SRA Principle 1 has been reworded and states that regulated persons must act in a way ‘that upholds the constitutional principle of the rule of law, and the proper administration of justice’. The addition of the words ‘the constitutional principle’ would seem to emphasise that this principle cannot be used to argue that any professional negligence amounts to a breach of the principle.2 Finally in relation to the Day case, the court emphasised that not every breach of a SRA Principle would be sufficient to justify proceedings before the SDT, and that, with the possible exception of the SRA Accounts Rules 2019,3 it would generally be necessary in each case to consider the seriousness and culpability of the breach. 1 [2018] EWHC 2726 (Admin) (Davis LJ, Foskett and Holgate JJ). 2 Ibid., at [156]. 3 See para 16.79, below.

(f)  Principle 7 – acting in the client’s best interests, and conflicts of interest 16.74 Principle 7 requires regulated persons or bodies to act in the best interests of each client. Paragraphs 7.11 of the SRA  Code of Conduct for Individuals 2019, and 3.5 of the SRA  Code of Conduct for Firms 2019, provide that: ‘You are open and honest with clients if things go wrong, and if a client suffers loss or harm as a result you put matters right (if possible) and explain fully and promptly what has happened and the likely impact …’ The SRA’s Guidance – Putting matters right when things go wrong, and own interest conflicts,1 shows that these paragraphs are intended to apply to ‘putting matters right when you identify that things have gone wrong through the fault of you or your firm’ (emphasis added). Further, ‘client’ in this context means ‘the person for whom you act and, where the context permits, includes prospective and former clients’2 (emphasis added). These paragraphs, therefore, apply when a regulated person or entity realises that it has made an error when acting for either a current or a former client. The regulated party has a duty under the relevant Code to ‘be open and honest’ with the client or former client, which must mean explaining the error to the client or potential client. It seems likely that such an explanation will generally amount to either admitting, or suggesting the possibility of, error on the part of the regulated party. Such an admission will almost certainly require the approval of the regulated party’s professional indemnity insurers, under the terms of the relevant insurance 866

Legal issues arising from the SRA Principles and Accounts Rules  16.75 policy, and the regulated party’s realisation of the error is likely to mean that ‘circumstances’ exist which, as a matter of contractual obligation in insurance law, the regulated party will have a duty to report to its/their insurers.3 As the SRA’s Guidance states, ‘you will normally need to consult with your insurers at the earliest possible opportunity’. Once insurers have been notified, it is likely that the regulated party will have to act as directed by those insurers. Presumably the insurers will have, so far as possible, to act in a way which enables the insured to comply with their regulatory obligations. But, as set out below, working out how to comply with those obligations will not always be easy, and we suggest that regulated parties and their insurers must be allowed some time in which to decide how to act, albeit they must act ‘promptly’ to explain the position to the client or former client. 1 25 November 2019. 2 SRA Glossary. The SRA’s Guidance – Putting matters right when things go wrong, and own interest conflicts (November 2019) confirms that the reference to ‘clients’ in these paragraphs includes former as well as current clients. 3 See para 17.08, below.

16.75 A  particular difficulty may arise where the person or entity which may have lost out as a result of an error is a current, and not former, client. Paragraph 6.1 of each of the two Codes provides that ‘you do not act if there is an own interest conflict or a significant risk of such a conflict’. An ‘own interest conflict’ means: ‘any situation where your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter’.1 It would therefore appear that, on discovering an error on their own part, a regulated party must immediately consider whether there is either an ‘own interest conflict’ or a significant risk of one. This is because, if the answer is that there is either an own interest conflict or a significant risk of an own interest conflict, then the regulated party must cease acting for the client.2 1 SRA Glossary. 2 See the agreed outcome in the SDT in SRA  v Howell Jones LLP  (4  December 2018). The respondent solicitors were representing a husband in a dispute with his former wife about financial provision. Based on the solicitors’ advice, the husband reached a settlement with the ex-wife. It then occurred to the solicitors that their advice might have been at fault. They took counsel’s advice. Counsel advised that the settlement was unfair to the husband, that he might be able to resile from it a later court hearing, that the reason for the bad settlement was the solicitors’ poor advice, and that there was a ‘clear conflict of interest’ between the solicitors and the husband. The solicitors carried on acting for the husband with a view to remedying the problem for him. In the SDT proceedings, however, the solicitors accepted that, when they received counsel’s advice, they had known of an ‘own interest conflict’, and that they should therefore have cased to act for the husband once they had considered the effect of that advice. The SDT accepted those concessions. The decision is criticised by Treverton-Jones in the Law Society’s Gazette, 6 May 2019, though it must now be considered in light of the SRA’s 2019 Guidance (see below).

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16.76  Disciplinary proceedings 16.76 The SRA’s Guidance states that ‘not all occasions … where you make a mistake, give rise to a risk of a conflict.’ The Guidance suggests that, where there is a ‘straightforward remedy’ which can easily be carried out, then there may be no risk of conflict. For example, ‘the consequences of a defect in title may be put right through purchasing a title indemnity policy …’. Even in this case, however, the regulated party must: ‘inform the client promptly about what has happened and of any consequences for their matter, being open and honest in your communication with the client’.

16.77 Where, on the other hand, remedial action is not entirely straightforward, then the question may arise as to whether it is in the best interests of the client to make a claim against the regulated party for professional negligence. The Guidance makes clear that, in that case, the regulated party will not be able to advise the client on the potential advantages or disadvantages of, on the one hand, retaining the regulated party to try to remedy the position, or, on the other hand, suing the regulated party for professional negligence. Other lawyers will have to provide independent legal advice on that question, possibly at the expense of the regulated party.

16.78 The most difficult question may be as to whether a regulated party is able to admit the mistake but then carry on acting for the client. As indicated above, if there is a significant possibility of a professional negligence claim against the regulated party then it would appear that this will require independent legal advice for the client. The Guidance asks: ‘If there is a risk of conflict, are you able to mitigate against this, reducing the significance or existence of the risk? This will be fact specific, but may include: •

Restricting the work you do. You may be able to take certain steps which do not present a risk of conflict, with another firm or adviser involved at key stages, for example to offer independent advice or carry out certain steps.

•

Offering to pay the costs of the remedial work. You will need to consider whether you wish to pay all costs or limit this to a proportion of the costs or certain steps – bearing in mind where litigation is involved if this will cover adverse cost orders, appeals, satellite proceedings etc. Depending on the circumstances, this may not reduce the risks sufficiently, for example if unexpected or additional costs arise and you need to advise on options where you have a personal interest.’ 868

Legal issues arising from the SRA Principles and Accounts Rules  16.80

3  The SRA Accounts Rules 2019 16.79 The SRA  Accounts Rules 2019 replace earlier accounts rules and are considerably shorter. They apply to authorised bodies, their managers and employees.1 The SRA  Glossary defines ‘manager’; the definition includes among others the sole principal of a recognised sole practice, a member of a LLP and a partner in a partnership. Rule 1.2 provides that ‘the authorised body’s managers are jointly and severally responsible for compliance by the authorised body, its managers and employees with these rules’. Rule 6.1 of the SRA Accounts Rules 2011 stated that principals in a firm had to ‘ensure compliance’ with those rules; that was held to impose strict liability on principals in relation to compliance with the then Accounts Rules.2 It remains to be seen whether it will be held that the SRA Accounts Rules 2019 impose strict liability on principals. Proper accounting for clients’ money is ‘a cornerstone of the [solicitors’] profession’,3 so it is a matter of great importance. But the effect of imposing strict liability is to make principals liable for breaches of the Accounts Rules even if they are blamelessly inadvertent in respect of such breaches. One would expect rules which set out to achieve such an objective to make quite clear that the intention is to impose strict liability. At the time of writing, there is room for argument as to whether r 1.2 is sufficiently clear to achieve that purpose. For practical purposes, however, we suggest that in most cases the more important question in relation to breaches of the Accounts Rules is likely to be whether there has been a breach of r 6(1) of the 2019 Accounts Rules, which requires regulated parties to correct breaches of the Accounts Rules on discovering such breaches. This is discussed at para  15.31, above. Since r 6(1) applies only ‘upon discovery’ by a regulated party of a breach of the Accounts Rules, breach of this rule is not a matter of strict liability. But the question of strict liability for the breach of other parts of the Accounts Rules may arise in relation to ‘stale balances’, in other words, in cases where firms of solicitors keep small sums of money in their client accounts for years without either closing the file or accounting to the client for the sum in question. The SRA may take the view that failures to repay such sums to the client are serious and require prosecution whatever the mental state of those running the firm. 1 R 1(1). 2 R (Holden) v SRA [2012] EWHC 2067 (Admin) (Irwin J) and paras 16.31 to 16.34 of the third edition of this book. 3 SRA v Siaw [2019] EWHC 2737 (Admin) at [69] (Flaux J; May J agreed).

16.80 The SRA has placed considerable importance in recent years on preventing solicitors using their client accounts as banking facilities. In the SRA Accounts Rules 2019, r 3.3 provides: ‘You must not use a client account to provide banking facilities to clients or third parties. Payments into, and transfers or withdrawals from a client account must be in respect of the delivery by you of regulated services.’ 869

16.81  Disciplinary proceedings The basic idea is that solicitors must use their client accounts to handle money only where the money relates to work which they are carrying out in their capacity as solicitors.1 The SRA’s views on the application of r 3.3 are helpfully set out by reference to worked examples in its document Case Studies – Improper Use of Client Account as a Banking Facility’.2 1 See, in relation to the previous wording of the Accounts Rules, Patel v SRA [2012] EWHC 3373 (Admin), (2012) 156(47)  SJLB  31, and Fuglers LLP  v SRA  [2014]  EWHC  179 (Admin), [2014] BPIR 610. 2 25 November 2019.

D SANCTIONS 16.81 We have already considered, at para  16.54, above, the procedure to be followed in the SDT in relation to sanctions. Once it is clear, either by agreement of the parties or decision of SDT, what is the extent of the respondent’s misconduct which is to be sanctioned, the SDT must consider the appropriate level of sanction. It must then ask its clerk whether any findings have been made against the respondent in previous disciplinary proceedings before the SDT, and ask the SRA whether it has imposed any sanction against the respondent in respect of other conduct.1 The respondent is entitled to make submissions in mitigation and to provide character references.2 There are three stages to the SDT’s approach to sanctions: first, it assesses the seriousness of the misconduct; secondly, it keeps in mind the purpose for which sanctions are imposed by the SDT; thirdly, it chooses a sanction which most appropriately fulfils that purpose for the seriousness of the conduct in question.3 The SDT ‘must’ have regard to its guidance on sanctions in force at the time when determining the appropriate sanction.4 At the time of writing, the relevant document is the SDT’s Guidance Note on Sanctions (7th edn, 2019), which states that it will be reviewed ‘at least annually’. As it states on p  3, the Guidance Note is a ‘distillation of current Solicitors Disciplinary Tribunal sanction principles brought together in one document’. Any lawyer practising in this area will wish to read the Guidance Note. In what follows we refer to some of the key points referred to in the Guidance Note and the case law. 1 Solicitors (Disciplinary Proceedings) Rules 2019, r 41(2). 2 Ibid., r 41(3). 3 Fuglers v SRA [2014] EWHC 179, [2014] BPIR 610 (Popplewell J). 4 Solicitors (Disciplinary Proceedings) Rules 2019, r 41(4), as amended by r 19 of the Solicitors (Disciplinary Proceedings) (Amendment) Rules 2020.

16.82 The SDT’s powers to impose sanctions include, by Solicitors Act 1974, s  47, powers to impose a reprimand, to impose an unlimited fine, to impose restrictions on the way in which a solicitor may practise,1 to suspend a solicitor from practice either indefinitely or for a specified period, or to strike a solicitor off the roll of solicitors. Following an order of suspension or striking 870

Sanctions  16.84 off, the SDT may, on the application of a regulated person, make orders either terminating the period of suspension or restoring them to the roll. The SDT also has powers, set out in the Guidance, in respect of the non-lawyer employees and managers of solicitors, and recognised bodies. 1 This power is inferred from the words in s 47 that the SDT has power to make such order as it thinks fit: Camacho v The Law Society [2004] EWHC 1675 (Admin), [2004] 1 WLR 3037.

16.83 As to the purposes for which the SDT may impose sanctions, the leading authority remains Bolton v the Law Society.1 Although sanctions may sometimes involve a punitive element, involving either retribution or deterrence, that is not their principal purpose. One purpose, in cases of suspension or striking off, is to ‘to be sure that the offender does not have the opportunity to repeat the offence’.2 But the most fundamental purpose is: ‘to maintain the reputation of the solicitors’ profession as one in which every member, of whatever standing, may be trusted to the ends of the earth. To maintain this reputation and sustain public confidence in the integrity of the profession it is often necessary that those guilty of serious lapses are not only expelled but denied re-admission. If a member of the public sells his house, very often his largest asset, and entrusts the proceeds to his solicitor, pending re-investment in another house, he is ordinarily entitled to expect that the solicitor will be a person whose trustworthiness is not, and never has been, seriously in question. Otherwise, the whole profession, and the public as a whole, is injured. A profession’s most valuable asset is its collective reputation and the confidence which that inspires.’3 Because the rationale of sanctions in the SDT is to ensure the trustworthiness of the solicitors’ profession in the public interest, in cases in which suspension or striking off are being considered, evidence to the effect that the offender will suffer tragic consequences from striking off, or glowing character references, are unlikely to make much difference to the sanction.4 1 [1994] 1 WLR 512 (CA). Though NB that the SDT is now required to take account of the rights of a regulated party under Articles 6 and 8 of the European Convention on Human Rights and Fundamental Freedoms: Salsbury v Law Society [2008] EWCA Civ 1285, [2009] 1 WLR 1286. Para.10 of the Guidance Note on Sanctions requires the SDT, in deciding which sanction to impose, to have regard to the principle of proportionality: ‘The interference with the solicitor’s right to practise must be no more than necessary to achieve the Tribunal’s purpose in imposing sanctions.’ 2 Ibid., at 518G. 3 At 518H–519A. 4 At 519B–E.

16.84 The most serious category of misconduct which may be found against a solicitor is dishonesty.1 Where dishonesty is proved, the solicitor will be struck off unless exceptional circumstances are shown. In considering whether to strike a solicitor off the roll for dishonesty, the principal considerations 871

16.85  Disciplinary proceedings are the nature and extent of the dishonesty and the degree of culpability, including the length of time for which the dishonesty was perpetrated, whether it was repeated, and the harm caused. Mental health issues such as stress or depression, or pressure of work, are most unlikely to prevent striking off for dishonesty.2 1 Bolton, at 518C. 2 SRA v James [2018] EWHC 3058 (Admin), [2018] 4 WLR 163.

16.85

Moving slightly down the scale of serious conduct,

‘If a solicitor is not shown to have acted dishonestly, but is shown to have fallen below the required standards of integrity, probity and trustworthiness, his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends on trust. A striking off order will not necessarily follow in such a case, but it may well … Only in a very unusual and venial case of this kind would the tribunal be likely to regard as appropriate any order less severe than one of suspension.’1 This dictum will apply to cases in which there is a finding of failure to act with integrity. In the recent case of SRA v Dar,2 the facts of which are referred to at para 16.71, above, the SDT made a finding of lack of integrity but imposed (i) a fine of £20,000, (ii) a 12-month suspension of practice which was suspended for 24 months, and (iii) a restriction, of unlimited duration, preventing the solicitor from accepting instructions in conveyancing or trust matters. The Divisional Court changed the time period attaching to the suspended suspension from 24 months to unlimited duration, so that it was consistent with the restriction, but apart from that declined to hold that the sanction was unduly lenient. 1 Bolton at 518D–E. 2 [2019]  EWHC  2831 (Admin) (Hickinbottom LJ and May J). Compare SRA  v Siaw [2019]  EWHC  2737 (Admin), a case relating to clients’ money, at [64], in which Flaux LJ stated, obiter, that striking off should have followed in a case of lack of integrity, and SRA v Lorrell [2019] EWHC 981 (Admin), in which Martin Spencer J overturned the SDT’s decision to strike a solicitor off for lack of integrity, and instead imposed a suspension from practice for two years.

16.86 Turning to the imposition of restrictions or conditions on a solicitor’s practice, the SDT has power to impose such conditions indefinitely, but, if it takes that step, it should generally give the offender liberty to apply later to have the conditions varied or removed.1 It is likely that restrictions will be imposed to protect the public from repetition of misconduct found to have occurred. As to the imposition of fines, para 30 of the Guidance Note contains a tariff of levels of fine. The highest band begins at £50,000, though, as noted at para 16.52, above, in the case of Locke Lord2 the SDT imposed a fine of £500,000. Finally, as to reprimands, these are appropriate where the SDT determines that the seriousness of the offender’s conduct justifies a sanction at 872

Sanctions  16.86 the lowest level, and that the protection of the public and the reputation of the legal profession does not require a greater sanction.3 1 Ebhogiaye v SRA  [2013]  EWHC  2445 (Admin), [2014]  ACD  13 (Haddon-Cave J), which contains a valuable discussion of the power to impose conditions. 2 10 November 2017. 3 Guidance Note, para 25. Para 26 sets out factors relevant to whether to impose a reprimand.

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Chapter 17

Insurance

A  STATUTORY FRAMEWORK 1  The SRA Indemnity Insurance Rules 17.01 Before 1 September 2000 solicitors’ firms were required to take out insurance with the Solicitors Indemnity Fund. From 1 September 2000 they were required to take out insurance in accordance with the Solicitors’ Indemnity Insurance Rules and the SRA Indemnity Insurance Rules. Under these rules, firms had a continuing obligation to ensure that they had professional indemnity insurance in place which satisfied the Minimum Terms and Conditions of Professional Indemnity Insurance (the ‘MTC’).1 On 25  November 2019 the SRA Indemnity Insurance Rules 2019 came into effect.2 The new rules apply to all authorised bodies and their principals.3 Rule 2.1 imposes an obligation upon an authorised body carrying on practice during an indemnity period (which usually runs from 1  October in one year to 30  September in the following year) to take out and maintain qualifying insurance with a participating insurer. To ensure that a solicitor is covered at all times, Rules 2.2 and 2.3 impose obligations to ensure that the authorised body obtains a policy of qualifying insurance before the expiry of the previous policy period (or the extended policy period which each policy is required to have) which incepts on and takes effect from the expiry of that period. If a firm or solicitor is unable to obtain cover, Rule 2.4 provides that they must cease to practise immediately. A  policy of qualifying insurance means ‘a policy that provides professional indemnity cover in accordance with MTC but only to the extent required by the MTC’.4 Rule 2.1 only permits authorised bodies to take out insurance with a participating insurer. This means an insurer authorised in accordance with specific provisions of the Financial Services and Markets Act 2000 which has entered into a participating insurer’s agreement with the SRA to underwrite qualifying insurance.5 Finally, it is impossible to contract out of the MTC because the policy must be construed or rectified to comply with them.6 For these reasons, every solicitor’s policy of primary layer of insurance cover must contain the same minimum terms and conditions and we focus on them in this chapter. 1 Both the term and the acronym are adopted in the new SRA  Standards and Regulations and they are used here to refer to the MTC under both 2013 and the 2019 rules (which are not materially different). The term ‘MTC’ is defined in the new SRA Standards and Regulations

874

Statutory framework  17.02 as: ‘the minimum terms and conditions with which a policy of qualifying insurance is required by the SRA Indemnity Rules to comply, as at annex 1 to those rules’. References and wording below are to the new rules which came into force on 25 November 2019. 2 The 2019 rules apply to any indemnity period beginning on or after 25 November 2019 and the 2013 rules remain in force in respect of any indemnity period before that date. For many firms, therefore, the new rules will apply for the first time to renewal for the policy year 1 October 2020 to 30 September 2021 (which is the usual policy year). The rules were made by the SRA under the statutory powers vested in the Law Society under ss 31 and 37 of the Solicitors Act 1974 and s 9 of the Administration of Justice Act 1985 and now delegated to the SRA. 3 The rules do not apply to solicitors, Registered European Lawyers and Registered Foreign Lawyers who do not practise in an authorised body. For detailed discussion of authorised bodies see Chapter 15, paras 15.14 to 15.21. 4 See the definition in the ‘SRA  Glossary’ which defines the standard terms used in the SRA  Standards and Regulations. This is supplemented by a separate ‘SRA  Glossary for SRA Compensation Fund Rules and SRA Indemnity Insurance Rules (including the Minimum Terms and Conditions)’ which contains the definition of the MTC (above). Where terms are defined in either glossary below, they are put in quotation marks and may be found by clicking on the term in the online version of the rules or the MTC. 5 For general descriptions of how the statutory framework was intended to work under the 2013 rules see The Qualifying Insurers Subscribing to the ARP  v Ross & Co [2004] EWHC  1181 (Ch) at [1]–[10] and Quinn Direct Insurance Ltd v Law Society [2010] EWCA Civ 805, [2011] 1 WLR  308 at [7]–[14] (both Sir Andrew Morritt C). The first case involved a challenge to the rules under competition law and the second the scope of legal professional privilege. For detailed consideration of Quinn see Chapter 14, paras 14.11 and 14.12, above. See also the Law Society’s Practice Note ‘Professional indemnity insurance’ dated November 2018. 6 See clause 4.10: ‘The insurance must provide that: (a) the insurance is to be construed or rectified so as to comply with the requirements of these MTC (including any amendment pursuant to clause 4.10); and (b) any provision which is inconsistent with these MTC (including any amendment pursuant to clause 4.10) is to be severed or rectified to comply.’

17.02 Rule 3.1 of the SRA  Indemnity Insurance Rules also imposes an obligation upon an authorised body to take out and maintain ‘adequate and appropriate cover in respect of current or past practice taking into account any alternative arrangements the body or its clients may make’. Rule 3.2 then provides that an authorised body must not exclude or attempt to exclude liability below the minimum level of cover required under the rules. These provisions did not appear in the SRA  Indemnity Insurance Rules 2013 but similar provisions appeared in the SRA  Code of Conduct 2013 (which no longer appear in either of the new codes of conduct).1 For the reasons set out in Chapter 1 it is not possible to exclude or limit liability in a consumer contract.2 Rule 9.2 also imposes an obligation to provide details3 of the firm’s policy upon request to any claimant who asserts a claim against the firm which relates to any matter which falls within the scope of cover in the MTC.4 1 O(7.13) (which was introduced in April 2015) required firms to ‘assess and purchase the level of professional indemnity insurance cover that is appropriate for your current and past practice, taking into account potential levels of claim by your clients and others and any alternative arrangements you or your clients may make’. O(1.8) required firms to ensure that ‘clients have the benefit of your compulsory professional indemnity insurance and you do not exclude or attempt to exclude liability below the minimum level of cover required by the SRA Indemnity Insurance Rules’. This outcome was supported by IB(1.8): ‘if you seek to limit your liability to your client to a level above the minimum required by the SRA Indemnity Insurance Rules, ensuring that this limitation is in writing and is brought to the client’s attention.’

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17.03 Insurance 2 See paras 1.05–1.07, above. 3 The details are: (a) the name of the participating insurer, (b) the policy number and (c) the address and contact details of the participating insurer. 4 Rule 9.1 provides that the rule is in addition to any obligations imposed by the Provision of Service Regulations 2009. The regulations implemented European Directive 2006/123/EC which imposed an obligation to disclose contact details of the firm’s insurer and the territorial coverage of the cover. The obligation can be satisfied by publication on the firm’s website or in its reception: see the Law Society’s Practice Note ‘Professional indemnity insurance’ §3.6.2.

2  The Minimum Terms and Conditions 17.03 Section 37 of the Solicitors Act 1974 empowers the Law Society to make indemnity rules and the SRA  Insurance Indemnity Rules 2019 (including the MTC) were made by the SRA (to whom this power has been delegated). The policy underlying this legislation was to ensure that solicitors were financially able to compensate both their clients1 and third parties to whom they had assumed duties of care or given undertakings.2 However, this does not mean that individual provisions of the MTC must be construed in a way which is most favourable to clients or members of the public because the overall terms represent a balance between the interests of insurers and the interests of the public. For example, the aggregation clause (which is considered in detail below) was renegotiated between the Law Society and the participating insurers following the decision of the House of Lords in Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd.3 In AIG Europe Ltd v Woodman4 the Supreme Court held that the application of the clause was to be judged not by looking at the transactions exclusively from the viewpoint of one party or another party but objectively and taking the transactions in the round. 1 See Swain v The Law Society [1983] 1 AC 598 at 608 (Lord Diplock) and 618 (Lord Brightman). 2 See Impact Funding Solutions Ltd v Barrington Services Ltd [2016] UKSC 57, [2017] AC 73 at [17] (Lord Hodge JSC) and [42]–[44] (Lord Toulson). 3 [2003] UKHL 48, [2003] 4 All ER 43. For the negotiations see the Law Society’s Gazette article dated 27 January 2005 quoted in full by Longmore LJ in AIG (above) in the Court of Appeal ([2016] EWCA Civ 367, [2017] 1 All ER 143 at [28]). 4 [2017] UKSC 18, [2017] 1 WLR 1168 at [25] (Lord Toulson). For further discussion see also the judgment of Teare J at first instance ([2015] EWHC 2398 (Comm) at [27]).

(a)  Scope of cover 17.04 Clause 1.1 of the MTC sets out the scope of cover which a policy of qualifying insurance must provide: ‘Subject to the limits in clause 2, the insurance must indemnify each insured against civil liability to the extent that it arises from private legal practice in connection with the insured firm’s practice, (including its prior practice and (unless run-off cover is provided in accordance with clause 5.3) any successor practice) provided that a claim in 876

Statutory framework  17.05 respect of such liability: (a) is first made against an insured during the period of insurance; or (b) is made against an insured during or after the period of insurance and arising from circumstances first notified to the insurer during the period of insurance.’ A qualifying policy will, therefore, provide for ‘claims made’ cover which is conventional in professional indemnity insurance.1 There are two triggers for liability, either of which is sufficient. They are: first, a claim made against the insured and, secondly, a claim arising from circumstances notified to the insurer during the period of insurance. Again, it is conventional for a ‘claims made’ policy to include circumstances notified to the insurer during the period of insurance (whether the subsequent claim is also made during the period of insurance or not). Indeed, provision for the notification of circumstances is integral to the structure of a claims made policy because it avoids the risk of a gap in coverage.2 The provisions of the MTC which govern prior and successor practices are discussed at paras 17.31–17.34, below. 1 For the wording used by other professions see Cannon and McGurk, Professional Indemnity Insurance (2nd edn, 2015) at 2.131–2.151. 2 See HLB  Kidsons v Lloyds Underwriters [2007]  EWHC  1951 (Comm) at [21] (Gloster J) and Euro Pools plc v Royal Sun Alliance Insurance plc [2019] EWCA Civ 808 at [39] (Dame Elizabeth Gloster).

(i)  The ‘insured’ 17.05 A policy of qualifying insurance which is issued under the MTC is a ‘composite’1 policy of insurance under which the firm itself and each individual solicitor who practises is separately insured and is entitled to cover under the policy whether or not cover for any other insured is excluded. This is reflected in clause 1.3 which requires that cover under clause 1.1 must include the insured firm, each principal and each employee.2 It is also reflected throughout the MTC. For example, where one partner has been guilty of fraud and that conduct has been condoned by a second partner, the policy will still cover the liability of the remaining partners under the law of partnership3 to compensate the victims of that fraud.4 1 For the meaning of composite insurance and the difference between joint and composite insurance see Cannon and McGurk (above) at 1.132–1.145. 2 Clause 1.3 provides in full: ‘For the purposes of the cover contemplated by clause 1.1, the insured must include: (a) the insured firm; and (b) each service, administration, trustee or nominee company owned as at the date of occurrence of relevant circumstances by the insured firm and/or the principals of the insured firm; and (c) each principal, each former principal and each person who becomes a principal during the period of insurance of the insured firm or a company referred to in paragraph (b); and (d) each employee, each former employee and each person who becomes during the period of insurance an employee of the insured firm or a company referred to in paragraph (b); and (e) the estate or legal personal representative of any deceased or legally incapacitated person referred to in paragraph (c) or (d).’ The term ‘insured’ is defined as ‘each person and entity named or described as a person to whom the insurance extends and includes, without limitation, those referred to in clause 1.3 in the MTC’.

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17.06 Insurance 3 See paras 17.18 and 17.19, below. 4 For the liability of one partner for the wrongs of another partner see Chapter 5. Although each employee must also be insured, an employee of the firm has no personal liability for the wrongs committed by his or her principals or by other employees. For this reason, it may often be important to establish whether an employee who is held out as a partner is genuinely a partner and liable for the wrongs of other members of the firm. It is also possible that a claim may be brought against a named employee as well as the firm (in which case the policy will also respond to the claim).

(ii) ‘Claim’ 17.06 In a claims made policy, the primary trigger of cover is a ‘claim’. This is an ordinary English word but most claims made policies now include a definition.1 The word ‘claim’ is given an extended meaning in the MTC (see further below). But the primary meaning given to it is ‘a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages’. In Re Lemma Europe Insurance Co Ltd2 the insured received a letter requesting disclosure of certain files and a statement by solicitors that their client ‘may’ issue protective proceedings. It was held that this did not amount to a ‘claim’ under the MTC which required ‘the communication of an intention to seek compensation or damages’. Again, where protective proceedings are issued but not served within the period of insurance, there is no claim for the purposes of the MTC (even if the insured is notified that proceedings have been issued or becomes aware of the proceedings by other means).3 Where the firm is made aware of potential proceedings or that protective proceedings have been issued but not served, the prudent course is to notify them to insurers as circumstances under clause 1.1(b). 1 For examples see Cannon and McGurk (above) at 2.19–2.22. 2 [2016] EWCA Civ 484 at [9]–[13] (Patten LJ). For similar reasoning where ‘claim’ was given its ordinary meaning and the term had not been defined see Thorman v New Hampshire Insurance Co (UK) Ltd [1988] 1 Lloyd’s Rep 1, CA; Robert Irving & Burns v Stone [1998] Lloyd’s Rep IR 258, CA; and Immerzeel v Santam Ltd [2007] Lloyd’s Rep IR 106, Supreme Court of South Africa (Zulman JA) (applying both decisions). 3 See Robert Irving & Burns v Stone [1998] Lloyd’s Rep IR 258, CA at 261–263 (Staughton LJ).

17.07 The term ‘claim’ carries a special extended definition in the MTC to cover any obligation to replace client funds misapplied or misappropriated from the firm’s client account in breach of the SRA Accounts Rules whether or not any demand for repayment has been made.1 The definition does not expressly state when such a claim should be treated as made. However, the definition equates the claim with the obligation to remedy the breach and it is suggested that the claim will be treated as made when the obligation to remedy the breach arises. Rule 6.1 of the Accounts Rules 2019 imposes an obligation to correct any breach upon discovery.2 1 ‘For these purposes, an obligation on an insured firm and/or any insured to remedy a breach of the SRA Accounts Rules, or any rules which replace them in whole or in part, shall be treated

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Statutory framework  17.08 as a claim, and the obligation to remedy such breach shall be treated as a civil liability for the purposes of clause 1 of the MTC, whether or not any person makes a demand for, or an assertion of a right to, civil compensation or civil damages or an intimation of an intention to seek such compensation or damages as a result of such breach, except where any such obligation may arise as a result of the insolvency of a bank (as defined in s 87 of the [Solicitors Act 1974]) or a building society which holds client money in a client account of the insured firm or the failure of such bank or building society generally to repay monies on demand.’ 2 ‘You correct any breaches of these rules promptly upon discovery. Any money improperly withheld or withdrawn from a client account must be immediately paid into the account or replaced as appropriate.’ Rule 7.1 of the Accounts Rules 2011 was to the same effect. For discussion of Rule 6.1 in the regulatory context see Chapter 15, paras 15.31 and 15.32.

