Edenwest Ltd v CMS Cameron McKenna (A Firm)

An administrative receiver’s agency of the company does not automatically make the receiver’s solicitor the company’s solicitor. A contractual retainer requires a specific act or instruction by the receiver, together with acceptance by the adviser, and its scope is a question of fact. The receiver’s primary duty is to realise the security for the debenture-holder, creating a potential conflict with the company’s interests. That conflict ordinarily weighs against inferring a concurrent retainer or tortious duty to the company. A company cannot create such a tortious duty by releasing the receivers from liability. Where the pleaded and disclosed facts show no real prospect of establishing the necessary retainer, proximity or assumption of responsibility, summary judgment may be granted without a trial.

The claimant company owned a business and insurance-related claims which were charged to its bank. The bank retained the defendant solicitors and prospective administrative receivers to advise on a proposed pre-packaged receivership sale, under which the claims were assigned to a purchaser for £100,000. The purchaser later recovered substantially more in proceedings against the brokers.

The claimant alleged that, through the receivers’ agency, the defendant had undertaken a contractual retainer or assumed a tortious duty to advise the claimant on the value and treatment of the claims. The defendant sought summary judgment under CPR Part 24, alternatively strike-out relief. The central issues were whether the claimant had become a client of the defendant and whether any duty of care in tort could arise.

1. Summary judgment. The court applied the established approach under CPR 24.2. It had to consider whether the claim had a real prospect of success, without conducting a mini-trial, while taking pleaded facts as established unless plainly implausible or undisputed. The complex pleadings and fact-sensitive issues did not provide a compelling reason for a trial.
2. Contractual retainer. The agency of an administrative receiver is legally real but has unusual incidents. It primarily protects the mortgagee, and general agency principles have limited assistance in identifying the receiver’s duties to the company. The receiver’s instruction of an adviser in the receiver’s own name does not, on appointment, automatically become a retainer with the company. A specific act or instruction by the receiver, and acceptance by the adviser, is required. The evidence afforded no realistic prospect of establishing the discrete retainer alleged.
3. The advice concerned the receivers’ duties and protection, and the realisation of the mortgagee’s security. It was not shown to have been intended for the claimant. The pre-packaged nature of the sale and payment of the solicitors’ costs from sale proceeds did not alter that conclusion. A general retainer for the mortgagee, receivers and company would also have raised an actual or potential conflict of interest, absent informed consent.
4. Tort. The reasoning in Raja v Austin Gray [2003] Lloyd’s Rep PN 126 (CA) applied. The claimant was not an advisee in the relevant sense, and the receivers were not required to pass on advice obtained for their own purposes. The release of the receivers could not create a duty against their advisers. The potential conflict of interest also militated against imposing a duty of care.
5. The receivers’ equitable duty to take care to obtain the best price reasonably obtainable remained the ordinary recourse for negligent valuation or sale advice. That duty could extend to ensuring reasonable care by professional agents, but it did not support the claimant’s claim against the defendant. The defendant was therefore entitled to summary judgment. The form of order and costs were reserved for further argument.