Judgments - Hilton (Appellant) v. Barker Booth and Eastwood (a firm) (Respondents)

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    33.  Two of the most important facts known to BBE, but unknown to Mr Hilton, were that Mr Bromage had been made bankrupt and that while an undischarged bankrupt he had committed numerous offences of dishonesty for which he was sentenced to a term of imprisonment. These facts were known to any journalist or member of the public who had been present in the Preston Crown Court when Mr Bromage pleaded guilty and was sentenced. They were also probably reported in local newspapers. They were, as Sir Andrew Morritt V-C observed, in para 11:

    "matters of public record and so not confidential in any strict legal sense."

Judge LJ's reference, in para 36, to legal professional privilege was, with respect, quite inapposite as regards the bare facts of the bankruptcy and the convictions.

    34.  In my opinion the notion of confidentiality, as generally understood by lawyers, is not really relevant to the issues in this case. It is a solicitor's duty to act in his client's best interests and not to do anything likely to damage his client's interests, so far as this is consistent with the solicitor's professional duty. To disclose discreditable facts about a client, and to do so without the client's informed consent, is likely to be a breach of duty, even if the facts are in the public domain. Some of the references in the Court of Appeal judgments to confidential information must, I think, be understood in this looser sense. The appellant's counsel was right to concede in the Court of Appeal, that disclosure of Mr Bromage's past by BBE would have been a breach of their duty to him, and the appellant did not seek to withdraw the concession before your Lordships.

Irreconcilable duties

    35.  If a house owner contracts to sell his house to one purchaser for £240,000 and then a week later contracts to sell it to another purchaser for £250,000, he assumes two contractual duties which are on the face of it irreconcilable, unless the seller has grounds for rescinding either contract, or can persuade one or other purchaser to release him from his obligation. That is so whether he enters into the second contract with his eyes open, in the hopes of making a larger profit, or whether (rather improbably) he does so inadvertently. It is no answer for him to say to either purchaser: I am sorry, I am obligated to another. His dilemma is his own fault (the phrase used by Lord Cozens-Hardy MR in Moody v Cox [1917] 2 Ch 71, 81, a case to which I shall return).

    36.  Mr Gibson QC (who appeared for BBE in this House and argued a difficult case with brevity and tact) did not accept that the man who sells his house twice was a fair analogy. He supported the reasoning in Sir Andrew Morritt V-C's judgment that the decision of the Court of Appeal in Moody v Cox was distinguishable, and that the only breach of duty on the part of BBE was their failure to refuse to act for Mr Hilton and to advise him to consult another solicitor. He did not accept that BBE's failure to disclose the facts about Mr Bromage's past was a second and more serious breach of duty, which did cause Mr Hilton actionable loss.

    37.  Sir Andrew Morritt V-C reasoned as follows, in paras 32 and 33:

    "I do not accept that BBE were also in breach of a duty to disclose to Mr Hilton what they knew of Mr Bromage. Just as the retainer of BBE by Mr Bromage in connection with his prosecution was not subject to some implied limitation by reference to disclosure to later clients so the retainer of BBE by Mr Hilton must be subject to an implied exclusion from any general duty of disclosure of that which they are legally obliged to treat as confidential. In my view such an exclusion satisfies all the well-known tests for the implication of contractual terms. Such an exclusion does not impinge on the solicitor's duty to do the best for his client; rather it demonstrates the importance of performing that duty promptly by informing the client that he cannot act for him.

    Thus it is not a question of two irreconcilable duties, to which the principles of Moody v Cox would apply, but of one being modified to take account of another."

    Sir Andrew Morritt V-C did not explain how this implied term (which was never pleaded) satisfied the well-known tests for implied terms. In my respectful opinion the suggested term plainly did not meet those tests, whether formulated by reference to the officious bystander or by reference to business efficacy. The suggested term would no doubt have been very convenient for BBE. But from Mr Hilton's point of view it would have amounted to his agreeing that because his solicitors had failed in their duty to tell him to take separate advice, and had instead proceeded to act for him as well as for Mr Bromage, and (unknown to Mr Hilton) in a matter in which they had a personal financial interest, their duty to Mr Hilton must in some way be curtailed in order to accommodate their first breach of duty.

    38.  The notion that one breach of duty by BBE (failure to tell Mr Hilton that they could not act for him and that he should seek independent advice) should exonerate BBE in respect of a subsequent and more serious breach of duty (failure to disclose to Mr Hilton facts which would have saved him from ruin) seems contrary to common sense and justice. It is also in my opinion contrary to the principles stated by the Court of Appeal in Moody v Cox, a decision which has often been cited and followed both in England and in Commonwealth jurisdictions.

Moody v Cox

    39.  Moody v Cox [1917] 2 Ch 71 was an action for rescission of a contract of sale of a public house and four cottages, with a counterclaim for specific performance. The sellers, Hatt and Cox, were respectively a solicitor and his managing clerk. They were the trustees of a will trust, and were selling as such. In addition Hatt acted as solicitor for the purchaser Moody. The contract price was £8,400. Moody complained that Cox had failed to disclose to him a valuation showing the property to be worth less than the contract price, and that Cox had expressly asserted that the cottages were worth £225 each when he knew that they were worth less. There was also a "clean hands" issue arising from the fact that Moody had paid two sums of £100 to Cox as a sweetener; that point is of no relevance to this appeal.

