Hilton v Barker Booth and Eastwood (a firm)

The House of Lords allowed the appellant's appeal in an action for breach of contract / professional negligence against his solicitors. The court held that the firm had acted for two clients in a transaction in which their duties were irreconcilable and that they were in breach both by continuing to act and by failing to disclose to the appellant material facts about the other party (Mr Bromage), including his bankruptcy and convictions. The defendants could not rely on an implied contractual term excusing disclosure or on a duty of confidentiality to the other client to absolve them of liability. The decision relies on and applies the principle in Moody v Cox [1917] 2 Ch 71. Damages were to be assessed (or agreed) without further delay.

Background and parties:

• The appellant, Mr Ian Hilton, a small-scale property developer, contracted to purchase and develop sites and to sell completed flats to Mr Neil Bromage.
• The respondent, Barker Booth and Eastwood (BBE), acted for both Mr Hilton and Mr Bromage in the relevant transactions; BBE knew that Mr Bromage had been made bankrupt and had been convicted and imprisoned for offences of dishonesty, facts unknown to Mr Hilton.

Nature of the claim and relief sought:

The appellant sued BBE for breach of contract / professional negligence seeking damages for loss suffered as a result of the solicitors acting for both parties and failing to advise him to obtain independent legal advice and failing to disclose Mr Bromage's antecedents.

Procedural history:

• The matter was tried before His Honour Judge Maddocks at Manchester in September 2001; the judge found BBE in breach of professional duty but concluded there was no causative loss and dismissed the claim.
• The Court of Appeal ([2002] EWCA Civ 723) unanimously dismissed Mr Hilton's appeal.
• The House of Lords allowed the appeal and remitted quantum for assessment if not agreed.

Issues framed by the court:

1. Whether BBE breached their contractual/professional duties to Mr Hilton by acting for both parties in circumstances of conflict and by failing to disclose material information about Mr Bromage;
2. Whether an implied term in the retainer could exclude any duty to disclose information which the firm was under a duty to treat as confidential as between solicitor and client;
3. Whether non-disclosure caused actionable loss to Mr Hilton.

Reasoning and subsidiary findings:

• The House of Lords held that a solicitor who places himself in a position of irreconcilable duties cannot excuse his failure to discharge the duty owed to one client by invoking duties to another; the situation is governed by Moody v Cox [1917] 2 Ch 71.
• The proposed implied term excusing disclosure could not be justified by the ordinary tests for implication: it would not have been agreed by the appellant and was inconsistent with his interests.
• Whether the facts about Mr Bromage were matters of public record or described as "confidential" was immaterial; the solicitors' duty to their client required disclosure where necessary to prevent the client suffering loss from mixed representation.
• The House rejected the view that the only breach was failure to decline the retainer and to advise independent counsel; non-disclosure was a separate and more serious breach.

Disposition: Appeal allowed and quantum of damages to be assessed (or agreed) by a judge.

Appeal allowed. The House of Lords held that the respondent solicitors were in breach of their contractual/professional duties by acting for both parties where their duties were irreconcilable and by failing to disclose to the appellant material facts about the other party; an implied term excusing disclosure was rejected and the appellant was entitled to damages, to be assessed.

Trial: Manchester, before His Honour Judge Maddocks (trial Sept 2001; reserved judgment 28 Sept 2001). Court of Appeal: appeal dismissed, [2002] EWCA Civ 723. House of Lords: appeal allowed, [2005] UKHL 8.