Caliendo & Anor v Mishcon De Reya (a firm) & Anor

A solicitor acting for a company may also assume a limited responsibility to shareholders or other parties involved in the transaction. The existence of a conflict of interest does not automatically prevent such a duty, particularly where the parties share a common interest in completing the transaction. The duty must nevertheless be defined narrowly by reference to the circumstances. It may require reasonable care in negotiating and executing documents, passing information between advisers, and raising conflicts affecting the other party’s instructions. An implied retainer requires conduct consistent only with the solicitor having been retained. A claimant alleging loss of a chance must prove the defendant’s breach caused the loss of the chance, while the chance itself is assessed separately.

The claimants alleged that Mishcon de Reya acted for them, or assumed responsibility towards them, in connection with the sale of interests in Queens Park Rangers Holdings Ltd to Flavio Briatore and Bernie Ecclestone. They alleged that the firm failed to follow instructions concerning a promotion bonus, loans, a net assets indemnity and certain debts.

The firm accepted that it acted for QPRH, but denied acting for the claimants or owing them relevant duties. The court considered whether there was an express or implied retainer, an assumption of responsibility, breach, and recoverable loss.

1. Retainer. The claimants failed to establish an express retainer. An implied retainer could arise only if the parties’ conduct was consistent only with Mishcon de Reya having been retained as solicitors for the claimants. The evidence was at least equally consistent with the firm acting for QPRH and its directors in their capacities as directors. The role of the T&F Group, which advised the claimants, also weighed against an implied retainer.
2. Assumption of responsibility. Despite the absence of a retainer, Mr Steele assumed a limited responsibility towards the claimants. The existence of a conflict between the company and the claimants did not itself prevent a duty of care. The duty was limited to exercising reasonable skill and care in negotiating and executing the Transaction Documents where the claimants’ interests were aligned with QPRH’s and the claimants were not being advised by T&F.
3. The duty included taking reasonable care to pass information and drafts between Withers and T&F. Where Mr Steele knew of a conflict between the claimants’ instructions and QPRH’s instructions, he was required to raise the issue directly or through T&F. He was not required to explain the documents where T&F was advising the claimants.
4. The directors were required to consider creditors’ interests because QPRH was insolvent or at serious risk of insolvency. The sale to the purchasers was the only realistic means of saving the company and enabling creditors to be paid.
5. The alleged breaches were not established. The claimants knew or accepted the material terms, the Dunga loans were properly treated as part of the Caliendo loans, and the alleged three debts were not proved. In any event, the claimants failed to establish causation or loss. They would probably have accepted the transaction, the purchasers were unlikely to have agreed to the claimants’ preferred terms, and there was no real or substantial chance of finding an equivalent alternative purchaser.
6. The costs of the later QPRH proceedings were not caused by any breach. The proceedings arose from claims advanced on a factual premise known to be false and from an unsustainable counterclaim. The claims were dismissed.

First-instance decision. No appellate history is stated in the judgment.