NDH Properties Ltd v Lupton Fawcett LLP

An implied solicitor-client retainer requires objectively demonstrated agreement to enter into that relationship. It is not inferred merely because solicitors prepare transaction documents or act for the other party. In negligence claims for pure economic loss, assumption of responsibility remains central, particularly where a solicitor is alleged to owe duties to the opposite party. Direct contact, reasonable reliance and circumstances making the duty fair, just and reasonable are important. A solicitor acting for one party to an arm’s-length transaction ordinarily owes no duty to advise the counterparty on the transaction’s commercial merits or to warn it to obtain independent advice, absent special circumstances. A separate financial adviser and the claimant’s lack of contact with the solicitor may negate both actual and reasonable reliance.

NDH Properties Limited claimed professional negligence against Lupton Fawcett LLP arising from a short-term secured loan made by Amalgamated Finance Limited. Lupton Fawcett acted for Amalgamated in preparing the facility and security documents. NDH alleged that the firm was implicitly retained to act for it, or alternatively assumed responsibility in tort, by failing to advise that the loan’s costs and refinancing risks made it commercially disadvantageous.

The defendant denied any retainer, duty of care or causative breach. The central issues were whether an implied retainer existed, whether a solicitor acting for the lender owed NDH a duty to advise or warn it, and whether any breach caused loss.

1. Disposition. The claim was dismissed. Lupton Fawcett neither had an implied retainer with NDH nor owed it contractual or tortious duties of the kind alleged.
2. Implied retainer. The question was objective. An implied retainer arises only where the parties’ conduct is consistent only with an agreement to enter into a solicitor-client relationship. The claimant must establish the necessity of implying the contract. The signed letter of authority was directed to bankruptcy proceedings, did not mention NDH and had not been accepted by the firm as instructions for the loan. The firm’s preparation of loan documents and board minutes was equally consistent with acting for the lender. The absence of any client-care letter, direct contact, request for advice or inquiry about fees strongly contradicted the alleged retainer.
3. Duty in tort. The loan involved a direct conflict between lender and borrower. There was no common interest of the kind present in Dean v Allin & Watts. NDH had no reasonable basis for relying on a solicitor whom it had never contacted and who had never contacted it. The commercial advice allegedly required was instead within the role of the financial adviser appointed by NDH. The principles of assumption of responsibility, reasonable reliance, foreseeability, proximity and incremental development did not justify imposing a duty.
4. Warning duty. There was no free-standing tortious duty requiring a solicitor acting for one side of a commercial transaction to tell the other side that it was not acting for them or to obtain independent advice. The concerns expressed in Consolidated Finance Limited v Collins and others arose in a different bankruptcy-annulment and dual-client context.
5. Causation and damages. Alternatively, even if a duty had existed, NDH would probably have proceeded with the loan because of the pressure to prevent an immediate sale and the assurances given by Mr Holmes and Mr Bleakley. The court also stated that the proposed loss calculation would not have been accepted; on the hypothetical evidence available, damages would have been assessed at £325,325.