Law Report: Solicitor was in breach of duty to client: Perry v Edwin Coe (a firm) - Chancery Division (Mr Justice Harman), 30 March 1994

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A solicitor who had been engaged to act on behalf of three joint clients, but who withheld information from one of the clients, and acted on instructions from another to the detriment of the first, was in serious breach of duty.

Mr Justice Harman awarded the plaintiff, Albert Richard Perry, pounds 166,000 plus interest on his claim against the defendants, Edwin Coe, a firm of solicitors, in respect of their conduct of negotiations to recover, on behalf of the plaintiff and two other clients, Robert William Bulfield and City Road Securities Ltd (CRS), the costs which those three clients were due as successful joint defendants to a failed action brought against them by Movitex Ltd.

Nicholas Underhill QC (Rowe & Maw) for the plaintiff; Edward Bannister QC (Edwin Coe) for the defendant.

MR JUSTICE HARMAN said the three clients had been dissatisfied with the conduct of the Movitex action by their then solicitors, Norton Rose, and wished to recover part of the sums provided on account. The sensible course was for Norton Rose to conduct the taxation of the inter partes bill, since they had had conduct of the action, but to instruct new solicitors to act on their behalf in respect of any dispute with them.

The three clients took separate advice, the plaintiff consulting Rowe & Maw, and Mr Bulfield with CRS instructing Edwin Coe.

A deed, dated 16 December 1987, drawn up by Edwin Coe, and approved by Rowe & Maw, provided that Mr Bulfield and CRS undertook to repay the plaintiff the pounds 216,000 which he had paid on account to Norton Rose, and that any sums received by Mr Bulfield or CRS from Norton Rose or Movitex were to be held on trust to be applied for this purpose first. CRS was to have conduct of the dispute, to the exclusion of the plaintiff, but that right of conduct was to cease if the plaintiff had not been repaid by 7 January 1991.

Both in correspondence with Mr Rushton, the solicitor in Rowe & Maw dealing with the plaintiff, and with Norton Rose, Mr Berry, the solicitor in Edwin Coe dealing with Mr Bulfield and CRS, referred to the plaintiff as one of 'his' clients in the costs recovery.

On 18 December 1990 an interim certificate for pounds 210,000 in the Movitex action was obtained from the taxing master.

On 21 December Edwin Coe sent it to Movitex's solicitors and called for payment. But when speaking to Mr Rushton on 11 January 1991, Mr Berry chose not to tell him about the interim certificate.

His Lordship found this lack of candour extremely puzzling and very regrettable.

Rowe & Maw, in ignorance of the certificate, pressed an action now being brought by the plaintiff against CRS for payment of pounds 166,000 still outstanding under the deed (pounds 50,000 having apparently been paid).

Mr Bulfield, in conference with Mr Berry, accepted that sum was due but instructed Mr Berry not to give any undertaking that it would be paid from the proceeds of the interim certificate.

In response to a demand by Edwin Coe for pounds 42,332.41 due for various matters unconnected with the plaintiff, Mr Bulfield later referred to money recovered from Movitex as being relevant to the discharge of his own debts to Edwin Coe.

So Mr Berry was thus faced with an apparent conflict between his firm's own interest in getting its debts from Mr Bulfield, and his duty to those for whom he had claimed to act, namely the three clients jointly, in obtaining the interim certificate.

His Lordship could only speculate that Mr Berry must have forgotten the terms of the deed; he could not believe Mr Berry consciously intended to participate in a wilful breach of trust to be committed by Mr Bulfield and CRS by allowing them to pay out of the intended trust fund to his own firm for their personal liability.

On 13 February, Movitex's solicitors sent Edwin Coe a cheque for pounds 183,936 towards payment of the interim certificate. On 15 February, Edwin Coe send a cheque for pounds 140,312.82 to CRS. Thus Edwin Coe retained pounds 43,623.18 out of the payment from Movitex, presumably in settlement of Mr Bulfield's bills.

The plaintiff had since been unable to recover the pounds 166,000 due to him from CRS or Mr Bulfield and now brought an action against Edwin Coe. The plaintiff took the view that Edwin Coe had been acting for him as his solicitor, but Mr Berry said he did not regard the plaintiff as his client.

It was said that a client was one who employed or retained a solicitor; that this was a contractual relationship depending on consideration; but that since the plaintiff was not liable to pay Edwin Coe for their services there was no consideration.

But it was beyond doubt that Edwin Coe represented the plaintiff in the costs dispute, and in the last resort consideration was frequently given other than by payment of money.

The plaintiff's permission to use his name and his giving of information and assistance were capable of being consideration.

In his Lordship's judgment, Edwin Coe were at all times acting in the costs disputes as solicitors for the plaintiff as well as for CRS and Mr Bulfield.

The firm had duties to each of its clients which certainly included the duty to inform each client of significant steps. The failure to tell Rowe & Maw as agents for the plaintiff of the issue of the interim certificate was a serious breach of duty.

After 7 January 1991, CRS ceased to have sole conduct of the costs disputes and thereafter Edwin Coe could only act on the joint instruction of all three clients, and if any one client gave instructions detrimental to the others, Edwin Coe could not act on it without committing a breach of duty.

It followed that since Edwin Coe knew the plaintiff was entitled to return of his contribution to the costs, and that pounds 166,000 of that contribution remained outstanding, it could not have been anything but a breach of duty to him to pay away the pounds 183,936 received on 13 February.

Edwin Coe were therefore liable to pay the plaintiff the sum he had lost by reason of that breach of duty, which loss was pounds 166,000 plus interest, since if the pounds 183,936 had been retained in safe hands, he would have recovered his entitlement.