    40.  Since Hatt and Cox were selling as trustees, they had a duty to their beneficiaries to obtain the best price reasonably obtainable. It was argued that this modified the extent of Hatt's duty, as a solicitor, to Moody as his client. That argument was decisively rejected. The key passages in the judgments of Lord Cozens-Hardy MR, Warrington LJ and Scrutton LJ [1917] 2 Ch 71, 81, 85, 91 are set out in Sir Andrew Morritt V-C's judgment (paras 12, 13 and 14 respectively). It is sufficient to repeat what Lord Cozens-Hardy MR said, at p 81:

    "A man may have a duty on one side and an interest on another. A solicitor who puts himself in that position takes upon himself a grievous responsibility. A solicitor may have a duty on one side and a duty on the other, namely, a duty to his client as solicitor on the one side and a duty to his beneficiaries on the other; but if he chooses to put himself in that position it does not lie in his mouth to say to the client 'I have not discharged that which the law says is my duty towards you, my client, because I owe a duty to the beneficiaries on the other side'. The answer is that if a solicitor involves himself in that dilemma it is his own fault. He ought before putting himself in that position to inform the client of his conflicting duties, and either obtain from that client an agreement that he should not perform his full duties of disclosure or say - which would be much better - 'I cannot accept this business.' I think it would be the worst thing to say that a solicitor can escape from the obligations, imposed upon him as solicitor, of disclosure if he can prove that it is not a case of duty on one side and of interest on the other, but a case of duty on both sides and therefore impossible to perform."

    41.  The thrust of this passage, and of all three judgments in Moody v Cox, is that if a solicitor puts himself in a position of having two irreconcilable duties (in that case, to his beneficiaries and to his client, Moody) it is his own fault. If he has a personal financial interest which conflicts with his duty, he is even more obviously at fault. In this case BBE were in the position (through their own fault) of having two irreconcilable duties, to Mr Bromage and to Mr Hilton, and of also having a personal interest (because of the undisclosed £25,000 loan, which was likely to be recoverable only if Mr Bromage did well in his transaction with Mr Hilton). On the face of it their position was significantly worse than that of the solicitor in Moody v Cox.

    42.  However, Mr Gibson submitted that Sir Andrew Morritt V-C had been right in distinguishing Moody v Cox, in para 15:

    "In that case the duty arose from the fiduciary relationship between the purchaser, Moody, and his solicitor and vendor Hatt and the presumption of undue influence in consequence of the fact that Hatt was not only Moody's solicitor but a vendor to him. No such relationship is relied on in this case."

Similarly, he said in para 33:

    "But that case concerned the breach of a fiduciary duty and presumption of undue influence arising on the sale of property by a solicitor to his client to which different considerations apply."

With great respect to Sir Andrew Morritt V-C I cannot agree with that analysis. In Moody v Cox Hatt owed a (purely) fiduciary duty to his beneficiaries and a duty to his client which was (in the way that I have already explained) both contractual and fiduciary, the content of the contractual duty of full disclosure being rooted in the fiduciary relationship between solicitor and client. In the present case BBE owed that type of duty to both Mr Bromage and Mr Hilton, and they also had a personal financial interest. In Moody v Cox [1917] 2 Ch 71, 80 Lord Cozens-Hardy MR expressly stated that the solicitor's duty of disclosure does not depend on undue influence.

    43.  Mr Gibson also relied on the reference at the end of the judgment of Scrutton LJ, at p 92, to "actual misrepresentations". But in my opinion my noble and learned friend Lord Hoffmann was right in describing this (in the course of argument) as a throwaway remark. The overwhelming focus of all three judgments in Moody v Cox is on non-disclosure, and the principle as to the solicitor's duty is stated in wide terms.

    44.  Mr Gibson submitted that a solicitor who has conflicting duties to two clients may not prefer one to another. That is, I think, correct as a general rule, and it distinguishes the case of two irreconcilable duties from a conflict of duty and personal interest (where the solicitor is bound to prefer his duty to his own interest). Since he may not prefer one duty to another, he must perform both as best he can. This may involve performing one duty to the letter of the obligation, and paying compensation for his failure to perform the other. But in any case the fact that he has chosen to put himself in an impossible position does not exonerate him from liability.

Mortgage cases

    45.  During the 1990s there were many reported cases concerned with claims (resulting from the crash in the property market) against solicitors who had acted for both sides in mortgage transactions. These cases are discussed at some length in the parties' written submissions. But counsel rightly spent little time on them in oral argument because many of them turned (as I have already noted) on special features of the mortgage lender's instructions to the solicitors. I do not think it is necessary or helpful to embark on a survey of the recent mortgage cases, but I note that in Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER 836, 844-845, Millett LJ stated the solicitor's duty in wide and general terms:

    "A solicitor who acts for both a purchaser and a mortgage lender faces a potential conflict of duty. A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client."

Millett LJ then went on to explain why no conflict arose on the particular facts of that case.

    46.  Sir Andrew Morritt V-C referred to the Mortgage Express case but treated it as inapplicable because of the implied term which he discerned as modifying the solicitor's duty. Parker LJ, in para 47, also referred to the Mortgage Express case and derived from the judgment of Sir Thomas Bingham MR, at p 842, the proposition that any term in a solicitor's contract of retainer relaxing a solicitor's duty of confidentiality to his client (save with informed consent) would be contrary to public policy. I respectfully doubt whether Sir Thomas Bingham MR intended to lay down any such rule, and I do not think there is any such rule. In any case the issue is not as to the extent of BBE's duty to Mr Bromage, but as to their duty to Mr Hilton. It comes back to the same simple point that if a solicitor is unwise enough to undertake irreconcilable duties it is his own fault, and he cannot use his discomfiture as a reason why his duty to either client should be taken to have been modified.

Disposal

    47.  For these reasons I would allow the appeal and direct that the quantum of damages (if not agreed) should be assessed by a judge. But it is now 15 years since Mr Hilton suffered a grievous wrong for which he has not been compensated. For the good name of the solicitors' profession his compensation should be agreed, on a generous scale, without further delay.

LORD BROWN OF EATON-UNDER-HEYWOOD

My Lords,

    

 
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