(iii) ‘Circumstances’ 17.08 The term ‘circumstances’ is defined as ‘an incident, occurrence, fact, matter, act or omission which may give rise to a claim in respect of civil liability’. The question whether there has been a valid notification of circumstances and the related question whether a particular claim arises out of circumstances which have been notified earlier have generated a number of cases on a variety of different policy wordings.1 A detailed discussion of the authorities falls outside the scope of this book. But in Euro Pools plc v Royal and Sun Alliance plc2 the Court of Appeal provided a useful summary of the legal principles which apply both to the MTC and more generally: (1) The policy wording has to be construed and applied with a view to its commercial purpose, namely, to provide an extension of cover for all claims in the future which flow from the notified circumstances. (2) A provision which refers to circumstances that ‘may’ give rise to claims sets a deliberately undemanding test. (3) A notification need not be limited to particular events. It may extend to something as general as a regulatory warning about a class of business or a concern about work done by a former employee or prior entity. The insured may give a ‘can of worms’ or ‘hornet’s nest’ notification, i.e. a notification of a problem, the exact scale and consequences of which are not known. (4) An insured can notify a problem in general terms without fully appreciating its cause or its potential consequences (e.g. because the insured is not a technical specialist). If the insured does so, then the insurance will cover claims which have some causal connection to the problem notified. (5) If there has been a proper notification of circumstances, any claim arising from those notified circumstances will be considered to have been made within the requisite period of insurance. Any claim which arose subsequently from the notified circumstances would arise from them but there must be some causal, as opposed to coincidental, link. 879

17.09 Insurance (6)

When construing a communication to determine whether it is, or its scope as, a notification, one applies conventional principles of interpretation.

(7) There are ordinarily two parts to the notification clause: first, the awareness of a circumstance which is a pure matter of fact and, secondly, the characterisation of the circumstances which may give rise to the claim which involves an estimation of the likelihood of a claim. The right general approach is to treat the right to notify as ‘subject to an implicit requirement that the circumstance may reasonably be regarded in itself as a matter which will give rise to a claim’.3 Proposition (7) amounts to a further limitation on notification. The key point is that insurers would be justified in rejecting the notification if, on the facts then known, it was not reasonable to consider that there was a real possibility of a claim. Moreover, this is an objective question and the subjective personal views of the insured are not relevant. It is rare that it will generate controversy in solicitors’ claims and much more relevant to construction claims where the risks of a small defect causing significant damage years later might be contested by insurers. 1 It should be noted that clause 4.6 of the MTC prevents insurers from excluding cover for circumstances which should have been notified during a prior policy period but does not: see para 17.27, below. In that respect the insuring clause under a qualifying policy will be more generous to the insured than other policy wordings. 2 [2019] EWCA Civ 808 at [39] (Dame Elizabeth Gloster) (with whom Males and Hamblen LJJ agreed). 3 This is a distillation of the judgments of Rix and Toulson LJJ in HLB  Kidsons v Lloyds Underwriters [2008] EWCA Civ 1206, [2009] Lloyd’s Rep 8 at [71] and [134]–[141] which formed the basis for Dame Elizabeth Gloster’s seventh proposition.

17.09 In McManus v European Risk Insurance Co1 a firm which had taken over two other firms notified insurers that every file of one of those predecessor firms ‘should properly be notified to you as individually containing shortcomings on which claimants will rely for the purposes of bringing claims against this firm as successor practice’. The notification letter was headed ‘Blanket Notification of Circumstances’ and estimated that there were about 5,000 files and enclosed a spreadsheet listing hundreds of files. In support of the notification they itemised five separate matters of concern.2 Insurers rejected the notification in relation to all matters apart from 32 specified files on the basis that the notification letter did not identify the specific incident, occurrence, fact, matter, act or omission which would give rise to each claim. The judge held that insurers were wrong to reject the notification and that it had been validly made. She held that a blanket notification of circumstances was valid for the purposes of clause 1.1(b) of the MTC even though the notification did not identify the individual clients or transactions which might form the basis for subsequent claims.3 However, she was unable to go beyond this and make any declarations about the detailed effect of the notification. In particular, she accepted that there were problems with trying to identify an exhaustive list of the relevant misconduct. She also 880

Statutory framework  17.10 accepted that the authorities were clear, that a notification could only be valid insofar as it was based on circumstances which were known to the insured at the time the notification was made, and that there had to be ‘a substratum of underlying external fact’.4 By this she meant that there had to be a number of material facts known to the insured which justified the notification. It was not necessary, however, for the insured to understand the precise causes of any defect or damage.5 Even where the insured firm wishes to make a ‘can of worms’ or ‘hornet’s nest’ notification, it will have to identify some known practice or misconduct or common feature which viewed objectively gives rise to a real risk of claims.6 1 [2013] EWHC 18 (Ch) at [29] and [30] (Vivien Rose QC) 2 The five matters were: (1) 17 claims which had already been notified to insurers, (2) the similarity between the individual transactions derived from an independent report, (3) a judgment in SDT disciplinary proceedings, (4) the identification of three fee earners who had worked at the predecessor firm and (5) a review of 110 files selected at random. For the details see [20]–[28]. 3 See [38]–[45]. This passage was cited with approval by Dame Elizabeth Gloster in Euro Pools plc v Royal and Sun Alliance plc [2019] EWCA Civ 808 at [39](iv). As the judge pointed out in this passage, the leading case on blanket notifications is J Rothschild Associates plc v Collyear [1998] CLC 1697 (Rix LJ). This is probably the widest example of a successful notification of circumstances in the authorities and in McManus the judge summarised the contents of the notification at [39]. 4 See [47]–[63] and, in particular, [56]. The principal authority upon which she relied was HLB Kidsons v Lloyds Underwriters [2008] EWCA Civ 1206, [2009] Lloyd’s Rep 8 (above) at [74] (Rix LJ) where the clause contained an express requirement that the insured should be ‘aware’ of the circumstances. The definition in the Glossary does not contain similar wording but it is difficult to see how the insured could notify any of an incident, occurrence, fact, matter, act or omission without being aware of them. There was no appeal against the judge’s finding that insurers were wrong to reject the notification but the Court of Appeal dismissed an appeal against her decision not to make any declarations and accepted her reasoning: see [2013] EWCA Civ 169, [2014] Lloyd’s Rep IR 169. 5 See Euro Pools plc v Royal and Sun Alliance plc [2019] EWCA Civ 808 at [72]–[74] where Dame Elizabeth Gloster distinguished McManus. She stated that: ‘The authorities to which I have already referred demonstrate that an insured must be aware of a circumstance in order to notify the insurer of that circumstance; but there is no requirement that he be aware of the full causal origins and implications of the circumstance notified.’ In the example given above of the former client who issues but does not serve a protective Claim Form, it ought to be sufficient to notify the client, a brief description of the matter or matters undertaken for that client together with the fact that a Claim Form has been issued. 6 For further discussion of ‘can of worms’ or ‘hornet’s nest’ notifications see Kajima UK Engineering Ltd v The Underwriter Insurance Company Ltd [2008] EWHC 83 (TCC) at [103]–[111] where Akenhead J rejected the argument that a ‘hornet’s nest’ notification had been made. In particular, he rejected the argument that specified defects in a building were part of a ‘continuum’ which did not have to be reported separately. See also The Cultural Foundation v Beazley Furlonge Ltd [2018] EWHC 1083 (Comm) at [156]–[160] where Andrew Henshaw QC considered J Rothschild Associates plc v Collyear (above) to be an example of a ‘hornet’s nest’ notification.

17.10 The MTC do not contain any provisions dealing with the form, content and service of the notification and this will normally be the subject matter of individual policy wording.1 Where the policy wording does not specify how the notification should be made or to whom, the normal principles of construction and authority will apply.2 In HLB Kidsons v Lloyds 881

17.10 Insurance Underwriters3 Gloster J adopted the test applied by Lord Steyn to unilateral notices in Mannai Investment Co Ltd v Eagle Star Life Assurance Co,4 namely, whether a reasonable person with the relevant background would have understood the relevant letter to be a notification of circumstances. She held that no valid notification had been given. The Court of Appeal reversed her decision by a majority. The notification had been given by the insured’s brokers to the claims’ side of the insurance syndicate with a file of documents including a bordereau cover sheet which made it clear that a notification of circumstances was being made.5 Rix LJ made it clear that the test was not whether there could be no argument about the scope of the notification but whether it was clear on an objective reading that it was intended to be a notification of circumstances.6 Again, the effect of the notification will depend on the terms of the policy, whether it requires notification to be given to a named person or entity7 and whether it has to be given by the insured firm itself.8 The authority of the person who gives and receives the notification will also be relevant. Most policies also require notification either immediately or within a reasonable time of the insured becoming aware of the relevant claim or circumstances.9 1 The failure to notify correctly is more likely to lead to a contest between insurers (as in McManus) rather than between insurers and insured. The failure to notify circumstances in one policy year will not prevent the insured from validly notifying a claim in a subsequent year: see paras 17.12–17.15, below. 2 See proposition (6), para 17.08, above. 3 [2008] EWCA Civ 1206, [2009] Lloyd’s Rep 8. 4 [1997] AC 749, HL at 767–768. Lord Steyn relied on Delta Vale Properties Ltd v Mills [1990] 1  WLR  445, CA at 454 (Slade LJ): ‘Even if such notices under contractual rights reserved contain errors they may be valid if they are “sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate”.’ 5 For the facts see [24]–[34]. Rix LJ summarised the position (at [84]): ‘But it was on all objective criteria intended to be a notification of circumstances, it was presented by the claims side of Millers to the claims side of syndicate 839, with an accompanying bordereau whose terms reflected that fact, and the question therefore was rather what the presentation reasonably conveyed to its recipient.’ Insurers also conceded that it was a proper notification but disputed its validity on the basis that the insured was holding information back. Rix LJ placed some significance on the concession. 6 The key paragraph in Rix LJ’s judgment (with which Toulson LJ agreed) was [84] (above). But Rix LJ also doubted the utility of the Mannai test where there was room for argument about the scope of the notification: see [87]. 7 Most professional policies will name the partnership secretary or a designated individual: see HLB Kidsons (above) at first instance ([2007] EWHC 1951 (Comm)) at [68] (Gloster J). Excess layer policies usually provide that notification to the primary layer will amount to notification to excess layers. But if this is not the case, the question whether effective notification has been made will depend on the actual or ostensible authority of the primary layer insurers: see Friends Provident Life and Pensions Ltd v Sirius International Insurance Corporation [2004] EWHC 1999 (Comm) at [30]–[32] (partly reversed on appeal at [2005] EWCA Civ 601). 8 See Barrett Bros (Taxis) Ltd v Davies [1966] 1 WLR 1334 (where the Court of Appeal held that notice from the police was effective) and AXA  Insurance UK  Plc v Thermonex Ltd [2013] TCLR 3 (where HHJ Simon Brown QC held that only the insured itself could give notice to the insurer). 9 For an example see Quinn Direct Insurance Ltd v Law Society [2010]  EWCA  805, [2011] 1 WLR 308 at [2] (Sir Andrew Morritt C). For examples of cases involving other professions see Cannon and McGurk (above) at 2.116–2.120.

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Statutory framework  17.12 17.11 A  particular problem for solicitors and counsel who may face potential claims is whether they can notify insurers of confidential or privileged information. This should ordinarily be the subject of an express term in the solicitor’s standard form terms and conditions permitting the solicitor to notify both claims and circumstances. But in the absence of such a term or a waiver of privilege, a solicitor is not permitted to disclose to insurers information which is privileged or confidential. In Quinn Direct Insurance Ltd v Law Society1 the Court of Appeal confirmed that there is no exception which permits a solicitor to notify insurers even on a confidential basis and even if this places the insured in a position of conflict between his or her client (or former client) and insurers. Where the client has served a notice of claim under the Professional Negligence Pre-Action Protocol, the notice is addressed to the insured but should ask the insured to inform his or her professional indemnity insurers (if any) immediately. The better view is that this amounts to an implied waiver of privilege (although it may be limited to insurers).2 But even if it does not amount to an implied waiver of privilege, it ought to be possible to make a valid notification of circumstances either by redacting the notice or by setting out the general nature of the claim anonymising the client and any client confidential information. Where a third party has made a claim, it will be unnecessary to identify the client or the transaction in order to notify circumstances in light of the guidance in McManus and Euro Pools. Insurers ought to accept the notification provided that the solicitor has taken reasonable steps to obtain the client’s consent to disclosure (and the client either refuses or cannot be found). 1 [2010] EWCA 805, [2011] 1 WLR 308 at [22]–[24] (Sir Andrew Morritt C) 2 For detailed discussion see Chapter 14, paras 14.11–14.13, below. See also Chapter 16, paras 16.28 to 16.30 for discussion of the related issue when solicitors may disclose confidential or privileged material to the SRA.

17.12 Where a solicitor’s firm makes a notification of circumstances, the scope of that notification is often the subject matter of dispute at the subsequent stage when a claim is then made. This issue is important because it will determine whether the policy in force at the time of the original notification or the policy in force at the time of the subsequent notification responds to the claim. The policy will respond to a claim ‘arising from circumstances first notified to the insurer during the period of insurance’. This means that any claim arising from those notified circumstances will be considered to have been made within the requisite period of insurance if there is some causal (as opposed to coincidental) link between them.1 This is a relatively broad test. It will be limited to facts known to the insured at the time of the notification but it will not be necessary to show that those facts were the proximate cause of the damage claimed. For instance, the notified circumstances may be the conduct of a particular individual.2 Moreover, the notification will cover new damage arising out of those circumstances even if it has been suffered or incurred after the original notification.3 But it will not cover damage arising from an entirely different defect or cause.4 Finally, in Re Lemma Europe Insurance Co Ltd5 the Court of Appeal rejected the argument that the insured could rely on 883

17.13 Insurance the aggregation clause (considered below) to treat notification of one claim as notification of a second claim arising out of similar acts or omissions in a series of related matters or transactions because the extended definition of a claim existed only for the purpose of establishing the limit of the cover and did not relate to any other part of the policy (including the notification provisions). 1 See proposition (5), para 17.08, above. In HLB Kidsons v Lloyds Underwriters [2007] EWHC 1951 (Comm) Gloster J  adopted this formulation: see [78]. In Kajima UK  Engineering Ltd v The Underwriter Insurance Company Ltd [2008] EWHC 83 (TCC) Akenhead J adopted the same formulation: see [94] and [100]. Both cases involved very similar wording to the MTC, ie claims arising from the relevant circumstances. 2 See, eg  Hamptons Residential Ltd v Field [1998] Lloyd’s Rep 248, CA (where the notified circumstances were the participation of a particular fee earner in mortgage fraud supported by the examples then known to the insured). 3 See Kajima (above) at [97](j). 4 In Kajima Akenhead J  held that the notification covered (i) the defects which caused (ii) the symptoms of, or (iii) the consequences of, the settlement or movement of ‘accommodation pods’ and distortion of the adjoining balconies, walkways and roofing of a pre-fabricated building but not later defects which had no relation to those factual circumstances: see [100] to [111]. By contrast, in Euro Pools plc v Royal and Sun Alliance plc [2019] EWCA Civ 808 the Court of Appeal held that the notified circumstances encompassed all third party claims arising out of the failure of ‘booms’ (vertical walls used to partition a swimming pool) to rise and fall properly even though the insured (which sold and installed the pools) had taken a series of different measures to mitigate the defects: see [46] and [47] (Dame Elizabeth Gloster) and [110]–[112] (Males LJ). 5 [2016] EWCA Civ 484 at [13] (Patten LJ)

(iv)  ‘Civil liability’ 17.13 A policy of qualifying insurance must indemnify each insured against civil liability which arises from private legal practice in connection with the insured firm’s practice (including its prior practice and any successor practice).1 The definition of ‘private legal practice’ has a wide meaning. It is defined as the provision of legal services in private practice as a solicitor or REL in an authorised body and includes: (a) providing such services in England, Wales and anywhere in the world,2 (b) the provision of such services as a secondee, (c) acting as a personal representative, trustee, attorney, notary, insolvency practitioner or in any other role in conjunction with a practice, (d) the provision of such services by any employee and (e) the provision of such services pro bono. It does not include any judicial office or judicial functions. Nor does not cover loans or funding liabilities.3 1 See the body of clause 1.1. 2 This is subject to the requirement that the services are provided in a recognised sole practice, a recognised body or a licensed body (in respect of its regulated activities). 3 In Sutherland Professional Funding Ltd v Bakewells [2011] 2658 (QB) HHJ  Hegarty QC held that a guarantee given by the firm for loans made by the claimant to its clients to fund disbursements in personal injury litigation did not fall within the insuring clauses of two qualifying policies: see [99]. In Impact Funding Solutions Ltd v Barrington Support Services Ltd [2013]  EWHC  4005 (QB) HHJ  Waksman distinguished Bakewells and held that a very similar agreement for funding litigation fell within the insuring clause. He nevertheless held that it fell within the ‘trading or personal debt’ exclusion in clause 6.6(a) (below). His decision on this point was upheld by the Supreme Court: see [2016] UKSC 57, [2017] AC 73.

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Statutory framework  17.15 (v)  ‘Defence costs’ 17.14 A  policy of qualifying insurance must also indemnify the insured against defence costs1 of any claim falling within clause 1.1 (or any circumstances first notified to the insurer during the period of insurance) and any investigation or inquiry arising from such a claim or such circumstances apart from the costs of any disciplinary proceedings under the authority of the SRA or the Solicitors Disciplinary Tribunal.2 Some insurers offer cover for the defence costs of disciplinary proceedings and for fines or penalties (where such cover does not involve fraud or dishonesty which would be contrary to public policy) and some cover may also be available under other types of insurance. But it is not mandatory to obtain cover of this kind. 1 Defence costs are defined as ‘legal costs and disbursements and investigative and related expenses reasonably and necessarily incurred with the consent of the insurer in: (a) defending any proceedings relating to a claim; or (b) conducting any proceedings for indemnity, contribution or recovery relating to a claim; or (c) investigating, reducing, avoiding or compromising any actual or potential claim; or (d) acting for any insured in connection with any investigation, inquiry or disciplinary proceeding (save in respect of any disciplinary proceeding under the authority of the SRA or the Tribunal), and does not include any internal or overhead expenses of the insured firm or the insurer or the cost of any insured’s time.’ 2 See clause 1.2. Clause 6.7 permits insurers to exclude any order or agreement to pay the costs of a complainant or regulator, investigator or prosecutor of any professional conduct complaint or investigation. Insurers may therefore exclude entirely the costs of any disciplinary proceedings.

(vi) Exclusions 17.15 Clause 6 of the MTC sets out the exclusions which the policy is permitted to include: death or bodily injury, property damage, partnership disputes, employment disputes, war, terrorism and asbestos and international trade sanctions.1 In Impact Funding Solutions Ltd v Barrington Support Services Ltd2 the Supreme Court held that the general principle that exemption clauses should be construed narrowly has no application to the exclusions in solicitors’ policies which comply with the MTC and the extent of the cover is ascertained by the construction of all of its relevant terms without recourse to any doctrine relating the exemption clauses. Clause 6.1 (which deals with prior cover) also permits the policy to exclude: ‘Any claim in respect of which the insured is entitled to be indemnified under a professional indemnity insurance contract for a period earlier than the period of insurance, whether by reason of notification of circumstances under the earlier contract or otherwise.’ It is important to recognise the limited nature of this exclusion. It only permits insurers to exclude claims arising out of notifications in a prior year. It does not permit them to exclude cover for circumstances which the insured could have notified in earlier years but failed to do so (either because the insured failed to notify at all or because the notification was defective or not wide enough). Even if new insurers take the view that the insured firm ought to have notified 885

17.16 Insurance its previous insurers and disclosed the notification on renewal, they are still bound to provide cover. 1 See clauses 6.2 to 6.5 and 6.10 to 6.11. These are standard exclusions and outside the scope of this book. Clause 6.9 also contains a permitted exclusion for D and O liability provided that it must cover liability arising from a breach of duty in the performance of legal work and the vicarious or joint liability of each insured. This is consistent with the general policy of the MTC which is to require insurers to meet claims of clients against a firm arising out of any legal work carried out by partners and employees whilst otherwise permitting freedom of contract between insurers and insured. 2 [2016] UKSC 57, [2017] AC 73 at [7] (Lord Hodge JSC) and [35] (Lord Toulson). See also Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc [2018]  EWCA  Civ 317 at [28] (Simon LJ).

17.16 Clause 6.6 contains a permitted exclusion for trading or personal debts of the insured. In Impact Funding Solutions Ltd v Barrington Support Services Ltd (above) the Supreme Court held that the liability of a solicitor’s firm to a data management company under which the firm paid a fee and could draw down funds to meet the disbursements of their clients in litigation but were personally liable to repay them fell within the exception. The firm entered into the agreement as a principal and not on behalf of the clients and the data management company was not a client of the firm.1 The clause also goes on to permit insurers to exclude the following: ‘legal liability assumed or accepted by an insured or an insured firm under any contract or agreement for the supply to, or use by, the insured or insured firm of goods and services in the course of the insured firm’s practice save that this exclusion 6.6(b) will not apply to any legal liability arising in the course of an insured’s practice in connection with its or any insured’s use of or access to the HM Land Registry network …’. Policies which adopt this wording may turn out to be a trap for the unwary. Where the insured firm agrees to supply services to a client provided by a third party (eg a technology or AI provider) the service contract may well provide that the firm (and not the provider) will assume the risk of liability to the client if the technology goes wrong or provides inaccurate results. The wording of clause 6.6(b) would appear to permit insurers to exclude the liability to the client in these circumstances. Likewise, where the firm chooses to use freelance lawyers2 under a contract for services which provides for the firm to assume liability for the consequences of their work, clause 6.6(b) would permit insurers to exclude liability to the client in those circumstances also. The prudent course, therefore, would be to negotiate a special condition for contracts of this kind. 1 See [2016] UKSC 57, [2017] AC 73 at [29] (Lord Hodge JSC) and [46] (Lord Toulson). Lord Carnwath dissented on the basis that the services were being provided to the firm’s clients: see [56]. 2 This was one of the major changes permitted by the new Standards and Regulations: see the guidance issued by the SRA on 4 July 2019 ‘Preparing to become a sole practitioner or an SRAregulated freelance solicitor’.

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Statutory framework  17.18 17.17 Clause 6.7 permits insurers to exclude (a) any fine or penalty, (b) any award of punitive or exemplary damages under the law of the USA or Canada or (c) any order or agreement to pay the costs of a complainant, regulator, investigator or prosecutor of any professional conduct complaint against or investigation into the professional conduct of the insured.1 This exclusion reflects the general principle that it is contrary to public policy to permit a party to insure against a criminal penalty. However, there is no authority that a fine imposed by a regulator or a disciplinary tribunal cannot be recovered under a policy of insurance2 and solicitors’ policies commonly include cover for the defence costs of regulatory or disciplinary proceedings. It is also becoming more common for solicitors’ policies to cover the fine or penalty itself. There is authority that it would be unlawful to permit recovery not only where the insured is guilty of dishonesty or intentional wrongdoing but also where the insured has been negligent.3 Moreover, where the relevant liability or offence involves ‘the infringement of statutory rules enacted for the protection of the public interest and attracting civil sanctions of a penal character’4 it may be contrary to public policy to permit a party to insure against a fine or penalty even where there is no culpability at all. It remains to be seen whether the court would enforce an indemnity against a fine imposed by the SDT even where there is no finding of intentional misconduct or negligence (eg where the firm or an individual partner is fined for a failure to ensure that another feeearner complied with the SRA Accounts Rules). However, there appears to be no objection to cover against punitive or exemplary damages.5 1 For a useful analysis of the English authorities see Geddes (D) (Contractors) Ltd v Neil Johnson Health & Safety Services Ltd [2017] CSOH 42, [2017] PNLR 21 (Lord Tyre) at [11]–[18]. 2 See Strongman (1945) Ltd v Sincock [1955] 2  QB  525, CA cited by Lord Tyre in Geddes (D) (Contractors) Ltd v Neil Johnson Health & Safety Services Ltd [2017]  CSOH  42, [2017] PNLR 21 at [18]. 3 See Les Laboratoires Servier v Apotex Inc [2014]  UKSC  55, [2015] AC  430 at [26] (Lord Sumption JSC). 4 Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897, where the Court of Appeal permitted recovery by a Chief Constable under a liability policy for his vicarious liability for the conduct of an individual constable. The decision is limited to circumstances in which the liability is vicarious. But this will almost always be the case where there is a claim against a solicitor’s firm. 5 See Lancashire County Council v Municipal Mutual Insurance Ltd (above) although professional policies often exclude this liability.

17.18 It is not possible for individuals to insure against their own fraud or dishonesty as a matter of public policy.1 There is no public policy objection, however, to an employer insuring against vicarious liability for fraud. But in the case of companies questions of attribution arise and it is often difficult to decide whether the relevant acts or omissions give rise to a primary liability2 or to a vicarious liability for the conduct of its officers, agents or employees.3 These difficult issues are addressed by the MTC in the following way. Clause 6.8 reflects the general principle and excludes liability for the fraud or dishonesty of an individual insured but requires insurers to provide cover for vicarious liability. It also deals expressly with attribution4 and requires 887

17.19 Insurance that no fraud or dishonesty will be imputed to a body corporate unless it was committed or condoned by (in the case of a company) all directors of that company or (in the case of an LLP) all members of that LLP.5 Insurers cannot, therefore, repudiate cover unless all of the partners in the firm or all the members of the LLP or all the directors of the company have either committed fraud or dishonesty or condoned it. Likewise, where the fraud or dishonesty has been committed by an employee, insurers cannot repudiate cover unless all of the principal, partners, members or directors have condoned that conduct. If insurers are unable to repudiate cover, they will be left with a right to reimbursement against the dishonest individuals which may have limited value.6 1 See Beresford v Royal Insurance Co Ltd [1938] AC 586, HL at 595 (Lord Atkin). 2 Any liability policy will ordinarily be construed as excluding liability for primary liability: see KR v Royal & Sun Alliance Plc [2006] EWCA Civ 1454 [2007] Lloyd’s Rep IR 368. 3 See Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472, [2011] 1 Lloyd’s Rep 462 at [28] (Longmore LJ): ‘There is undoubtedly a principle of English law that acts of an agent are not to be regarded as attributable to his principal if the acts of the agent were deliberately intended to be in fraud of and cause loss to his principal. It is arguably wider than this and may extend to acts of an agent which are in breach of his duty to his principal and which have, in fact, resulted in harm to his principal.’ But see also Bilta (UK) Ltd v Nazir [2015] UKSC 23, [2016] AC 1 where doubts were expressed about Twigger. These difficult issues do not arise if the policy follows the wording of clause 6.8. 4 It is doubtful whether the parties could vary by contract the legal rules of attribution. But the MTC are made under delegated legislation and the way in which the rules of attribution are intended to apply in any statutory context depend on the interpretation of that statute: see Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, HL at 507 (Lord Hoffmann) and Bilta (above) at [67] and [68] (Lord Sumption JSC). It is suggested, therefore, that clause 6.8 expressly provides how the rules of attribution were intended to apply in the present statutory context. If this is correct, then there is no difficulty in enforcing policy wording which follows it. 5 ‘The insurance may exclude liability of the insurer to indemnify any particular person to the extent that any civil liability or related defence costs arise from dishonesty or a fraudulent act or omission committed or condoned by that person, except that: (a) the insurance must nonetheless cover each other insured; and (b) the insurance must provide that no dishonesty, act or omission will be imputed to a body corporate unless it was committed or condoned by, in the case of a company, all directors of that company, or in the case of an LLP, all members of that LLP.’ 6 For the right to reimbursement see para 17.35, below.

17.19 Dishonesty is dealt with in detail in Chapter 4. The expression ‘condoned by’ used in qualifying policies of insurance has been considered in a number of authorities. In Zurich Professional Ltd v Karim1 Irwin J held that ‘dishonesty’ and ‘fraudulent act or omission’ were disjunctive in the relevant policy wording and that it excluded cover if the insured condoned either dishonesty or a fraudulent act or omission. He found that the insurers were entitled to repudiate cover because two of the partners had condoned the dishonesty of the third (their mother) even though he was unable to find that they knew about the property transactions which were the subject matter of the claim. They knew that she had control of the firm, that they were exercising no control (when they should have done) and that the flows of money into and out of the firm could not be legitimate.2 The decision has been followed in a 888

Statutory framework  17.20 number of cases. In Goldsmith Williams v Travelers Insurance Co Ltd3 Wyn Williams J stated the principle to be derived from Karim as follows: ‘As can be seen from these extracts from his judgment Irwin J decided that if an Insured condones a course of conduct which is dishonest or fraudulent and that course of conduct leads to or permits the specific acts or omissions upon which the claim is founded the insurer is entitled to repudiate liability.’ In that case he held that one partner who was aware that the other partner had made fraudulent misrepresentations in a mortgage application form had condoned the theft of a mortgage advance (even though she was unaware that his partner had stolen the money). In Rahim v Arch Insurance Co (Europe) Ltd4 one partner had herself participated in a series of mortgage frauds. HHJ Waksman QC held that she had condoned another series of mortgage frauds committed by her partner (who was in charge of the practice) even though she had not been involved in the individual transactions which were the subject matter of the claims.5 1 [2006] EWHC 3355 (QB). 2 For the findings of fact see [101] and [102]. The judge described their state of mind as ‘profoundly reckless’. 3 [2010] EWHC 26 (QB), [2010] Lloyd’s Rep IR 309. 4 [2016] EWHC 2967 (Comm). 5 For the findings of fact see [88]. See also Halliwells LLP v NES Solicitors [2011] EWHC 947 (QB), [2011] PNLR 30 at [136]–[143] where HHJ McCahill QC also followed Karim. He held that the two partners were held to be dishonest in giving an undertaking that they held funds in their client (when they did not). He also held that each partner condoned the dishonest conduct of the other.

(b)  Limit of cover 17.20 The sum insured for any one claim (exclusive of defence costs) must be at least £3 million (where the insured firm is a recognised body or licensed body) and in all other cases at least £2 million.1 There must be no monetary limit on the cover for defence costs2 although a policy of qualifying insurance may provide that liability for defence costs in relation to a claim which exceeds the sum insured is limited to the proportion which the sum insured bears to the total amount paid or payable to dispose of the claim.3 This can cause practical problems where the claim is very large and there is no top up cover. Insurers may end up funding the defence and then seeking to recover the uninsured proportion of defence costs if the defence ultimately fails. Subject to these provisions the policy must not limit liability to any monetary amount.4 Because of this the most common issue which arises in relation to the limit of cover (and, indeed, to any excess) is aggregation and whether a number of claims against the insured firm should be treated as one claim. 1 See clause 2.1. 2 See clause 2.2. 3 See clause 2.3. 4 See clause 2.4.

