ON APPEAL FROM THE COUNTY COURT AT CARDIFF
His Honour Judge Milwyn Jarman QC
HC110C1402
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
LADY JUSTICE RAFFERTY DBE
and
LADY JUSTICE SHARP DBE
Between :
PAUL SPENCER-WHITE | Appellant |
- and - | |
HARDING EVANS LLP | Respondent |
Mr John Dagnall (instructed by QualitySolicitors Rubin Lewis O'Brien) for the Appellant
Mr Graeme McPherson QC (instructed by DWF LLP) for the Respondent
Hearing date: 15 February 2017
Judgment
Lady Justice Sharp :
This is an appeal with permission of Lewison LJ, against the order of HHJ Milwyn Jarman QC as set out below.
The facts
The Respondent to this appeal is a firm of solicitors. The Defendant, and Appellant is Paul Spencer-White. The Respondent acted for the Appellant for about 9 years between 2002 and March or May 2011 in relation to a large number of matters, most of which were commercial and residential property transactions. Mr Michael Jenkins was the Respondent’s commercial property partner who dealt with the Appellant day to day, although another solicitor, Ms Strong, did so during a period in 2010 when Mr Jenkins was on secondment. The Respondent also carried out certain work for the Appellant and his then wife jointly, for example in relation to the annual rent review on a property they jointly owned in Aberystwyth called the Academy.
The relationship between the two men was a friendly one. However, the position changed in 2011. A deed of variation (the Blockbuster deed) drawn up by the Respondent and signed by the Appellant in relation to a property in Brecon, which the Appellant leased to Blockbusters, provided that there should be a rent free period until 25 March 2011. The Appellant claimed he did not authorise this variation but had only agreed a rent free period until 1 February 2011. The Respondent’s position was, however, that the Appellant had instructed Mr Jenkins by telephone on 23 February 2009 that he was content for the end-date for the rent free period to be until the 25 March 2011.
In consequence of the disagreement over this issue the Appellant “terminated the relationship” with the Respondent. The Respondent was not at that stage engaged in any contentious or non-contentious matters for the Appellant (i.e. there were no ‘live’ retainers); therefore this termination meant only that the Appellant did not instruct the Respondent in respect of any new matters.
However, the Respondent had incurred fees and disbursements in the sum of £3,231.36 plus interest for work the firm had carried out for the Appellant in relation to a proposed (but ultimately abortive) sale to a Mr and Mrs McDougall of a property owned by him, namely 6 Vineyard Mews in Richmond.
On 8 December 2011, the Respondent invoiced the Appellant for that sum. The Appellant refused to pay. In consequence, the Respondent exercised a lien over the Appellant’s files and it eventually issued these proceedings, a Part 7 Claim, claiming the sum of £3,231.36 (fees of £2,692.80, plus VAT) plus interest. The Respondent acknowledged it had sums of £587.50 and £1,023.12 belonging to the Appellant in its client account, but claimed to be entitled to retain those sums to be offset against the sum invoiced when it obtained judgment. The Appellant disputed the Respondent’s entitlement to the sum of £3,231.36; by the time of the trial, he had relied on a considerable number of grounds of defence and counterclaims. An important part of his case that he was under no obligation to pay the fees claimed arose from his discovery in 2012 that the Respondent had, so he believed, acted for the Appellant’s ex-wife, after, on the Appellant’s case, it had agreed not to do so. Broadly speaking however, the matters relied on in his defence fell into three categories:
Technical objections to the amounts that had been billed;
A claim that the Vineyard Mews retainer was an entire contract, and that as the sale of that property had not been completed, the Respondent was not entitled to charge the fees claimed in the Invoice; and
An overarching assertion that he was not obliged to pay the Invoice in any event because the Respondent’s conduct in acting for the Appellant’s ex-wife, after assurances were given in September 2008 and June 2009 that it would not do so, entitled the Appellant to rescind “all retainers and relationships and contracts between the [Respondent] and [the Appellant] from July 2009”. Therefore, so it was said, the Respondent was not entitled to charge the Appellant any fees for work done after it accepted instructions to act on the ex-wife’s behalf; the Appellant was entitled to damages and/or an account of profits made by the Respondent from the Appellant and his ex-wife after that date, and the Respondent was not entitled to a lien over the Appellant’s client files.
As for the counterclaims, these were based on contractual retainers existing between the Respondent and the Appellant. It was alleged that the Respondent had been negligent in respect of two of those retainers:
The retainer in respect of the Deed of Variation for the Blockbuster lease (the Appellant claimed sums he alleged he had lost as a result of the unauthorised extension of the rent free period); and
The Vineyard Mews retainer.
