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Solicitors under No Duty to Warn Non-Client

In NDH Properties v Lupton Fawcett [2020] EWHC 3056 (Ch), Mr Justice Snowden considered and reiterated principles applicable for implied retainers and duties of care to arise in favour of non-clients.  He also held that a solicitors’ firm owed no duty to warn a non-client that the firm was not acting for him even where the solicitors’ firm was made aware that the non-client was representing to other that he had appointed the solicitors.

The action concerned a loan taken out by NDH in 2012 to repay an overdraft and for the ultimate purpose of permitting NDH to develop property into student accommodation and to hold the property once developed for investment purposes. The solicitors acted for the lender.

The essence of the claim was that the lender’s solicitors came under implied contractual and tortious obligations to NDH to advise NDH: “that [NDH] should not under any circumstances whatsoever, enter into the transaction which it did enter into with [the lender]”. It was also alleged that, as part of the process of reaching and giving that advice, the alleged duty on the solicitors extended to (a) advising that the transaction was manifestly disadvantageous because of the fees and interest charges and the absence of any guaranteed long-term financing and (b) advising that if refinancing on normal commercial terms could not be obtained, NDH would better off allowing the LPA receivers to sell the Property.

In a detailed judgment Snowden J

(1)        reaffirmed the principles applicable for implied retainers, including that what must be implicit is that the parties had agreed to enter into a contractual relationship of solicitor and client and that the implication must be necessary; and

(2)        reaffirmed the principles applicable for duties of care to be owed to non-clients, including the need for commonality of interests, the need for an assumption of responsibility by the solicitors and the need for any assumption by the non-client that the solicitor was acting as its solicitor to have been reasonable.

Perhaps the most uncommon allegation in the case was that, because the solicitors had been made aware that the non-client was representing to others that it had appointed the solicitors and because of various provisions in the SRA’s Code of Conduct relating to how a solicitor should act in relation to a third party, the solicitors owed a (pre-duty) duty to advise NDH that they would not be acting for NDH.   Snowden J rejected that contention, including because the solicitor had no reasonable grounds for thinking that NDH was relying on it for advice.

Jason Evans-Tovey acted for the successful defendant solicitors firm.  He was instructed by Malcolm Rogers of DWF Law.

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