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17.21 Insurance 17.21 It is usual for liability insurance policies to include an aggregation clause which treats individual claims which are closely connected on the facts or related to each other as if they were a single claim. In Scott v The Copenhagen Reinsurance Company (UK) Ltd1 Rix LJ described the function of such a clause as: ‘to police the imposition of a limit by treating a plurality of linked losses as if they were one loss’. In Axa Reinsurance (UK) Plc v Field2 Lord Mustill explained how the concept of aggregation is integral to the way in which direct insurers underwrite and reinsure liability insurance: ‘Thus for example a direct insurer may issue many policies on terms as to deductible and limit of liability which he can fix according to his knowledge of the policyholders and of the likely size and incidence of the kind of casualties which are insured. The financial outcome of these policies will depend on other factors besides the total monetary amount of the valid claims made. Thus, if many of the policyholders make a large number of small claims, comparatively few of them will exceed the deductible, and the underwriter’s gross exposure will be small. At the other extreme, if the claims are large but few, most of them will be cut off by the upper limit, and again the exposure may be quite small. But if there are many claims of medium size the underwriter may find himself carrying them all in full. If when writing his policies he foresees that this could happen, he will consider limiting his liability under an individual policy by reference to aggregate claims made during the policy year, as well as by the size of each individual claim. Or, again, if the likelihood is that even when there are numerous losses a group or groups of them will share a more or less distant common origin, it may be prudent to impose not only a limit per claim but also a limit per group. These matters form an element in determining not only the premium charged but also the amount and the nature of the reinsurance which it is prudent for the direct insurer to carry.’ However, aggregation clauses do not necessarily favour insurers. Many policies will adopt the same aggregation clause in order to determine whether a number of claims should be treated as the same claim and also in order to determine whether a single excess or multiple excesses are payable in respect of the same claim.3 If multiple excesses are aggregated, this will assist the insured rather than insurers. Moreover, in relation to both excess insurers and reinsurance it is very difficult to predict what effect an aggregation clause might have on both primary and excess layer insurers. It may assist the insurers of the primary layer to pierce the limits of the excess layers but it may also operate to exhaust the primary or secondary layers and damage the interests of the excess layer insurers.4 For this reason the approach to the construction of aggregation clauses has been to pay close attention to the wording and to treat them as neutral on the basis that they can favour either the insured or insurers. 1 [2003] EWCA Civ 688 at [12]. Rix LJ used the expression ‘unifying concept’ which in that case was the phrase ‘arising out of one event’. 2 [1996] 1 WLR 1026, HL at 1034

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Statutory framework  17.22 3 We describe these as ‘symmetrical’ aggregation clauses. Excesses are dealt with below but it is rare for solicitors’ policies to be truly symmetrical. Most adopt the same aggregation clause but cap the total number of excesses at a fixed number of claims per year or at a cap per aggregated claim. This enables the insured to predict with certainty what losses it must self-insure or insure with other insurers. 4 See Scott (above) at [10]–[12] (Rix LJ). See also Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc [2018] EWCA Civ 317 at [22]–[24] (Simon LJ).

17.22 Most aggregation clauses achieve their purpose by reference to a ‘unifying concept’ or ‘unifying factor’1 by which a number of claims are deemed to be a single claim. Common unifying factors are ‘cause’, ‘originating cause’, ‘event’, ‘occurrence’, ‘act’ or ‘omission’ all of which feature in a number of well-established alternative wordings which have been used in the insurance market more widely and interpreted by the courts.2 The ‘same act or omission’ wording in the MTC is derived from the standard form wording adopted by the Solicitors Indemnity Fund.3 From 1 September 2000 the first version of the MTC adopted an expanded wording.4 In Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd5 the House of Lords placed a narrow construction on a similar policy. The case was not concerned with the MTC but was sufficiently close to concern insurers in the solicitors’ market that the courts would take a much narrower view than the London market had conventionally taken of the aggregation clause under the MTC. In 2005 the Law Society agreed to adopt a wider aggregation clause in return for agreement by insurers to an increase in the mandatory limit for basic cover.6 Clause 2.5 of the MTC (which has been in the same form since then) provides as follows: ‘The insurance may provide that, when considering what may be regarded as one claim for the purposes of the limits contemplated by clauses 2.1 to 2.3 (inclusive): (a)

all claims against any one or more insured arising from: (i)

one act or omission;

(ii) one series of related acts or omissions; (iii) the same act or omission, in a series of related matters or transactions; (iv) similar acts or omissions, in a series of related matters or transactions, and (b) all claims against one or more insured arising from one matter or transaction will be regarded as one claim.’ 1 We adopt the term ‘unifying factor’ which was used by Lord Hoffmann in the Lloyds TSB case (below). 2 See Lloyds TSB  General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48, [2003] 4 All ER 43 at [48]–[51] (Lord Hobhouse) for the principal alternatives. See also Spire Healthcare Ltd v Royal & Sun Alliance Insurance plc [2018] EWCA Civ 317 at [22]–[24] (Simon LJ).

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17.23 Insurance 3 ‘All claims arising from the same act or omission … shall be regarded as one claim.’ 4 ‘The insurance may provide that all claims against any one or more insured arising from the same act or omission or from one series of related acts or omissions will be regarded as one claim for the purposes of the limits contemplated by clauses 2.1 and 2.3.’ 5 [2003] UKHL 48, [2003] 4 All ER 43. 6 For the negotiations see the Law Society’s Gazette article dated 27 January 2005 quoted in full by Longmore LJ in AIG (below) in the Court of Appeal ([2016] EWCA Civ 367, [2017] 1 All ER 143 at [28]).

17.23 Clause 2.5 covers multiple claims arising from one act or omission (limb (a)(i)), one series of acts or omissions (limb (a)(ii)), the same act or omission in a series of related matters or transactions (limb (a)(iii)) and similar acts or omissions in a series of related matters and transactions (limb (a)(iv)). Limbs (a)(iii) and (a)(iv) were added in 2005 after the Lloyds TSB decision and in AIG Europe Ltd v Woodman1 the Supreme Court had to consider limb (a) (iv). In that case 214 investors brought claims against a firm of solicitors who had acted for a property developer in relation to two separate development schemes in Turkey and Marrakech. The developer operated through separate subsidiaries for each development and Lord Toulson described the legal structure and the relevant transactions as follows:2 ‘In 2004 they instructed the solicitors to devise a legal mechanism for the financing of foreign developments by private investors who would have security over the development land. The investments would take the form either of loans, at an attractive rate of interest, or of purchase of holiday properties. A  trust was created for each development with the object of providing security for the investors. The solicitors were the initial trustees. The trust would either own or hold a charge over the development land as security for the amounts invested. The beneficiaries were the investors. The funds advanced by the investors would initially be held by the solicitors in an escrow account. They were not to be released to the developer unless and until the value of the assets held by the trust was sufficient to cover the investment to be protected, applying a “cover test” set out in the trust deed. As well as devising the scheme, the solicitors acted for the developers in relation to the individual investments. For each investment the solicitors would open a file, which would include a loan or purchase agreement between the investor and the developer and an escrow agreement between the investor, the developer and the solicitors.’ The solicitors released investors’ funds held in this way to the developers in a series of tranches between April 2007 and October 2008. In May 2008 the FSA prohibited the developer from raising any further investment in both projects and they collapsed. The developers were unable to acquire title to the properties or to complete the developments and the investors lost their money. They brought claims against the solicitors for breach of contract, breach of trust, misrepresentation and breach of fiduciary duty. The firm (which had gone into administration) had basic cover of £3 million but no top up cover and their 892

Statutory framework  17.24 insurers brought separate proceedings to determine whether the claims should be aggregated under clause 2.5 of the MTC. At first instance Teare J held that they should not be aggregated because none of the individual claims were dependent upon each other. He gave permission to appeal and on an expedited appeal on issues of principle the Court of Appeal accepted the submission of the Law Society that there had to be some ‘intrinsic’ relationship between the transactions and remitted the action to the Commercial Court for further hearing. The insurers appealed again to the Supreme Court which allowed the appeal on the basis that the clause did not require matters or transactions to have an additional requirement of an ‘intrinsic relationship’. Lord Toulson gave a clear indication that the claims of each group of investors arose from acts or omissions in a series of related transactions but that insurers had no right to aggregate the claims of investors in one development scheme with the claims of investors in the other development schemes.3 On this basis, the claims of investors would be treated as two claims for the purpose of clause 2.5. 1 [2017] UKSC 18, [2017] 1 WLR 1168. 2 See [4] and [5]. 3 See [26] and [27]

17.24 AIG was an unusual case because the firm did not act for any of the investors but held their money under separate escrow arrangements. It was unnecessary, therefore, to decide whether any ‘matters’ were related or formed part of a series but only whether transactions involving investors were ‘related’ and formed part of a series. Even on this issue the Supreme Court was only prepared to give limited guidance because the Law Society had chosen not to circumscribe the wording in the clause by any further prescription and it was an acutely fact-sensitive exercise.1 However, the decision does provide the following guidance on whether claims involving the purchase or investment in units or properties in a particular scheme should be aggregated:2 (1)

It is necessary to begin by identifying the relevant matters or transactions.

(2) The court should not take a narrow view of the transactions. In AIG itself the transaction included the trust deed and escrow agreement, the bilateral arrangements between the investor and developer and the trilateral arrangements between investor, developer and solicitors. (3) It is permissible to look not only at these connecting factors but also at the underlying objective of carrying out a particular development project. (4)

The striking similarity between the form of documents used in relation to the transactions is not enough to justify aggregation. Nor is the corporate relationship between the promoter of one scheme and the promoter of another.

1 See [22]. 2 See the analysis at [23]–[27].

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17.25 Insurance 17.25 In AIG in the Court of Appeal the parties were ordered to provide a series of examples and these also formed the basis of argument in the Supreme Court (although they do not feature in the judgments). Nevertheless, it may be instructive to set out a number of them as useful analogies:1 (1)

A solicitor (‘S’) conspires with a client (‘C’) to commit a series of mortgage frauds using the same modus operandi. It was common ground that if the policy wording had adopted ‘originating cause’ as the unifying factor, then the claims would aggregate. But the parties did not agree that limb (a)(iv) had the same effect. It is suggested that applying Lord Toulson’s wider test (above), they should now be aggregated. The claims by lenders form both a series of related matters and a series of related transactions.

(2) S  conducts personal injury claims for an insurer by virtue of a panel appointment and commits similar acts of negligence in separate claims. It was common ground that the claims by the individual clients and insurers should not be aggregated. The matters are not related by virtue of the common source of work. (3) S  conducts ‘vibration white finger’ claims for an insurer, who gives instructions to settle a batch of claims by reference to a specific formula or criteria which S fails to apply correctly in each case. It was common ground that if the claims involved common work carried out across all of the cases, then the individual claims should be aggregated. They are a series of related matters. (4) S acts for C in assembling a site for development from different sellers. S  commits similar acts of negligence in carrying out the searches in relation to each plot. Again, it was common ground that the claims should be aggregated. These are similar acts and omissions and if C’s instructions are that they are being acquired for a common purpose, the matters are related. (5)

S acts for purchasers who buy properties to let from a developer on a single site and are recommended by the developer (who agrees to pay their fees). The standard form documentation used for each sale is defective. It was common ground that these were similar acts and omissions but the parties did not agree that the matters or transactions were related. On the Court of Appeal’s test, there is no intrinsic connection between them and the claims do not aggregate. But it is suggested that applying Lord Toulson’s test, the claims by individual purchasers should now be aggregated.

1 These were the appellant’s examples but debated by all the parties.

(c) Excesses 17.26 A qualifying policy may be made subject to an excess of such amount and on such terms as insurers and the insured agree.1 The policy may also 894

Statutory framework  17.28 provide that an excess applies to defence costs.2 However, the policy must provide that the excess deductible does not reduce the mandatory limit of cover.3 It must also provide that if the insured fails to pay any sum which falls within the excess to the claimant within 30 days of it becoming due for payment, the claimant may give notice of the insured’s default to insurers and the insurers will become liable to remedy the default.4 These provisions are unusual and intended to protect the public against the risk of default or insolvency whilst preserving the usual provision of a liability policy that an insured should be responsible for meeting a specified element of the claim. 1 See clause 3.1. 2 See clause 3.3. 3 See clause 3.2. 4 See clause 3.4.

(d)  Special conditions (i)  No avoidance or repudiation or limitation 17.27 A qualifying policy must provide that insurers are not entitled to avoid or repudiate the insurance on any grounds whatsoever including any breach of the duty to make fair presentation of the risk or any misrepresentation (whether fraudulent or not).1 It must also provide that insurers are not entitled to cancel the policy except in specified circumstances (merger of the firm, replacement insurance and where the firm ceases to be required to have a qualifying policy of insurance).2 In addition, the policy must not contain an ‘other insurance’ provision3 and it must not exclude or limit the liability of the insurer in respect of claims arising from incidents, occurrences, facts, matters, acts or omissions which occurred prior to a specified date.4 It almost goes without saying that these provisions are uncommon in professional liability policies and favour the insured. These provisions provide, perhaps, the clearest example of the policy explained in para 17.03, above. 1 See clause 4.1. 2 See clause 4.3. 3 See clause 4.4: ‘The insurance must not provide that the liability of the insurer is reduced or excluded by reason of the existence or availability of any other insurance other than: (i) as contemplated by clause 6.1 [earlier policy]; or (ii) where the insured, having entered the extended policy period or cessation period, obtains a policy of qualifying insurance that incepts from and with effect from the expiration of the policy period.’ 4 See clause 4.6.

(ii)  Advancement of defence costs 17.28 A qualifying policy must provide that insurers will meet defence costs as and when they are incurred, including defence costs incurred on behalf of an insured who is alleged to have committed or condoned dishonesty or a fraudulent act or omission (provided that insurers are not liable for defence 895

17.29 Insurance costs incurred after the insured has admitting committing or condoning the dishonesty or fraud or there is a finding to that effect).1 The policy may provide that the insured will reimburse insurers for defence costs which insurers are not ultimately liable to pay.2 This may give rise to difficulty where some of the claims are ultimately found to be insured and others are not. In those circumstances, there are three categories of costs: first, those costs which relate exclusively to the claim or claims which fall within the policy will be covered. Secondly, those costs which relate exclusively to the claim or claims which fall outside the policy will not be covered. But, thirdly, insurers will ordinarily be liable for all of the common costs, ie those costs relating to issues which are common to both the insured claims and the uninsured claims.3 In practice, this may be the lion’s share of the costs. For instance, if a claimant brought two claims and the insured notified the first but not the second in the policy year, insurers would be liable for the costs incurred exclusively in relation to the first claim but not the costs incurred exclusively in relation to the other. But insurers would be liable for the common costs of, eg dealing with the existence of a duty of care or retainer and the scope of that duty.4 1 See clause 4.9. 2 See clause 7.3. For the scope of the right of reimbursement see Oldham v QBE  Insurance (Europe) Ltd (where a policy issued under the ICA’s minimum terms did not contain an express right of reimbursement). Popplewell J held that insurers were entitled to reimbursement if and to the extent that there was coverage for the claim under the policy. 3 See XYZ v Travelers Insurance Co Ltd [2019] UKSC 48, [2019] 1 WLR 6075 at [13]: ‘in relation to issues common to insured and uninsured claims, it is settled law that insurers may not seek to apportion their contractual liability to pay defence costs’ citing New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237, PC and International Energy Group Ltd v Zurich Assurance plc [2015] UKSC 33, [2016] AC 509 at [36]–[38]. We say ‘ordinarily’ because this is a matter of construction. 4 For the assessment of common costs more generally see Dyson Technology Ltd v Strutt [2007]  EWHC  1756 (Ch), [2007] 4 Costs LR  597 (Patten J) and Haynes v Department for Business Innovation and Skills [2014] EWHC 643 (QB), [2014] 3 Costs LR 475 (Jay J).

(e)  Extended policy period and run-off cover 17.29 If a solicitor or firm fails to obtain cover at the end of a policy period, then they should cease to practise immediately.1 But the MTC provide for a safety net where they continue to practise after the current policy period has expired. A qualifying policy must provide additional cover complying with the MTC for the duration of an ‘extended policy period’ of up to 30 days where an insured firm has not obtained a policy incepting on and taking effect from the day after the expiry of the current policy period.2 Where the firm ceases to practice, the policy must also provide cover for a ‘cessation period’ of up to 90 days.3 The difference between the two periods is that insurers are entitled to a right of reimbursement if the firm incurs liabilities by continuing to practise in the cessation period.4 Once the solicitor or firm has ceased to practise the policy must also provide run-off cover on the same terms extending the period of insurance for an additional six years from the date on which the policy 896

Statutory framework  17.31 period would have ended.5 It will, therefore, provide run-off cover for any ‘prior practice’. 1 See para 17.01, above. 2 See clause 5.1. The term ‘extended policy period’ is defined as the earlier of ‘(a) the period commencing at the end of the policy period and ending on the date which is the earlier to occur of: (a) the date, if any, on which the firm obtains a policy of qualifying insurance incepting on and with effect from the day immediately following the expiration of the policy period; (b) the date which is 30 days after the end of the policy period; or (c) the date on which the insured firm’s practice ceases’. 3 See clause 5.2. The clause provides that the ‘cessation period’ may extend beyond the 30 day ‘extended policy period’ presumably on the basis that it may take up to 90 days for the firm may wind down its practice and that it may not seek separate cover for that period. The term ‘cessation period’ is defined as: ‘the period commencing on the expiry of the extended policy period where, during the extended policy period the relevant authorised body has not ceased practice or obtained a policy of qualifying insurance incepting with effect on and from the day immediately following expiration of the policy period, and ending on the date which is the earlier to occur of: (a) the date, if any, on which the authorised body obtains a policy of qualifying insurance incepting with effect on and from the day immediately following expiration of the policy period; (b) the date which is 90 days after the commencement of the extended policy period; or (c) the date on which the insured firm’s practice ceases’. 4 See para 17.35, below. 5 See clauses 5.3 and 5.4.

17.30 The policy must also provide that if there is a ‘successor practice’ the insured may elect before cessation whether it wishes the ceased practice: (a) to be insured under the run-off cover or (b) to be insured as a ‘prior practice’ under the insurance of a ‘successor practice’. If the insured firm fails to make an election or to pay any premium due under the terms of the policy for run-off cover before its cessation, the second option will apply automatically and it will be treated as a ‘prior practice’ of its ‘successor practice’.1 These provisions are intended to apply on the orderly merger or amalgamation of firms but they are also intended to apply where a practice is acquired or taken over but no proper arrangements are made for run-off cover. The Law Society’s Practice Note ‘Professional indemnity insurance’ provides a useful guide on how these provisions work in practice where there is no ‘successor practice’.2 1 See clause 5.5. For an example of a case in which no election was made see Justin Cohen v Lorrells LLP [2019] EWHC 32 (QB) (Master Cook). The fact that a prior practice is insured under the policy of a successor practice involves no transmission of liability and the appropriate course is to bring proceedings against the prior practice: see [40] and [41]. 2 See §9.2 and §9.3. The note was published on 2 November 2018 and was intended to apply to the MTC in force for the 2018–2019 policy year. It replaces a number of earlier notes which provide similar guidance.

(i)  ‘Prior practice’ 17.31 Clause 1.1 of the MTC (which is set out above) provides that a qualifying policy of insurance must indemnify each insured against civil liability arising from private legal practice in connection not only with the firm’s existing practice but also any ‘prior practice’. As we have seen immediately 897

17.32 Insurance above, clause 5.5 also provides that in the absence of an election under that clause, any firm which ceases to practise will be treated as a ‘prior practice’ of the ‘successor practice’ to which its business is transferred. The term ‘Prior Practice’ is defined as: ‘each practice to which the insured firm’s practice is ultimately a successor practice by way of one or more mergers, acquisitions, absorptions or other transitions, but does not include any such practice which has elected to be insured under run-off cover in accordance with clause 5.5 of the MTC’ This definition (and the definition of ‘successor practice’ considered below) is intended to ensure that so far as is possible there is no gap in cover and any claims made against a firm which is no longer in existence are covered by a policy of insurance which complies with the MTC. This will either be runoff cover under clause 5.3 or (where the firm fails to pay the premium1) the insurance of its ‘successor firm’. It will be apparent that the term is defined by reference to the term ‘successor practice’. Where, therefore, firm B is treated as a successor practice to firm A, firm A will be a ‘prior practice’. 1 The Law Society’s note (above) states that the premium for run-off cover has historically been 2.5 to 3 times the annual premium.

(ii)  ‘Successor practice’ 17.32 The term ‘successor practice’ is the subject matter of a very complex definition in the Glossary to the SRA Indemnity Insurance and it is necessary therefore to set it out in full. A ‘successor practice’: ‘(a) means a practice identified in this definition as ‘B’, where: (i) ‘A’ is the practice to which B succeeds; and (ii) ‘A’s owner’ is the owner of A  immediately prior to transition; and (iii) ‘B’s owner’ is the owner of B  immediately following transition; and (iv) ‘transition’ means merger, acquisition, absorption or other transition which results in A no longer being carried on as a discrete legal practice. (b) B is a successor practice to A where: (i) B is or was held out, expressly or by implication, by B’s owner as being the successor of A  or as incorporating A, whether such holding out is contained in notepaper, business cards, form of electronic communications, publications, promotional material or otherwise, or is contained in any statement or declaration by B’s owner to any regulatory or taxation authority; and/or 898

Statutory framework  17.32 (ii) (where A’s owner was a sole practitioner and the transition occurred on or before 31 August 2000) – the sole practitioner is a principal of B’s owner; and/or (iii) (where A’s owner was a sole practitioner and the transition occurred on or after 1 September 2000) – the sole practitioner is a principal or employee of B’s owner; and/or (iv) (where A’s owner was a recognised body or a licensed body (in respect of an activity regulated by the SRA in accordance with the terms of the body’s licence)) – that body is a principal of B’s owner; and/or (v) (where A’s owner was a partnership) – the majority of the principals of A’s owner have become principals of B’s owner; and/or (vi) (where A’s owner was a partnership and the majority of principals of A’s owner did not become principals of the owner of another legal practice as a result of the transition) – one or more of the principals of A’s owner have become principals of B’s owner and: (A) B is carried on under the same name as A or a name which substantially incorporates the name of A (or a substantial part of the name of A); and/or (B) B is carried on from the same premises as A; and/or (C) the owner of B acquired the goodwill and/or assets of A; and/or (D) the owner of B assumed the liabilities of A; and/or (E) the majority of staff employed by A’s owner became employees of B’s owner (c) notwithstanding the foregoing, B  is not a successor practice to A  under paragraph (b) (ii), (iii), (iv), (v) or (vi) if another practice is or was held out by the owner of that other practice as the successor of A or as incorporating A, provided that there is insurance complying with the MTC in relation to that other practice.’ Paragraph (a) introduces a number of additional terms used in the definition. Firm A is the prior practice and firm B the successor practice. It also uses the terms ‘A’s owner’ and ‘B’s owner’ and paragraph (b) uses the term ‘principal’. Both ‘owner’1 and ‘principal’2 have complex definitions in the Glossary. Paragraph (a) also introduces the concept of a ‘transition’ and if there is no transition then firm B cannot be the successor practice to firm A.3 Despite the 899

17.33 Insurance number and length of the definitions, it should be reasonably simple in most cases to identify firm B and then to work out whether it is a ‘successor practice’ to firm A (see below). One helpful point to remember is that firms A and B are the practice4 and that A’s owner and B’s owner are the legal entities which own and operate those practices. 1 ‘in relation to a body, a person with any interest in the body’ (subject to certain exceptions which do not apply here). 2 ‘(a) where the authorised body is or was: (i) a recognised sole practice – the sole practitioner; (ii) a partnership – each partner; (iii) a company with a share capital – each director of that company and any person who: (A) is held out as a director; or (B) beneficially owns the whole or any part of a share in the company; or (C) is the ultimate beneficial owner of the whole or any part of a share in the company; (iv) a company without a share capital – each director of that company and any person who: (A) is held out as a director; or (B) is a member of the company; or (C) is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the company; (iv) an LLP – each member of that LLP, and any person who is the ultimate owner of the whole or any part of a body corporate or other legal person which is a member of the LLP; (b) where a body corporate or other legal person is a partner in the authorised body, any person who is within paragraph (a)(iii) of this definition (including sub-paragraphs (A) and (C)), paragraph (a)(iv) of this definition (including sub-paragraphs (A) and (C)), or paragraph (a)(v) of this definition’. 3 In Zurich Professional Ltd v Brown [2010] EWHC 3300 (Ch) Sir William Blackburne held that there was no ‘transition’ where a sole practitioner had ceased to practise under his own name and began to use the firm name ‘CS Law’: see [89]. The facts were unusual, however. The principal issue was whether he was acting in his capacity as a solicitor as an executor of two estates and the primary finding was that he was not: see [53]–[80]. 4 The term ‘insured firm’s practice’ is defined as: (a) the legal practice carried on by the insured firm as at the commencement of the period of insurance; and (b) the continuous legal practice preceding and succeeding the practice referred to in paragraph (i) (irrespective of changes in ownership of the practice)’.

17.33 The MTC provide that firm B will be treated as the ‘successor practice’ to firm A in a number of different ways. The first, and the most important, is where B is held out1 by B (or by its owner) to the public or to the regulatory and tax authorities as the successor to A or as incorporating A: see sub-paragraph (b) (i). Moreover, if there is a firm which satisfies this test, then none of the other subparagraphs will apply (unless firm B has no insurance which complies with the MTC): see paragraph (c). If there is no firm with qualifying insurance held out as the successor to firm A or as incorporating firm A, then one of the remaining sub-paragraphs will apply and their application depends on whether firm A was a recognised sole practice, a partnership or a recognised or licensed body: (1) Sole practitioner: where firm A’s owner was a sole practitioner, then firm B  will be a successor practice where he or she is now a principal or employee of firm B (or where, before 31 August 2000,2 firm A’s owner was a sole practitioner who is now a principal of B’s owner): see (b)(ii) and (iii). (2) Recognised body:3 where firm A’s owner was a recognised body, then firm B will be a successor practice where that body is now a principal of firm B’s owner: see (b)(iv). 900

Statutory framework  17.34 (3) Licensed body:4 where firm A’s owner was a licensed body, then firm B will be a successor practice where that body is now a principal of B’s owner: see (b)(iv). (4) Partnership: where firm A’s owner was a partnership, firm B  will be a successor practice where the majority of principals have become principals of firm B’s owner: see (b)(v) (5) Partnership: where firm A’s owner was a partnership (but the majority of principals of A’s owner did not become principals of the owner of another legal practice as a result of the transition), then firm B will be a successor practice where one or more of the principals have become principals of firm B’s owner and one or more of the conditions in b(vi) (A) to (E) (above) are satisfied: see (b)(vi).5 1 For the general principles of ostensible authority (which will be relevant to whether firm B is held out as the successor to firm A) see Chapter 15, para 15.24, above. 2 For the significance of the date see para 17.01, above. 3 ‘Recognised body is defined as ‘a body recognised by the SRA under section 9 of the AJA’. For further discussion see Chapter 15, para 15.16. 4 ‘Licensed body’ is defined as ‘a body licensed by the SRA under section 71(2) of the LSA in accordance with the SRA Authorisation of Firms Rules’. This is s 71 of the Legal Services Act 2007. The ‘successor practice’ definition only apples ‘in respect of an activity regulated by the SRA in accordance with the terms of the body’s licence’: see para (b)(iv). ‘Private practice’ for the purposes of the LSA means any reserved legal activity and any other legal activity which is regulated under Part 5 of the Act. For further discussion of the terms ‘reserved legal activity’ and ‘licensed body’: see Chapter 15, paras 15.04 and 15.17. 5 For an example of this paragraph where one firm was the successor practice to two other firms and the difficulties which this created for the notification of circumstances see McManus v European Risk Insurance Co hf [2013] EWHC 18 (Ch) (Vivien Rose QC) at [2]–[4] (considered in para 17.09, above).

17.34 Finally, it is possible that two or more firms may fall within one of the categories set out in para  17.33, above. For instance if a partnership is wound up and two or more partners go to different firms sharing the goodwill and assets (without a majority going to a single firm), then both firms would fall within para (b)(vi). If that happens and a situation of ‘double insurance’ arises, the MTC provide that contribution between insurers is to be determined in accordance with the relative numbers of principals of the owners of the constituent practices immediately prior to succession.1 Finally, if there is a dispute over whether a practice is a successor practice for the purposes of clauses 1.1 or 5.5, the MTC provide that both insured and insurers must take all reasonable steps (including, if appropriate, referring the dispute to arbitration) to resolve the dispute in conjunction with any related dispute between any other party which has insurance complying with the MTC and that party’s insurer.2 1 See clause 4.7. 2 See clause 4.8.

901

17.35 Insurance

(f)  General conditions 17.35 A qualifying policy may contain general conditions agreed between insurers and insured but it must provide that the special conditions required by clause 4 prevail in the extent of any inconsistency.1 The principal condition set out in the MTC, which the policy may include, is a right of reimbursement for conduct which historically would have entitled insurers either to avoid or cancel the policy or to repudiate a claim.2 It also permits insurers to claim reimbursement where an insured carries on practice without insurance during the cessation period (except to the extent necessary to discharge existing obligations and instructions).3 However, it may only permit insurers to recover to the extent that it is just and equitable to do so having regard to the prejudice caused to their interests by such conduct and it contains the same provision for attribution as clause 6.3 It may also provide for insurers to obtain reimbursement of defence costs,4 any excess paid by insurers on the insured’s behalf5 and payments on account made pending resolution of any coverage dispute for which insurers are not liable.6 1 See clause 7.1. For the principal special conditions see paras 17.27 and 17.28, above. 2 See clause 7.2: ‘The insurance may provide that each insured who: (a) committed or condoned (whether knowingly or recklessly): (i) any breach of the duty to make a fair presentation of the risk, or misrepresentation; or (ii) any breach of the terms or conditions of the insurance; or (iii) dishonesty or any fraudulent act or omission; or (b) undertakes, either itself or by any of its principals, employees, consultants or agents or any person on its behalf, any activity during the cessation period in connection with private legal practice save to the extent that the activity is undertaken to discharge any of its obligations within the scope of its existing instructions or is necessary in connection with the discharge of any such obligation, will reimburse the insurer to the extent that is just and equitable having regard to the prejudice caused to the insurer’s interests by such failure to make a fair presentation of the risk, misrepresentation, breach, dishonesty, act or omission, provided that no insured shall be required to make any such reimbursement to the extent that any such breach of the terms or conditions of the insurance was in order to comply with any applicable regulatory arrangements of the SRA.’ 3 See, again, clause 7.2: ‘The insurance must provide that no failure to make a fair presentation of the risk, misrepresentation, breach, dishonesty, act or omission will be imputed to a body corporate unless it was committed or condoned by, in the case of a company, all directors of that company, or in the case of an LLP, all members of that LLP.’ 4 See clause 7.3 (considered in para 17.28, above). 5 See clause 7.4. 6 See clause 7.5.