The Appellant also alleged the Respondent had wrongly detained his files (a claim which included an assertion that the Respondent had lost files relating to land known as Hillside).
The First Instance Decision
The trial took place before the judge over the course of four days, in March 2015. The judge handed down a reserved judgement on 16 April 2015.
The judge approached the matter by first resolving two major disputes of fact. The first was whether the rent free period for the Blockbuster lease extended to 1 February 2011 or 25 March 2011. He resolved that issue in the Respondent’s favour. The second related to the counterclaim based on the assurance which the Appellant claimed had been given that the Respondent would not act for his ex-wife. The judge did not accept that such an assurance had been given in 2008: see para 29 of his judgment. However, in July 2009 discussions had taken place between the Appellant and Mr Jenkins about whether Mr Jenkins should be appointed as a trustee of the Appellant’s will. The judge found that it was within the reasonable contemplation of the Appellant and Mr Jenkins in July 2009 that Mr Jenkins was not acting and would not act for the Appellant’s ex-wife, “whilst the potential for that relationship of trust existed.” (See para 30 of his judgment).
Mr. Jenkins accepted that he did act for the ex-wife in respect of two matters: see para 31 of the judgment. Those two matters were:
Sending a letter on her behalf to the lessee of the Academy, which reminded it of an annual rent review (the letter). One such letter was sent in July 2009 and a second was sent in 2010. Mr Jenkins had previously sent such letters on behalf of both the Appellant and his wife, but ownership of the Academy had been transferred to the ex-wife, as part of an agreed division of assets in the divorce proceedings. Mr Jenkins did not charge for sending the letters; and
The sale of a plot of land known as Pipers Croft, Llaneyre (the Pipers Croft transfer). The file in respect of this matter was opened in January 2011. Mr Jenkins was named as the “matter manager” and Ms Strong was the fee earner. It was common ground however, that Mr Jenkins did no work on the file himself but was on secondment at all material times. As a result of certain work done by Ms Strong, on this matter, disbursements for making office copies, were entered on the ledger, as was a bill for £150 plus VAT on 17 March 2011.
The judge decided that sending the letter(s) did not amount to a breach of the assurance or “understanding” arrived at in July 2009: (see para 33 of his judgment). He said it did not give rise to any conflict of interest; the Appellant had been aware that such letters had been sent in the past, and there appeared to be no issue but that this asset (the Academy) belonged to the ex-wife because it was part of the agreed division of assets in the divorce. He found the position was different however in relation to the Pipers Croft transfer. This was nevertheless a relatively minor transaction; furthermore the fact that the Respondent had so acted did not amount to a destruction of trust and confidence entitling the Appellant to treat the retainers as terminated. Instead, the judge said, it gave rise to a right for compensatory damages, which on the facts the judge assessed as the profit element on the £150 fee. This amounted to a sum of £75: (see para 34 of his judgment).
A third dispute of fact resolved by the judge arose from the dispute over the lost files concerning Hillside. The issue was whether the Respondent had lost the files, as the Appellant alleged, or whether they had been collected by the Appellant and his new solicitors in May or June 2011, as the Respondent asserted. Detailed evidence about this was given, and set out by the judge at paras 35 to 41 of his judgment. The judge determined this aspect of the Appellant’s claim failed as he had not established on the balance of probabilities that responsibility for the loss lay with the Respondent.
The judge rejected a further claim made by the Appellant that retention of the Appellant’s Files by way of lien was unlawful. This claim was based on clause 20 of the Respondent’s standard terms and conditions. The clause said: “You are entitled to terminate this Agreement at any time. Upon termination, we are entitled to retain all your papers and documents, until such time as all money owing to us for our charges and expenses has been paid…”. The argument for the Appellant was that the Respondent was only entitled to exercise a lien in respect of a charge arising on the particular files retained and/or that the retention of those files was otherwise wrongful because the relevant retainer had been rescinded by the Appellant or had come to an end when he accepted what was asserted to be the Respondent’s repudiatory breach of contract. The judge rejected these arguments because he did not accept the Appellant’s construction of clause 20 was correct; he also rejected the argument that the retainer had been rescinded or made subject to an accepted repudiation (see paras 44 and 45 of his judgment).
The judge also rejected the counterclaim in negligence in relation to Vineyard Mews for reasons he set out at some length in his judgment. I need say no more about this aspect of the case, however, since this forms no part of the appeal before us.
