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Solicitors obtain summary judgment and strike out of a claim by a litigation funder

The Court has held that a solicitors’ obligations to a third party litigation funder are determined by the contractual arrangements between them, and the litigant.  There was not a free-standing duty of disclosure to the funder and the solicitors did not owe fiduciary duties to the funder. 

Daniel Shapiro KC and James Sharpe acted for the successful solicitor Defendants, instructed by Kirsty Hick and Jack Holling of DAC Beachcroft LLP.  They obtained summary judgment and strike out of a claim by a litigation funder.

On 27 February 2020, Richard Salter KC, sitting as a Deputy Judge of the High Court, gave summary judgment in favour of a firm of solicitors and an individual solicitor (the “Solicitors”) in respect of a claim that had been brought against them by, the Claimant, an assignee of a litigation funder (the “Funder”).  He also struck out the claim.

The Solicitors had acted for a company Malicorp Ltd (“Malicorp”) in proceedings in the Commercial Court to enforce an Egyptian international arbitration award obtained in the Cairo Regional Centre for International Commercial Arbitration.

The Funder complained that the Solicitors had not informed the Funder various of various views on the merits.  The Funder alleged that those omissions were in breach of (1) the tripartite funding agreement between the Funder, Malicorp and the firm of Solicitors; (2) a common law duty of care; and/or (3) a fiduciary duty owed by the Solicitors to the Funder.  There was also an inadequately pleaded allegation of deceit against one of the solicitors personally.

The Solicitors sought summary judgment and to strike out on the basis that the Solicitors did not owe any contractual obligation to report to the Funder of the merits (absent specific instructions from Malicorp to do so), that there was no tortious duty independent of the contract, and that the Funder was not owed any fiduciary duty.

Richard Salter KC agreed with the Defendants that the funding agreement did not impose any obligation on the Solicitors to report on the merits to the Funder.  The Solicitors also did not owe the Claimant any duty of care in tort of fiduciary duty. Further, even if the Defendants had owed contractual reporting obligations to the Funder, there was no proper basis for imposing fiduciary duties based on such contractual obligations. Malicorp was the client of the Solicitors and it was inherently unlikely that the parties would have agreed to impose obligations on the Solicitors which might well give rise to a conflict of fiduciary duties.

The claim in deceit also failed as the Judge found there could be no claim in deceit based upon non-disclosure. The Judge also found that the claim in deceit had not been pleaded with the requisite particularity and precision demanded for a claim of dishonesty and struck it out.

A copy of the judgment can be found here.

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