Hilton v Barker Booth & Eastwood (A Firm)
| Jurisdiction | England & Wales |
| Judge | The Vice-Chancellor,Lord Justice Judge,Lord Justice Jonathan Parker,the Vice-Chancellor,THE VICE-CHANCELLOR |
| Judgment Date | 22 May 2002 |
| Neutral Citation | [2002] EWCA Civ 723 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2001/2186 |
| Date | 22 May 2002 |
[2002] EWCA Civ 723
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE MADDOCKS
SITTING AS A DEPUTY JUDGE IN THE CHANCERY DIVISION
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Vice-Chancellor
Lord Justice Judge and
Lord Justice Jonathan Parker
Case No: B2/2001/2186
Mr. Charles Machin (instructed by John Budd & Co) for the Appellant
Mr. Christopher Gibson QC and Mr. Ian Wood (instructed by James Chapman & Co) for the Respondents
The defendants ("BBE") are a firm of solicitors. They were retained by Mr Neil Bromage to conduct his defence to the offences of participating in the management of a company whilst an undischarged bankrupt, of fraudulent trading and of obtaining credit whilst a bankrupt of which he was convicted on 30th October 1999 and sentenced to 9 months imprisonment. The partner in charge of the conduct of those proceedings on behalf of Mr Bromage was Mr Kevin Gorman.
Following his release from prison in March 1990 Mr Bromage proposed to the claimant, Mr Hilton, that Mr Hilton should acquire land at 74 Waterloo Road, Ashton, Nr Preston, Lancs, build a block of six flats on it and sell such flats to Mr Bromage as and when they were completed. Mr Bromage and Mr Hilton went to see Mr Gorman for advice on three occasions in July or August 1990. On the last occasion Mr Gorman told Mr Hilton that he could not act for both Mr Bromage and Mr Hilton and suggested that Mr Hilton should instruct Mr Barry Scott. Mr Scott was then a junior employee of BBE. Mr Hilton did as Mr Gorman suggested.
On 10th September 1990 three contracts were exchanged. The first was for the purchase by Mr Hilton of the land at 74 Waterloo Road from the then owners for £85,000. The second was for the purchase of the flats when built by Mr Bromage from Mr Hilton for an aggregate sum of £351,000. The third, of which Mr Hilton was unaware, was for the resale of the flats by Mr Bromage to a Mr Riley for £390,000.
The purchase of the land by Mr Hilton and the building of the six flats were completed on 8th October 1990 and 20th November 1991 respectively with, in each case, money borrowed by Mr Hilton from his bank. By the latter date Mr Riley had disappeared and Mr Bromage was unable to complete his purchase from Mr Hilton. On 10th January 1992 the contract between Mr Hilton and Mr Bromage was rescinded and BBE ceased to act for Mr Hilton.
From Mr Hilton's point of view the transaction was a disaster. In September 1992 he was obliged to make proposals to his creditors for an individual voluntary arrangement. The proposals were approved by the creditors in November 1992 but the IVA failed and was determined by the supervisor in November 1994. In February 1994, the bank, as mortgagee, sold the flats for £180,000. This was much less than what Mr Hilton had spent in the purchase and development of the land.
In the meantime, in December 1993, Mr Hilton commenced these proceedings against BBE for damages for negligence and breach of duty. He claimed that he had retained BBE to advise him in relation to the transactions and had entrusted them with implementing the necessary conveyancing formalities. He complained that BBE had failed to tell him of Mr Bromage's convictions and that he had only recently been discharged from prison and bankruptcy. He alleged that BBE should have advised him of the substantial risks inherent in entering into the contract with Mr Bromage. He asserted that had he been so informed and advised he would not have entered into either of the first two contracts to which I have referred, would not have borrowed the money needed to acquire and develop the land, would not have sustained the considerable losses arising from having done so and would not have been obliged to enter any arrangement with his creditors.
The action came before His Honour Judge Maddocks, sitting as a deputy judge of the Chancery Division, in September 2001. He concluded that had Mr Hilton been told of Mr Bromage's recent past he would not have entered into either of the first two contracts. But he also held that it would have been a gross breach of the duty owed by BBE to Mr Bromage if Mr Gorman had so informed Mr Hilton. In those circumstances Judge Maddocks considered that the breach of the duty owed by BBE to Mr Hilton was in continuing to act for him, not in failing to pass on the information about Mr Bromage and continued:
"Upon that footing, Mr Hilton was entitled to be placed, and is entitled to be placed, in the position he would have been if he had instructed an independent solicitor. The claim was not advanced that any such solicitor would have been aware or would have become aware of Mr Bromage's conviction, nor was it suggested that he should have advised Mr Hilton to have a credit report. In short, Mr Scott acted in the same way as would such an independent solicitor. It must follow that no loss was caused by the breach of duty."
