The High Court has dismissed a claim for damages of £2.5m against a firm of solicitors for breaches of duties relating to a property transaction in McDonnell v DASS Legal Solutions (MK) Law Ltd T/A DLS Law [2022] EWHC 991 (Admin). In making its decision, the court has reviewed the law on solicitors’ retainers in a commercial relationship in circumstances familiar to many property professionals.
The law
Where a client provides an instruction to a solicitor an express retainer results, whether or not the instruction is reduced to writing (Jackson and Powell on Professional Liability 8th edition, para 11-006).
An implied retainer can arise through conduct where the parties act as if the relationship of solicitor and client exists, but the courts are not swift to imply one and there are clear principles to be applied:
i) The test for implication is necessity. Is there conduct by the parties which is only consistent with the firm being retained? Caliendo v Mishcon de Reya [2016] EWCH 150.
ii) Choosing not to enter an express retainer indicates an implied retainer is unlikely. A court cannot properly find an implied retainer unless the parties have behaved towards each other in a way that can only be explained by an intention to enter into legal relations of a particular kind.
iii) An objective consideration of all the circumstances is necessary to ascertain whether an intention to enter into a contractual relationship ought fairly and properly to be imputed to the parties.
iv) An implied retainer will not be imposed for convenience.
Background
The claimant was a prominent member of the Buckinghamshire business community, whose interests were in waste disposal and land. He alleged that the defendant firm failed to protect him against the loss of opportunity to benefit from a contract to buy land – a scrap and storage yard – at Aylesbury in 2017.
The land was to be acquired by Arc Holdings and Investments Ltd, a company in which the claimant asserted a 70% beneficial interest, although the shares were registered to an associate, Charles Giblin. The sale fell through when the associate agreed to transfer the land to a third party.
The claimant argued that not only had he lost out on the deal to purchase valuable land, but the land was transferred at a significant undervalue. He claimed that he had instructed the defendant to draw up a deed of trust to protect his interest either at a meeting in January 2017 or by letters written in February 2017. It failed to do so, nor did it advise him on how to protect his beneficial interest.
It was not disputed that there had been ongoing relationships between the parties since 2014, nor that there were a series of signed client care letters governing those relationships where the claimant had chosen to be a client. However, there was a signed letter of engagement with Arc concerning the purchase of the land and the defendant denied that, at the relevant time, the claimant was its client or that there was any suggestion that the claimant’s interests were other than coterminous with those of Arc. It also denied any request or duty to protect the claimant’s personal interests: the instructions relating to a deed of trust were understood to relate to a trust of family assets in Ireland.
The evidence
The court found the claimant to be an astute, intelligent and experienced businessman who had an excellent working awareness of corporate structure, its scope and limitations. However, his evidence on the important matters in issue including whom he spoke to and what he said to them was unsatisfactory.
Evasive answers given in cross-examination were intended to minimise evidence of his controlling roles and he was prepared to lie when the truth appeared to be to his disadvantage, or to get himself off the hook in respect of difficult questions – which suggested he had not given the instructions he claimed.
The court was satisfied that the claimant often preferred to operate “off-book” or in the shadows, not being a director of an entity but choosing a person as a nominee in order to remain undetectable to the casual observer – but nonetheless exercising some control.
The claimant had a variety of advisers available to him and a history of presenting the issues he wished to be dealt with, to be resolved in a manner that he chose and of asking for such advice as he needed.
The decision
There was no express retainer between the parties in relation to the purchase of the land.
The claimant was explicit, at the meeting in January 2017, that Arc would be the defendant’s client in relation to the land purchase and that instructions should be taken from Charles Giblin. So, he had quite deliberately chosen not to be a client and there was no implied retainer.
Even if there had been a retainer, the defendant would not have been in breach because, at all times, the claimant knew precisely what he was doing. He held blank stock transfer forms signed by Charles Giblin to enable him to register himself as majority owner of the shares in Arc, and believed they were his protection. So, it was not more likely than not that he would have taken advice that he should be a director or shareholder of Arc. A deed of trust would not have made any difference to the outcome concerning the sale of the land.
Key points
- An instruction leads to an express retainer whether or not it is in writing
- Where there have previously been express retainers the court will be slow to find an implied retainer
Louise Clark is a property law consultant and mediator