Hilton (Appellant) v. Barker Booth and Eastwood (a firm) (Respondents)

A solicitor who undertakes duties to two clients which cannot both be performed remains liable for breaching either duty. The duty owed to one client is not curtailed merely because its performance would breach a duty owed to the other.

The solicitor should avoid the conflict by declining to act and directing the client to obtain fresh independent advice. If the solicitor continues to act, the resulting dilemma is the solicitor’s own fault. No term excusing material disclosure can be implied into the retainer merely to accommodate the solicitor’s conflicting obligation.

A firm of solicitors acted for both a property developer and the purchaser in a substantial development transaction. The firm knew that the purchaser was a bankrupt recently convicted and imprisoned for dishonesty. It also secretly financed the purchaser’s deposit. The transaction failed and the developer suffered serious loss.

The trial judge found a breach of professional duty but held that it caused no loss, because an independent solicitor would not have known the purchaser’s history. The Court of Appeal unanimously dismissed the developer’s appeal: [2002] EWCA Civ 723.

The central issue was whether the firm’s duty to the developer was limited because disclosing the purchaser’s history would itself have breached the firm’s duty to the purchaser.

1. Appeal allowed unanimously. Lord Walker of Gestingthorpe and Lord Scott of Foscote delivered the reasoned speeches. Lord Hoffmann, Lord Hope of Craighead and Lord Brown of Eaton-under-Heywood agreed with both.

2. Per Lord Walker, a solicitor’s duty to a client is primarily contractual and its scope depends upon the express and implied terms of the retainer. Although the solicitor-client relationship is fiduciary, not every breach by a solicitor is a breach of fiduciary duty. In this case the relevant contractual duty was informed by the relationship of trust and confidence.

3. The firm could not properly act for both parties. Its duty was to tell the developer that it could not act for him and that he should obtain fresh advice from other solicitors. A bare refusal to act would not have sufficed. The firm’s conduct also contravened rule 6 of the Solicitor's Practice Rules 1990, whose relevant prohibitions could not be waived by informed consent.

4. The purchaser’s bankruptcy and convictions were matters of public record and were not confidential in the strict legal sense. Nevertheless, disclosing them without the purchaser’s informed consent would have breached the firm’s duty to act in his interests. The firm therefore assumed irreconcilable duties to its two clients.

5. Applying Moody v Cox [1917] 2 Ch 71, the existence of the duty to the purchaser neither modified nor exonerated the firm from its duty to the developer. A solicitor who creates such a dilemma cannot invoke one duty as an answer to liability for breaching the other. The suggested implied term excluding disclosure could satisfy neither the officious-bystander test nor the business-efficacy test. It would improperly curtail the duty to the developer merely to accommodate the firm’s prior breach.

6. Lord Scott agreed that the reasoning in Moody v Cox depended upon non-disclosure, not upon any actual misrepresentation. The firm could have escaped the conflict by declining to act at an early stage. Having continued for both clients, it was inevitably in breach of its contractual duty to one of them and had no answer to the developer’s damages claim.

7. The assessment of damages was remitted to a judge unless agreed.

1. House of Lords: Allowed the developer’s appeal unanimously and directed that damages be assessed by a judge if not agreed: [2005] UKHL 8.
2. Court of Appeal: Unanimously dismissed the developer’s appeal from the trial judge’s decision: [2002] EWCA Civ 723, [2002] Lloyds Rep PN 500.
3. Manchester County Court: His Honour Judge Maddocks found that the solicitors had breached their professional duty but that the breach caused no loss. He dismissed the action with costs.