(g)  Law and jurisdiction 17.36 Any dispute (including any non-contractual disputes or claims) arising out of or in connection with the MTC or their subject-matter or formation must be governed by and construed in accordance with the law of England and Wales and subject to the jurisdiction of the courts of England and Wales.1 1 See clause 8.

902

Rights of third parties against insurers  17.38

B  RIGHTS OF THIRD PARTIES AGAINST INSURERS 1 Introduction 17.37 Before 1930 a claimant (‘C’) had no recourse against the insurers of a defendant solicitor or other professional (‘D’) against whom he or she had a claim and the proceeds of any insurance would be distributed amongst D’s creditors in the event of an insolvency. The Third Parties (Rights Against Insurers) Act 19301 was passed to address this problem. It did so by creating a statutory assignment of D’s rights under the relevant policy to C. In practice, it was time-consuming and costly for C to establish his or her rights under the 1930 Act because the amount of D’s liability had to be ascertained before the statutory assignment took effect. On 1 August 2016 the Third Parties (Rights Against Insurers) Act 2010 (as amended)2 came into force which enables C to proceed directly against insurers. The 2010 Act repealed the 1930 Act prospectively but provided that the 1930 Act would continue to apply in relation to cases where the two conditions set out in s 1(1) are met.3 In practice, this means that the 1930 Act continues to apply to a cause of action which accrued before 1 August 2010 against a D who became insolvent before that date.4 For this reason claims under the 1930 Act will continue to arise for some years to come. 1 We refer to it as the ‘1930 Act’. 2 We refer to it as the ‘2010 Act’. It was amended by the Insurance Act 2015 and the Third Party (Rights Against Insurers) Regulations 2016 (SI 2016/570). 3 See Sch 3 which provides that despite its repeal the 1930 Act continues to apply in relation to cases where the event referred to in s 1(1) and the incurring of the liability in that section both happened before the commencement day. Section 1(1) is set out below. 4 In Redman v Zurich Insurance plc [2017] EWHC 1919 (QB), [2018] 1 WLR 280, Turner J held that D incurs a liability for the purpose of s 1(1) of the 2010 Act when the cause of action is complete (as under the 1930 Act: see below). He also held that the 1930 Act has no retrospective application before the commencement day. It follows that the date of insolvency will be the determinative event.

2  Third Parties (Rights Against Insurers) Act 1930 17.38 Where C  has a claim against an individual or firm, who becomes bankrupt or is wound up, s 1(1) of the 1930 Act1 provides that their rights under the relevant policy will vest in C as follows: ‘(1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then– (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of a winding-up order being made, or a resolution for a voluntary winding-up being passed, with respect to the company, or 903

17.38 Insurance of the company entering administration, or of a receiver or manager of the company’s business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge or of a voluntary arrangement proposed for the purposes of Part I  of the Insolvency Act 1986 being approved under that Part; if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.’ The 1930 Act applies where D is an insolvent limited liability partnership as it does to companies and individuals (and unlimited partnerships).2 The statutory assignment takes effect when two conditions are met: first, D’s liability to C has been ‘incurred’ and, secondly, the relevant insolvency event set out in either para (a) or (b) has also occurred. There is long-standing authority that D’s liability is incurred when the cause of action is complete.3 However, it is a general principle that D only acquires a right of indemnity under a policy of liability insurance when the third party liability has been ascertained by judgment, arbitral award or settlement.4 In Law Society v Shah5 Floyd J had to consider the effect of this general principle on clause 1.1 of the MTC. He held that ‘it is only where there is an established obligation to pay that an indemnifiable loss comes into being and that the indemnity under the contract arises’.6 He also held that the effect of its admission in the bankruptcy would give it that elevated status.7 However, even where the liability has been ascertained, insurers will not necessarily be bound by the outcome unless they were parties to the relevant proceedings or settlement and it will be open to them to challenge the amount of any liability and whether it is covered by the policy in any proceedings brought by C under the 1930 Act.8 1 The section was amended by the Insolvency Act 1986 and the Enterprise Act 2002. 2 See s 3A (added by the Limited Liability Partnerships Regulations 2001 (SI 2001/1090), Sch 5, para 2 with effect from 6 April 2001). 3 See Post Office v Norwich Union Fire Insurance Society [1967] 2 QB 367, CA at 375 (Lord Denning MR) approved in Bradley v Eagle Star Insurance Co Ltd [1989] AC 957, HL. Both decisions were cited by Turner J in Redman v Zurich Insurance plc [2017] EWHC 1919 (QB) (above): see [21]. 4 See Post Office v Norwich Union Fire Insurance Society (above) at 375 (Lord Denning MR) (where C had brought a claim directly against D’s insurers before the claim against D had been adjudicated): ‘In these circumstances I think the right to sue for these moneys does not arise until the liability of the wrongdoer is established and the amount ascertained. How is this to be done? If there is an unascertained claim for damages in tort, it cannot be proved in the bankruptcy; nor in the liquidation of the company. But nevertheless the injured person can bring an action against the wrongdoer.’ 5 [2007] EWHC 2841 (Ch), [2009] Ch 223. 6 See [22] (original emphasis). In fact, Ds had been unable to obtain cover from qualifying insurers and were in the Assigned Risk Pool. But the scope of the indemnity was the same. For detailed discussion of the earlier cases and the general principle see [13]–[19].

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Rights of third parties against insurers  17.39 7 See [44]. It would only be an established liability if the trustee in bankruptcy or the liquidator admitted C’s proof of debt or if they rejected the proof and C  appealed it successfully: see Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd [2005]  EWCA  Civ 1408, [2006] QB 808 at [11] (Lloyd LJ) and [63] (Moore-Bick LJ) (cited by Floyd J in Shah). As Lloyd LJ pointed out, in a compulsory liquidation both the liquidator and the Court might decide that it would be better for C to pursue a claim under CPR Part 7 (in which case C would be granted permission to do so). 8 For detailed consideration of these issues see Cannon and McGurk, Professional Indemnity Insurance (2nd edn, 2016) at 9.106–9.132. It is unlikely that qualifying insurers would permit the ascertainment of liability without taking any involvement in any underlying proceedings or settlement negotiations (although it does occasionally happen).

17.39 Section 1(3) of the 1930 Act prevents the parties to an insurance contract from contracting out of its provisions.1 But C  is put in no better position than D, the insured, by the statutory assignment. Once the statutory assignment has taken place, C will have to comply with D’s obligations under the policy including its notification provisions.2 C will also be bound by any arbitration clause.3 Insurers can also rely on any applicable exclusions.4 But it is unclear whether insurers would be entitled to deduct any excess or excesses payable under the policy. A qualifying policy must provide for insurers to pay the excess of any claim to a third party claimant if the insured firm fails to do so itself although the policy may provide for a right of reimbursement.5 There is a difference of view at first instance whether insurers may set off a debt due from D against a claim by C.6 It seems clear that insurers could not set off a claim for reimbursement against one insured (eg  for fraud or dishonesty) if there were other insureds who were not liable to reimburse them.7 C must step into the shoes of each insured and must be entitled to enforce their separate rights against insurers. However, where insurers are entitled to reimbursement from all of the insureds (as in the case of an unpaid excess), it is suggested that insurers are entitled to set off the amount of the excess against C’s claim.8 Although it is the policy of the MTC to protect clients and third parties to whom they owe duties by requiring insurers to pay the excess, it is important to recognise that the 1930 Act operates by statutory assignment and that C is enforcing D’s rights against insurers (rather than any of his or her own). The position may be different where there are unpaid premiums or series of excesses outstanding in relation to other claims.9 1 For the scope of the section see Firma C-Trade SA  v Newcastle Protection and Indemnity Association (The ‘Fanti’) [1991] 2 AC 1, HL. But it would be impossible contract out of the 1930 Act under the MTC. The position before the statutory assignment is very different: see para 17.41, below. 2 However, even if D did not notify the claim in the policy year in which the claim was made, the qualifying insurers who insured the firm for the year in which the firm went into liquidation will have to provide run-off cover and will not be able to exclude liability on the basis that the claim could have been notified earlier and to another insurer: see para 17.15, above. 3 There appears to be no direct authority for this proposition under the 1930 Act. But the leading commentators agree on it: see Cannon and McGurk, Professional Indemnity Insurance (2nd edn, 2016) at 13.54 and MacGillivray on Insurance Law (14th edn, 2018) at 30–20. 4 See Goldsmith Williams v Travelers Insurance Co Ltd [2010] EWHC 26 (QB), [2010] Lloyd’s Rep IR 309, considered at para 17.18, above where Wyn-Williams J held that insurers could rely

905

17.40 Insurance on the exclusion for fraud because one insured had been fraudulent and the other had condoned the fraud. 5 See paras 17.26 and 17.35, above. 6 In Murray v Legal & General Assurance Society Ltd [1970] 2 QB 495 Cumming-Bruce J held that insurers could not set off unpaid premiums against C’s claim on the basis that the draftsman of the 1930 Act had carefully limited the statutory assignment to ‘the rights under the contract in respect of the liability incurred by the insured to the third party’: see 503. In Cox v Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 437 Phillips J  declined to follow Murray and allowed a set off arising from payment by insurers of defence costs falling within the insured’s policy excess and recoverable either under an express policy term or in restitution. In Denso Manufacturing UK  Ltd v Great Lakes Reinsurance (UK) plc [2017]  EWHC  391 (Comm), [2018] 4 WLR 93 Sara Cockerill QC followed Murray (in relation to unpaid premiums): see [142]–[151]. But in Cultural Foundation v Beazley Furlonge Ltd [2018] EWHC 1083 (Comm) Andrew Henshall QC followed Cox in relation to reimbursement of defence costs: see [394]– [408]. 7 In Goldsmith Williams v Travelers Insurance Co Ltd insurers had a defence against both insured and the right of reimbursement did not arise. 8 See the analysis in Cultural Foundation v Beazley Furlonge Ltd (above) at [402]. The judge also found that insurers could set off claims arising after the statutory assignment: see [409]–[418]. 9 It would seem inequitable for insurers to set off a series of unpaid excesses in relation to other claims and neither Cox nor Cultural Foundation go that far. Both related to the costs of the proceedings brought against the insured by the claimant (one giving rise to an excess and a claim for restitution and the other to a right of reimbursement).

17.40 In order to exercise his or her rights under the statutory assignment (and to comply with D’s obligations) C will need to know the terms of the policy. Section 2 of the 1930 Act imposes a duty to provide necessary information upon insurers: ‘(1) In the event of any person becoming bankrupt or making a composition or arrangement with his creditors, or in the event of the estate of any person falling to be administered in accordance with an order under section 421 of the Insolvency Act 1986, or in the event of a winding-up order being made, or a resolution for a voluntary windingup being passed, with respect to any company or of the company entering administration or of a receiver or manager of the company’s business or undertaking being duly appointed or of possession being taken by or on behalf of the holders of any debentures secured by a floating charge of any property comprised in or subject to the charge it shall be the duty of the bankrupt, debtor, personal representative of the deceased debtor or company, and, as the case may be, of the trustee in bankruptcy, trustee, liquidator, administrator, receiver, or manager, or person in possession of the property to give at the request of any person claiming that the bankrupt, debtor, deceased debtor, or company is under a liability to him such information as may reasonably be required by him for the purpose of ascertaining whether any rights have been transferred to and vested in him by this Act and for the purpose of enforcing such rights, if any, and any contract of insurance, in so far as it purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the giving of any such 906

Rights of third parties against insurers  17.41 information in the events aforesaid or otherwise to prohibit or prevent the giving thereof in the said events shall be of no effect.’ Section 2(1) imposes a preliminary duty upon the bankrupt insured or the liquidator or administrator of the firm to provide the necessary information to C and the final words of the subsection prevent the parties from contracting out of the statutory obligation. Section 2(2) provides that if that information discloses reasonable grounds for supposing that rights against any particular insurer have been transferred to C, then that insurer shall be subject to the same duty (which also includes the duty to allow the relevant policies to be inspected and copies taken).1 Section 2 does not depend on ascertainment of liability and C may enforce the duty before liability is established and quantified.2 Because the statutory assignment takes place on insolvency it is important that C should be able to establish his or her rights under the policy from that date. 1 Section 2(3) 2 See Re OT Computers Ltd (In Administration) [2004] EWCA Civ 653, [2004] Ch 317 at [42]– [55] (Longmore LJ). The Court of Appeal decided that s 2 of the 1930 Act will usually enable a third party claimant to obtain disclosure of documentation before the establishment of the insured’s liability to that third party. They did not decide in terms, therefore, that an insured could not obtain disclosure before insolvency (eg where insolvency seemed highly likely). But their reasoning was based on the fact that the statutory assignment took place on insolvency rather than ascertainment of liability. The better view, therefore, is that C  has no right to information before that date: compare Peel Port Shareholder Finance Co Ltd v Dornoch Ltd [2017] EWHC 876 (TCC) (below) in relation to the position under the 2010 Act.

17.41 Once the statutory assignment under section 1(1) has taken place, D loses the ability to settle the claim or compromise his or rights under the policy to defeat the claim. Section 3 provides: ‘Where the insured has become bankrupt or where in the case of the insured being a company, a winding-up order or an administration order has been made or a resolution for a voluntary winding-up has been passed, with respect to the company, no agreement made between the insurer and the insured after liability has been incurred to a third party and after the commencement of the bankruptcy or winding-up or the day of the making of the administration order, as the case may be, nor any waiver, assignment, or other disposition made by, or payment made to the insured after the commencement or day aforesaid shall be effective to defeat or affect the rights transferred to the third party under this Act, but those rights shall be the same as if no such agreement, waiver, assignment, disposition or payment had been made.’ The Act does not apply, however, to settlements which take place before the insured is insolvent. C  will be bound by such a settlement and will not normally have any rights to prevent such a settlement taking place.1 This can be very beneficial to insurers. For example, if there has already been a binding settlement or arbitration between D and insurers before C brings a 1930 Act claim determining whether there is cover for the claim or the extent of that 907

17.42 Insurance cover, C cannot reopen the settlement or award even if C would have taken different points and succeeded where D failed.2 1 See Normid Housing Association v Ralphs [1989] 1 Lloyd’s Rep, 265, CA and Jackson v Greenfield [1998] BPIR 699 (Lawrence Collins QC). 2 The statutory assignment may provide grounds for applying for permission to appeal out of time. But the grounds on which C could set aside any award would be very limited.

3  Third Parties (Rights Against Insurers) Act 2010 (a)  The statutory assignment 17.42 In 2001 the Law Commission recommended reform of the 1930 Act.1 They recommended keeping the overall structure of the 1930 Act but made individual recommendations to address its shortcomings. The 2010 Act introduced the concept of the ‘relevant person’ which was expanded by the Third Parties (Rights Against Insurers) Regulations 2016. The 2010 Act creates a statutory assignment which takes effect when two conditions are satisfied: first (and as before) liability has to be incurred to C (the third party) and, secondly, D (the insured) has to be a relevant person: ‘(1) This section applies if– (a)

a relevant person incurs a liability against which that person is insured under a contract of insurance, or

(b) a person who is subject to such a liability becomes a relevant person. (2) The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred (the “third party”).’ A  ‘relevant person’ is a person (whether an individual or body corporate) to whom the circumstances set out in ss 4 to 7 apply.2 The transfer of rights therefore takes place regardless of whether the insured’s insolvency preceded or post-dated the incurring of liability to the third party. The principal difference between the 1930 Act and the 2010 Act is that C may now bring proceedings to enforce his or her rights against insurers without having to establish D’s liability first (but may not actually enforce them until liability has been established).3 For the purposes of the Act, liability is established (a) by virtue of a declaration under s 2 or (b) by judgment or (c) by an arbitral award or (d) by an enforceable agreement.4 The scheme of the 2010 Act is, therefore, clear. C may establish liability by proceedings against D in the conventional way. But if D becomes insolvent, C may proceed directly against insurers by seeking a declaration of liability under s 2. 1 See the Law Commission Report, ‘Third Parties – Rights against Insurers’ (Law Com No. 272 (Cm 5217) dated July 2001).

908

Rights of third parties against insurers  17.43 2 These sections are very wide and cannot easily be summarised. Section 4 deals with all forms of individual insolvency; s 5 deals with individuals who die insolvent; and ss 6 and 6A deal with all forms of corporate insolvency. The provisions were much more widely drafted than the 1930 Act. The 1930 Act was never amended to include a company voluntary arrangement which is now included in s 6(2) of the 2010 Act. Section 6A of the 2010 Act also includes dissolved corporate bodies within the definition of a ‘relevant persons’, subject to certain exceptions. This removes the need for C to restore D to the register if it had been dissolved for the purposes of establishing liability before C could proceed against insurers. Finally, s 19 gives the Secretary of State power to make regulations to add or remove circumstances in which a person is to be a relevant person. 3 See s  1(3): ‘The third party may bring proceedings to enforce the rights against the insurer without having established the relevant person’s liability; but the third party may not enforce those rights without having established that liability.’ 4 See s 1(4).

(b) Declaration 17.43 Where C  claims to have rights under a contract of insurance under s  1 but has not yet established D’s liability, s  2 permits C  to bring a claim against the insurer for either (a) a declaration as to D’s liability to C or (b) a declaration as to the insurer’s potential liability to C.1  C  may bring a claim under s 2 even where the insurer disputes cover.2 If C proves D’s liability, then (subject to any defence upon which the insurer is entitled to rely) C is entitled to a declaration of D’s liability or ‘the insurer’s potential liability’.3 Where the court makes a declaration that the insurer is liable to the third party, it may also give ‘the appropriate judgment’ against the insurer.4 C may join D as a party5 but there is no requirement to do so. If D is joined, it will be bound by any declaration.6 The term ‘the insurer’s potential liability’ may seem slightly confusing given that C will want to establish both that D is liable and that he or she is entitled to an indemnity from insurers. However, it is clear that C may obtain a final judgment against insurers and the use of the word ‘potential’ is, it is suggested, intended to make it clear that C may bring proceedings against the insurer before D’s liability has been ascertained.7 It does no more than reflect the general principle that insurers will only become contractually liable to indemnify C once D’s liability has been established either under the section or in separate proceedings. 1 See s 2(2). Sections 3 and 7 apply in Scotland and are not considered further here. 2 See BAE Systems Pension Funds Trustees Ltd v Bowmer and Kirkland Ltd [2017] EWHC 2082 (TCC), [2018] 1 WLR 1165 (O’Farrell J). For the operation of the Act see, in particular, [16] and [17]: ‘I am satisfied that section 2 is engaged wherever the claimant claims that the insured is a relevant person, that the insured has liability to the claimant, that the insured has insurance in respect of that liability and that therefore there is a transfer under section 1 of the 2010 Act. The claimant does not have to establish those rights before section 2 operates. Section 2 provides the machinery for establishing the existence of those rights.’ 3 See s 2(3). 4 See s  2(6).This ought to include a money judgment where C  establishes and quantifies D’s liability. Section 2(7) also provides that where C is entitled or required to apply for a declaration in arbitral proceedings, he or she may apply for a declaration under s 2(2)(a) (for a declaration as to D’s liability) in the same proceedings. This confers statutory jurisdiction on the arbitral tribunal.

909

17.44 Insurance 5 See s  2(8). There may be circumstances in which C  will want to join D  (eg  to prove in the insolvency or for the purposes of obtaining disclosure). But the failure to do so will not prevent C from obtaining a judgment against insurers. 6 See s 2(9). 7 See s 2(11): ‘In this section, references to the insurer’s potential liability to P are references to the insurer’s liability in respect of the insured’s liability to P, if established.’ (P is the third party claimant.)

(c) Defences 17.44 Section 2(3) provides that insurers may rely on any defences available to D in respect of liability to C (as under the 1930 Act). Section 10 resolves the controversy over set off which has arisen under the 1930 Act. It provides as follows: (1)  This section applies if— (a) rights of an insured under a contract of insurance have been transferred to a third party under section 1, (b) the insured is under a liability to the insurer under the contract (“the insured’s liability”), and (c) if there had been no transfer, the insurer would have been entitled to set off the amount of the insured’s liability against the amount of the insurer’s own liability to the insured. (2) The insurer is entitled to set off the amount of the insured’s liability against the amount of the insurer’s own liability to the third party in relation to the transferred rights.’ It follows that insurers ought to be able to set off any unpaid excess in relation to C’s claim against D. The section does not resolve the issue identified in para  17.40, above and whether insurers would be entitled to set off other excesses or unpaid premiums or other debts which are unrelated to C’s claim. This will depend on whether insurers have a right of set off under the general law. It is tentatively suggested that it would be inequitable to permit insurers to set off debts of that nature against C’s claim, especially if the consequence is that the claim would be uninsured.1 1 Cannon and McGurk (above) suggest that the effect of s 10 is to reverse the decision in Murray v Legal & General Assurance Society Ltd [1970] 2 QB 495 (Cumming-Bruce J): see 13.68. It is suggested that the effect is more nuanced than this for the reasons set out above.

(d) Limitation 17.45 Section 2(4) also provides that s 2(3) is made subject to s 12(1) and (2) which deals with defences of limitation. Section 12(1) applies where (a) C has brought proceedings for a declaration after the expiry of a period of limitation applicable to an action against D to enforce C’s liability and (b) while such 910

Rights of third parties against insurers  17.46 an action is in progress. Section 12(2) provides that in those circumstances the insurer may not rely on the expiry of that limitation period unless D could have done so. For example, if C  brings a claim against D  firm which goes into liquidation during the proceedings and C  then brings proceedings for a declaration under s 2, insurers will not be able to rely on a limitation period which has expired in the meantime. The action must be ‘in progress’ however.1 This means that C  must not withdraw or discontinue the action before commencing proceedings under s 2. Section 12(4)(a) also provides that where C has established D’s liability nothing in the 2010 Act is to be read as meaning that, for the purposes of limitation, C’s cause of action against the insurer arose otherwise than at the time when C established the liability of the insured. The effect of this provision is to prevent insurers going behind any judgment, award or settlement under which C has established liability and arguing that D had a limitation defence (even if the point was never taken).2 1 Section 12(3) provides that an action is in progress before it has been concluded by a judgment or award even if it is subject to appeal. 2 Where no action is in progress, it will be open to insurers to take any limitation defence which would have been available to D before the issue of proceedings. Where C has obtained judgment or an award, insurers will not be able to take any limitation defence and C will be able to enforce it by obtaining judgment under s 2(4).

(e)  Information rights 17.46 Under the 1930 Act there was a two stage process for obtaining information. First, C  had to attempt to obtain disclosure from the bankrupt insured or the relevant insolvency practitioner under s 2(1) and then attempt to obtain information from insurers and although the 1930 Act expressly permitted C  to take copies of the relevant policy, the precise scope of the information right was unclear. The 2010 Act imposes a new regime. Schedule 1 gives C  the option of obtaining disclosure from the relevant person (ie  the insolvent insured) or from any third party whom he or she reasonably believes will have that information (including insurers). If C  is aware of the identity of D’s insurers, therefore, he or she can require them to provide the relevant information. Schedule 1, paras 1 and 2 provide as follows: ‘(1)  If a person (A) reasonably believes that– (a)

another person (B) has incurred a liability to A, and

(b) B is a relevant person, A may, by notice in writing, request from B such information falling within sub-paragraph (3) as the notice specifies. (2)  If a person (A) reasonably believes that— (a)

a liability has been incurred to A,

(b) the person who incurred the liability is insured against it under a contract of insurance, 911

17.46 Insurance (c)

rights of that person under the contract have been transferred to A under section, and

(d) there is a person (C) who is able to provide information falling within sub-paragraph (3), A may, by notice in writing, request from C such information falling within that sub-paragraph as the notice specifies.’1 Paragraph 1(3) specifies the information which C is entitled to request. C is entitled to ask whether there is a contract of insurance2 and, if there is such a contract, who the insurer is, what the terms are, whether the insurers have purported to repudiate cover and claimed not to be liable,3 whether there are any proceedings between insurers and insured (and, if so, the relevant details4), whether any policy limits have been exhausted and whether there is a fixed charge over the proceeds of the policy to which any liability to C  would be subject. The notice must include particulars of the facts upon which C relies as entitlement to give the notice.5 The recipient of a notice under para  1 must provide the information within 28 days or, if they are unable to provide the information, explain why not.6 It also requires the recipient to provide particulars of any documents which are not within its control.7 A  failure to comply with the notice is enforceable by court proceedings.8 Schedule 1 also contains an anti-avoidance provision.9 1 See Peel Port Shareholder Finance Co Ltd v Dornoch Ltd [2017] EWHC 876 (TCC) at [20] where Jefford J  summarised the effect of these provisions as follows: ‘It is clear from these paragraphs that the relevant information may be sought from the insurer and others and that it may be sought before the insured’s liability is established.’ 2 See para  1(3)(a): ‘whether there is a contract of insurance that covers the supposed liability or might reasonably be regarded as covering it’. C will have to give particulars in the notice under para 1(6) of the facts upon which he or she relies to demonstrate that there are reasonable grounds for believing that there is a policy and that it covers the supposed liability. In most cases it will be enough to identify the material upon which C relies to demonstrate that the recipient is D’s insurer for the relevant policy year and to point to the relevant provisions of the MTC. 3 Paragraph 1(3) does not require insurers to explain the reasons why they claim not to be liable and have purported to decline cover (although they ought to give reasons in response to a Letter of Claim). 4 Paragraph 1(4) sets out the relevant details: ‘(a) in the case of court proceedings– (i) the name of the court; (ii) the case number; (iii) the contents of all documents served in the proceedings in accordance with rules of court or orders made in the proceedings, and the contents of any such orders; (b) in the case of arbitral proceedings…– (i) the name of the arbitrator; (ii) information corresponding with that mentioned in paragraph (a)(iii).’ 5 See para 1(6). 6 See para 2(1): ‘A person (R) who receives a notice under paragraph 1 must, within the period of 28 days beginning with the day of receipt of the notice– (a) provide to the person who gave the notice any information specified in it that R is able to provide; (b) in relation to any such information that R is not able to provide, notify that person why R is not able to provide it.’ 7 See para 2(2): ‘Where– (a) a person (R) receives a notice under paragraph 1, (b) there is information specified in the notice that R is not able to provide because it is contained in a document that is not in R’s control, (c) the document was at one time in R’s control, and (d) R knows or believes that it is now in another person’s control, R must, within the period of 28 days beginning with the day of receipt of the notice, provide the person who gave the notice with whatever particulars R can as to the nature of the information and the identity of that other person.’

912

Rights of third parties against insurers  17.47 8 See para 2(4). 9 See para 5: ‘A contract of insurance is of no effect in so far as it purports, whether directly or indirectly– (a) to avoid or terminate the contract or alter the rights of the parties under it in the event of a person providing information, or giving disclosure, that the person is required to provide or give by virtue of a notice under paragraph 1 or 3, or (b) otherwise to prohibit, prevent or restrict a person from providing such information or giving such disclosure.’ Paragraphs 3 and 4 make special provision for disclosure by officers, employees and insolvency practitioners in respect of dissolved bodies corporate.

(f)  Other provisions 17.47 Section 8 provides that where the liability of an insured to a third party is less than the liability of the insurer to the insured (ignoring the effect of s  1), no rights are transferred under that section in respect of the difference.1 Section 9 addresses conditions which affect transferred rights. It prevents insurers from relying on any condition which cannot be fulfilled because of the insured’s insolvency and permit C  to step into the insured’s shoes.2 It also prevents insurers from relying on conditions which require the insured to provide information or assistance3 although this does not apply to the notification provisions of the policy.4 It also prevents insurers from relying on a ‘pay to be paid’ clause.5 Section 14 deals with the residual liability of the insured. It provides that where there has been a transfer of rights under s 1, C may enforce that liability against the insured only to the extent that it exceeds the amount recoverable from the insurer by virtue of the transfer.6 The purpose of this provision is to enable C to pursue the insured (or prove in any bankruptcy or liquidation) to the extent that there is a ‘gap’ in cover (eg  because insurers are themselves insolvent or because the claim exceeds the limit of cover7). Finally, s 17 contains an anti-avoidance provision which prevents the parties from contracting out of the effect of the 2010 Act.8 1 The explanatory note to s 8 states: ‘This clause ensures that a third party does not receive a right to recover from the insurer any amounts in excess of the insured’s liability. The rights of the insured against the insurer are preserved in respect of any amount that is due under the insurance policy but not payable to the third party. An example is where the insurer is obliged by the policy not only to indemnify the insured in full but also to reimburse the insured for costs incurred in mounting a defence to a third party’s claim or in seeking advice on whether a third party’s claim is likely to be successful. These costs would, by virtue of clause 8, be payable under the policy but not recoverable by the third party (the insured would retain the right to claim them).’ 2 See s 9(2): ’Anything done by the third party which, if done by the insured, would have amounted to or contributed to fulfilment of the condition is to be treated as if done by the insured.’ 3 ‘The transferred rights are not subject to a condition requiring the insured to provide information or assistance to the insurer if that condition cannot be fulfilled because the insured is– (a) an individual who has died, (b) a body corporate that has been dissolved, or (c) an unincorporated body, other than a partnership, that has been dissolved.’ 4 See s 9(4). For the reasons set out in para 17.35, footnote 2, above the failure by the insured to provide the proper notification is unlikely to be fatal. 5 This condition is not permissible under the MTC. 6 See s 14(1). 7 Section 14(6) expressly provides that: ‘For the purposes of this section the amount recoverable from the insurer does not include any amount that the third party is unable to recover as a result of– (a) a shortage of assets on the insurer’s part, in a case where the insurer is a relevant person,

913

17.47 Insurance or (b) a limit set by the contract of insurance on the fund available to meet claims in respect of a particular description of liability of the insured.’ 8 ‘(1) A contract of insurance to which this section applies is of no effect in so far as it purports, whether directly or indirectly, to avoid or terminate the contract or alter the rights of the parties under it in the event of the insured– (a) becoming a relevant person, or (b) dying insolvent (within the meaning given by section 5(2)). (2) A  contract of insurance is one to which this section applies if the insured’s rights under it are capable of being transferred under section 1.’