Finally, the judge also rejected a claim made by the Appellant for an assessment of the solicitors’ bill out of time. However, having considered the detailed points of complaint made about the bill itself on behalf of the Appellant, he determined (as a matter of common law) that a fair and reasonable charge for the work done, was represented by the sum claimed, less 15 per cent (see paras 51 to 53 of his judgment).
In the result, the final order made by the judge was as follows:
He gave judgment for the Respondent on its claim in the sum of £2,689.43 plus VAT; this represented 85 per cent of the sum invoiced;
He gave judgment for the Appellant on two of his counterclaims;
For the repayment of the sums retained by the Respondent of £587.50 and £1,023.12; and
Damages of £75.
All other counterclaims were dismissed.
He directed that the sums awarded to the Appellant be offset against the sums due to the Respondent; in consequence, the balance of £1,003.81 plus interest was payable by the Appellant to the Respondent.
On 16 April 2016, following a costs hearing, the judge ordered the Appellant to pay 80 per cent of the Respondent’s costs of the claim and the counterclaims.
Grounds of Appeal
Out of six grounds of appeal mounted by the Appellant, permission was given for two. These concern:
Ground A: The consequences that flow from the judge’s finding that the Respondent had acted in breach of an assurance not to act for the Appellant’s ex-wife; and
Ground E: The judge’s finding that the Respondent had been entitled to exercise a lien over the Files and to refuse to deliver them up, while monies remained due to the Respondent.
Contingent permission was given to appeal the costs order made by the judge (Ground F), but only on the footing that the Appellant was successful under either ground.
The original grounds are not easy to comprehend. The argument for the Appellant even now is not clearly expressed in the Amended Grounds, or the skeleton argument, which is now in a re-re-revised form. The Appellant claims the judge should have held that the writing of the letter(s) was a breach of the assurance; “by reason of such acting and its not being revealed, there were actionable misrepresentations”; breaches of fiduciary duty and fundamental/repudiatory breach; these justified the termination of the retainer in 2011 “so as (a) to deprive the Respondent of (i) any and all fees (ii) any lien (b) to cause a breach of a preceding contract regarding fees on an earlier abortive transaction involving” 6 Vineyard Mews “and (c) to give rise to a much higher damages/recovery of fees remedies (sic) than £75…”
The judge should therefore have dismissed the Respondent’s claim in whole or in part, and made an order for damages “to be assessed in relation to breach and accepted repudiation of retainer and misrepresentation” in excess of the £75, which he awarded.
As for Ground E, the Appellant submits that the Respondent was not entitled to exercise a lien over the files for two reasons: (i) it was not entitled to the fees claimed, because it had repudiated the contractual retainer, and it was not entitled therefore to exercise any lien over the files until the fees were paid; and/or (ii) Clause 20 of the Respondent’s terms and conditions only entitled the Respondent to exercise a lien, over files which related to the fees claimed.
Discussion
Against that background, it is necessary to unpick the legal foundations which are said to underpin the claim and this appeal, in what to my mind are these somewhat convoluted and, by now, disproportionate proceedings.
Ground A – Recovery of sums under the Vineyard Mews retainer
The Appellant maintains on appeal that the Respondent is not entitled to recover the sums due under the Vineyard Mews retainer based on the fact that: (i) the Vineyard Mews retainer was an entire contract and the sale had not been completed; and (ii) the Respondent was in breach of an assurance that they would not act for Mrs Spencer-White.
The ‘entire contract’ argument is unconvincing:
The Respondent’s ‘Client care and Terms of Business’ identify that fees are charged on a ‘time spent’ basis and so all work completed prior to the termination of the retainer is properly payable. This is clear from Clause 1 which states that ‘our charges are based on the time we spend on your matter’; and
Pursuant to the agreement, payment is not contingent upon the sale being completed and the solicitor does not bear the risk of non-completion. Specifically, Clause 20 stipulates that if the Agreement is terminated by either party, the Appellant will be required to pay the Respondent’s ‘charges and expenses incurred to the date of the termination’ (my emphasis).
Accordingly, the Respondent was contractually entitled to the sums payable.
As to (ii), the Appellant contends that the Respondent was in breach of the assurance given in July 2009 and is therefore not entitled to recover the fees under the Vineyard Mews retainer. No permissible challenge can be made to the judge’s findings of fact. Thus, the appeal before us must proceed on the basis that, as the judge found, the assurance that was given to the Appellant by Mr Jenkins was that Mr Jenkins (acting on behalf of the Respondent) would not act for the Appellant’s ex-wife whilst he remained a trustee of the Appellant’s estate under the Appellant’s will. I would add that the case that was put to Mr Jenkins, on behalf of the Appellant, was not that he was or became a trustee during the material period but that he would ‘only become the trustee when [the Appellant] died …’.
