Solicitor — Duty of care — Appellant suffering loss as a result of failure by another party to complete transaction — Respondent solicitor acting for both parties — Solicitor previously acting for other party in defence of criminal proceedings — Whether solicitor under duty to disclose that information to appellant — Whether solicitor under duty to advise appellant to instruct independent solicitor — Appeal dismissed
On three occasions, the appellant and B sought advice from G, a solicitor in the respondent firm, on a proposed deal. Under that deal, the appellant was to acquire land in Preston, build a block of six flats on it, and then sell the flats to B when completed. G had previously acted for B in relation to a prosecution for fraudulent trading and obtaining credit while an undischarged bankrupt, for which B had been convicted. On the last of the three occasions, G informed the appellant that he could not act for both him and B. The appellant, on G’s advice, instructed a junior solicitor in the same firm.
Three contracts were subsequently exchanged for: (i) the appellant’s purchase of the land; (ii) B’s purchase of the flats when built; and (iii) the resale of the flats by B to R, although the appellant was unaware of this contract. The appellant completed the purchase of the land and built the flats, financed by money borrowed from his bank. However, R then disappeared, B was unable to complete his purchase of the flats from the appellant, and that contract was rescinded.
The appellant was obliged to enter into an individual voluntary arrangement with his creditors, and the bank, as mortgagee, sold the flats for a much lower figure than the appellant had expended in the purchase and development of the land. He brought proceedings against the respondent for damages for negligence in failing to inform him of B’s recent conviction and bankruptcy, or, alternatively, for failing to advise him of the substantial risks inherent in entering into the contract with B.
The judge found that the appellant, had he been so informed and advised, would not have entered into the first two contracts, borrowed the money necessary to acquire and develop the land or sustained the consequential losses. However, he considered that it would have been a gross breach of G’s duty to B for G to pass on that information, and that the respondent’s breach of duty lay only in continuing to act for the appellant in the circumstances. He held that the appellant, had he instructed an independent solicitor, would still have been unaware of B’s past, and that, accordingly, no loss had been suffered as a result of the respondent’s breach. He dismissed the claim, and the appellant appealed.
Held: The appeal was dismissed.
The following relevant principles were derived from the authorities: (i) a solicitor’s duty of disclosure depended upon the terms of his retainer; (ii) a solicitor was under no obligation to disclose to a later client confidential information obtained under an earlier retainer from a former client, but was, on the contrary, under a duty not to do so; and (iii) a solicitor acting for more than one party in the same transaction could, in certain circumstances, be obliged to disclose information obtained in that transaction from one to another, in which case he could not excuse his breach of duty to either of them by reference to the duty he owed to the other: Mortgage Express Ltd v Bowerman & Partners [1996] 1 EGLR 126; Bristol & West Building Society v Baden Barnes Groves & Co [2000] Lloyd’s Rep PN 788; Darlington Building Society v O’Rourke James Scourfield & McCarthy [1999] Lloyd’s Rep PN 33; and Moody v Cox [1917] 2 Ch 71 applied.
Those authorities did not support the proposition that the respondent was under a duty to disclose to the appellant what it knew of B. B had retained the respondent to conduct his criminal defence upon the conventional basis that the respondent would not disclose to others confidential information that came to its knowledge in the process. It was not possible to imply into the contract of retainer any exception in favour of a later client, as and when disclosure was necessary, to advise the latter properly, and there was no evidence that B had waived his right to confidentiality. Likewise, the duty to the appellant was subject to the implied exclusion, from any general duty of disclosure, of information that the respondent was legally obliged to treat as confidential. Accordingly, the only breach of duty by the respondent was that identified by the judge, and no loss had been sustained as a result of it.
Charles Machin (instructed by John Budd & Co, of Blackpool) appeared for the appellant; Christopher Gibson QC and Ian Wood (instructed by James Chapman & Co, of Manchester) appeared for the respondent.
Sally Dobson, barrister