914

Index [all references are to paragraph number]

Abuse of confidence breach of fiduciary duty limitation, 4.80 Abuse of process conduct of litigation, and civil cases, 12.09–12.16 criminal cases, 12.05–12.08 introduction, 12.03–12.04 enforcement of undertakings, and, 5.45 legal professional privilege, and, 13.27 wasted costs orders, and, 13.44–13.50 Accounts Rules 2019 generally, 16.79–16.80 Acting in client’s best interests disciplinary proceedings, and, 16.74– 16.78 Acting for parties in conveyancing transactions borrower only, 10.25–10.26 buyer and seller ‘double employment’ rule, 9.03 conduct, 9.02 contract, 9.04 equity, 9.03 damages (acting for purchaser) alternative investment opportunity, 9.72 date of assessment, 9.59 defective purchase, 9.62–9.70 delayed purchase, 9.61 distress and inconvenience, for, 9.74 duties to third parties, and, 9.33 extent of liability, 9.73 introduction, 9.58 loss of opportunity to purchase, 9.60 measure, 9.60–9.72 profit on resale, 9.71 damages (acting for vendor) loss of a chance, 9.86

Acting for parties in conveyancing transactions—contd damages (acting for vendor)—contd other cases, 9.87 sale of freehold property, 9.85 sale of leasehold interest, 9.86 trading losses, 9.88 valuation method, 9.85 guarantor alone generally, 9.16 liability to guarantor, 9.17–9.19 liability to lender, 9.20 lender alone from 1999 to 2011, 10.25–10.26 from 2011, 10.38 generally, 9.25 lender and borrower liability to guarantor, 9.24 liability to lender, 9.21–9.23 lender’s claims (from 1999 to 2011) individual mortgages, 10.21–10.22 introduction, 10.20 standard mortgages, 10.21–10.24 lender’s claims (from 2011) Indicative Behaviour, 10.30–10.32 introduction, 10.27–10.28 Outcome, 10.29 lender’s claims (from 2019) Indicative Behaviour, 10.33–10.37 more than one party buyer and seller, 9.02–9.04 duties to third parties, 9.26–9.33 lender and borrower, 9.21–9.24 mortgagors, mortgagees and sureties, 9.09–9.20 obtaining authority of client(s), 9.05–9.08 mortgagors, mortgagees and sureties generally, 9.09 guarantor alone, 9.17–9.20 lender alone, 9.25

915

Index Acting for parties in conveyancing transactions—contd mortgagors, mortgagees and sureties— contd lender and borrower, 9.21–9.24 non est factum, 9.10 undue influence, 9.11–9.16 purchaser alienation clauses, 9.46 boundaries and dimensions, 9.37 break clauses, 9.45 commercial advice, 9.34 conditions, 9.50 damages, 9.53–9.74 duties after contract, 9.48–9.52 duties before contract, 9.34–9.46 duties on completion, 9.53–9.56 duties on exchange of contracts, 9.47 easements, 9.41 encumbrances, 9.49 further advice, 9.52 general advice, 9.35 illegality, 9.57 investigation of title, 9.48 leasehold purchasers, 9.42–9.46 local authority searches, 9.38–9.39 occupiers, 9.51 rent receivable, 9.40 rent review clauses, 9.44 restrictive covenants, 9.41 searches and inquiries, 9.36–9.41 tenancies, 9.40 user clauses, 9.43 vendor contract races, 9.75 damages, 9.85–9.88 deposit, 9.78 general advice, 9.76–9.91 leases, 9.83 liability, 9.75–9.84 overage clauses, 9.79 requisitions, 9.82 sale and leaseback, 9.81 sale price, 9.77 searches and inquiries, 9.82 tax, 9.80 title, 9.84 Actions for money had and received lenders’ claims, and, 10.200

Actual authority See also Authority bind the client, to, 5.22 bind the firm, to, 5.04–5.05 introduction, 5.02 Administration of justice disciplinary proceedings, and, 16.73 Advocates former immunity from suit, and, 12.02 Agency authority, and bind the client, to, 5.22 introduction, 5.01 conflicting duties of confidentiality and disclosure, and, 6.36 supervening events, and, 3.48 Alienation clauses acting for purchaser of property, and, 9.46 Apparent authority See also Authority bind the client, to, 5.25 bind the firm, to, 5.11 introduction, 5.02 Appeals disciplinary proceedings, and Regulatory and Disciplinary Procedure Rules, 16.16 SDT proceedings, 16.39, 16.59 wasted costs orders, and, 13.23 Apportionment contributory negligence, and, 8.45– 8.46 Assessment of costs generally, 13.91–13.92 Assessment of damages conduct of litigation, and loss of a trial, 12.61–12.78 loss of opportunity to claim, 12.33– 12.60 loss of settlement, 12.79–12.80 Assumption of responsibility beneficiary principle, 1.26–1.28 commercial transactions, 1.22–1.24 consumer notices, 1.32 employee’s duty of care, 1.29 exclusion of liability, 1.30–1.33 general, 1.19–1.21 incremental test, 1.19 limitation of liability, 1.30–1.33

916

Index Assumption of responsibility—contd litigation, 1.25 notices, 1.32–1.33 threefold test, 1.19 Authority acts done by partners for the purpose of the partnership ‘for the purposes of the business’, 5.06 generally, 5.03–5.05 knowledge of the third party, 5.09 manner of performance, 5.08 undertakings, 5.07 actual authority bind the client, to, 5.22 bind the firm, to, 5.04–5.05 introduction, 5.02 agency, and, 5.01 apparent authority bind the client, to, 5.25 bind the firm, to, 5.11 introduction, 5.02 bind the client, to actual authority, 5.22 implied authority, 5.23 incidental authority, 5.23 ostensible authority, 5.24–5.25 bind the firm, to LLPs, 5.13–5.16 s 5 Partnership Act 1890, under, 5.03–5.09 s 10 Partnership Act 1890, under, 5.10 s 11 Partnership Act 1890, under, 5.11 s 13 Partnership Act 1890, under, 5.11 s 14 Partnership Act 1890, under, 5.12 vicarious liability, 5.17–5.21 breach of duty, and, 5.10 breach of warranty of authority basis of liability, 5.27 commencement of litigation, 5.28–5.30 compensation, 5.35–5.39 costs, 5.38 exclusion of warranty, 5.33 identity fraud, 5.31–5.32 introduction, 5.26

Authority—contd breach of warranty of authority—contd litigation cases, 5.38 nature of warranty, 5.28–5.33 reliance, 5.34 transactional cases, 5.36–5.37 unauthorised proceedings, 5.39 client funds, and, 5.11 commencement of litigation, and generally, 5.28–5.30 introduction, 5.26 conveyancing, and ‘double employment’ rule, 9.03 conduct, 9.05 contract, 9.06–9.07 tort, 9.08 employees, and claimant is client, where, 5.20 claimant is third party, where, 5.21 general principles, 5.17 estoppel, and, 5.02 express actual authority bind the client, to, 5.22 bind the firm, to, 5.04–5.05 introduction, 5.02 general authority ‘for the purposes of the business’, 5.06 generally, 5.03–5.05 knowledge of the third party, 5.09 manner of performance, 5.08 undertakings, 5.07 identity fraud, and generally, 5.31–5.32 introduction, 5.26 implied authority bind the client, to, 5.23 introduction, 5.02 incidental authority bind the client, to, 5.23 introduction, 5.02 ‘indoor management’ rule, 5.03 introduction, 5.01–5.02 knowledge of the third party, 5.09 limited liability partnerships s 6(1) LLPA 2000, under, 5.13 s 6(2) LLPA 2000, under, 5.14 s 6(3) LLPA 2000, under, 5.15 s 6(4) LLPA 2000, under, 5.16 manner of performance, 5.08

917

Index Authority—contd misappropriation or misapplication of client funds, 5.11 ostensible authority bind the client, to, 5.24–5.25 bind the firm, to, 5.04–5.05 introduction, 5.02 partners ‘for the purposes of the business’, 5.06 generally, 5.03–5.05 knowledge of the third party, 5.09 manner of performance, 5.08 undertakings, 5.07 representation, and, 5.02 salaried partners, and, 5.12 trading debts and liabilities, and, 5.10 trustees, and, 5.11 types, 5.02 undertakings, 5.07 usual authority bind the client, to, 5.23 introduction, 5.02 vicarious liability claimant is client, where, 5.20 claimant is third party, where, 5.21 general principles, 5.17–5.19 Back to back sales lenders’ claims, and, 10.11–10.12 Boundaries and dimensions acting for purchaser of property, and, 9.37 Breach of contract undertakings, and, 5.44 Breach of duty authority, and, 5.10 errors of judgment, 2.22–2.24 expert evidence, and admissibility, 2.19–2.20 introduction, 2.18 restrictions, 2.19–2.20 solicitors, by, 2.21 extent of advice, 2.31–2.32 extent of duty to advise clarifying instructions, 2.27 confirming instructions in person, 2.29 confirming instructions in writing, 2.28

Breach of duty—contd extent of duty to advise—contd introduction, 2.25 nature of advice, 2.30–2.32 nature of client, 2.26 nature of task, 2.27–2.29 lenders’ claims, and, 10.149–10.159 nature of advice, 2.30 nature of client, 2.26 nature of task clarifying instructions, 2.27 confirming instructions in person, 2.29 confirming instructions in writing, 2.28 professional practice, 2.15–2.17 professional standards, 2.12–2.14 reasonable competence failure to obtain counsel’s advice, 2.11 knowledge of the law, 2.09 level of expertise, 2.03–2.07 level of fees, 2.08 reliance on counsel’s advice, 2.10 slips and mistakes, 2.22–2.24 standard of care errors of judgment, 2.22–2.24 expert evidence, and, 2.18–2.21 introduction, 2.01–2.02 professional practice, 2.15–2.17 professional standards, 2.12–2.14 reasonable competence, 2.03–2.11 slips and mistakes, 2.22–2.24 wills, and damages, 11.21–11.26 execution, 11.12 notification of personal representatives or beneficiaries, 11.15 preparation, 11.11 taking instructions, 11.13–11.14 Breach of fiduciary duty conflicts of duty actual conflict rule. 4.39 double employment rule, 4.36– 4.38 good faith, 4.41–4.42 introduction, 4.35 no inhibition principle, 4.40 terminology, 4.35

918

Index Breach of fiduciary duty—contd conflicts of interest abuse of confidence, 4.31 bribes, 4.33 general principle, 4.28–4.29 no profit rule, 4.30 professional conduct, 4.34 secret benefits, 4.33 undue influence, 4.32 introduction, 4.26–4.27 lenders’ claims, and, 10.201 limitation, and abuse of confidence, 4.80 bribes, 4.82 generally, 4.77–4.78 no profit rule, 4.79 secret profits, 4.82 undue influence, 4.81 Breach of implied contractual terms lenders’ claims, and creditworthiness of borrower, 10.100–10.107 implied waiver of confidentiality by borrower, 10.108–10.111 information learnt from other transactions, 10.112–10.113 introduction, 10.89 matters relevant to value of security, 10.90–10.99 Breach of trust client funds, 4.02–4.05 conduct rules SRA Accounts Rules 2019, 15.31 terms of trust, 15.32 conscious breach, 4.11 constructive trusts dishonest assistance, 4.13–4.20 introduction, 4.12 knowing receipt, 4.21–4.24 ministerial receipt, 4.25 contribution, and, 8.30 contributory negligence, and, 8.14 deliberate breach, 4.11 dishonest assistance assistance, 4.16 breach of trust, 4.15 dishonesty, 4.17–4.21 existence of a trust, 4.14 generally, 4.13 dishonest breach, 4.11

Breach of trust—contd express trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 fraudulent breach, 4.11 implied trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 knowing receipt beneficial receipt, 4.23 disposal of assets in breach of fiduciary duty, 4.22 generally, 4.21 knowledge, 4.24 lenders’ claims, and, 10.201 ministerial receipt, 4.25 resulting trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 third party funds, 4.06–4.10 undertakings, and, 5.44 Breach of undertaking lenders’ claims, and, 10.195–10.199 Breach of warranty of authority See also Authority basis of liability, 5.27 commencement of litigation, 5.28–5.30 compensation costs, 5.38 introduction, 5.35 litigation cases, 5.38 transactional cases, 5.36–5.37 unauthorised proceedings, 5.39 contributory negligence, and, 8.13 costs, 5.38 exclusion of warranty, 5.33 identity fraud, 5.31–5.32 introduction, 5.26 lenders’ claims, and, 10.195–10.199 litigation cases, 5.38 nature of warranty commencement of litigation, 5.28–5.30 exclusion of warranty, 5.33 identity fraud, 5.31–5.32 reliance, 5.34 transactional cases, 5.36–5.37

919

Index Breach of warranty of authority— contd unauthorised proceedings, 5.39 Break clauses acting for purchaser of property, and, 9.45 Bribes breach of fiduciary duty limitation, 4.82 Burden of proof misuse of confidential information, and, 6.31 standard of care, and, 2.02 ‘But for’ test Chester v Afshar, 3.05 concurrent or competing causes, 3.04 general rule, 3.03 misrepresentation case, 3.06–3.07 Causation advice/information distinction, 3.31–3.34 alternative causes claimant’s conduct, 3.43–3.44 defendant’s conduct, 3.47 events, 3.48 generally, 3.41–3.42 third party acts, 3.45–3.46 ‘but for’ test Chester v Afshar, 3.05 concurrent or competing causes, 3.04 general rule, 3.03 misrepresentation case, 3.06–3.07 claimant’s conduct, 3.43–3.44 contractual liability, and alternative causes, 3.41–3.48 ‘but for’ test, 3.03–3.07 extent of defendant’s liability, 3.26–3.48 factual causation, 3.03–3.25 how would the claimant have acted, 3.09–3.11 how would the defendant have acted, 3.08 how would third parties have acted, 3.12–3.25 information/advice distinction, 3.31–3.34 intervening causes, 3.41–3.48 introduction, 3.01–3.02

Causation—contd contractual liability, and—contd loss of a chance, 3.12–3.25 misrepresentation case, in, 3.06– 3.07 SAAMCo principle, 3.26–3.48 defendant’s conduct, 3.47 equitable liability, and claimant’s conduct, 4.53 defendant’s conduct, 4.54 scope of duty, 4.56 scope of principle, 4.49–4.52 third party conduct, 4.55 extent of defendant’s liability ‘advice’ cases, 3.31–3.34 alternative causes, 3.41–3.48 application of principle, 3.27–3.28 burden of proof, 3.39 counter-factual, 3.35–3.36 failure to report fact which was fundamental to decision to proceed, 3.40 general approach, 3.26 ‘information’ cases, 3.31–3.34 loss suffered if information negligently provided been true, 3.35–3.36 new intervening causes, 3.41–3.48 scope of duty of care, 3.37–3.38 summary of principle, 3.29–3.30 factual causation, 3.03–3.25 how would the claimant have acted burden of proof, 3.11 general test, 3.09–3.10 how would the defendant have acted, 3.08 how would third parties have acted application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21

920

Index Causation—contd how would third parties have acted— contd speculative or negligible chances, 3.22 third party given evidence, where, 3.19 information/advice distinction, 3.31–3.34 intervening causes claimant’s conduct, 3.43–3.44 defendant’s conduct, 3.47 events, 3.48 generally, 3.41–3.42 third party acts, 3.45–3.46 introduction, 3.01–3.02 lenders’ claims, and intervening redemption of mortgage, 10.123–10.129 proof, 10.116–10.122 loss of a chance application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19 misrepresentation case, in, 3.06–3.07 mitigation of damage, and general principle, 3.73–3.74 introduction, 3.72 pre-Fulton professional negligence, 3.75–3.80 SAAMCo principle contribution, and, 8.42 generally, 3.26–3.48 third party acts, 3.45–3.46 tortious liability, and alternative causes, 3.41–3.48

Causation—contd tortious liability, and—contd ‘but for’ test, 3.03–3.07 extent of defendant’s liability, 3.26–3.48 factual causation, 3.03–3.25 how would the claimant have acted, 3.09–3.11 how would the defendant have acted, 3.08 how would third parties have acted, 3.12–3.25 information/advice distinction, 3.31–3.34 intervening causes, 3.41–3.48 introduction, 3.01–3.02 loss of a chance, 3.12–3.25 misrepresentation case, in, 3.06– 3.07 SAAMCo principle, 3.26–3.48 wasted costs orders, and, 13.70–13.72 Certificates of title conveyancing, and, 9.29–9.30 Civil litigation abuse of process civil cases, 12.09–12.16 criminal cases, 12.05–12.08 introduction, 12.03–12.04 advocates’ former immunity from suit, 12.02 assessment of damages loss of a trial, 12.61–12.78 loss of opportunity to claim, 12.33– 12.60 loss of settlement, 12.79–12.80 consequential losses, 12.82 costs, 12.86 criminal cases, 12.81 CRU certificates, 12.86 damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85 failure to issue within limitation period, 12.20 introduction, 12.01 liability to client advice on merits, strategy and settlement, 12.27–12.30

921

Index Civil litigation—contd liability to client—contd basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 limitation period, and, 7.44–7.47 loss of a chance, and application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19 loss of a trial appeals, 12.74 costs, 12.75–12.77 enforcement, 12.78 evidence available at trial, 12.62– 12.67 interaction of risks, 12.69 intermediate cases, 12.73 litigation risk, 12.70 nominal damages, 12.71 notional trial date, 12.61 state of the law at notional trial date, 12.68

Civil litigation—contd loss of a trial—contd strong cases, 12.72 weak cases, 12.75–12.77 loss of opportunity to claim assessment of value, 12.48–12.51 balance of probabilities, 12.34– 12.37 categories of case, 12.38 claimant loses chance of having claim or part of claim tried or settled, 12.39–12.51 evaluation, 12.40–12.41 general principles, 12.33–12.58 introduction, 12.33 matter proceeded to trial, 12.59– 12.60 Mount principles, 12.42–12.47 nature of assessment of value, 12.48–12.51 settlement of claim, 12.59–12.60 types of case, 12.38 underlying claim settled at undervalue, 12.52–12.55 underlying claim tried but worse result achieved, 12.56–12.58 loss of settlement, 12.79–12.80 mental distress, 12.83–12.84 mitigation, 12.87 obtaining worse settlement, 12.79– 12.80 psychiatric illness, 12.85 recoverable damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85 standard of care to client advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30

922

Index Civil litigation—contd standard of care to client—contd parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 want of prosecution, 12.20 Claimant’s conduct causation, and, 3.43–3.44 Clarifying instructions extent of duty to advise, and, 2.27 Client funds authority, and, 5.11 breach of trust, and, 4.02–4.05 express, implied and resulting trusts, and limitation, 4.72–4.73 Clients duty of care, and, 1.17–1.18 CML Lenders’ Handbook See also Lenders’ claims generally, 10.15–10.19 identity fraud, and, 10.13 introduction, 10.04 retainer of solicitor, and, 10.10 SRA guidance, and, 10.14 Codes of conduct civil liabilities breach of trust, 15.31–15.32 common law duties, 15.23–15.27 duty of care, 15.23–15.25 implied terms, 15.26–15.27 introduction, 15.22 statutory duties, 15.28–15.30 Guide to the Professional Conduct of Solicitors, 15.10 Solicitors’ Code of Conduct 2007, 15.11 Solicitors Practice Rules 1990, 15.10 SRA Handbook, 15.12 Collateral benefits mitigation of damage generally, 3.81 introduction, 3.72 Commencement of litigation breach of warranty of authority, and generally, 5.28–5.30 introduction, 5.26

Commercial advice acting for purchaser of property, and, 9.34 Committal undertakings, and, 5.45 Common interest privilege pre-action disclosure, and, 14.10 Compensation See also Damages breach of warranty of authority costs, 5.38 introduction, 5.35 litigation cases, 5.38 transactional cases, 5.36–5.37 unauthorised proceedings, 5.39 equitable liability account, 4.44 causation, 4.49–4.56 changes in value, 4.61 contributory negligence, 4.58 date of assessment, 4.60 equitable account, 4.44–4.46 interest, 4.63–4.65 introduction, 4.43 measure, 4.60–4.61 mitigation of damage, 4.59 nature of remedy, 4.47–4.48 relief under s 61 Trustee Act 1925, 4.66–4.70 remoteness of damage, 4.57 restitution, and, 4.47 set off, 4.62 undertakings, 5.49 Complaint to SRA undertakings, and, 5.44 Conditional fee agreements wasted costs orders, and, 13.67–13.69 Conduct of litigation abuse of process civil cases, 12.09–12.16 criminal cases, 12.05–12.08 introduction, 12.03–12.04 advocates’ former immunity from suit, 12.02 assessment of damages loss of a trial, 12.61–12.78 loss of opportunity to claim, 12.33– 12.60 loss of settlement, 12.79–12.80 consequential losses, 12.82

923

Index Conduct of litigation—contd costs, 12.86 criminal cases, 12.81 CRU certificates, 12.86 damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85 failure to issue within limitation period, 12.20 introduction, 12.01 liability to client advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 limitation period, and, 7.44–7.47 loss of a chance, and application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19

Conduct of litigation—contd loss of a trial appeals, 12.74 costs, 12.75–12.77 enforcement, 12.78 evidence available at trial, 12.62– 12.67 interaction of risks, 12.69 intermediate cases, 12.73 litigation risk, 12.70 nominal damages, 12.71 notional trial date, 12.61 state of the law at notional trial date, 12.68 strong cases, 12.72 weak cases, 12.75–12.77 loss of opportunity to claim assessment of value, 12.48–12.51 balance of probabilities, 12.34– 12.37 categories of case, 12.38 claimant loses chance of having claim or part of claim tried or settled, 12.39–12.51 evaluation, 12.40–12.41 general principles, 12.33–12.58 introduction, 12.33 matter proceeded to trial, 12.59– 12.60 Mount principles, 12.42–12.47 nature of assessment of value, 12.48–12.51 settlement of claim, 12.59–12.60 types of case, 12.38 underlying claim settled at undervalue, 12.52–12.55 underlying claim tried but worse result achieved, 12.56– 12.58 loss of settlement, 12.79–12.80 mental distress, 12.83–12.84 mitigation, 12.87 obtaining worse settlement, 12.79– 12.80 psychiatric illness, 12.85 recoverable damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85

924

Index Conduct of litigation—contd standard of care to client advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 want of prosecution, 12.20 Conduct rules breach of trust SRA Accounts Rules 2019, 15.31 terms of trust, 15.32 common law duties duty of care, 15.23–15.25 implied terms, 15.26–15.27 duty of care, 15.23–15.25 implied terms, 15.26–15.27 introduction, 15.22 statutory duties, 15.28–15.30 Confidentiality, duty of absolute nature, 6.12–6.14 acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 burden of proof of misuse, 6.31 conflict with duty of disclosure acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 contents, 6.17–6.31 court orders, and, 6.52 extent, 6.05–6.31 fiduciary duty, and, 6.05 greater duty to client, and, 6.43–6.44 incidents absolute nature of duty, 6.12–6.14

Confidentiality, duty of—contd incidents—contd duty post-dates termination of retainer, 6.08–6.09 persons to whom duty owed, 6.10–6.11 protected information, 6.15 source of information, 6.16 iniquity, and, 6.45–6.46 injunctions to restrain accepting retainer from new client adequacy of information barriers, 6.62–6.64 balance of convenience, 6.65 Bolkiah v KPMG, 6.57–6.59 Bolkiah test, 6.60–6.61 claim by existing client, where, 6.66–6.69 generally, 6.56 introduction, 6.55 post-Bolkiah cases, 6.62–6.64 SRA Code of Conduct, 6.70 type, 6.65 injunctions to restrain use of disclosed information acquired during arbitration, 6.78 acquired during mediation, 6.75 mistaken disclosure, 6.71–6.74 pursuant to CPR 31, 6.76–6.77 introduction, 6.01 law of confidence, and, 6.05 legal compulsion, and, 6.51–6.52 legal professional privilege, and, 6.02–6.04 loss to the public domain, 6.53 misuse of information acquired burden of proof, 6.31 generally, 6.17–6.20 remedies, 6.54–6.79 wrongful disclosure, 6.21–6.25 wrongful use, 6.26–6.30 money laundering, and, 6.52 multiple principals, where acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 overriding greater duty to client, 6.43–6.44 iniquity, 6.45–6.46

925

Index Confidentiality, duty of—contd overriding—contd introduction, 6.42 legal compulsion, 6.51–6.52 loss to the public domain, 6.53 proceedings against or by the solicitor, 6.47–6.50 public interest, 6.45–6.46 statutory obligations, 6.51–6.52 persons to whom duty owed, 6.10– 6.11 proceedings against or by the solicitor, and, 6.47–6.50 proceeds of crime, and, 6.52 protected information, 6.15 public domain, and, 6.53 public interest, and, 6.45–6.46 reasonable skill and care, and, 6.05 release greater duty to client, 6.43–6.44 iniquity, 6.45–6.46 introduction, 6.42 legal compulsion, 6.51–6.52 loss to the public domain, 6.53 proceedings against or by the solicitor, 6.47–6.50 public interest, 6.45–6.46 statutory obligations, 6.51–6.52 remedies for misuse account of profits, 6.54 constructive trusts, 6.54 damages, 6.79 delivery up, 6.54 destruction of documents, 6.54 disgorgement of profits, 6.79 equitable compensation, 6.79 injunctions to restrain accepting retainer from new client, 6.56–6.70 injunctions to restrain use of disclosed information, 6.71– 6.78 introduction, 6.54–6.55 retainer, and, 6.05 source of information, 6.16 sources, 6.05–6.07 SRA Code of Conduct, and conflict with duty of disclosure, 6.35 generally, 6.05 introduction, 6.01

Confidentiality, duty of—contd statutory obligations, and, 6.51–6.52 termination of retainer, and, 6.08–6.09 wrongful disclosure, 6.21–6.25 wrongful use, 6.26–6.30 Confirming instructions extent of duty to advise, and person, in, 2.29 writing, in, 2.28 Conflicts of duty actual conflict rule. 4.39 double employment rule, 4.36–4.38 good faith, 4.41–4.42 introduction, 4.35 no inhibition principle, 4.40 terminology, 4.35 Conflicts of interest abuse of confidence, 4.31 bribes, 4.33 disciplinary proceedings, and, 16.74– 16.78 general principle, 4.28–4.29 lenders’ claims, and, 10.80–10.83 no profit rule, 4.30 professional conduct, 4.34 secret benefits, 4.33 undue influence, 4.32 Consequential losses generally, 12.82 Consideration undertakings, and, 5.45 Constructive trusts dishonest assistance assistance, 4.16 breach of trust, 4.15 dishonesty, 4.17–4.21 existence of a trust, 4.14 generally, 4.13 limitation, 4.75 introduction, 4.12 knowing receipt beneficial receipt, 4.23 disposal of assets in breach of fiduciary duty, 4.22 generally, 4.21 knowledge, 4.24 limitation, 4.76 limitation, and dishonest assistance, 4.75 knowing receipt, 4.76

926

Index Constructive trusts—contd limitation, and—contd ministerial receipt, 4.76 ministerial receipt generally, 4.25 limitation, 4.76 Contract races acting for vendor of property, and, 9.75 Contractual liability breach date rule date of breach, 3.82 date of transaction, 3.83–3.84 flexible approach, 3.85–3.86 general rule, under, 3.82 ‘but for’ test Chester v Afshar, 3.05 concurrent or competing causes, 3.04 general rule, 3.03 misrepresentation case, 3.06–3.07 causation alternative causes, 3.41–3.48 ‘but for’ test, 3.03–3.07 extent of defendant’s liability, 3.26–3.48 factual causation, 3.03–3.25 how would the claimant have acted, 3.09–3.11 how would the defendant have acted, 3.08 how would third parties have acted, 3.12–3.25 information/advice distinction, 3.31–3.34 intervening causes, 3.41–3.48 introduction, 3.01–3.02 loss of a chance, 3.12–3.25 misrepresentation case, in, 3.06– 3.07 SAAMCo principle, 3.26–3.48 contributory negligence, and, 8.05 date of assessment of damages breach date rule, 3.82–3.86 conclusion, 3.88–3.90 valuation method, 3.87 exclusion of liability, 1.05–1.07 introduction, 1.01–1.04 limitation of liability, 1.05–1.07 limitation period, and continuing obligations, 7.10–7.14

Contractual liability—contd limitation period, and—contd general rule, 7.09 loss of a chance application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19 mental distress, and, 3.91 mitigation of damage causation, 3.73–3.80 collateral benefits, 3.81 commencing litigation, 3.68–3.71 conduct of litigation, and, 12.87 consequential benefits of breach of duty, 3.72–3.80 equitable liability, and, 4.59 general principles, 3.65–3.67 legal causation, 3.73–3.80 lenders’ claims, and, 10.176–10.179 reasonableness of commencing litigation, 3.68–3.70 recovery of costs of alternative litigation, 3.71 psychotic illness, and, 3.91 quantum of damages causation, 3.01–3.48 date of assessment, 3.82–3.90 mental distress, for, 3.91 mitigation of damage, 3.65–3.81 psychotic illness, for, 3.91 remoteness of damage, 3.49–3.64 remoteness of damage amalgam of approaches, 3z,56–3.58 application of contractual test, 3.60–3.64 available tests, 3.49–3.50

927

Index Contractual liability—contd remoteness of damage—contd contractual interpretation approach, 3.55 contractual test, 3.51–3.59 market changes, 3.63 orthodox approach, 3.52–3.54 special contracts, 3.64 timing of application of test, 3.59 types of damage, 3.61–3.62 retainer, 1.08–1.13 rule against reflective loss, 1.14–1.16 valuation method rule, 3.87 Contribution amount contractual limitation clause, and, 8.43 contributory negligence, and, 8.40–8.41 costs figure, 8.44 ‘damage in question’, 8.38 generally, 8.36–8.37 remoteness, and, 8.39 SAAMCo, and, 8.42 application figure to be apportioned, 8.45–8.46 recoverable amount, 8.36–8.44 assessment of amount contractual limitation clause, and, 8.43 contributory negligence, and, 8.40–8.41 costs figure, 8.44 ‘damage in question’, 8.38 generally, 8.36–8.37 remoteness, and, 8.39 SAAMCo, and, 8.42 contractual limitation clause, and, 8.43 contributory negligence, and, 8.40–8.41 costs figure, 8.44 ‘damage in question’, 8.38 general principles, 8.19–8.29 knowing assistance in breach of trust, 8.30 lenders’ claims, and, 10.180–10.182 limitation period, and, 7.85 method of apportionment, 8.45–8.46 recoverable amount contractual limitation clause, and, 8.43

Contribution—contd recoverable amount—contd contributory negligence, and, 8.40–8.41 costs figure, 8.44 ‘damage in question’, 8.38 generally, 8.36–8.37 remoteness, and, 8.39 SAAMCo, and, 8.42 remoteness of damage, and, 8.39 restitution, 8.30 SAAMCo, and, 8.42 ‘same damage’, 8.19–8.29 scope, 8.19–8.35 settlements, 8.31–8.35 wasted costs orders, and, 13.74 Contributory negligence application general principles, 8.15–8.16 solicitors’ cases, in, 8.17–8.18 breach of trust, 8.14 breach of warranty of authority, 8.13 contract claims, 8.05 contribution, and, 8.40–8.41 equitable liability, and, 4.58 fiduciary duty, 8.14 fraudulent misrepresentation, 8.13 general principles generally, 8.15–8.16 solicitors’ cases, in, 8.17–8.18 introduction, 8.01 lenders’ claims, and application, 8.06–8.12 borrower known to lack integrity, 10.175 excessive loan to value ratios, 10.168–10.171 generally, 10.161–10.164 levels of deduction, 10.165–10.167 non-status lending, 10.172–10.174 scope, 8.06–8.12 negligence claims, 8.02–8.04 negligent misrepresentation, 8.13 scope breach of trust, 8.14 breach of warranty of authority, 8.13 contract claims, 8.05 fiduciary duty, 8.14 fraudulent misrepresentation, 8.13 lenders’ claims, 8.06–8.12