The first question that arises is what did this assurance amount to as a matter of law? The judge obviously considered it gave rise to a legally enforceable claim, but he did not clearly explain on what basis. Having regard to the somewhat obscure way in which the Appellant’s claim was pleaded, I have some sympathy with any difficulty the judge might have had in identifying a clear legal route for his finding. However, it appears to be common ground that the assurance (that the Respondent would not act for the Appellant’s ex-wife whilst Mr Jenkins continued to be named as a trustee of the Appellant’s estate in the Appellant’s will) gave rise to a collateral contract which was, as the Respondent puts it, ‘a contract collateral to any contract to provide legal services then in existence between the Appellant and the Respondent, and to any such contract that was subsequently entered into between the Appellant and the Respondent’. For present purposes, I proceed on that basis.
Mr Dagnall concedes that the Appellant could not establish that the breaches of which he complains caused him any provable loss sounding in damages. It follows therefore that the Appellant had to establish a legal ground for his refusal to pay the fees. This approach seems to me to have led to an element of backward reasoning in the arguments advanced on the Appellant’s behalf. Mr Dagnall’s principal argument is that the collateral contract was ‘imported’ into the Vineyard Mews retainer, as an implied term. However, this would not be sufficient for his purpose since even a repudiatory breach of the implied term would not be a legal bar to the Respondent recovering its fees (McDonald v Dennys Lascelles Ltd (1933) 48 C.L.R. 457, 476–477). Thus, Mr Dagnall is driven to submit that the implied term was not a mere warranty or innominate term, but was a condition of the contract, that is, of each and every substantive retainer into which the parties entered.
The Appellant’s argument that the assurance became a term of the Vineyard Mews retainer cannot be accepted. The Respondent’s terms of business (which it is not necessary to reproduce here) set out the contractual basis upon which each retainer for legal services was entered into; the short point is that implication of such a term was not necessary to give effect to the unexpressed intentions of the parties to the contract given the existence of the collateral contract. There is nothing in short which suggests that any aspect of the stringent test which must be satisfied before terms are implied into a contract was satisfied in this case: see further Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and anor [2015] UKSC 72, and in particular paras 15 to 22, where Lord Neuberger identified the correct approach to the implication of terms, in a judgment with which Lord Hodge and Lord Sumption JJSC agreed.
Were it to be the case however that such a term was to be implied into the contractual retainer, contrary to the view that I have expressed above, I do not consider this could be characterised as a condition of the contract so as to ever trigger the right to repudiate. Accordingly, the judge’s conclusion that the Respondent was prima facie entitled to the fees due under the Vineyard Mews was legally sound.
The Appellant further argued that the following actions constituted a breach of the assurance: (i) sending the letter to the Academy on behalf of Mrs Spencer-White; and (ii) dealings in relation to the transfer of Pipers Croft. In relation to (i), the judge justifiably found against the Appellant; sending the letter was essentially a mechanical and formulaic task which involved no element of advice. Conversely, the judge found in favour of the Appellant in relation to (ii). However, this did not entitle the Appellant to treat the main contract as discharged. Significantly, breach of a collateral contract gives rise to a claim for damages and does not entitle the Appellant to repudiate the main contract (Chitty on Contracts, 32nd Edition, Volume 1 - General Principles, paragraph 13-006).
Next I turn to the purported misrepresentation. The claim (which the judge rejected) was that the assurance amounted to an actionable misrepresentation. It was not suggested that the representation was fraudulent; however, if the assurance amounted to an actionable misrepresentation (whether innocent or negligent) this would have obvious implications for remedy.
In my judgment, however, there is no substance in this part of the Appellant’s claim, or the assertion that the judge was wrong to reject it (as it is implicit from his judgment that he did). As the Respondent points out, at the point at which the assurance was given (in July 2009), there was no suggestion on the facts that the Respondent was acting for the Appellant’s ex-wife. Both of the matters now relied on (the writing of the letters, and the Piper’s Croft transaction) had yet to occur. Insofar therefore, as the assurance contained a representation of fact (which could only be that Mr Jenkins was not then acting for the ex-wife) this was a statement of fact which was true.
