This article was co-authored by Michael J. Smith, Trainee Solicitor, London.
The High Court has provided a welcome recap of the case law and considerations to be applied when determining the existence (or non-existence) of an implied retainer between solicitor and client.
The case concerned a conversation between the claimant and his solicitor lasting a few minutes, on the one hand, and on the other, a contract to purchase an area of land in Aylesbury (the land), by Arc Holdings and Investments Limited (Arc) from Andrew McGee (McGee) (the land transaction). The proposed contract of sale between Arc and McGee fell through between exchange and completion, as the director of Arc, Charles Giblin (Giblin) agreed for the land to be transferred directly to a third party called Midwest Formwork UK Limited (the later sale).
Sean McDonnel (the claimant), held no position or shares in Arc, with Giblin being the sole director.
The claimant sought £2.5 million in damages against the defendant solicitors (DLS), for failing to protect him against the loss of opportunity to benefit from purchase of the land and that, as a result of this failure, the claimant missed out on proceeds of the later sale and claimed those losses against DLS.
The claimant alleged that he gave express instructions for DLS to draw up a Deed of Trust and for advice on how to protect his 70% interest in Arc on 17 January 2017 and 14 February 2017. As a result, he asserted there was a retainer and a duty of care owed to him by DLS.
DLS denied that the claimant was their client at the relevant time of the transaction. Instead, DLS asserted that they were instructed by Arc (pointing to their letter of engagement and it having been addressed to and signed by Giblin and not the claimant). DLS argued, as a fallback, that even had the claimant been their client, at no time were express instructions given by him in relation to the land transaction.
Forster J held that there was neither an express retainer nor implied retainer, applying the following principles:
- The test for implication is a necessity (Caliendo v Mishcon de Reya );
- Choosing not to enter an express retainer indicates that an implied retainer is unlikely (James-Bowen v Metropolitan Police Commissioner );
- An objective consideration of all the circumstances is necessary to determine whether an intention to enter a contractual relationship must be implied (Dean v Allin & Watts ); and
- An implied retainer will not be imposed for convenience (Searles v Cann & Hallett ).
When applying those principles, Forster J noted that:
- The claimant personally had a retainer or retainers with DLS regarding several previous land transactions, as well as other contemporaneous land transactions which were taking place at all material times.
- The claimant was experienced and practiced in procuring legal advice and services.
- Where the claimant had previously elected to retain DLS, a series of separate retainer letters were provided to and signed by the claimant.
- There was, however, no retainer letter in connection with the transaction giving rise to the claim.
All of those circumstances led the to the inference that the claimant had chosen not to be the client for the purpose of the land transaction. Forster J concluded that there certainly had been previous and an ongoing relationship between the claimant and DLS. Here however, the claimant intended not to enter into a retainer with DLS in connection with the land transaction. There was, similarly, no tortious duty of care owed to him by DLS, as the claimant alleged, and the claim failed.
The approach of the Court and principles applied are a timely reminder of the importance of the intentions of the parties at the time. For law firms, this is a reminder of the importance of recording clearly and unambiguously the nature and scope of the instructions that they have received and the scope of their retainer at the point entered into. Where a law firm has received instructions but feels that more is required before entering into a retainer, it would be well advised to set this out in clear terms also.