Candey Limited v Basem Bosheh & Anor

A solicitor’s retainer funded by a conditional fee agreement does not, without satisfying the orthodox test for implied terms, impose a duty of good faith on the client. The funding arrangement governs remuneration. It does not convert an ordinary solicitor-client relationship into a relational contract.

Even if such a duty existed, a client may prefer a settlement perceived to serve the client’s own economic and personal interests over one benefiting the solicitor.

Legal professional privilege remains enforceable against a former solicitor who already possesses the communications. A client’s conduct in allegedly giving the solicitor a cause of action does not itself waive privilege. The iniquity principle applies only where the communication falls outside, or abuses, the ordinary professional engagement. Improperly obtained confidential evidence may be excluded after balancing its probative value and fairness against the public interest in confidentiality.

Candey Limited acted for Basem Bosheh and his son under a conditional fee agreement in fraud proceedings. The agreement provided that Candey would recover no fees following a settlement under which the clients recovered nothing. The clients instructed Candey to conclude a global settlement on a “drop hands” basis.

Candey terminated the retainer and claimed £3 million for fraudulent misrepresentation, deceit and breach of an alleged implied duty of good faith. Related claims were brought against Amjad Salfiti for inducing breach of contract and conspiracy. Candey sought to rely upon privileged communications and confidential bank statements received after the retainer had ended.

Ms Clare Ambrose, sitting as a High Court judge, struck out the claims apart from a claim under an express costs term, refused permission to use the disputed material and refused a freezing injunction: [2021] EWHC 3409 (Comm). The central issues on appeal were whether the retainer contained the alleged good-faith term, whether the settlement could breach it, and whether Candey could use the privileged and confidential material.

1. Appeal dismissed. The retainer contained no implied duty requiring the clients to act in good faith towards their solicitors. An implied term must satisfy the orthodox requirements of reasonableness, necessity or obviousness, precision and consistency with the express agreement. The proposed term was neither necessary nor obvious and conflicted with the conditional fee agreement. That agreement regulated remuneration but did not alter the parties’ underlying duties or transform an ordinary retainer into a relational contract.

2. The indicators discussed in Bates v Post Office [2019] EWHC 606 (QB) were a sense check, not statutory requirements. The retainer lacked the relevant long-term collaboration, mutual relational trust, investment and exclusivity. Moreover, Candey’s fiduciary obligation involved loyal subordination of its interests to those of its clients, which differed from the mutual trust characteristic of relational contracts.

3. Even assuming a duty of good faith, the pleaded breach had no real prospect of success. A client may select a settlement perceived to be as good as or better for the client than one serving the solicitor’s financial interests. Conflicts created by remuneration terms must be addressed by the solicitor when arranging the retainer. They cannot be resolved through an implied duty requiring the client to prefer the solicitor’s interests. The global settlement also avoided the risks of adverse findings, contribution proceedings and continued litigation.

4. Legal professional privilege prevented Candey from using the clients’ communications. Information may remain confidential and privileged although already known to, or possessed by, the solicitor. A client does not impliedly waive privilege merely by acting in a way said to give the solicitor a cause of action. The alleged false explanations arose in the ordinary course of defending fraud proceedings. They did not abuse the professional relationship or engage the iniquity principle.

5. The confidential bank statements had been opened and examined unlawfully after the retainer and underlying proceedings had ended. Their admission was not justified under the balancing exercise governing improperly obtained evidence. The public interest in excluding the material outweighed Candey’s interest in advancing its claim.

6. A witness’s consent under rule 32.12(2)(a) authorised prospective use of her witness statement. The statement’s earlier unauthorised use required retrospective court permission under rule 32.12(2)(b). Prospective permission from the court was unnecessary once the witness had consented.

The claims remained struck out except for the existing claim based upon the express Costs Term.

1. Court of Appeal (Civil Division): The appeal was dismissed. The order striking out all claims apart from the express Costs Term claim was confirmed, subject to clarification that the witness’s consent permitted prospective use of her statement: [2022] EWCA Civ 1103.

2. High Court, Business and Property Courts: Ms Clare Ambrose, sitting as a High Court judge, prevented reliance on privileged and specified confidential material and struck out the implied-term, deceit, misrepresentation, conspiracy and inducing-breach claims. The express Costs Term claim alone survived: [2021] EWHC 3409 (Comm).