928

Index Contributory negligence—contd scope—contd negligence claims, 8.02–8.04 negligent misrepresentation, 8.13 solicitors’ cases, in, 8.17–8.18 Conveyancing acting for buyer and seller ‘double employment’ rule, 9.03 conduct, 9.02 contract, 9.04 equity, 9.03 acting forguarantor alone generally, 9.16 liability to guarantor, 9.17–9.19 liability to lender, 9.20 acting forlender alone, 9.25 acting forlender and borrower liability to guarantor, 9.24 liability to lender, 9.21–9.23 acting for more than one party buyer and seller, 9.02–9.04 duties to third parties, 9.26–9.33 lender and borrower, 9.21–9.24 mortgagors, mortgagees and sureties, 9.09–9.20 obtaining authority of client(s), 9.05–9.08 acting for mortgagors, mortgagees and sureties generally, 9.09 guarantor alone, 9.17–9.20 lender alone, 9.25 lender and borrower, 9.21–9.24 non est factum, 9.10 undue influence, 9.11–9.16 acting for purchaser alienation clauses, 9.46 boundaries and dimensions, 9.37 break clauses, 9.45 commercial advice, 9.34 conditions, 9.50 damages, 9.53–9.74 duties after contract, 9.48–9.52 duties before contract, 9.34–9.46 duties on completion, 9.53–9.56 duties on exchange of contracts, 9.47 easements, 9.41 encumbrances, 9.49 further advice, 9.52

Conveyancing—contd acting for purchaser—contd general advice, 9.35 illegality, 9.57 investigation of title, 9.48 leasehold purchasers, 9.42–9.46 local authority searches, 9.38–9.39 occupiers, 9.51 rent receivable, 9.40 rent review clauses, 9.44 restrictive covenants, 9.41 searches and inquiries, 9.36–9.41 tenancies, 9.40 user clauses, 9.43 acting for vendor contract races, 9.75 damages, 9.85–9.88 deposit, 9.78 general advice, 9.76–9.91 leases, 9.83 liability, 9.75–9.84 overage clauses, 9.79 requisitions, 9.82 sale and leaseback, 9.81 sale price, 9.77 searches and inquiries, 9.82 tax, 9.80 title, 9.84 alienation clauses, 9.46 authority of client(s) ‘double employment’ rule, 9.03 conduct, 9.05 contract, 9.06–9.07 tort, 9.08 boundaries and dimensions, 9.37 break clauses, 9.45 certificates of title, 9.29–9.30 commercial advice, 9.34 conditions, 9.50 damages (acting for purchaser) alternative investment opportunity, 9.72 date of assessment, 9.59 defective purchase, 9.62–9.70 delayed purchase, 9.61 distress and inconvenience, for, 9.74 duties to third parties, and, 9.33 extent of liability, 9.73 introduction, 9.58 loss of opportunity to purchase, 9.60

929

Index Conveyancing—contd damages (acting for purchaser)—contd measure, 9.60–9.72 profit on resale, 9.71 damages (acting for vendor) loss of a chance, 9.86 other cases, 9.87 sale of freehold property, 9.85 sale of leasehold interest, 9.86 trading losses, 9.88 valuation method, 9.85 damages (options) exercise, 9.96 grant, 9.95 defective purchase additional expenditure, 9.65 costs of cure, 9.69 costs of replacement, 9.70 date of transaction, 9.63 date other than that of transaction, 9.67 extraction cases, 9.68 introduction, 9.62 reduction in purchase price, 9.66 subsequent events, 9.64 valuation method, 9.63–9.67 ‘double employment’ rule, 9.03 duties to third parties certificates of title, 9.29–9.30 damages, 9.33 miscellaneous cases, 9.32 pre-contract inquiries, 9.26–9.28 requisitions on title, 9.31 exchange of contracts, 9.47 easements, 9.41 encumbrances, 9.49 introduction, 9.01 investigation of title, 9.48 lease renewals acting for landlords, 9.92 acting for tenants, 9.89–9.91 leasehold purchasers alienation clauses, 9.46 break clauses, 9.45 introduction, 9.42 rent review clauses, 9.44 user clauses, 9.43 local authority searches, 9.38–9.39 non est factum, 9.10 occupiers, 9.51

Conveyancing—contd options damages, 9.95–9.96 exercise, 9.94 reminders, 9.93 pre-contract inquiries, 9.26–9.28 reference as to financial standing or honesty of client, 9.32 rent receivable, 9.40 rent review clauses, 9.44 restrictive covenants, 9.41 requisitions on title, 9.31 searches and inquiries, 9.36–9.41 tenancies, 9.40 undue influence generally, 9.11 importance of legal advice, 9.12 lender’s duty, 9.14–9.15 notice, 9.13 post-Etridge cases, 9.15–9.16 pre-Etridge cases, 9.14 user clauses, 9.43 Cost of cure damages for defective property purchase, and, 9.69 Cost of replacement damages for defective property purchase, and, 9.70 Costs assessment, 13.91–13.92 conduct of litigation, and, 12.86 contribution, and, 8.44 disciplinary proceedings, and investigations by SRA, 16.17 SDT proceedings, 16.55–16.58 improper acts and omissions, 13.38– 13.41 inherent jurisdiction of courts, 13.79– 13.80 investigations, and 16.17 non-party costs orders, 13.81–13.90 solicitors, against bases for order, 13.01–13.03 criminal proceedings, 13.75–13.77 inherent jurisdiction of courts, 13.79–13.80 introduction, 13.01–13.03 non-party costs orders, 13.81– 13.90 wasted costs orders, 13.04–13.63

930

Index Costs—contd unreasonable acts and omissions abuse of process, 13.44–13.50 agreeing expert evidence, 13.43 generally, 13.42 hopeless cases, 13.44–13.50 introduction, 13.03 wasted costs orders abuse of process, 13.44–13.50 agreeing expert evidence, 13.43 appeals against refusal to make, 13.23 causation, 13.70–13.72 conditional fee agreements, 13.67– 13.69 contribution, 13.74 court-initiated applications, 13.31 hopeless cases, 13.44–13.50 improper acts and omissions, 13.38–13.41 indemnity, 13.74 interrelationship with order for costs against LSC, 13.34 introduction, 13.04–13.05 judges, 13.29–13.30 jurisdiction, 13.06–13.12 justice in all the circumstances, 13.73 legal professional privilege, 13.24– 13.28 negligent acts or omissions, 13.51– 13.63 negligent conduct, 13.57–13.63 non-negligent conduct, 13.52– 13.56 non-party applications, 13.32 Practice Direction, 13.15 procedure, 13.13–13.34 public funding, 13.67–13.69 reliance on counsel, 13.64–13.66 requirements for application, 13.35–13.37 rules of procedure, 13.13–13.14 scope of provisions, 13.06–13.12 settlement of application, 13.33 stage of application, 13.16–13.17 timing of applications, 13.29–13.30 unreasonable acts and omissions, 13.42–13.50 wills, and, 11.23–11.24

Council of Mortgage Lenders (CML) Lenders’ Handbook See also Lenders’ claims generally, 10.15–10.19 identity fraud, and, 10.13 introduction, 10.04 retainer of solicitor, and, 10.10 SRA guidance, and, 10.14 Court orders duty of confidentiality, and, 6.52 Creditworthiness of borrower lenders’ claims, and, 10.100–10.107 CRU certificates conduct of litigation, and, 12.86 Damages See also Compensation acting for purchaser alternative investment opportunity, 9.72 date of assessment, 9.59 defective purchase, 9.62–9.70 delayed purchase, 9.61 distress and inconvenience, for, 9.74 duties to third parties, and, 9.33 extent of liability, 9.73 introduction, 9.58 loss of opportunity to purchase, 9.60 measure, 9.60–9.72 profit on resale, 9.71 acting for vendor loss of a chance, 9.86 other cases, 9.87 sale of freehold property, 9.85 sale of leasehold interest, 9.86 trading losses, 9.88 valuation method, 9.85 breach of warranty of authority costs, 5.38 introduction, 5.35 litigation cases, 5.38 transactional cases, 5.36–5.37 unauthorised proceedings, 5.39 conveyancing acting for purchaser, 9.58–9.72 acting for vendor, 9.85–9.88 duties to third parties, 9.33 options, 9.95–9.96 loss of a trial appeals, 12.74 costs, 12.75–12.77

931

Index Damages—contd loss of a trial—contd enforcement, 12.78 evidence available at trial, 12.62– 12.67 interaction of risks, 12.69 intermediate cases, 12.73 litigation risk, 12.70 nominal damages, 12.71 notional trial date, 12.61 state of the law at notional trial date, 12.68 strong cases, 12.72 weak cases, 12.75–12.77 loss of opportunity to claim assessment of value, 12.48–12.51 balance of probabilities, 12.34– 12.37 categories of case, 12.38 claimant loses chance of having claim or part of claim tried or settled, 12.39–12.51 evaluation, 12.40–12.41 general principles, 12.33–12.58 introduction, 12.33 matter proceeded to trial, 12.59– 12.60 Mount principles, 12.42–12.47 nature of assessment of value, 12.48–12.51 settlement of claim, 12.59–12.60 types of case, 12.38 underlying claim settled at undervalue, 12.52–12.55 underlying claim tried but worse result achieved, 12.56–12.58 loss of settlement, 12.79–12.80 options exercise, 9.96 grant, 9.95 wills costs, 11.23–11.24 general principles, 11.21–11.22 rectification, 11.25–11.26 Date of assessment of damages acting for purchaser of property, and, 9.59 breach date rule, under date of breach, 3.82 date of transaction, 3.83–3.84

Date of assessment of damages—contd breach date rule, under—contd flexible approach, 3.85–3.86 general rule, under, 3.82 conclusion, 3.88–3.90 valuation method rule, 3.87 Date of knowledge limitation period, and, 7.06 Defective property purchase additional expenditure, 9.65 costs of cure, 9.69 costs of replacement, 9.70 date of transaction, 9.63 date other than that of transaction, 9.67 extraction cases, 9.68 introduction, 9.62 reduction in purchase price, 9.66 subsequent events, 9.64 valuation method, 9.63–9.67 Defendant’s conduct causation, and, 3.47 Delayed purchase acting for purchaser of property, and, 9.61 Deliberate commission of a breach of duty constructive knowledge, 7.83–7.84 generally, 7.81 introduction, 7.72–7.73 overview, 7.04 Deliberate concealment constructive knowledge, 7.83–7.84 generally, 7.75–7.80 introduction, 7.72–7.73 overview, 7.04 Delayed purchase acting for purchaser of property, and, 9.61 Deposit money acting for vendor of property, and, 9.78 Derivative claims wills, and, 11.19–11.20 Direct payments lenders’ claims, and factual background, 10.11–10.12 generally, 10.47–10.56 Disciplinary proceedings acting in client’s best interests, 16.74– 16.78

932

Index Disciplinary proceedings—contd administration of justice, 16.73 Administration of Justice Act 1985, under, 16.03 conflicts of interest, 16.74–16.78 dishonesty blind eye knowledge, 16.63 definition, 16.62 introduction, 16.62 overview, 16.61 ‘relevant’ knowledge, 16.63 stages of test, 16.63–16.65 standards of ordinary decent people. 16.64–16.65 subjective state of mind, 16.63 disqualification, 16.04 Enforcement Strategy generally, 16.13 introduction, 16.02 introduction, 16.01 investigations by SRA accountability, 16.20 commencement, 16.21 co-operation, 16.20 costs, 16.17 disclosure to third parties, 16.31 explanations, 16.26 ‘forensic investigation reports’, 16.32 guidance, 16.19 information offences, 16.27 introduction, 16.19 jurisdiction, 16.19 legal professional privilege, 16.28– 16.30 production notices, 16.22–16.25 reports, 16.32 third party disclosure, 16.31 lack of integrity definitions, 16.67 examples, 16.68–16.71 introduction, 16.66 overview, 16.61 post-Ivey decisions, 16.70–16.71 pre-Ivey decisions, 16.68–16.69 Legal Services Act 2007, under, 16.04 penalties, 16.04 powers of SRA Administration of Justice Act 1985, under, 16.03

Disciplinary proceedings—contd powers of SRA—contd Enforcement Strategy, 16.13 introduction, 16.01 Legal Services Act 2007, under, 16.04 other controls, 16.05 Regulatory and Disciplinary Procedure Rules 2019, under, 16.06–16.18 Solicitors Act 1974, under, 16.02 procedure appeals, 16.16 authorised decision makers, 16.07 costs of investigation, 16.17 delegation of powers, 16.07 disclosure of decisions, 16.14 enforcement, 16.13 evidence, 16.09 findings, 16.12 introduction, 16.09 meetings, 16.11 oral hearings, 16.11 paper decisions, 16.10 publication of decisions, 16.14 review of decisions, 16.15 settlement agreements, 16.18 ‘professional misconduct’, 16.02 prosecution, 16.05 public trust and confidence in the profession, 16.72 regulated firms and individuals, and employees, 15.20 interest holders, 15.21 introduction, 15.14 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 terminology, 15.14 Regulatory Settlement Agreements, 16.18 rule of law, 16.73 sanctions, and, 16.81–16.86 Solicitors Act 1974, under, 16.02 Solicitors’ Disciplinary Tribunal proceedings adjournment, 16.50 agreed outcomes, 16.52 Answers, 16.44

933

Index Disciplinary proceedings—contd Solicitors’ Disciplinary Tribunal proceedings—contd appeals to High Court, 16.39, 16.59 applications, 16.42 case management, 16.44 certification of case to answer, 16.43 client privilege, 16.45–16.46 costs of hearings, 16.55–16.58 directions, 16.44–16.45 disclosure, 16.45–16.46 evidence, 16.48 generally, 16.33 hearings, 16.53–16.54 introduction, 16.34–16.35 investigative powers, 16.47 jurisdiction, 16.36–16.39 making applications, 16.42 outcomes, 16.52 procedure, 16.40–16.59 publicity, 16.51 rule 12 statement, 16.42 Rules, 16.40 sanctions, and, 16.81–16.86 standard of proof, 16.41 subpoenas, 16.49 substantive hearings, 16.53–16.54 SRA Accounts Rules 2019, 16.79– 16.80 SRA Enforcement Strategy generally, 16.13 introduction, 16.02 SRA Principles 2019 acting in client’s best interests, 16.74–16.78 administration of justice, 16.73 conflicts of interest, 16.74–16.78 content, 16.61 dishonesty, 16.62–16.65 introduction, 16.60 lack of integrity, 16.66–16.71 principles, 16.61 public trust and confidence in the profession, 16.72 rule of law, 16.73 status, 16.61 upholding public trust and confidence, 16.72 upholding rule of law, 16.73

Disciplinary proceedings—contd SRA Regulatory and Disciplinary Procedure Rules 2019 appeals, 16.16 authorised decision makers, 16.07 costs of investigation, 16.17 delegation of powers, 16.07 disclosure of decisions, 16.14 enforcement, 16.13 evidence, 16.09 findings, 16.12 introduction, 16.06 investigations, 16.19–16.32 jurisdiction, 16.08 meetings, 16.11 oral hearings, 16.11 paper decisions, 16.10 procedure, 16.09–16.12 publication of decisions, 16.14 purpose, 16.06 review of decisions, 16.15 scope, 16.06 settlement agreements, 16.18 upholding public trust and confidence, 16.72 upholding rule of law, 16.73 Disclosure crime or fraud exception generally, 14.26–14.27 legal advice privilege, 14.28–14.29 litigation privilege, 14.30 disciplinary proceedings, and client privilege, and, 16.78–16.81 generally, 16.75 SRA, by, 16.76 duty of confidentiality, and acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 legal advice privilege crime or fraud exception, 14.28– 14.29 generally, 14.20–14.25 litigation privilege, 14.30 pre-action disclosure absence of client consent or waiver, 14.11–14.12 access to solicitor’s file, 14.03, 14.08–14.09

934

Index Disclosure—contd pre-action disclosure—contd common interest privilege, 14.10 inspection of documents, 14.02– 14.03 introduction, 14.01 joint interest privilege, 14.10 joint retainers, 14.05–14.06 multiple retainers, 14.07–14.08 ownership of solicitor’s file, 14.02, 14.07 production of documents, 14.02– 14.03 protocol, 14.04 solicitors’ rights, 14.11–14.15 waiver of privilege, 14.13–14.15 standard disclosure compromises, 14.39 counsel’s advice, 14.36 damages, 14.38 defendant’s files, 14.31–14.32 files of other solicitors, 14.33–14.34 implied waiver of privilege, 14.31– 14.39 introduction, 14.16 legal advice privilege, 14.20–14.29 limitation defences, 14.37 litigation privilege, 14.30 relevance of other transactions, 14.17–14.19 reliance on legal advice, 14.36 settlements, 14.39 ‘Disgraceful or dishonourable’ test professional misconduct, and, 16.11– 16.13 Dishonest assistance assistance, 4.16 breach of trust, 4.15 constructive trusts limitation, 4.75 dishonesty, 4.17–4.21 existence of a trust, 4.14 generally, 4.13 Dishonest breach breach of trust, and, 4.11 Dishonesty blind eye knowledge, 16.63 definition, 16.62 introduction, 16.62 overview, 16.61

Dishonesty—contd ‘relevant’ knowledge, 16.63 stages of test, 16.63–16.65 standards of ordinary decent people. 16.64–16.65 subjective state of mind, 16.63 Disqualification disciplinary proceedings, and, 16.04 Distress and inconvenience acting for purchaser of property, and, 9.74 ‘Double employment’ rule acting for buyer and seller, and, 9.03 Duty of care breach of duty extent of duty to advise, 2.25–2.32 standard of care, 2.01–2.24 client, to, 1.17–1.18 extent of duty to advise introduction, 2.25 nature of advice, 2.30–2.32 nature of client, 2.26 nature of task, 2.27–2.29 standard of care errors of judgment, 2.22–2.24 expert evidence, and, 2.18–2.21 introduction, 2.01–2.02 professional practice, 2.15–2.17 professional standards, 2.12–2.14 reasonable competence, 2.03–2.11 slips and mistakes, 2.22–2.24 third parties, to assumption of responsibility test, 1.19–1.21 beneficiary principle, 1.26–1.28 commercial transactions, 1.22–1.24 consumer notices, 1.32 employee’s duty of care, 1.29 exclusion of liability, 1.30–1.33 general, 1.19–1.21 incremental test, 1.19 limitation of liability, 1.30–1.33 litigation, 1.25 notices, 1.32–1.33 threefold test, 1.19 wills, and beneficiary principles, 11.02–11.03 breach, 11.11–11.15 claims involving client’s will or estate, 11.01

935

Index Duty of care—contd wills, and—contd class of potential beneficiaries, 11.07 damages for breach, 11.21–11.26 no other remedy, 11.08–11.10 object of transaction, 11.05–11.06 proximity, 11.04 scope, 11.04–11.10 Duty of confidentiality absolute nature, 6.12–6.14 acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 burden of proof of misuse, 6.31 conflict with duty of disclosure acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 contents, 6.17–6.31 court orders, and, 6.52 extent, 6.05–6.31 fiduciary duty, and, 6.05 greater duty to client, and, 6.43–6.44 incidents absolute nature of duty, 6.12–6.14 duty post-dates termination of retainer, 6.08–6.09 persons to whom duty owed, 6.10–6.11 protected information, 6.15 source of information, 6.16 iniquity, and, 6.45–6.46 injunctions to restrain accepting retainer from new client adequacy of information barriers, 6.62–6.64 balance of convenience, 6.65 Bolkiah v KPMG, 6.57–6.59 Bolkiah test, 6.60–6.61 claim by existing client, where, 6.66–6.69 generally, 6.56 introduction, 6.55 post-Bolkiah cases, 6.62–6.64 SRA Code of Conduct, 6.70 type, 6.65 injunctions to restrain use of disclosed information acquired during arbitration, 6.78

Duty of confidentiality—contd injunctions to restrain use of disclosed information—contd acquired during mediation, 6.75 mistaken disclosure, 6.71–6.74 pursuant to CPR 31, 6.76–6.77 introduction, 6.01 law of confidence, and, 6.05 legal compulsion, and, 6.51–6.52 legal professional privilege, and, 6.02–6.04 loss to the public domain, 6.53 misuse of information acquired burden of proof, 6.31 generally, 6.17–6.20 remedies, 6.54–6.79 wrongful disclosure, 6.21–6.25 wrongful use, 6.26–6.30 money laundering, and, 6.52 multiple principals, where acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 overriding greater duty to client, 6.43–6.44 iniquity, 6.45–6.46 introduction, 6.42 legal compulsion, 6.51–6.52 loss to the public domain, 6.53 proceedings against or by the solicitor, 6.47–6.50 public interest, 6.45–6.46 statutory obligations, 6.51–6.52 persons to whom duty owed, 6.10– 6.11 proceedings against or by the solicitor, and, 6.47–6.50 proceeds of crime, and, 6.52 protected information, 6.15 public domain, and, 6.53 public interest, and, 6.45–6.46 reasonable skill and care, and, 6.05 release greater duty to client, 6.43–6.44 iniquity, 6.45–6.46 introduction, 6.42 legal compulsion, 6.51–6.52 loss to the public domain, 6.53

936

Index Duty of confidentiality—contd release—contd proceedings against or by the solicitor, 6.47–6.50 public interest, 6.45–6.46 statutory obligations, 6.51–6.52 remedies for misuse account of profits, 6.54 constructive trusts, 6.54 damages, 6.79 delivery up, 6.54 destruction of documents, 6.54 disgorgement of profits, 6.79 equitable compensation, 6.79 injunctions to restrain accepting retainer from new client, 6.56–6.70 injunctions to restrain use of disclosed information, 6.71– 6.78 introduction, 6.54–6.55 retainer, and, 6.05 source of information, 6.16 sources, 6.05–6.07 SRA Code of Conduct, and conflict with duty of disclosure, 6.35 generally, 6.05 introduction, 6.01 statutory obligations, and, 6.51–6.52 termination of retainer, and, 6.08–6.09 wrongful disclosure, 6.21–6.25 wrongful use, 6.26–6.30 Duty to advise extent of advice, 2.31–2.32 introduction, 2.25 nature of advice, 2.30 nature of client, 2.26 nature of task clarifying instructions, 2.27 confirming instructions in person, 2.29 confirming instructions in writing, 2.28 Easements acting for purchaser of property, and, 9.41 Employees authority, and claimant is client, where, 5.20 claimant is third party, where, 5.21

Employees—contd authority, and—contd general principles, 5.17 duty of care to third parties, and, 1.29 regulatory framework, and, 15.20 Encumbrances acting for purchaser of property, and, 9.49 Enforcement disciplinary proceedings, and, generally, 16.13 introduction, 16.02 undertakings, and compensation, 5.49 defences, 5.45 discretion, 5.47–5.48 generally, 5.45 impossibility to perform, 5.46 procedure, 5.50 Equitable liability abuse of confidence conflicts of interest, 4.31 limitation, 4.80 breach of fiduciary duty conflicts of duty, 4.35–4.42 conflicts of interest, 4.28–4.34 introduction, 4.26–4.27 limitation, 4.77–4.82, breach of trust client funds, 4.02–4.05 conscious breach, 4.11 constructive trusts, 4.12–4.25 deliberate breach, 4.11 dishonest assistance, 4.13–4.20 express trusts, 4.02–4.11 implied trusts, 4.02–4.11 knowing receipt, 4.21–4.24 ministerial receipt, 4.25 resulting trusts, 4.02–4.11 third party funds, 4.06–4.10 bribes conflicts of interest, 4.33 limitation, 4.82 causation claimant’s conduct, 4.53 defendant’s conduct, 4.54 scope of duty, 4.56 scope of principle, 4.49–4.52 third party conduct, 4.55

937

Index Equitable liability—contd client funds conflicts of interest, 4.02–4.05 limitation, 4.72–4.73 compensation account, 4.44 causation, 4.49–4.56 changes in value, 4.61 contributory negligence, 4.58 date of assessment, 4.60 equitable account, 4.44–4.46 interest, 4.63–4.65 introduction, 4.43 measure, 4.60–4.61 mitigation of damage, 4.59 nature of remedy, 4.47–4.48 relief under s 61 Trustee Act 1925, 4.66–4.70 remoteness of damage, 4.57 restitution, and, 4.47 set off, 4.62 compound interest, 4.65 conflicts of duty actual conflict rule. 4.39 double employment rule, 4.36–4.38 good faith, 4.41–4.42 introduction, 4.35 no inhibition principle, 4.40 terminology, 4.35 conflicts of interest abuse of confidence, 4.31 bribes, 4.33 general principle, 4.28–4.29 no profit rule, 4.30 professional conduct, 4.34 secret benefits, 4.33 undue influence, 4.32 conscious breach, 4.11 constructive trusts dishonest assistance, 4.13–4.20 introduction, 4.12 knowing receipt, 4.21–4.24 limitation, 4.75–4.76 ministerial receipt, 4.25 contributory negligence, 4.58 deliberate breach, 4.11 dishonest assistance assistance, 4.16 breach of trust, 4.15 dishonesty, 4.17–4.21

Equitable liability—contd dishonest assistance—contd existence of a trust, 4.14 generally, 4.13 limitation, 4.75 dishonest breach, 4.11 express trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 limitation, 4.72–4.74 third party funds, 4.06–4.10 fiduciary relationship, and, 4.01 fraudulent breach, 4.11 implied trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 interest compound interest, 4.65 generally, 4.63–4.64 knowing receipt beneficial receipt, 4.23 disposal of assets in breach of fiduciary duty, 4.22 generally, 4.21 knowledge, 4.24 limitation, 4.76 lenders’ claims, and, 10.201 limitation, and abuse of confidence, 4.80 breach of fiduciary duty, 4.77–4.82 bribes, 4.82 client funds, 4.72–4.73 constructive trusts, 4.75–4.76 dishonest assistance, 4.75 express trusts, 4.72–4.74 introduction, 4.71 knowing receipt, 4.76 ministerial receipt, 4.76 no profit rule, 4.79 secret profits, 4.82 third party funds, 4.74 undue influence, 4.81 ministerial receipt breach of trust, 4.25 limitation, 4.76 mitigation of damage, 4.59 no profit rule conflicts of interest, 4.30 limitation, 4.79

938

Index Equitable liability—contd professional conduct, 4.34 Quistclose trusts, and, 4.01 relevance of equity, 4.01 relief under s 61 Trustee Act 1925 fairness, 4.70 generally, 4.66 honesty, 4.67 reasonableness, 4.68–4.69 remoteness of damage, 4.57 restitution, and, 4.47 resulting trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 secret benefits and profits conflicts of interest, 4.33 limitation, 4.82 set off, 4.62 third party funds express, implied and resulting trusts, 4.06–4.10 limitation, 4.74 undue influence conflicts of interest, 4.32 limitation, 4.81 Errors of judgment standard of care, and, 2.22–2.24 Estate claims wills, and derivative claims, 11.19–11.20 inheritance tax losses, 11.18 losses suffered during administration, 11.16 losses suffered on death, 11.17 Estoppel authority, and, 5.02 Exchange of contracts acting for purchaser of property, and, 9.47 Exclusion of liability contractual duties, and, 1.05–1.07 duty of care to third parties, and, 1.30–1.33 Execution of wills See also Wills breach of duty, 11.11–11.15 claims by estates, 11.16–11.19–11.20 damages, 11.21–11.26 duty of care, 11.01–11.10

Expert evidence standard of care, and admissibility, 2.19–2.20 introduction, 2.18 restrictions, 2.19–2.20 solicitors, by, 2.21 wasted costs orders, and, 13.43 Express actual authority See also Authority bind the client, to, 5.22 bind the firm, to, 5.04–5.05 introduction, 5.02 Express trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 limitation client funds, 4.72–4.73 third party funds, 4.74 third party funds, 4.06–4.10 Extraction cases damages for defective property purchase, and, 9.68 Fairness relief from equitable liability, and, 4.70 Fiduciary duty contributory negligence, and, 8.14 duty of confidentiality, and, 6.05 Fiduciary relationship equitable liability, and, 4.01 Fraud lenders’ claims, and, 10.193–10.194 limitation period, and constructive knowledge, 7.83–7.84 generally, 7.74 introduction, 7.72–7.73 overview, 7.04 Fraudulent misrepresentation contributory negligence, and, 8.13 Guarantors lenders’ claims, and, 10.85 Guide to the Professional Conduct of Solicitors regulatory framework, and, 15.10 Honesty relief from equitable liability, and, 4.67 Identity fraud authority, and generally, 5.31–5.32 introduction, 5.26

939

Index Identity fraud—contd lenders’ claims, and cases to which CML Handbook applies, 10.67–10.77 cases to which CML Handbook does not apply, 10.65–10.66 equitable liability, and, 10.201 factual background, 10.13 limitation period, and, 7.35 Illegality acting for parties in conveyancing transactions, and, 9.57 Implied authority See also Authority bind the client, to, 5.23 introduction, 5.02 Implied trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 Impossibility undertakings, and, 5.46 Incidental authority See also Authority bind the client, to, 5.23 introduction, 5.02 Incremental test duty of care to third parties, and, 1.19 ‘Indoor management’ rule authority, and, 5.03 Inheritance planning limitation period, and, 7.48 Inheritance tax wills, and, 11.18 Injunctions restrain accepting retainer from new client, to adequacy of information barriers, 6.62–6.64 balance of convenience, 6.65 Bolkiah v KPMG, 6.57–6.59 Bolkiah test, 6.60–6.61 claim by existing client, where, 6.66–6.69 generally, 6.56 introduction, 6.55 post-Bolkiah cases, 6.62–6.64 SRA Code of Conduct, 6.70 type, 6.65

Injunctions—contd restrain use of disclosed information, to acquired during arbitration, 6.78 acquired during mediation, 6.75 mistaken disclosure, 6.71–6.74 pursuant to CPR 31, 6.76–6.77 Inspection of documents pre-action disclosure, and access to solicitor’s file, 14.03 ownership of solicitor’s file, 14.02 Insurance framework Indemnity Insurance Rules, 17.01– 17.02 Minimum Terms and Conditions, 17.03–17.36 Law Society, and, 17.03 liability to client, and, 12.21–12.23 Minimum Terms and Conditions (MTC) advancement of defence costs, 17.28 aggregation clauses, 17.21–17.22 asbestos, 17.15 avoidance restriction, 17.27 cessation period, 17.29 ‘circumstances’, 17.08–17.12 ‘civil liability’, 17.13 ‘claim’, 17.06–17.07 ‘claims made’ cover, 17.04 composite policy, 17.05 conditions, 17.27–17.35 costs awards, 17.17 damage to property, 17.15 damages awards, 17.17 death, 17.15 debts, 17.16 ‘defence costs’, 17.14 dishonesty of one’s wn, 17.18–17.19 disputes, 17.15 excesses, 17.26 exclusions, 17.15–17.19 extended policy period, 17.29–17.34 financial limits, 17.20–17.24 fines, 17.17 fraud, 17.18–17.19 general conditions, 17.35 governing law, 17.36 ‘insured’, 17.05

