A recent High Court case judgment highlights the case law on implied retainers and assumption of responsibility by solicitors to those other than their clients.
The High Court ruled that the case of NDH Properties Limited -v- Lupton Fawcett LLP did not support any basis for an implied retainer or duty of care owed to a non-client borrower who secured finance from Lupton Fawcett’s lender client.
The scope of duty between a solicitor and client should normally be set out in an engagement letter which clearly outlines the work to be done, and the nature of how that work will be completed (and charged for). What happens however when a non-client seeks to claim against a solicitor who it had not retained? There are some circumstances where a solicitor may assume duties to someone other than their client, which can create potential problems when the non-client suffers a loss. The test is whether that solicitor has assumed a duty to advise the client, and if so what the scope of that duty is.
In this case the claimant, NDH, argued that Lupton Fawcett owed duties to it to properly advise it on the terms of a short- term loan that it was securing from Lupton Fawcett’s lender client Amalgamated Finance Limited (Amalgamated). It was alleged that the loan attracted very high rates of interest and charges, and that there was no certainty that the loan could easily be refinanced. NDH argued that there was an agreed implied retainer between it and Lupton Fawcett, or that Lupton Fawcett had acted in such a way that it had assumed a duty of care to properly advise it of the terms of the loan, or at least to confirm that it was not acting for NDH.
Lupton Fawcett defended the claim arguing that NDH was not its client, and that there were no circumstances which would justify a finding that there was either an implied retainer with NDH, or that Lupton Fawcett had assumed a duty of care to advise it on the terms of the loan that Amalgamated (Lupton’s client) was offering.
The judgment provides a useful summary of the case law on implied retainers and assumption of responsibility by solicitors to those other than their clients.
In summary the position was clarified as follows:
- Even if there is no express retainer between a client and his solicitor the court may find that one could be implied if viewed objectively the parties acted as if such a relationship existed, but there must be objective evidence to demonstrate that there was an agreement to enter into a contractual relationship.
- Any such implied retainer can only be inferred if it is necessary to give business reality to the transaction.
- Key factors to consider would include the extent of contact between the solicitor and the implied client, whether there had been any prior relationship with the solicitors, whether the acts of the solicitor could only be consistent with an intention to make such a contract.
In this case it was clear that there was very limited contact between NDH and Lupton Fawcett, there had been no prior relationship, there had been no discussion or consideration of the proposed charges that Lupton Fawcett would incur, or the named solicitor who would act for it. Lupton Fawcett had not conducted itself in any way that was consistent only with it having been retained by NDH.
The court concluded that when viewed objectively there was no documentary evidence or conduct of the parties to support an inference that Lupton Fawcett had agreed to act as solicitors for NDH in relation to the loan transaction.
Duty of care
NDH also argued that Lupton Fawcett had assumed a duty of care in tort towards it and had breached that duty by not advising it of the nature or character of the loan it was taking out. Again, the court rejected this assertion. It reviewed the leading authorities on solicitor duties of care to non-clients. Reference was made to the Supreme Court judgement in NRAM plc -v- Steel  and the judgment of Lord Wilson who confirmed that a solicitor does not assume a responsibility to a non-client unless it was reasonable for that party to have relied upon what the solicitor said and unless the solicitor should reasonably have foreseen that he would do so.
On the facts of this case the court held that there was no common interest between the lender (for whom Lupton Fawcett were acting) and the borrower claimant. There is (as to be expected) a straight conflict of interest, and as such a presumption that there was no duty of care owed by Lupton Fawcett, absent some special circumstances to impose such a duty. There was no reasonable basis for the claimant to assume that Lupton Fawcett was acting for it given the lack of contact with Lupton Fawcett.
The court rejected that there was any duty of care owed in tort to the claimant.
The case is a helpful reminder of the need to be careful about how the scope of a client retainer letter is expressed and that sometimes the proximity between solicitor and non-client can result in an implied retainer, or an assumption of a duty of care. As ever all cases will turn on their facts, and in this case the very limited contact between the claimant and defendant, and the nature of the relationship between borrower and lender were such that the court was very clear that no duties were owed.
NDH Properties Limited -v- Lupton Fawcett LLP  EWHC 3056 (Ch)