Hall v Saunders Law Ltd & Ors

On an application for summary judgment, the court should decide a short, determinative point of law or construction where the relevant facts are available. It should remain cautious where the law is developing or factual investigation may affect the result.

A funding agreement which required the litigant to report material developments did not, on its wording, instruct the solicitors to report them or impose a free-standing reporting duty on the solicitors. A general obligation not to deprive another party of contractual benefits prohibited positive acts, not omissions, and did not create a duty to perform another party’s obligation. A contractual relationship does not become fiduciary merely because one party relies on the other. A deceit claim based on non-disclosure must plead an implied representation, falsity, dishonesty, intended reliance and actual reliance with particularity.

John Hall sued in his own right and as assignee of a litigation funder against Saunders Law Limited, Subir Kumar Karmakar and Saunders & Partners LLP. The claim arose from funded English enforcement proceedings brought by Malicorp Limited against Egypt.

Mr Hall alleged that the solicitors had failed to communicate pessimistic counsel’s advice to the funder. He claimed breach of the tripartite funding agreement, breach of duties of care and fiduciary duties, and deceit against Mr Karmakar. The defendants applied under CPR Part 24 and CPR Part 3.4(2) for summary dismissal or strike-out.

The central issues were whether the funding agreement imposed reporting duties on the solicitors, whether equivalent tortious or fiduciary duties arose, and whether the pleaded deceit claim could succeed.

1. Summary judgment. The court had all facts necessary to determine the contractual construction issues. A short, non-fact-sensitive and potentially determinative point should ordinarily be decided summarily under the overriding objective. The court should nevertheless hesitate where developing law or further factual investigation may affect the result.
2. Clauses 9.2.1.4 and 9.3. Clause 9.2.1.4 imposed reporting obligations on Malicorp. It did not constitute a continuing instruction by Malicorp to Saunders, nor impose a free-standing contractual obligation on Saunders to report material developments to the funder. The pleaded continuing instruction would also make Malicorp’s separate obligation in clause 15.4 redundant. Even if an instruction existed, breach would be actionable by Malicorp as Saunders’ client, not by the funder.
3. Clause 9.3 was a prohibition against doing or permitting acts likely to deprive another party of contractual benefits. It did not prohibit omissions. Further, an obligation not to permit another party’s breach does not ordinarily impose a positive obligation to perform that party’s obligation. Saunders lacked the power to prevent Malicorp’s failure to give instructions.
4. Clause 13.2. Read with clauses 13.1 and 13.3, clause 13.2 imposed obligations on Malicorp. Its reference to Saunders keeping the funder informed was a particular of Malicorp’s undertaking to comply with the insurance arrangements and instruct Saunders accordingly. It did not create a direct reporting obligation owed by Saunders to the funder.
5. Tort and fiduciary duties. In the contractual relationship between Saunders and the funder, the contract normally defined their mutual duties. Since no contractual reporting duty existed, no equivalent positive duty arose in negligence. Reliance or trust in a commercial counterparty was insufficient to create fiduciary duties. The agreement treated Malicorp as Saunders’ client and the Saunders–funder relationship as contractual.
6. Deceit. The court did not decide whether fraudulent non-disclosure can found deceit where a duty of disclosure exists, because no such duty existed here. In any event, the pleading failed to identify the implied representation, its falsity, the intended reliance and actual reliance, and did not plead dishonesty with the required precision.
7. The claim disclosed no reasonable grounds, had no realistic prospect of success, and presented no compelling reason for trial. The defendants’ application succeeded. Consequential matters, including permission to appeal, were adjourned for determination by written submissions if necessary.