No implied duties owed to counter-party

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No implied duties owed to counter-party

Published 14 December 2020

Mr Justice Snowden confirmed in NDH Properties Limited v Lupton Fawcett LLP [2020] EWHC 3050 (Ch) that it is rare that an implied solicitor/client relationship will be held to exist, especially where the solicitor is instructed by the other side to the transaction.

The Claimant, NDH Properties Limited (“NDH”), was a company whose sole director and majority shareholder was a Mr Nayee. NDH owed about £282,000 to the Yorkshire Bank, secured by a charge over a property in Preston.

To prevent receivers from selling the property, NDH took out a short-term loan with Amalgamated Finance Limited (“Amalgamated”), which was secured over the property instead of the Bank’s charge, which was redeemed. NDH was unable to repay this loan, so Amalgamated later appointed its own receiver and sold the property, resulting in a minimal return of funds to NDH.

The Defendant, Lupton Fawcett LLP (“Lupton”), advised Amalgamated on the loan. It had no meaningful contact with NDH or Mr Nayee, who also had their own financial adviser, Mr Bleakley. Despite this, NDH contended the Defendant owed and breached duties to it in contract and in tort.

NDH and Mr Nayee had been introduced to Amalgamated by the Bankruptcy Protection Fund Limited (“BPFL”) and their agent, Mr Holmes. Lupton was accustomed to being instructed by BPFL in relation to schemes in which its associated companies made secured loans.

In support of its contention that Lupton was acting for it, NDH referred to a letter of authority dated 28 February 2012. The letter was signed by Mr Nayee and stated that he had given formal instructions to BPFL and Lupton as agents to act on his behalf. The attached terms and conditions referred to Amalgamated and BPFL as having authority to arrange refinancing.

After making a number of factual findings, the judge summarised the law regarding implied retainers[1], which may be held to exist if, viewed objectively, the parties acted as if such a relationship existed. He concluded that no such relationship existed on the facts of this case for the following reasons:

  1. There was no prior relationship between Lupton and either NDH or Mr Nayee.
  2. There was no objective basis for finding that Lupton had authorised Mr Holmes as the firm’s agent to act on its behalf. 
  3. The content of the letter of authority could not be a foundation of an implied contract.
  4. There was no evidence or relevant communication from Lupton that the letter of authority was accepted as the basis of instructions from NDH.
  5. Mr Nayee made no enquiries about Lupton and never asked for its assistance regarding the transaction documents. All Lupton did was prepare relevant corporate documents in a standard form, as was commonplace where a lender wanted to make it clear the form of documents they required the borrower to complete. 

For similar reasons, the judge held that no duty of care in tort was owed to NDH. He approved case law[2] stating that a solicitor will not assume responsibility to the opposite party, unless it was reasonable for them to have relied and the solicitor should have foreseen they would do so.

In many ways this was an entirely unsurprising decision. Whilst there are cases where an implied retainer has been found, so long as solicitors take care when dealing with lay persons who do not have their own representation and about how they represent their own role, liability is unlikely to be established. Solicitors and their professional indemnity insurers should welcome the consistent reluctance of the judiciary to find liability in such circumstances.

[1] With particular reference to the leading case of Dean v Allin & Watts [2001] PNLR 39

[2] With particular reference to the leading case of NRAM plc v Steel [2018] 1 WLR 1190, and other cases, including Gran Gelato v Richcliff (Group) [1992] Ch 560, 571–2


Sara Robertson

Sara Robertson

London - Walbrook

+44 (0)20 7894 6303

Philip Murrin

Philip Murrin

London - Walbrook

+44 (0)20 7894 6900

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