As for the assurance that Mr Jenkins would not act for the Appellant’s ex-wife in the future, whilst he remained a trustee of the Appellant’s estate, in the Appellant’s will, this was not, and plainly not, a statement of fact, but one of future intention. This was not therefore an actionable representation (and it did not fall into one of the limited classes of representations as to future intention which falls to be treated as a representation of fact, and thus may become actionable should it subsequently become false).
I do not accept the Appellant’s argument, made on his behalf by Mr Dagnall, that the representation was a continuing one; but even if he is right about that, it is clear that the representation could only have been operative to the point where the relevant contract for legal services was subsequently entered into. This presents the Appellant with a chronological difficulty. The Vineyard retainer (giving rise to the disputed claim for fees and disbursements) was entered into on 28 July 2009. It is common ground that the Respondent was not acting for the ex-wife at that stage and beyond. It is impossible to maintain a case in those circumstances that the Appellant was induced to enter into that particular retainer by a false representation (that the Respondent was not acting for the ex-wife).
Next I turn to the issue of ‘trust and confidence’ which arises from the use of that phrase in support of this appeal, on the footing that the Respondent’s conduct damaged that aspect of the relationship with the Appellant, with certain legal consequences, namely that it constituted a fundamental breach of the Vineyard Mews retainer. In this regard, the judge found that whilst the sale of Pipers Croft, for which the Respondent charged, amounted to a breach of the assurance, it did not amount to a ‘destruction’ of trust and confidence (see paragraph 34 of the Judgment). In my judgment, no error of law can be discerned from the judge’s conclusion:
The Appellant has failed to provide any legal basis upon which the notion of ‘trust and confidence’ could be regarded as an implied contractual term; and
The actions of the Respondent did not, in any event, damage trust and confidence. The judge properly characterised the Pipers Croft transaction as ‘minor’ so as to render any conflict of interest unlikely. Significantly, the Vineyard Mews sale was no longer ‘live’ given the Appellant’s decision not to proceed until his tax issues were resolved.
It is trite law that the relationship between solicitor and client is a fiduciary one. See for example, the way the matter is put in Cordery on Legal Services, as at December 2016, where it is said at para 3159: “The relationship of trust and confidence between solicitor and client, which has been described as “one of the most important fiduciary relations known to our law” (per Cozens-Hardy MR in Re Van Laun [1907] 2 KB 23 at 29) gives rise to a range of fiduciary duties owed by a solicitor to his client. These duties are quite separate from obligations in contract or duties in tort… [and] may therefore outlive that contractual relationship”. See further, Bristol & West Building Society v Mothew [1998] Ch 1 where Millett LJ (as he then was) said at page 16C that:
‘The expression "fiduciary duty" is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. Unless the expression is so limited it is lacking in practical utility.’
But it is necessary to point out, as Millett LJ went on to say, that not every obligation or duty owed by a solicitor is a fiduciary one, and thus that not every breach of duty is a breach of a fiduciary duty. Further, fiduciary duties ‘cannot be prayed in aid to enlarge the scope of contractual duties’ (see Clark Boyce v Mouat [1994] 1 A.C. 428 at p. 437). It therefore follows that fiduciary duties come into existence based on the nature of the relationship between the parties. In my view, the assurance given in July 2009 did not give rise to a fiduciary duty as it was not an inherent part of the parties’ relationship but arose out of the collateral contract. Consequently, the question of breach simply cannot arise.
Ground E – The Lien
Further to Ground E, the Appellant contends that the Respondent was not entitled to a lien over the remaining files held by them. In this respect, the Appellant pursued two lines of argument, namely that: (i) The Terms of Business do not reserve the right to retain such files; and (ii) no fees are owed to the Respondent due to a breach of the assurance.
The relevant provision under the Respondent’s ‘Client care and Terms of Business’ is Clause 20 which reads:
‘You are entitled to terminate this Agreement at any time. Upon termination, we are entitled to retain all your papers and documents, until such time as all money owing to us for our charges and expenses has been paid….’
In my judgment, the judge was correct to conclude (pursuant to (i)) that the construction proposed by the Appellant is inconsistent with the express words used. The use of the term ‘all’ is broad and clear so as to encompass both the files in connection with Vineyard Mews and other files held by the Respondent. The Appellant has failed to provide a satisfactory explanation of the narrow construction advanced.
The Appellant’s argument under (ii) that no fees are owed to the Respondent due to a breach of the assurance is rejected in the light of my conclusion above that breach of the assurance does not disentitle the Respondent to the fees payable under the Vineyard Mews retainer.
Given my conclusions on Grounds A and E, it follows that Ground F does not fall for consideration.
Conclusion
I would dismiss this appeal.
Lady Justice Rafferty
I agree.