940

Index Insurance—contd Minimum Terms and Conditions (MTC)—contd international trade sanctions, 17.15 introduction, 17.03 jurisdiction, 17.36 limit of cover, 17.20–17.25 multiple claims, 17.23 no avoidance or repudiation or limitation, 17.27 penalties, 17.17 personal injury, 17.15 ‘prior practice’, 17.31 public policy, 17.18 repudiation restriction, 17.27 run-off cover, 17.29–17.34 scope of cover, 17.04–17.19 special conditions, 17.27–17.34 ‘successor practice’, 17.32–17.34 terrorism, 17.15 trading debts, 17.16 ‘unifying factor’, 17.22 war, 17.15 rights of third parties declaration, 17.43 defences, 17.44 information rights, 17.46 introduction, 17.37 limitation, 17.45 other provisions, 14.37 statutory assignment, 17.42 TP(RAI)A 1930, under, 17.38– 17.41 TP(RAI)A 2010, under, 17.42– 17.47 SRA Indemnity Insurance Rules 2019, 17.01–17.02 Inter vivos trusts beneficiaries’ claims, 11.31–11.33 settlors’ claims, 11.30 trustees’ claims, 11.27–11.29 Interest equitable liability, and compound interest, 4.65 generally, 4.63–4.64 lenders’ claims, and, 10.135–10.137 Interest holders regulatory framework, and, 15.21 Intervening causes claimant’s conduct, 3.43–3.44

Intervening causes—contd defendant’s conduct, 3.47 events, 3.48 generally, 3.41–3.42 third party acts, 3.45–3.46 Investigation of title acting for purchaser of property, and, 9.48 Investigatory powers accountability, 16.20 commencement, 16.21 co-operation, 16.20 costs, 16.17 disclosure to third parties, 16.31 explanations, 16.26 ‘forensic investigation reports’, 16.32 guidance, 16.19 information offences, 16.27 introduction, 16.19 jurisdiction, 16.19 legal professional privilege, 16.28– 16.30 production notices, 16.22–16.25 reports, 16.32 third party disclosure, 16.31 Joint interest privilege pre-action disclosure, and, 14.10 Joint retainers pre-action disclosure, and, 14.05– 14.06 Knowing assistance contribution, and, 8.30 Knowing receipt beneficial receipt, 4.23 disposal of assets in breach of fiduciary duty, 4.22 generally, 4.21 knowledge, 4.24 limitation, and, 4.76 ministerial receipt, and, 4.25 Lack of integrity definitions, 16.67 examples, 16.68–16.71 introduction, 16.66 overview, 16.61 post-Ivey decisions, 16.70–16.71 pre-Ivey decisions, 16.68–16.69 Law of confidence See also Duty of confidentiality generally, 6.05

941

Index Law Society insurance, and, 17.03 regulatory framework, and, 15.07 Lease renewals acting for landlords, 9.92 acting for tenants, 9.89–9.91 Leases acting for purchaser of property, and alienation clauses, 9.46 break clauses, 9.45 introduction, 9.42 rent review clauses, 9.44 user clauses, 9.43 acting for vendor of property, and, 9.83 Legal advice privilege crime or fraud exception, 14.28– 14.29 generally, 14.20–14.25 Legal Ombudsman scheme civil claims, 15.37 determinations, 15.35 introduction, 15.34 investigative powers, 15.36 rules, 15.34 Legal professional privilege duty of confidentiality, and, 6.02–6.04 wasted costs orders, and, 13.24–13.28 Legal Services Act 2007 disciplinary proceedings, and, 16.04 Law Society, 15.07 reserved legal activity consequences of carrying on when not entitled, 15.06 generally, 15.04–15.05 Lenders’ claims acting for borrower only, 10.25–10.26 acting for lender and borrower (from 1999 to 2011) individual mortgages, 10.21–10.22 introduction, 10.20 standard mortgages, 10.21–10.24 acting for lender and borrower (from 2011) Indicative Behaviour, 10.30–10.32 introduction, 10.27–10.28 Outcome, 10.29 acting for lender and borrower (from 2019) Indicative Behaviour, 10.33–10.37

Lenders’ claims—contd acting for lender only from 1999 to 2011, 10.25–10.26 from 2011, 10.38 from 2019, 10.33–10.37 actions for money had and received, 10.200 attributable loss breach of duty, and, 10.149–10.159 Hughes-Holland v BPE, 10.142– 10.143 interest, 10.144 introduction, 10.138 SAAMCo, 10.139–10.140 solicitors, 10.145–10.160 valuers, 10.139–10.141 back to back sales, 10.11–10.12 basic loss generally, 10.130–10.134 interest, 10.135–10.137 breach of fiduciary duty, 10.201 breach of trust, 10.201 breach of undertaking, 10.195–10.199 breach of warranty of authority, 10.195–10.199 causation intervening redemption of mortgage, 10.123–10.129 proof, 10.116–10.122 CML Lenders’ Handbook, 10.15– 10.19 completion, 10.88 conflicts of interest, 10.80–10.83 contract attributable loss, 10.138–10.160 basic loss, 10.130–10.137 breach of implied contractual terms, 10.89–10.113 causation, 10.95–10.129 contribution, 10.180–10.182 contributory negligence, 10.161– 10.175 express contractual terms, 10.39– 10.88 factual background, 10.05–10.14 forms of undertaking, 10.114– 10.115 introduction, 10.01–10.04 Lenders’ Handbook, 10.15–10.38 mitigation, 10.176–10.179

942

Index Lenders’ claims—contd contract—contd securitisation, 10.189–10.190 SRA Code of Conduct, 10.15–10.38 syndication, 10.183–10.192 contribution, 10.180–10.182 contributory negligence, and application, 8.06–8.12 borrower known to lack integrity, 10.175 excessive loan to value ratios, 10.168–10.171 generally, 10.161–10.164 levels of deduction, 10.165–10.167 non-status lending, 10.172–10.174 scope, 8.06–8.12 creditworthiness of borrower, 10.100– 10.107 direct payments factual background, 10.11–10.12 generally, 10.47–10.56 equitable liability, and, 10.201 express contractual terms completion, 10.88 conflicts of interest, 10.80–10.83 direct payments, 10.47–10.56 failing to obtain proper security on completion, 10.62–10.64 following SRA guidance, 10.78– 10.79 guarantors, 10.85 identity fraud, 10.65–10.77 introduction, 10.39–10.43 material changes in circumstances, 10.61 occupiers, 10.85–10.87 purchase price discrepancies, 10.47–10.56 redemption of existing mortgages before completion, 10.59– 10.60 reporting sub-sales, 10.44–10.46 resident borrower, 10.57–10.58 terms of reporting, 10.84 factual background back to back sales, 10.11–10.12 direct payments, 10.11–10.12 identity fraud, 10.13 introduction, 10.05–10.06 lender’s retainer of solicitor, 10.10

Lenders’ claims—contd factual background—contd mortgage fraud, 10.14 sub-sales, 10.11–10.12 value of borrower’s covenant, 10.08–10.09 value of security, 10.07 failing to obtain proper security on completion cases to which Lenders’ Handbook applies, 10.64 cases to which Lenders’ Handbook does not apply, 10.62–10.63 following SRA guidance, 10.78–10.79 fraud, 10.193–10.194 guarantors, 10.85 identity fraud cases to which Lenders’ Handbook applies, 10.67–10.77 cases to which Lenders’ Handbook does not apply, 10.65–10.66 equitable liability, and, 10.201 factual background, 10.13 implied waiver of confidentiality by borrower, 10.108–10.111 information learnt from other transactions, 10.112–10.113 interest, and, 10.135–10.137 intervening redemption of mortgage, 10.123–10.129 introduction, 10.01–10.04 Lenders’ Handbook, 10.15–10.19 lender’s retainer of solicitor, 10.10 liability for breach of implied contractual terms creditworthiness of borrower, 10.100–10.107 implied waiver of confidentiality by borrower, 10.108–10.111 information learnt from other transactions, 10.112–10.113 introduction, 10.89 matters relevant to value of security, 10.90–10.99 limitation period, and basic comparison, 7.37–7.41 cause of action accruing before borrower has defaulted, 7.42–7.43 introduction, 7.36

943

Index Lenders’ claims—contd material changes in circumstances, 10.61 matters relevant to value of security Bowerman duty, 10.90–10.93 cases to which Lenders’ Handbook applies, 10.94–10.95 cases to which Lenders’ Handbook does not apply, 10.96–10.99 introduction, 10.90 mitigation of damage, 10.176–10.179 mortgage fraud, 10.14 occupiers, 10.85–10.87 proof of causation, 10.116–10.122 purchase price discrepancies cases to which Lenders’ Handbook applies, 10.52–10.56 cases to which Lenders’ Handbook does not apply, 10.47–10.51 redemption of existing mortgages before completion cases to which Lenders’ Handbook applies, 10.60 cases to which Lenders’ Handbook does not apply, 10.59 regime from 1999 to 2011 acting for borrower only, 10.25– 10.26 acting for lender and borrower, 10.20–10.24 acting for lender only, 10.25–10.26 regime from 2011 acting for lender and borrower, 10.27–10.32 acting for lender only, 10.38 regime from 2019 acting for lender and borrower, 10.33–10.37 reporting material changes in circumstances, 10.61 reporting sub-sales cases to which Lenders’ Handbook applies, 10.45–10.46 cases to which Lenders’ Handbook does not apply, 10.44 resident borrower cases to which Lenders’ Handbook applies, 10.58 cases to which Lenders’ Handbook does not apply, 10.57

Lenders’ claims—contd retainer, 10.10 securitisation of loans generally, 10.189–10.190 introduction, 10.183 SRA Code of Conduct acting for lender and borrower, 10.27–10.37 acting for lender only, 10.38 sub-sales cases to which Lenders’ Handbook applies, 10.45–10.46 cases to which Lenders’ Handbook does not apply, 10.44 generally, 10.11–10.12 introduction, 10.05 reporting obligations, 10.44–10.46 summary of issues, 10.01–10.04 syndication of loans contract, 10.184–10.188 introduction, 10.183 novation, 10.185 securitisation, 10.189–10.190 sub-participation agreements, 10.186–10.187 tort, 10.191–10.192 trust arrangements, and, 10.188 terms of reporting, 10.84 transactional loss generally, 10.130–10.134 interest, 10.135–10.137 undertakings agreed between banks and Law Society, 10.114–10.115 value of borrower’s covenant, 10.08– 10.09 value of security, 10.07 Liability advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24

944

Index Liability—contd preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 Licensed bodies regulatory framework, and, 15.17– 15.18 Limitation See also Limitation periods common law, at, 7.02–7.48 contribution, 7.85 introduction, 7.01 statutory extensions, 7.49–7.84 Limitation of liability contractual duties, and, 1.05–1.07 duty of care to third parties, and, 1.30–1.33 Limitation periods abuse of confidence, 4.80 breach of fiduciary duty abuse of confidence, 4.80 bribes, 4.82 generally, 4.77–4.78 no profit rule, 4.79 secret profits, 4.82 undue influence, 4.81 bribes, 4.82 causation knowledge 7.56–7.65 client funds, 4.72–4.73 common law, at conduct of litigation, 7.44–7.47 contract, 7.09–7.14 date of knowledge, 7.06 identity fraud, 7.35 inheritance planning, 7.48 introduction, 7.02–7.05 lenders’ claims, 7.36–7.43 negligence, 7.15–7.35 negligent conduct of litigation, 7.44–7.47 personal injury, 7.06–7.08 statutory extensions, 7.49–7.84 wills, 7.48 conduct of litigation, 7.44–7.47, 12.20 constructive knowledge s 14A Limitation Act 1980, 7.67– 7.70 s 32 Limitation Act 1980, 7.83–7.84

Limitation periods—contd constructive trusts dishonest assistance, 4.75 knowing receipt, 4.76 contract continuing obligations, 7.10–7.14 general rule, 7.09 contribution, 7.85 date of knowledge, 7.06 deliberate commission of a breach of duty constructive knowledge, 7.83–7.84 generally, 7.81 introduction, 7.72–7.73 overview, 7.04 deliberate concealment constructive knowledge, 7.83–7.84 generally, 7.75–7.80 introduction, 7.72–7.73 overview, 7.04 dishonest assistance, 4.75 equity, in abuse of confidence, 4.80 breach of fiduciary duty, 4.77–4.82 bribes, 4.82 client funds, 4.72–4.73 constructive trusts, 4.75–4.76 dishonest assistance, 4.75 express trusts, 4.72–4.74 introduction, 4.71 knowing receipt, 4.76 ministerial receipt, 4.76 no profit rule, 4.79 resulting trusts, 4.72–4.74 secret profits, 4.82 third party funds, 4.74 undue influence, 4.81 express trusts client funds, 4.72–4.73 third party funds, 4.74 fraud constructive knowledge, 7.83–7.84 generally, 7.74 introduction, 7.72–7.73 overview, 7.04 identity fraud, 7.35 implied trusts client funds, 4.72–4.73 third party funds, 4.74 inheritance planning, 7.48

945

Index Limitation periods—contd introduction, 7.01 knowing receipt, 4.76 lenders’ claims basic comparison, 7.37–7.41 cause of action accruing before borrower has defaulted, 7.42–7.43 introduction, 7.36 Limitation Act 1980,s 14A burden of proof, 7.54 causation knowledge 7.56–7.65 constructive knowledge, 7.67–7.70 degree of certainty required, 7.55 introduction, 7.50–7.51 knowledge as to separate causes of action, 7.71 material facts knowledge, 7.66 overview, 7.03 scope, 7.52 ‘starting date’, 7.53 Limitation Act 1980,s 32 constructive knowledge, 7.83–7.84 deliberate commission of a breach of duty, 7.81 deliberate concealment, 7.75–7.80 fraud, 7.74 introduction, 7.72–7.73 mistake, 7.82 overview, 7.04 material facts knowledge, 7.66 ministerial receipt, 4.76 mistake constructive knowledge, 7.83–7.84 generally, 7.82 introduction, 7.72–7.73 overview, 7.04 negligence claimant would have entered into transaction but on better terms, 7.23–7.27 claimant would not have entered into transaction at all, 7.20– 7.22 claimant’s loss purely dependant on a contingency, 7.28–7.32 conduct of litigation, 7.44–7.47 future contingency depresses value of an asset, 7.18–7.19 generally, 7.15–7.17

Limitation periods—contd negligence—contd identity fraud, 7.35 lenders’ claims, 7.36–7.43 purchasers’ cases, 7.33–7.34 statutory extensions, 7.49–7.84 negligent conduct of litigation, 7.44– 7.47 no profit rule, 4.79 personal injury, 7.06–7.08 purchasers of property, 7.33–7.34 reform proposals, 7.01 resulting trusts client funds, 4.72–4.73 third party funds, 4.74 secret profits, 4.82 special time limit for negligence actions, 7.03 standard disclosure, and, 14.37 statutory extensions background, 7.02 generally, 7.49 introduction, 7.03–7.04 s 14A Limitation Act 1980, 7.50– 7.71 s 32 Limitation Act 1980, 7.72–7.84 substantive law, 7.01 third party funds, 4.74 undue influence, 4.81 wills, 7.48 Limited liability partnerships authority, and s 6(1) LLPA 2000, under, 5.13 s 6(2) LLPA 2000, under, 5.14 s 6(3) LLPA 2000, under, 5.15 s 6(4) LLPA 2000, under, 5.16 Litigation abuse of process civil cases, 12.09–12.16 criminal cases, 12.05–12.08 introduction, 12.03–12.04 advocates’ former immunity from suit, 12.02 assessment of damages loss of a trial, 12.61–12.78 loss of opportunity to claim, 12.33– 12.60 loss of settlement, 12.79–12.80 consequential losses, 12.82 costs, 12.86

946

Index Litigation—contd criminal cases, 12.81 CRU certificates, 12.86 damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85 failure to issue within limitation period, 12.20 introduction, 12.01 liability to client advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 limitation period, and, 7.44–7.47 loss of a chance, and application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19

Litigation—contd loss of a trial appeals, 12.74 costs, 12.75–12.77 enforcement, 12.78 evidence available at trial, 12.62– 12.67 interaction of risks, 12.69 intermediate cases, 12.73 litigation risk, 12.70 nominal damages, 12.71 notional trial date, 12.61 state of the law at notional trial date, 12.68 strong cases, 12.72 weak cases, 12.75–12.77 loss of opportunity to claim assessment of value, 12.48–12.51 balance of probabilities, 12.34– 12.37 categories of case, 12.38 claimant loses chance of having claim or part of claim tried or settled, 12.39–12.51 evaluation, 12.40–12.41 general principles, 12.33–12.58 introduction, 12.33 matter proceeded to trial, 12.59– 12.60 Mount principles, 12.42–12.47 nature of assessment of value, 12.48–12.51 settlement of claim, 12.59–12.60 types of case, 12.38 underlying claim settled at undervalue, 12.52–12.55 underlying claim tried but worse result achieved, 12.56– 12.58 loss of settlement, 12.79–12.80 mental distress, 12.83–12.84 mitigation, 12.87 obtaining worse settlement, 12.79– 12.80 psychiatric illness, 12.85 recoverable damage consequential losses, 12.82 costs, 12.86 mental distress, 12.83–12.84 psychiatric illness, 12.85

947

Index Litigation—contd standard of care to client advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30 want of prosecution, 12.20 Litigation privilege generally, 14.30 Local authority searches acting for purchaser of property, and, 9.38–9.39 Loss of a chance application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19 Loss of a trial appeals, 12.74 costs, 12.75–12.77 enforcement, 12.78 evidence available at trial, 12.62–12.67 interaction of risks, 12.69 intermediate cases, 12.73 litigation risk, 12.70

Loss of a trial—contd nominal damages, 12.71 notional trial date, 12.61 state of the law at notional trial date, 12.68 strong cases, 12.72 weak cases, 12.75–12.77 Loss of opportunity to claim assessment of value, 12.48–12.51 balance of probabilities, 12.34–12.37 categories of case, 12.38 claimant loses chance of having claim or part of claim tried or settled evaluation, 12.40–12.41 generally, 12.39 Mount principles, 12.42–12.47 nature of assessment of value, 12.48–12.51 evaluation, 12.40–12.41 general principles, 12.33–12.58 introduction, 12.33 matter proceeded to trial, 12.59–12.60 Mount principles, 12.42–12.47 nature of assessment of value, 12.48– 12.51 settlement of claim, 12.59–12.60 types of case, 12.38 underlying claim settled at undervalue, 12.52–12.55 underlying claim tried but worse result achieved, 12.56–12.58 Loss of opportunity to purchase acting for purchaser of property, and, 9.60 Loss of settlement conduct of litigation, and, 12.79–12.80 Managers regulatory framework, and, 15.19 Material changes in circumstances lenders’ claims, and, 10.61 Mediation generally, 12.31 Mental distress conduct of litigation, and, 12.83–12.84 recoverability of damages, and, 3.91 Minimum Terms and Conditions (MTC) See also Insurance advancement of defence costs, 17.28 aggregation clauses, 17.21–17.22

948

Index Minimum Terms and Conditions (MTC)—contd asbestos, 17.15 avoidance restriction, 17.27 cessation period, 17.29 ‘circumstances’, 17.08–17.12 ‘civil liability’, 17.13 ‘claim’, 17.06–17.07 ‘claims made’ cover, 17.04 composite policy, 17.05 conditions, 17.27–17.35 costs awards, 17.17 damage to property, 17.15 damages awards, 17.17 death, 17.15 debts, 17.16 ‘defence costs’, 17.14 dishonesty of one’s own, 17.18–17.19 disputes, 17.15 excesses, 17.26 exclusions, 17.15–17.19 extended policy period, 17.29–17.34 financial limits, 17.20–17.24 fines, 17.17 fraud, 17.18–17.19 general conditions, 17.35 governing law, 17.36 ‘insured’, 17.05 international trade sanctions, 17.15 introduction, 17.03 jurisdiction, 17.36 limit of cover, 17.20–17.25 multiple claims, 17.23 no avoidance or repudiation or limitation, 17.27 penalties, 17.17 personal injury, 17.15 ‘prior practice’, 17.31 public policy, 17.18 repudiation restriction, 17.27 run-off cover, 17.29–17.34 scope of cover, 17.04–17.19 special conditions, 17.27–17.34 ‘successor practice’, 17.32–17.34 terrorism, 17.15 trading debts, 17.16 ‘unifying factor’, 17.22 war, 17.15 Ministerial receipt breach of trust, and, 4.25

Ministerial receipt—contd limitation, and, 4.76 Misappropriation or misapplication of client funds authority, and, 5.11 Mistake limitation period, and constructive knowledge, 7.83–7.84 generally, 7.82 introduction, 7.72–7.73 overview, 7.04 Misuse of information acquired duty of confidentiality, and burden of proof, 6.31 generally, 6.17–6.20 remedies, 6.54–6.79 wrongful disclosure, 6.21–6.25 wrongful use, 6.26–6.30 Mitigation of damage causation general principle, 3.73–3.74 introduction, 3.72 pre-Fulton professional negligence, 3.75–3.80 collateral benefits generally, 3.81 introduction, 3.72 commencing litigation reasonableness, 3.68–3.70 recovery of costs, 3.71 conduct of litigation, and, 12.87 consequential benefits of breach of duty collateral benefits, 3.81 introduction, 3.72 legal causation, 3.73–3.80 equitable liability, and, 4.59 general principles, 3.65–3.67 legal causation general principle, 3.73–3.74 introduction, 3.72 pre-Fulton professional negligence, 3.75–3.80 lenders’ claims, and, 10.176–10.179 reasonableness of commencing litigation, 3.68–3.70 recovery of costs of alternative litigation, 3.71 Money laundering duty of confidentiality, and, 6.52

949

Index Mortgage fraud lenders’ claims, and, 10.14 Multiple principals duty of confidentiality, and acting for borrower and lender, 6.38 acting for purchaser and vendor, 6.39–6.41 introduction, 6.32–6.37 Multiple retainers pre-action disclosure, and access to solicitor’s file, 14.08– 14.09 ownership of solicitor’s file, 14.07 Negligence contributory negligence, and, 8.02– 8.04 limitation period, and claimant would have entered into transaction but on better terms, 7.23–7.27 claimant would not have entered into transaction at all, 7.20–7.22 claimant’s loss purely dependant on a contingency, 7.28–7.32 conduct of litigation, 7.44–7.47 future contingency depresses value of an asset, 7.18–7.19 generally, 7.15–7.17 identity fraud, 7.35 lenders’ claims, 7.36–7.43 purchasers’ cases, 7.33–7.34 statutory extensions, 7.49–7.84 statutory extensions to limitation period, and background, 7.02 generally, 7.49 introduction, 7.03–7.04 s 14A Limitation Act 1980, 7.50– 7.71 s 32 Limitation Act 1980, 7.72–7.84 Negligent conduct of litigation limitation period, and, 7.44–7.47 Negligent misrepresentation contributory negligence, and, 8.13 No profit rule breach of fiduciary duty limitation, 4.79 Non est factum acting for mortgagors, mortgagees and sureties, and, 9.10

Non-party costs orders generally, 13.81–13.90 Occupiers acting for purchaser of property, and, 9.51 lenders’ claims, and, 10.85–10.87 Options damages exercise, 9.96 grant, 9.95 exercise, 9.94 reminders, 9.93 Ostensible authority See also Authority bind the client, to, 5.24–5.25 bind the firm, to, 5.04–5.05 introduction, 5.02 Overage clauses acting for vendor of property, and, 9.79 Penalties disciplinary proceedings, and, 16.04 Personal injury limitation period, and, 7.06–7.08 Pre-action disclosure absence of client consent or waiver, 14.11–14.12 access to solicitor’s file generally, 14.03 introduction, 14.01 multiple retainers, 14.08–14.09 common interest privilege, 14.10 inspection of documents access to solicitor’s file, 14.03 ownership of solicitor’s file, 14.02 introduction, 14.01 joint interest privilege, 14.10 joint retainers, 14.05–14.06 multiple retainers access to solicitor’s file, 14.08– 14.09 ownership of solicitor’s file, 14.07 ownership of solicitor’s file generally, 14.02 introduction, 14.01 multiple retainers, 14.07 production of documents access to solicitor’s file, 14.03 ownership of solicitor’s file, 14.02 protocol, 14.04

950

Index Pre-action disclosure—contd solicitors’ rights absence of client consent or waiver, 14.11–14.12 waiver of privilege, 14.13–14.15 waiver of privilege persons entitled, 14.15 relevant circumstances, 14.11–14.12 scope, 14.14 timing, 14.13 Pre-contract inquiries conveyancing, and, 9.26–9.28 Price discrepancies lenders’ claims, and cases to which CML Handbook applies, 10.52–10.56 cases to which CML Handbook does not apply, 10.47–10.51 Privilege common interest privilege, 14.10 crime or fraud exception generally, 14.26–14.27 legal advice privilege, 14.28–14.29 litigation privilege, 14.30 implied waiver compromises, 14.39 counsel’s advice, 14.36 damages, 14.38 defendant’s files, 14.31–14.32 extent, 14.35 files of other solicitors, 14.33–14.34 limitation defences, 14.37 reliance on legal advice, 14.36 settlements, 14.39 joint interest privilege, 14.10 legal advice privilege crime or fraud exception, 14.28– 14.29 generally, 14.20–14.25 litigation privilege, 14.30 pre-action disclosure, and common interest privilege, 14.10 joint interest privilege, 14.10 waiver, 14.11–14.15 waiver implied, 14.31–14.39 persons entitled, 14.15 relevant circumstances, 14.11–14.12 scope, 14.14 timing, 14.13

Proceeds of crime duty of confidentiality, and, 6.52 Production of documents pre-action disclosure, and access to solicitor’s file, 14.03 ownership of solicitor’s file, 14.02 Professional misconduct disciplinary proceedings, and, 16.02 Professional practice standard of care, and, 2.15–2.17 Professional regulation Accounts Rules 2019, 15.31 breach of trust SRA Accounts Rules 2019, 15.31 terms of trust, 15.32 civil liabilities breach of trust, 15.31–15.32 common law duties, 15.23–15.27 duty of care, 15.23–15.25 implied terms, 15.26–15.27 introduction, 15.22 statutory duties, 15.28–15.30 complaints handling, 15.39 conduct rules civil liabilities, and, 15.22–15.32 Guide to the Professional Conduct of Solicitors, 15.10 Solicitors’ Code of Conduct 2007, 15.11 Solicitors Practice Rules 1990, 15.10 SRA Handbook, 15.12 co-operation and accountability, 15.38 employees, 15.20 firms and individuals, for employees, 15.20 interest holders, 15.21 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 framework conduct rules, 15.10–15.13 introduction, 15.03 Legal Services Act 2007, 15.04– 15.09 regulated firms and individuals, 15.14–15.21 scope, 15.01 terminology, 15.02

951

Index Professional regulation—contd Guide to the Professional Conduct of Solicitors, 15.10 interest holders, 15.21 introduction, 15.01–15.02 Law Society, 15.07 Legal Ombudsman scheme civil claims, 15.37 determinations, 15.35 introduction, 15.34 investigative powers, 15.36 rules, 15.34 Legal Services Act 2007 Law Society, 15.07 reserved legal activity, 15.04–15.06 Solicitors Regulation Authority, 15.08 licensed bodies, 15.17–15.18 managers, 15.19 objectives, 15.09 recognised bodies, 15.16 regulated firms and individuals employees, 15.20 interest holders, 15.21 introduction, 15.14 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 terminology, 15.14 regulators Law Society, 15.07 Solicitors Regulation Authority, 15.08 regulatory framework conduct rules, 15.10–15.13 introduction, 15.03 Legal Services Act 2007, 15.04– 15.09 regulated firms and individuals, 15.14–15.21 scope, 15.01 terminology, 15.02 regulatory objectives, 15.09 regulatory redress complaints handling, 15.39 co-operation and accountability, 15.38 introduction, 15.33 Legal Ombudsman scheme, 15.34– 15.37

Professional regulation—contd regulatory redress—contd other, 15.38–15.39 relevant statutes, 15.03 reserved legal activity consequences of carrying on when not entitled, 15.06 generally, 15.04–15.05 solicitors, 15.15 Solicitors’ Code of Conduct 2007, 15.11 Solicitors’ Code of Conduct 2011 generally, 15.12 introduction, 15.01 Solicitors Codes of Conduct 2019, 15.01 Solicitors Practice Rules 1990, 15.10 Solicitors Regulation Authority Accounts Rules, 15.31 Codes of Conduct, 15.01 generally, 15.08 Handbook, 15.12 regulated firms and individuals, 15.14–15.21 Standards and Regulations, 15.13 SRA Accounts Rules 2019, 15.31 SRA Handbook, 15.12 SRA Solicitors’ Code of Conduct 2007, 15.11 SRA Solicitors’ Code of Conduct 2011 generally, 15.12 introduction, 15.01 SRA Solicitors’ Codes of Conduct 2019, 15.01 SRA Standards and Regulations 2019 background, 15.01 generally, 15.13 terminology, 15.02 Professional standards standard of care, and, 2.12–2.14 Profit on resale acting for purchaser of property, and, 9.71 Proximity wills, and, 11.04 Psychiatric illness conduct of litigation, and, 12.85 recoverability of damages, and, 3.91 Public domain duty of confidentiality, and, 6.53

952

Index Public interest duty of confidentiality, and, 6.45–6.46 Public trust and confidence disciplinary proceedings, and, 16.74– 16.78 Purchasers of property limitation period, and, 7.33–7.34 Quantum of damages breach date rule, under date of breach, 3.82 date of transaction, 3.83–3.84 flexible approach, 3.85–3.86 general rule, under, 3.82 causation alternative causes, 3.41–3.48 ‘but for’ test, 3.03–3.07 extent of defendant’s liability, 3.26–3.48 factual causation, 3.03–3.25 how would the claimant have acted, 3.09–3.11 how would the defendant have acted, 3.08 how would third parties have acted, 3.12–3.25 information/advice distinction, 3.31–3.34 intervening causes, 3.41–3.48 introduction, 3.01–3.02 loss of a chance, 3.12–3.25 misrepresentation case, in, 3.06–3.07 SAAMCo principle, 3.26–3.48 date of assessment breach date rule, 3.82–3.86 conclusion, 3.88–3.90 valuation method, 3.87 loss of a chance application of doctrine, 3.14–3.18 burden of proof, 3.22 circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21

