One of the principles behind any claim for negligence is that the ‘tortfeasor’ (legal jargon for the wrongdoer), needs to owe the claimant a duty of care.  It is difficult to specifically define a duty of care: it is along the lines of an obligation to ensure that one acts reasonably such that it will not cause harm to others.  This does not mean that we are all obligated to look after every Tom, Dick and Harry – there does have to be some proximity between the parties.  In claims for negligence, this is usually identified by the existence of a contract between the professional and the claimant.

We are often contacted by people who want to bring a claim against a solicitor only to find that the solicitor they wish to sue is another other party’s solicitor, not their own.  Unfortunately, in those circumstances, there is rarely a close enough proximity between the parties for a solicitor to offer a third party a duty of care. There are some very specific exceptions to this, including the duty of care owed by a solicitor who drafts a will to the beneficiaries as well as the testator.

However, late last year, the Supreme Civil Court in Scotland (Court of Session Inner House) concluded that, where a solicitor has knowledge of a fraud, despite a duty of confidentiality to his client, he must inform his opponent of this situation.

The case is Frank Houlgate Investment Company Limited V Biggart Baillie Llp [2014] CSIH 79.  In this instance, an investment company loaned a large sum of money to Mr Cameron on the basis that Mr Cameron owned a valuable property.  Although the property was owned by a Mr Cameron, it was not the Mr Cameron in question.  Mr Cameron ultimately confessed to his lawyers (BB) that he did not own the property, but asked them not to tell FH.  Believing that they were under a duty of confidentiality, they did not tell FH who subsequently found out about the fraud.  They sued the solicitors, BB, even though those solicitors had not been representing them.

The judgment from the CSIH makes interesting reading.  Its general conclusion is that a solicitor has a duty to act honestly which, by implication, gives the representation that he is not aware of any fraud on the part of his client.  Further, this is an ongoing representation.  So, at the outset of the transaction, BB were of the belief that the transaction was an honest one so were acting correctly but, when they became aware of the fraud, they were relieved of their duty of confidentiality to their client.

As an aside, the CSIH did mention that even if the Court had not made this finding, the solicitor could still be considered an accessory to fraud.

What is the relevance of this case?

At the moment, we do not know for sure.  This is a Scottish case and it does not mean that the English courts need to follow it, but it is open for parties who have been affected in a similar way to cite this case and invite an English court to come to a similar finding.

Secondly, it is unclear how this will affect situations where the parties have been engaged in litigation.  In litigation, once a solicitor is aware of dishonesty, as they have a duty not to mislead the Court, they should ask to no longer represent the client.  It is unclear whether the solicitor would have to go beyond that and actually inform the other side or the Court of the fraud.

Finally, this only relates to issues of fraud; nothing else.  Even then, it will not be that simple as fraud is notoriously difficult to prove and Courts are reluctant to impute fraud unless the evidence is clear cut.  In this case, a third party told BB of the fraud and Mr Cameron admitted it – quite distinct facts.

Conclusion

This is an interesting case and certainly one to watch.  It may be that BB will appeal the decision – that has yet to be decided – but it may open up another avenue of redress for a client who has been the victim of a fraud.

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