Firm that broke assurance not to act for client’s ex-wife still entitled to unpaid fees, CA rules

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19 June 2017

Court of Appeal: right to unpaid fees upheld

A law firm that gave a client an assurance that it would not act for his ex-wife, but later handled two small matters for her, did not breach its fiduciary duty to him and could claim for unpaid fees, the Court of Appeal has ruled.

It also found that the firm, south Wales practice Harding Evans, had the power to retain a lien over his files until he paid.

The firm acted for Paul Spencer-White for nine years until 2011, when the relationship broke down.

Harding Evans sought £3,231 outstanding in fees on another matter, but when Mr Spencer-White refused to pay, it exercised a lien over his files and eventually issued a part 7 claim seeking the money.

One part of his defence was that Harding Evans had acted for his ex-wife, having earlier given assurances in 2009 that it would not – specifically, that it would not act for her whilst one of its partners continued to be named as a trustee of Mr Spencer-White’s estate in his will.

Mr Spencer-White argued that he was entitled to rescind “all retainers and relationships and contracts” after that date, including the work which led to the unpaid bill.

On the lien, clause 20 of Harding Evans’ standard terms and conditions stated: “You are entitled to terminate this Agreement at any time. Upon termination, we are entitled to retain all your papers and documents, until such time as all money owing to us for our charges and expenses has been paid.”

At first instance, HHJ Milwyn Jarman QC found that this entitled the firm to exercise its lien.

The firm accepted that it did act for the ex-wife in respect of two matters. One, the judge found, was so minor as not to amount to a breach of the 2009 assurance.

The other, the sale of a plot of land, was different (though still minor – the fee was £150 plus VAT), but the judge said it did not amount to a destruction of trust and confidence entitling Mr Spencer-White to treat the retainers as terminated.

Instead, the judge said, it gave rise to a right for compensatory damages, which on the facts he assessed as the profit element on the £150 fee. This amounted to £75.

He gave judgment for the firm on the unpaid invoice, ordering Mr Spencer-White to pay 85% of it.

Dismissing his appeal, Lady Justice Sharp said that the 2009 assurance gave rise to a collateral contract in relation to any contract to provide legal services – but it did not pass the “stringent test” required to imply the former’s terms into the latter.

“Were it to be the case, however, that such a term was to be implied into the contractual retainer, contrary to the view that I have expressed above, I do not consider this could be characterised as a condition of the contract so as to ever trigger the right to repudiate. Accordingly, the judge’s conclusion that the [firm] was prima facie entitled to the fees due… was legally sound.”

Citing Chitty on Contracts, she added that breach of the collateral contract gave rise to a claim for damages and did not entitle Mr Spencer-White to repudiate the main contract.

Further, said Sharp LJ, it was not an actionable misrepresentation: at the time it was given, the firm was not acting for the ex-wife, and so it was a statement of future intention. Mr Spencer-White also faced a “chronological difficulty” because the firm started working on the matter which led to the unpaid fees before it acted for the ex-wife.

“It is impossible to maintain a case in those circumstances that [Mr Spencer-White] was induced to enter into that particular retainer by a false representation,” the judge said.

She went on to uphold the circuit judge’s ruling that, while the firm later breached the assurance, it did not amount to a destruction of trust and confidence – there was no legal basis to imply ‘trust and confidence’ as a contractual term, and in any case, the firm’s actions did not damage trust and confidence.

The judge “properly characterised” the transaction for the ex-wife as minor, said Sharp LJ, “so as to render any conflict of interest unlikely”, while the work which led to the bill had ended.

“It is trite law that the relationship between solicitor and client is a fiduciary one… But it is necessary to point out… that not every obligation or duty owed by a solicitor is a fiduciary one, and thus that not every breach of duty is a breach of a fiduciary duty.

“Further, fiduciary duties ‘cannot be prayed in aid to enlarge the scope of contractual duties’ (see Clark Boyce v Mouat [1994] 1 AC 428 at p437). It therefore follows that fiduciary duties come into existence based on the nature of the relationship between the parties.

“In my view, the assurance given in July 2009 did not give rise to a fiduciary duty as it was not an inherent part of the parties’ relationship but arose out of the collateral contract. Consequently, the question of breach simply cannot arise.”

Sharp LJ also rejected Mr Spencer-White’s attempt to narrow the construction of clause 20. “The use of the term ‘all’ is broad and clear so as to encompass… files held by [the firm],” she said.

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