In the recent decision of Caliendo v Mishcon de Reya, the High Court dismissed a professional negligence claim by a former football agent against a firm of solicitors relating to a transfer of shares in QPR football club. Mr Justice Arnold considered whether the Defendant solicitors, who were instructed by another party in the transaction, had acted in a way which was consistent with them being retained as solicitors for the Claimants, or had assumed responsibility to the Claimants or owed them a duty of care.
On 1 September 2007, a 19.9% shareholding in QPR Holdings Ltd (QPRH) was transferred from Wanlock LLC to Sarita Capital Investment Ltd and Bernie Ecclestone (together, the Purchasers). At the time, QPRH was insolvent and at risk of being put into administration or liquidation. As a part of the transaction Mr Caliendo (the First Claimant) partially waived loans which he had made to QPRH, and Barnaby (the Second Claimant) and Moorbound LLC both undertook to sell their shares in QPRH. The Defendant solicitors (the Solicitors) were instructed by QPRH and whilst the Claimants were not legally represented, the T&F Group, advisors to the First Claimant for 20 years, liaised with the Solicitors on behalf of the Claimants throughout the transaction. The Solicitors, though not instructed by the Claimants, executed transaction documents on behalf of the Claimants under powers of attorney, including the share sale agreement and deeds of irrevocable undertaking for the sale of shares.
The Claimants claimed that the terms of the various transaction documents differed materially from the terms which the First Claimant had instructed the Solicitors to implement, to the Claimants' detriment. Such alleged material differences included the failure to provide for a £2 million payment to the First Claimant in the event that QPR were promoted to the Premier League within 5 years (as they went on to do) as well as a failure to provide for the Purchasers to discharge three loans made to QPRH totalling more than £1 million which, it was claimed, were guaranteed by the First Claimant. The Claimants sought damages for the loss of the chance to conclude the transaction, either with the Purchasers or an alternative purchaser, on the terms which they claimed they instructed the Solicitors to agree.
The Solicitors acknowledged that they were retained by QPRH but denied that they were retained by the Claimants or that they assumed any duty to them. The Solicitors also contended that the Claimants had suffered no loss and also took issue with a number of key factual foundations underpinning the Claimants' claim.
The claim was dismissed after falling at every hurdle. Mr Justice Arnold concluded that:
- There was no express retainer, or implied retainer and the actions of the parties were not consistent with the Solicitors being retained as the Claimants' solicitors; and
- The Solicitors assumed a limited responsibility and, therefore, owed a correlatively limited duty of care to the Claimants but only to exercise reasonable skill and care in the negotiation and execution of the transaction documents and only in so far as (i) the Claimants' interests were aligned with those of QPRH; and (ii) the Claimants were not advised by the T&F Group. The Solicitors were not under a duty to explain the nature and effect of the transaction documents to the Claimants because they were entitled to assume that the T&F Group would do that. Regarding the scope of the duty owed, the Solicitors had a duty to pass acquired information and drafts between the Purchasers' solicitors and the T&F Group as well as to raise with the Claimants any conflict between the Claimants and QPRH; and
- The Solicitors had not acted in breach of duty in respect of any of the allegations made by the Claimants; and
- In any event, the Solicitors did not cause the Claimants to suffer any loss. The Claimants had not established, on the balance of probabilities, that they would have refused to enter into the transaction on the terms of the transaction documents, there was no real or substantial chance that the Purchasers would have agreed to the Claimants' terms, the Claimants would not have been willing or able to continue funding QPRH until May 2008, there was no real or substantial chance of the Claimants finding another purchaser who would have offered the same terms as the Purchasers, let alone the terms sought by the Claimants and the Claimant's expenditure on the defence of another claim was not caused by any breach on the part of the Solicitors.
Mr Justice Arnold considered that the Caliendo claim depended, to a large extent, upon the credibility of the First Claimant's evidence. The Judge commented that the First Claimant "was on any view a very unsatisfactory witness", that his evidence directly contradicted both documentary evidence and his own written and oral testimony and was, in places, implausible, concluding that the First Claimant's evidence could not be relied upon. The Claimants also failed to call relevant witnesses and failed to give proper disclosure, which the Judge considered to be further reasons to treat the First Claimant's evidence with considerable caution.
The broader issue to be considered by the court was the potential widening of the duty of care owed by solicitors to third parties or non-clients. It is well known that in White v Jones  2 A.C. 207, the Court of Appeal overturned a High Court decision, finding that an assumption of responsibility can extend to those a testator intended to benefit. Dean v Allin & Watts  EWCA Civ 758 held that if a solicitor can reasonably foresee that a third party non-client may suffer loss in some way if the solicitor is negligent then that may be enough to create a duty to that third party. The Caliendo decision confirmed, however, that courts will be reluctant to readily extend a solicitor's duty of care to third parties who are involved in a transaction. It is therefore a positive and reassuring decision for solicitors and shows that they should not be exposed to a theoretical minefield of actions by parties with whom they have no retainer. The case is, nevertheless, a reminder to solicitors to be wary of assuming responsibilities to third parties, to use disclaimers and limitation clauses when dealing with third parties, and to encourage third parties to seek independent professional advice.