Quantum of damages—contd loss of a chance—contd speculative or negligible chances, 3.22 third party given evidence, where, 3.19 mental distress, and, 3.91 mitigation causation, 3.73–3.80 collateral benefits, 3.81 commencing litigation, 3.68–3.71 conduct of litigation, and, 12.87 consequential benefits of breach of duty, 3.72–3.80 equitable liability, and, 4.59 general principles, 3.65–3.67 legal causation, 3.73–3.80 lenders’ claims, and, 10.176–10.179 reasonableness of commencing litigation, 3.68–3.70 recovery of costs of alternative litigation, 3.71 psychotic illness, and, 3.91 remoteness of damage amalgam of approaches, 3z,56–3.58 application of contractual test, 3.60–3.64 available tests, 3.49–3.50 contractual interpretation approach, 3.55 contractual test, 3.51–3.59 market changes, 3.63 orthodox approach, 3.52–3.54 special contracts, 3.64 timing of application of test, 3.59 types of damage, 3.61–3.62 valuation method rule, 3.87 Quistclose trusts equitable liability, and, 4.01 Reasonable competence counsel’s advice failure to obtain, 2.11 reliance, 2.10 expertise, 2.03–2.07 fees, 2.08 knowledge of the law, 2.09 standard of care, and failure to obtain counsel’s advice, 2.11 knowledge of the law, 2.09

953

Index Reasonable competence—contd standard of care, and—contd level of expertise, 2.03–2.07 level of fees, 2.08 reliance on counsel’s advice, 2.10 Reasonable skill and care duty of confidentiality, and, 6.05 Reasonableness relief from equitable liability, and, 4.68–4.69 Recognised bodies regulatory framework, and, 15.16 Rectification wills, and, 11.25–11.26 Redemption of existing mortgages before completion lenders’ claims, and cases to which CML Handbook applies, 10.60 cases to which CML Handbook does not apply, 10.59 Reduction in purchase price damages for defective property purchase, and, 9.66 Reference as to financial standing or honesty of client conveyancing, and, 9.32 Reflective loss contractual duties, and, 1.14–1.16 Regulated firms and individuals employees, 15.20 interest holders, 15.21 introduction, 15.14 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 terminology, 15.14 Regulation Accounts Rules 2019, 15.31 breach of trust SRA Accounts Rules 2019, 15.31 terms of trust, 15.32 civil liabilities breach of trust, 15.31–15.32 common law duties, 15.23–15.27 duty of care, 15.23–15.25 implied terms, 15.26–15.27 introduction, 15.22 statutory duties, 15.28–15.30

Regulation—contd complaints handling, 15.39 conduct rules civil liabilities, and, 15.22–15.32 Guide to the Professional Conduct of Solicitors, 15.10 Solicitors’ Code of Conduct 2007, 15.11 Solicitors Practice Rules 1990, 15.10 SRA Handbook, 15.12 co-operation and accountability, 15.38 employees, 15.20 firms and individuals, for employees, 15.20 interest holders, 15.21 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 framework conduct rules, 15.10–15.13 introduction, 15.03 Legal Services Act 2007, 15.04– 15.09 regulated firms and individuals, 15.14–15.21 scope, 15.01 terminology, 15.02 Guide to the Professional Conduct of Solicitors, 15.10 interest holders, 15.21 introduction, 15.01–15.02 Law Society, 15.07 Legal Ombudsman scheme civil claims, 15.37 determinations, 15.35 introduction, 15.34 investigative powers, 15.36 rules, 15.34 Legal Services Act 2007 Law Society, 15.07 reserved legal activity, 15.04–15.06 Solicitors Regulation Authority, 15.08 licensed bodies, 15.17–15.18 managers, 15.19 objectives, 15.09 recognised bodies, 15.16

954

Index Regulation—contd regulated firms and individuals employees, 15.20 interest holders, 15.21 introduction, 15.14 licensed bodies, 15.17–15.18 managers, 15.19 recognised bodies, 15.16 solicitors, 15.15 terminology, 15.14 regulators Law Society, 15.07 Solicitors Regulation Authority, 15.08 regulatory framework conduct rules, 15.10–15.13 introduction, 15.03 Legal Services Act 2007, 15.04– 15.09 regulated firms and individuals, 15.14–15.21 scope, 15.01 terminology, 15.02 regulatory objectives, 15.09 regulatory redress complaints handling, 15.39 co-operation and accountability, 15.38 introduction, 15.33 Legal Ombudsman scheme, 15.34– 15.37 other, 15.38–15.39 relevant statutes, 15.03 reserved legal activity consequences of carrying on when not entitled, 15.06 generally, 15.04–15.05 solicitors, 15.15 Solicitors’ Code of Conduct 2007, 15.11 Solicitors’ Code of Conduct 2011 generally, 15.12 introduction, 15.01 Solicitors Codes of Conduct 2019, 15.01 Solicitors Practice Rules 1990, 15.10 Solicitors Regulation Authority Accounts Rules, 15.31 Codes of Conduct, 15.01 generally, 15.08

Regulation—contd Solicitors Regulation Authority—contd Handbook, 15.12 regulated firms and individuals, 15.14–15.21 Standards and Regulations, 15.13 SRA Accounts Rules 2019, 15.31 SRA Handbook, 15.12 SRA Solicitors’ Code of Conduct 2007, 15.11 SRA Solicitors’ Code of Conduct 2011 generally, 15.12 introduction, 15.01 SRA Solicitors’ Codes of Conduct 2019, 15.01 SRA Standards and Regulations 2019 background, 15.01 generally, 15.13 terminology, 15.02 Regulators Law Society, 15.07 Solicitors Regulation Authority, 15.08 Regulatory redress complaints handling, 15.39 co-operation and accountability, 15.38 introduction, 15.33 Legal Ombudsman scheme civil claims, 15.37 determinations, 15.35 introduction, 15.34 investigative powers, 15.36 rules, 15.34 other, 15.38–15.39 Regulatory settlement agreements disciplinary proceedings, and, 16.73 Reliance on counsel wasted costs orders, and, 13.64–13.66 Remedies duty of confidentiality, and account of profits, 6.54 constructive trusts, 6.54 damages, 6.79 delivery up, 6.54 destruction of documents, 6.54 disgorgement of profits, 6.79 equitable compensation, 6.79 injunctions to restrain accepting retainer from new client, 6.56–6.70

955

Index Remedies—contd duty of confidentiality, and—contd injunctions to restrain use of disclosed information, 6.71– 6.78 introduction, 6.54–6.55 Remoteness of damage amalgam of approaches, 3z,56–3.58 application of contractual test, 3.60– 3.64 available tests, 3.49–3.50 changes in market price, 3.63 contractual interpretation approach, 3.55 contractual test, 3.51–3.59 equitable liability, and, 4.57 market changes, 3.63 orthodox approach, 3.52–3.54 special contracts, 3.64 timing of application of test, 3.59 types of damage, 3.61–3.62 Remoteness of damage contribution, and, 8.39 equitable liability, and, 4.57 Rent receivable acting for purchaser of property, and, 9.40 Rent review clauses acting for purchaser of property, and, 9.44 Requisitions on title conveyancing, and acting for purchaser of property, 9.31 acting for vendor of property, 9.82 Reserved legal activity consequences of carrying on when not entitled, 15.06 generally, 15.04–15.05 Restitution contribution, and, 8.30 equitable liability, and, 4.47 Restrictive covenants acting for purchaser of property, and, 9.41 Resulting trusts client funds, 4.02–4.05 conscious or deliberate breach, 4.11 third party funds, 4.06–4.10 Retainer duty of confidentiality, and, 6.05

Retainer—contd exclusion of liability, 1.05–1.07 formation and duration, 1.08–1.13 introduction, 1.01–1.04 lenders’ claims, and, 10.10 limitation of liability, 1.05–1.07 rule against reflective loss, 1.14–1.16 Rule against reflective loss contractual duties, and, 1.14–1.16 Rule of law disciplinary proceedings, and, 16.73 Salaried partners authority, and, 5.12 Sale and leaseback acting for vendor of property, and, 9.81 Sale price acting for vendor of property, and, 9.77 Sanctions disciplinary proceedings, and, , 16.81– 16.86 Searches and inquiries acting for purchaser of property, and, 9.36–9.41 acting for vendor of property, and, 9.82 Secret profits breach of fiduciary duty limitation, 4.82 Securitisation of loans lenders’ claims, and generally, 10.189–10.190 introduction, 10.183 Set off equitable liability, and, 4.62 Settlement of claim conduct of litigation, and loss of opportunity to claim, 12.59– 12.60 loss of settlement, 12.79–12.80 Settlements contribution, and, 8.31–8.35 Slips and mistakes standard of care, and, 2.22–2.24 Solicitors’ Code of Conduct 2007 See SRA Code of Conduct 2007 Solicitors’ Code of Conduct 2011 See SRA Code of Conduct 2011 Solicitors’ Code of Conduct 2019 See SRA Code of Conduct 2019

956

Index Solicitors Disciplinary Tribunal (SDT) adjournment, 16.50 agreed outcomes, 16.52 Answers, 16.44 appeals to High Court, 16.39, 16.59 applications, 16.42 case management, 16.44 certification of case to answer, 16.43 client privilege, 16.45–16.46 costs of hearings, 16.55–16.58 directions, 16.44–16.45 disclosure, 16.45–16.46 evidence, 16.48 generally, 16.33 hearings, 16.53–16.54 introduction, 16.34–16.35 investigative powers, 16.47 jurisdiction, 16.36–16.39 making applications, 16.42 outcomes, 16.52 procedure adjournment, 16.50 agreed outcomes, 16.52 Answers, 16.44 appeals to High Court, 16.59 applications, 16.42 case management, 16.44 certification of case to answer, 16.43 client privilege, 16.45–16.46 costs of hearings, 16.55–16.58 directions, 16.44–16.45 disclosure, 16.45–16.46 evidence, 16.48 hearings, 16.53–16.54 investigative powers, 16.47 making applications, 16.42 outcomes, 16.52 publicity, 16.51 rule 12 statement, 16.42 Rules, 16.40 standard of proof, 16.41 subpoenas, 16.49 substantive hearings, 16.53–16.54 prosecuting authority generally, 16.33 introduction, 16.05 publicity, 16.51 rule 12 statement, 16.42 Rules, 16.40 sanctions, and, 16.81–16.86

Solicitors Disciplinary Tribunal (SDT)—contd standard of proof, 16.41 subpoenas, 16.49 substantive hearings, 16.53–16.54 Solicitor’s duties confidentiality, of contents, 6.17–6.31 extent, 6.05–6.31 incidents, 6.08–6.16 introduction, 6.01 legal professional privilege, and, 6.02–6.04 multiple principals, where, 6.32– 6.41 overriding, 6.42–6.53 release, 6.42–6.53 remedies for misuse, 6.54–6.79 sources, 6.05–6.07 contract, in exclusion of liability, 1.05–1.07 introduction, 1.01–1.04 limitation of liability, 1.05–1.07 retainer, 1.08–1.13 rule against reflective loss, 1.14– 1.16 tort, in client, to, 1.17–1.18 third parties, to, 1.19–1.33 Solicitors Practice Rules 1990 regulatory framework, and, 15.10 Solicitors Regulation Authority (SRA) Accounts Rules, 16.79–16.80 Enforcement Strategy generally, 16.13 introduction, 16.02 generally, 15.08 Handbook, 15.12 investigations accountability, 16.20 commencement, 16.21 co-operation, 16.20 costs, 16.17 disclosure to third parties, 16.31 explanations, 16.26 ‘forensic investigation reports’, 16.32 guidance, 16.19 information offences, 16.27 introduction, 16.19

957

Index Solicitors Regulation Authority (SRA)—contd investigations—contd jurisdiction, 16.19 legal professional privilege, 16.28– 16.30 production notices, 16.22–16.25 reports, 16.32 third party disclosure, 16.31 oversight and control role, 16.05 powers Administration of Justice Act 1985, 16.03 Enforcement Strategy, 16.13 introduction, 16.01 Legal Services Act 2007, under, 16.04 other controls, 16.05 Regulatory and Disciplinary Procedure Rules, 16.06–16.18 Solicitors Act 1974, 16.02 Principles acting in client’s best interests, 16.74–16.78 administration of justice, 16.73 conflicts of interest, 16.74–16.78 content, 16.61 dishonesty, 16.62–16.65 introduction, 16.60 lack of integrity, 16.66–16.71 principles, 16.61 public trust and confidence in the profession, 16.72 rule of law, 16.73 status, 16.61 upholding public trust and confidence, 16.72 upholding rule of law, 16.73 prosecuting authority for SDT, as generally, 16.33 introduction, 16.05 Regulatory and Disciplinary Procedure Rules appeals, 16.16 authorised decision makers, 16.07 costs of investigation, 16.17 delegation of powers, 16.07 disclosure of decisions, 16.14 enforcement, 16.13 evidence, 16.09

Solicitors Regulation Authority (SRA)—contd Regulatory and Disciplinary Procedure Rules—contd findings, 16.12 introduction, 16.06 investigations, 16.19–16.32 jurisdiction, 16.08 meetings, 16.11 oral hearings, 16.11 paper decisions, 16.10 procedure, 16.09–16.12 publication of decisions, 16.14 purpose, 16.06 review of decisions, 16.15 scope, 16.06 settlement agreements, 16.18 sanctions, and, 16.81–16.86 Solicitors Regulation Authority (SRA) Handbook generally, 15.12 SRA Accounts Rules 2019 generally, 15.31 introduction, 15.13 SRA Code of Conduct 2007 conveyancing, and acting for buyer and seller, 9.02 double employment rule, and, 4.36 duty of confidentiality, and conflict with duty of disclosure, 6.35 generally, 6.05 injunctions by existing or former client, 6.60 proceedings against or by the solicitor, 6.48 lenders’ claims, and CML Lenders’ Handbook, 10.15 express contractual terms, 10.39– 10.43 limitation periods, and continuing obligations, 7.11 regulatory framework, and, 15.11 retainer, and, 1.13 standard of care, and duty to confirm instructions in person, 2.29 professional standards, 2.12 SRA Code of Conduct 2011 conveyancing, and acting for buyer and seller, 9.02

958

Index SRA Code of Conduct 2011—contd conveyancing, and—contd acting for vendor, 9.75 contact races, 9.75 obtaining authority of client(s), 9.05 double employment rule, and, 4.37 duties in contract, and, 1.01 duty of confidentiality, and conflict with duty of disclosure, 6.35 generally, 6.05 injunctions by existing or former client, 6.70 introduction, 6.01 enforcement of undertakings, and, 5.41 exclusion of liability, and, 1.05 generally, 15.12 introduction, 15.01 lenders’ claims, and acting for lender and borrower, 10.27–10.37 acting for lender only, 10.38 express contractual terms, 10.39– 10.43 Lenders’ Handbook, 10.15–10.17 limitation of liability, and, 1.05 limitation periods, and continuing obligations, 7.10 litigation, and funding, 12.21 overview, 1.01 retainer, and, 1.13 standard of care, and duty to confirm instructions in person, 2.29 professional standards, 2.12–2.13 undertakings, and, 5.41 SRA Codes of Conduct 2019 generally, 15.13 introduction, 15.01 lenders’ claims acting for lender and borrower, 10.33–10.37 overview, 1.01 SRA Handbook professional regulation, 15.12 professional standards, 2.12 SRA Indemnity Insurance Rules 2019 generally, 17.01–17.02 introduction, 15.13

SRA investigatory powers accountability, 16.20 commencement, 16.21 co-operation, 16.20 costs, 16.17 disclosure to third parties, 16.31 explanations, 16.26 ‘forensic investigation reports’, 16.32 guidance, 16.19 information offences, 16.27 introduction, 16.19 jurisdiction, 16.19 legal professional privilege, 16.28– 16.30 production notices, 16.22–16.25 reports, 16.32 third party disclosure, 16.31 SRA Principles 2019 acting in client’s best interests, 16.74– 16.78 administration of justice, 16.73 conflicts of interest, 16.74–16.78 content, 16.61 dishonesty blind eye knowledge, 16.63 definition, 16.62 introduction, 16.62 overview, 16.61 ‘relevant’ knowledge, 16.63 stages of test, 16.63–16.65 standards of ordinary decent people. 16.64–16.65 subjective state of mind, 16.63 introduction, 16.60 lack of integrity definitions, 16.67 examples, 16.68–16.71 introduction, 16.66 overview, 16.61 post-Ivey decisions, 16.70–16.71 pre-Ivey decisions, 16.68–16.69 overview, 15.13 principles, 16.61 public trust and confidence in the profession, 16.72 rule of law, 16.73 status, 16.61 upholding public trust and confidence, 16.72 upholding rule of law, 16.73

959

Index SRA Regulatory and Disciplinary Procedure Rules 2019 appeals, 16.16 authorised decision makers, 16.07 costs of investigation, 16.17 delegation of powers, 16.07 disclosure of decisions, 16.14 enforcement, 16.13 evidence, 16.09 findings, 16.12 introduction, 16.06 investigations accountability, 16.20 commencement, 16.21 co-operation, 16.20 costs, 16.17 disclosure to third parties, 16.31 explanations, 16.26 ‘forensic investigation reports’, 16.32 guidance, 16.19 information offences, 16.27 introduction, 16.19 jurisdiction, 16.19 legal professional privilege, 16.28– 16.30 production notices, 16.22–16.25 reports, 16.32 third party disclosure, 16.31 jurisdiction, 16.08 meetings, 16.11 oral hearings, 16.11 overview, 15.13 paper decisions, 16.10 procedure, 16.09–16.12 publication of decisions, 16.14 purpose, 16.06 review of decisions, 16.15 scope, 16.06 settlement agreements, 16.18 SRA Standards and Regulations 2019 background, 15.01 generally, 15.13 overview, 1.01 Standard disclosure compromises, 14.39 counsel’s advice, 14.36 crime or fraud exception generally, 14.26–14.27 legal advice privilege, 14.28–14.29

Standard disclosure—contd crime or fraud exception—contd litigation privilege, 14.30 damages, 14.38 defendant’s files, 14.31–14.32 files of other solicitors, 14.33–14.34 implied waiver of privilege compromises, 14.39 counsel’s advice, 14.36 damages, 14.38 defendant’s files, 14.31–14.32 extent, 14.35 files of other solicitors, 14.33–14.34 limitation defences, 14.37 reliance on legal advice, 14.36 settlements, 14.39 introduction, 14.16 legal advice privilege crime or fraud exception, 14.28– 14.29 generally, 14.20–14.25 limitation defences, 14.37 litigation privilege, 14.30 relevance of other transactions, 14.17– 14.19 reliance on legal advice, 14.36 settlements, 14.39 Standard of care advice on merits, strategy and settlement, 12.27–12.30 burden of proof, 2.02 conduct of litigation, and advice on merits, strategy and settlement, 12.27–12.30 basic errors, 12.20 costs information, 12.21 failure to attend at court, 12.32 failure to defend proceedings, 12.20 funding, 12.21–12.23 generally, 12.17–12.19 insurance, 12.21–12.23 interlocutory applications, 12.25 mediation, 12.31 merits, 12.27–12.30 parties, 12.24 preparation for trial, 12.26 public funding, 12.23 settlement, 12.27–12.30 statements of case, 12.24 strategy, 12.27–12.30

960

Index Standard of care—contd costs information, 12.21 counsel’s advice, 2.10 errors of judgment, 2.22–2.24 expert evidence, and admissibility, 2.19–2.20 introduction, 2.18 restrictions, 2.19–2.20 solicitors, by, 2.21 expertise, 2.03–2.07 failure to attend at court, 12.32 failure to defend proceedings, 12.20 failure to obtain counsel’s advice, 2.11 fee level, 2.08 funding, 12.21–12.23 insurance, 12.21–12.23 interlocutory applications, 12.25 introduction, 2.01–2.02 knowledge of the law, 2.09 level of expertise, 2.03–2.07 level of fees, 2.08 mediation, 12.31 merits, 12.27–12.30 preparation for trial, 12.26 professional practice, and, 2.15–2.17 professional standards, and, 2.12–2.14 public funding, 12.23 reasonable competence failure to obtain counsel’s advice, 2.11 knowledge of the law, 2.09 level of expertise, 2.03–2.07 level of fees, 2.08 reliance on counsel’s advice, 2.10 settlement, 12.27–12.30 slips and mistakes, 2.22–2.24 statements of case, 12.24 strategy, 12.27–12.30 Standard of proof SDT proceedings, and, 16.41 Statutory obligations duty of confidentiality, and, 6.51–6.52 Sub-sales generally, 10.11–10.12 introduction, 10.05 reporting obligations cases to which CML Handbook applies, 10.45–10.46 cases to which CML Handbook does not apply, 10.44

Subpoena powers SDT proceedings, and, 16.49 Summary jurisdiction undertakings, and, 5.40 Syndication of loans lenders’ claims, and contract, 10.184–10.188 introduction, 10.183 novation, 10.185 securitisation, 10.189–10.190 sub-participation agreements, 10.186–10.187 tort, 10.191–10.192 trust arrangements, and, 10.188 Tax acting for vendor of property, and, 9.80 Tenancies acting for purchaser of property, and, 9.40 Termination of retainer duty of confidentiality, and, 6.08–6.09 Third parties duty of care, and assumption of responsibility test, 1.19–1.21 beneficiary principle, 1.26–1.28 commercial transactions, 1.22–1.24 consumer notices, 1.32 employee’s duty of care, 1.29 exclusion of liability, 1.30–1.33 general, 1.19–1.21 incremental test, 1.19 limitation of liability, 1.30–1.33 litigation, 1.25 notices, 1.32–1.33 threefold test, 1.19 Third party funds breach of trust, and, 4.06–4.10 express trusts, and limitation, 4.74 Threefold test duty of care to third parties, and, 1.19 Title acting for vendor of property, and, 9.84 Tortious liability breach date rule date of breach, 3.82 date of transaction, 3.83–3.84

961

Index Tortious liability—contd breach date rule—contd flexible approach, 3.85–3.86 general rule, under, 3.82 breach of duty extent of duty to advise, 2.25–2.32 standard of care, 2.01–2.24 ‘but for’ test Chester v Afshar, 3.05 concurrent or competing causes, 3.04 general rule, 3.03 misrepresentation case, 3.06–3.07 causation alternative causes, 3.41–3.48 ‘but for’ test, 3.03–3.07 extent of defendant’s liability, 3.26–3.48 factual causation, 3.03–3.25 how would the claimant have acted, 3.09–3.11 how would the defendant have acted, 3.08 how would third parties have acted, 3.12–3.25 information/advice distinction, 3.31–3.34 intervening causes, 3.41–3.48 introduction, 3.01–3.02 loss of a chance, 3.12–3.25 misrepresentation case, in, 3.06– 3.07 SAAMCo principle, 3.26–3.48 clients, to, 1.17–1.18 date of assessment of damages breach date rule, 3.82–3.86 conclusion, 3.88–3.90 valuation method, 3.87 duty of care breach, 2.01–2.32 clients, to, 1.17–1.18 third parties, to, 1.19–1.33 extent of duty to advise introduction, 2.25 nature of advice, 2.30–2.32 nature of client, 2.26 nature of task, 2.27–2.29 loss of a chance application of doctrine, 3.14–3.18 burden of proof, 3.22

Tortious liability—contd loss of a chance—contd circumstances in which claimant given benefit of doubt, 3.24 commercial transaction cases, 3.25 examples, 3.25 general doctrine, 3.12–3.13 hypothetical behaviour would have been honest, 3.20 independent risks, 3.23 linked risks, 3.23 parties closely aligned to claimant, 3.21 speculative or negligible chances, 3.22 third party given evidence, where, 3.19 mental distress, and, 3.91 mitigation of damage causation, 3.73–3.80 collateral benefits, 3.81 commencing litigation, 3.68–3.71 conduct of litigation, and, 12.87 consequential benefits of breach of duty, 3.72–3.80 equitable liability, and, 4.59 general principles, 3.65–3.67 legal causation, 3.73–3.80 lenders’ claims, and, 10.176–10.179 reasonableness of commencing litigation, 3.68–3.70 recovery of costs of alternative litigation, 3.71 psychotic illness, and, 3.91 quantum of damages causation, 3.01–3.48 date of assessment, 3.82–3.90 mental distress, for, 3.91 mitigation of damage, 3.65–3.81 psychotic illness, for, 3.91 remoteness of damage, 3.49–3.64 remoteness of damage amalgam of approaches, 3z,56–3.58 application of contractual test, 3.60–3.64 available tests, 3.49–3.50 contractual interpretation approach, 3.55 contractual test, 3.51–3.59 market changes, 3.63

962

Index Tortious liability—contd remoteness of damage—contd orthodox approach, 3.52–3.54 special contracts, 3.64 timing of application of test, 3.59 types of damage, 3.61–3.62 standard of care errors of judgment, 2.22–2.24 expert evidence, and, 2.18–2.21 introduction, 2.01–2.02 professional practice, 2.15–2.17 professional standards, 2.12–2.14 reasonable competence, 2.03–2.11 slips and mistakes, 2.22–2.24 third parties, to assumption of responsibility test, 1.19–1.21 beneficiary principle, 1.26–1.28 commercial transactions, 1.22–1.24 consumer notices, 1.32 employee’s duty of care, 1.29 exclusion of liability, 1.30–1.33 general, 1.19–1.21 incremental test, 1.19 limitation of liability, 1.30–1.33 litigation, 1.25 notices, 1.32–1.33 threefold test, 1.19 valuation method rule, 3.87 Trading debts and liabilities authority, and, 5.10 Trustees authority, and, 5.11 Trusts beneficiaries’ claims, 11.31–11.33 settlors’ claims, 11.30 trustees’ claims, 11.27–11.29 Undertakings authority, and, 5.07 breach of contract, 5.44 breach of trust, 5.44 capacity of solicitor to give, 5.43 committal, and, 5.45 compensation, 5.49 complaint to SRA, 5.44 consideration, and, 5.45 construction, 5.42 definition, 5.41 enforcement compensation, 5.49

Undertakings—contd enforcement—contd defences, 5.45 discretion, 5.47–5.48 generally, 5.44–5.45 impossibility to perform, 5.46 methods, 5.44 procedure, 5.50 impossibility to perform, 5.46 introduction, 5.40 lenders’ claims, and, 10.114–10.115 SRA Code of Conduct, and, 5.41 summary jurisdiction, 5.40 Undue influence generally, 9.11 importance of legal advice, 9.12 lender’s duty, 9.14–9.15 limitation breach of fiduciary duty 4.81 notice, 9.13 post-Etridge cases, 9.15–9.16 pre-Etridge cases, 9.14 Unfair contract terms exclusion or limitation of liability, and, 1.05 Unreasonable acts and omissions abuse of process, 13.44–13.50 agreeing expert evidence, 13.43 generally, 13.42 hopeless cases, 13.44–13.50 introduction, 13.03 User clauses acting for purchaser of property, and, 9.43 Usual authority See also Authority bind the client, to, 5.23 introduction, 5.02 Vicarious liability claimant is client, where, 5.20 claimant is third party, where, 5.21 general principles, 5.17 Waiver of privilege implied compromises, 14.39 counsel’s advice, 14.36 damages, 14.38 defendant’s files, 14.31–14.32 extent, 14.35 files of other solicitors, 14.33–14.34

963

Index Waiver of privilege—contd implied—contd limitation defences, 14.37 reliance on legal advice, 14.36 settlements, 14.39 pre-action disclosure, and implied, 14.31–14.39 persons entitled, 14.15 relevant circumstances, 14.11–14.12 scope, 14.14 timing, 14.13 standard disclosure, and, 14.31–14.39 Want of prosecution conduct of litigation, and, 12.20 Wasted costs orders abuse of process, 13.44–13.50 acts and omissions improper, 13.38–13.41 negligent, 13.51–13.63 unreasonable 13.42–13.50 agreeing expert evidence, 13.43 appeals against refusal to make, 13.23 applications court-initiated, 13.31 generally, 13.13–13.14 judges, 13.29–13.30 non-party, 13.32 Practice Direction, 13.15 rules, 13.13–13.14 settlement, 13.33 simple procedure, 13.18–13.22 stages, 13.16–13.17 timing, 13.29–13.30 causation, 13.70–13.72 conditional fee agreements, 13.67– 13.69 contribution, 13.74 court-initiated applications, 13.31 expert evidence, 13.43 hopeless cases, 13.44–13.50 improper acts and omissions generally, 13.38–13.41 introduction, 13.03 indemnity, 13.74 interrelationship with order for costs against LSC, 13.34 introduction, 13.04–13.05 judges, 13.29–13.30 jurisdiction, 13.06–13.12 justice in all the circumstances, 13.73

Wasted costs orders—contd legal professional privilege, 13.24– 13.28 negligent acts or omissions introduction, 13.51 negligent conduct, 13.57–13.63 non-negligent conduct, 13.52–13.56 non-party applications, 13.32 Practice Direction, 13.15 procedure appeals against refusal to make order, 13.23 court-initiated applications, 13.31 generally, 13.13–13.14 judges, 13.29–13.30 legal professional privilege, 13.24– 13.28 non-party applications, 13.32 Practice Direction, 13.15 rules, 13.13–13.14 settlement of application, 13.33 simple, 13.18–13.22 stages of application, 13.16–13.17 timing of applications, 13.29– 13.30 public funding, 13.67–13.69 reliance on counsel, 13.64–13.66 requirements for application, 13.35– 13.37 rules of procedure, 13.13–13.14 scope of provisions, 13.06–13.12 settlement of application, 13.33 simple procedure, 13.18–13.22 stages of application, 13.16–13.17 timing of applications, 13.29–13.30 unreasonable acts and omissions abuse of process, 13.44–13.50 agreeing expert evidence, 13.43 generally, 13.42 hopeless cases, 13.44–13.50 introduction, 13.03 Wills breach of duty damages, 11.21–11.26 execution, 11.12 notification of personal representatives or beneficiaries, 11.15 preparation, 11.11 taking instructions, 11.13–11.14

964

Index Wills—contd claims by estates derivative claims, 11.19–11.20 inheritance tax losses, 11.18 losses suffered during administration, 11.16 losses suffered on death, 11.17 costs, 11.23–11.24 damages costs, 11.23–11.24 general principles, 11.21–11.22 rectification, 11.25–11.26 derivative claims, 11.19–11.20 duty of care beneficiary principles, 11.02–11.03 breach, 11.11–11.15 claims involving client’s will or estate, 11.01 class of potential beneficiaries, 11.07 damages for breach, 11.21–11.26 no other remedy, 11.08–11.10 object of transaction, 11.05–11.06 proximity, 11.04 scope, 11.04–11.10 estate claims derivative claims, 11.19–11.20 inheritance tax losses, 11.18 losses suffered during administration, 11.16 losses suffered on death, 11.17 execution breach of duty, 11.11–11.15

Wills—contd execution—contd claims by estates, 11.16–11.19–11.20 damages, 11.21–11.26 duty of care, 11.01–11.10 inheritance tax losses, 11.18 limitation period, and, 7.48 losses suffered during administration, 11.16 losses suffered on death, 11.17 no other remedy, 11.08–11.10 notification of personal representatives or beneficiaries, 11.15 object of transaction, 11.05–11.06 preparation breach of duty, 11.11–11.15 claims by estates, 11.16–11.19–11.20 damages, 11.21–11.26 duty of care, 11.01–11.10 proximity, 11.04 rectification, 11.25–11.26 scope of duty of care class of potential beneficiaries, 11.07 no other remedy, 11.08–11.10 object of transaction, 11.05–11.06 proximity, 11.04 taking instructions, 11.13–11.14 Wrongful disclosure duty of confidentiality, and, 6.21–6.25 Wrongful use duty of confidentiality, and, 6.26–6.30

965