The High Court held in Caliendo & another v Mishcon De Reya (a firm) & another that, in the course of acting for QPR Holdings, the firm of solicitors (MDR) had assumed a limited responsibility to the claimant directors in their personal capacity and owed them a duty of care. MDR was not, however, held to have breached that duty.

It has long been recognised that, in certain circumstances, a retainer may be implied between a solicitor and a client and that a solicitor may assume a responsibility to, and therefore owe a duty of care to, a third party. This can even be the case where there is a conflict of interest between the solicitor’s express client and the third party.

The Judge in this case provided a useful summary of the law in this area and it is a useful reminder of the risks firms face.

Background

The claim concerned the sale in 2007 of the claimants’ shareholding in QPR Holdings (QPRH) to Sarita Capital Investment Ltd and Bernie Ecclestone. At time of the sale, the claimants were directors of QPRH.

The facts surrounding the sale are complex but it was common ground that MDR were instructed to act on behalf of QPRH. There was, however, no retainer letter.

Following the sale, it was alleged that MDR had also been retained by the claimants in their personal capacity (whether on an express or implied basis) or, alternatively, that MDR had assumed a responsibility to the claimants. It was said that MDR had breached its duty to the claimants as the terms of the sale documents differed materially, and to the detriment of the claimants, from the terms which Mr Caliendo had asked MDR to implement. Mr Caliendo’s request conflicted with the instructions given to MDR by QPRH.

Decision

The Court had no difficulty in holding that there was no oral express retainer. The decision in respect of an implied retainer and/or assumption of responsibility was more difficult.

In considering whether there had been an implied retainer, the Judge considered the leading case ofDean v Allin & Watts, which provides that all the circumstances should be taken into account, and Baird Textiles Ltd v Marks & Spencer plc in which it was stated that the test of any such implication was necessity, i.e. that the parties actions were consistent only with an intention to make a contract.

The Judge concluded here that there was no implied contract, as the actions of the parties were not consistent only with MDR being retained as solicitors for the claimants in their personal capacity. Their actions were “at least equally” consistent with MDR acting as solicitors for QPRH and the claimants in their capacity as directors of the company. The Judge expressly noted that he did not find this decision easy and there were many factors supporting the view that a retainer should be implied, including the facts that MDR had acted for the first claimant previously without a retainer letter, that no other solicitors acted for the claimants, that MDR signed a number of the transaction documents (albeit under a power of attorney), and that MDR received the proceeds of sale.

Although there was no implied retainer, the Judge did go on to find that MDR had assumed a responsibility to the claimants and, therefore, did owe them a duty of care (albeit, on the facts, to a limited extent). The Judge again considered the authorities, and gave careful consideration to the fact that there was a conflict of interest between MDR’s express client, QPRH, and the claimants. In such circumstances the courts are generally reluctant to find that the solicitor assumed a duty of care to the third party but the Judge made clear that the law did not preclude the imposition of a duty of care.

In deciding that MDR did assume a responsibility to the claimants, the Judge referred to the fact that MDR had stated in emails to the purchasers’ solicitor that it was “acting for” Barnaby and Wanlock. This was not sufficient to imply a retainer but it was “inescapable” that MDR were assuming a responsibility to the claimants.

On the facts, the duty MDR owed to the claimants was limited in scope because the claimants had sought advice from other advisors, albeit not lawyers. In any event, the court found that MDR had not breached their duty and the claim was dismissed.

Comment

Whilst the claim was unsuccessful, the case serves as a useful reminder to solicitors and other professional advisors of the importance of a clear and unambiguous retainer letter for each instruction, which makes clear at the outset who the client is and the capacity in which individuals give instructions. It is also advisable for firm’s to include a term in their retainer that the services are provided solely for the benefit of the client and no responsibility to any third party is accepted. Firms also need to be alive to the possibility of, and take care to avoid, assuming responsibility to a third party.

Further reading: Caliendo & another v Mishcon De Reya (a firm) & another [2016] EWHC 150 (Ch) 

Claims by third parties are discussed in more detail in Solicitors’ Claims: A Practical Guide.