The judge then considered, on the assumption that his conclusion was wrong, that Mr Hilton would be entitled to recover £175,335. In the event the judge gave judgment for BBE with costs but gave Mr Hilton permission to appeal.
On this appeal Mr Hilton contends that Judge Maddocks was wrong to have concluded that the only breach of duty committed by BBE was that which he identified. Mr Hilton contends that BBE were also obliged to disclose the information in their possession concerning Mr Bromage's recent past once they decided to act for Mr Hilton as well as Mr Bromage. He contends that a failure to perform this duty cannot be excused by the further breach of duty arising from BBE continuing to act for both Mr Bromage and Mr Hilton. This is the only issue for our determination because it is agreed that if we allow the appeal the amount of damages should be remitted to the judge for further assessment.
Thus the issue lies in a fairly small compass: does a solicitor who acts for both parties to a transaction owe to one of those parties a duty to communicate to him relevant information concerning the other party obtained by the solicitor under an earlier retainer from the latter party only?
It is not disputed that BBE failed to observe the Solicitors' Professional Conduct Rules in acting for both Mr Bromage and Mr Hilton. Their conduct in that respect spanned two versions of the Rules, those of 1988 and of 1990. As the judge observed Rule 6 in both versions was to the same effect and prohibited a solicitor from acting for both vendor and purchaser. Though there are exceptions from the general rule none applied in this case. Likewise it is common ground that for BBE to have given to Mr Hilton relevant information about Mr Bromage's recent past would have been a breach of BBE's duty to Mr Bromage, notwithstanding that his conviction and bankruptcy were matters of public record and so not confidential in any strict legal sense.
Counsel for Mr Hilton, in submitting that the judge was wrong, drew our attention to a number of authorities to which I should refer. In Moody v Cox [1917] 2 Ch.71 Hatt was, as trustee of the settlement which owned the relevant property, a vendor thereof to Moody as well as a solicitor acting for both vendors and purchaser. The other defendant, Cox, was the other trustee and vendor as well as being Hatt's managing clerk. Both Cox and Hatt knew of valuations of the property which indicated that Moody was paying too much for it but did not disclose them. Moody sought to rescind the contract on the ground, amongst others, of non-disclosure. The defence was that the duty of confidence owed by the vendors as trustees to the beneficiaries under the settlement precluded and excused them from doing so. This defence was rejected by all three members of the Court of Appeal. At p. 81 Lord Cozens-Hardy MR said
"A solicitor may have a duty on this side and a duty on the other, namely a duty to his client as solicitor on the one side and a duty to his beneficiaries on the other; but if he chooses to put himself in that position it does not lie in his mouth to say to the client "I have not discharged that which the law says is my duty towards you, my client, because I owe a duty to the beneficiaries on the other side." The answer is that if a solicitor involves himself in that dilemma it is his own fault. He ought before putting himself in that position to inform the client of his conflicting duties, and either obtain from that client an agreement that he should not perform his full duties of disclosure or say—which would be much better—"I cannot accept this business."
Warrington LJ at p. 85 held that
"It affords no answer at all. I will assume that he [Moody] knew that it was Hatt's duty to do the best he could for his cestuis que trust. Of course he would but he did not know that there were any facts the disclosure of which would reduce, or tend to reduce, the purchase price to be required. How could he possibly know that he was not to expect that Hatt would do his duty to him? It seems to me that Hatt has placed himself in a position in which he might possibly have been open to attack by his cestius que trust, if he had done his duty to Moody, but that is no answer to Moody, who says, "You have not done your duty to me."
Scrutton LJ was of the same opinion. At p.91 he said
"It may be that a solicitor who tries to act for both parties puts himself in such a position that he must be liable to one or the other, whatever he does. The case has been put of a solicitor acting for the vendor, and purchaser who knows of a flaw in the...
To continue reading
Request your trial
- F & C Alternative Investments (Holdings) Ltd v Barthelemy and another (No 3)
-
Mason v Mills & Reeve (A Firm)
...applied to the facts of this case it is nonetheless necessary to set out them out. 144 As Lord Walker of Gestingthorpe said in Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567 at [28]: "A solicitor's duty to his client is primarily contractual and its scope depends on the e......
- F & C Alternative Investments (Holdings) Ltd v Barthelemy and another (No 3)
-
Rossetti Marketing Ltd and Another v Diamond Sofa Company Ltd
...by Joshua Getzler, LQR, 2006, 122 (Jan), 1, 7, which commends the approach of the House of Lords in the subsequent case of Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567. In that case, Lord Walker referred to 'the content of the contractual duty of full disclosure being r......