The Court of Appeal has recently rejected an appeal lodged by a law firm that was seeking to recover £3 million in legal fees from a former client. The Court of Appeal confirmed that law firms’ retainers do not include an implied term that their client will act in good faith.
Candey v Basem Bosheh
Case background
Candey, a London law firm, entered into a retainer with its client in relation to litigation concerning fraud allegations against the client (Basem Bosheh). The retainer was a Conditional Fee Agreement (CFA), which means that Candey was only entitled to payment if the client recovered amounts in the litigation.
However, Lord Justice Coulson said it did not matter that the retainer in question was a CFA.
The client ended up settling the proceedings on a “drop hands” basis, and because the retainer included a CFA, this meant Candey would not receive payment from Mr Bosheh (and his son). A “drop hands” basis means that the parties both agree to withdraw their respective claims against each other and that both parties will bear their own costs of the dispute.
In response, Candey sued Mr Bosheh arguing that in settling the litigation in this way the client had therefore breached an implied duty of good faith and in repudiatory breach of the retainer.
Candey alleged that Mr Bosheh not only breached an implied obligation of good faith but was liable in unlawful conspiracy, the claims relied mainly on both privileged and confidential material.
What was the Court’s decision?
At first instance, the High Court judge, Ms Clare Ambrose, ruled against the law firm, ruling that the retainer was not subject to a duty of good faith and had no prospect of success. This was regardless of a CFA. She also ruled that Candey could not rely on either the privileged or some of the confidential material.
The Judge also mentioned claims of deceit, conspiracy, fraudulent misrepresentation, and a breach of contract. However, the Judge stated the only claim which had a real prospect of success was the alleged breach of an express term of the retainer as it included a CFA. This part of the claim is still ongoing.
The case was referred to the Court of Appeal, in particular the issue of whether a duty of good faith was owed, and it found there was no implied duty of good faith as per the conclusion of Ms Clare Ambrose.
Lord Justice Coulson said:
“There is no authority that supports the proposition that, when retaining a solicitor to act for him or for her, the client owed that solicitor a duty of good faith.
The absence of authority is perhaps unsurprising: it is a startling concept. Many would say that, if a duty of good faith was applicable at all, it would arise the other way round, and be owed by the solicitor to the client.
[I]t (the CFA) governs the solicitor’s remuneration; it does not change the services or duties that the solicitor owes the client or vice-versa. Furthermore, the CFA was itself contrary to the implied duty as Candey well knew, the allegations made by Sheikh Mohamed against the Boshehs involved fraud and dishonesty.”
Comment
As Lord Justice Coulson confirmed it is perhaps surprising that a client does not owe their solicitor a duty of good faith. However, the reasoning provided is sensible and prevents a myriad of claims from being pursued, therefore, offering welcome clarity on such a point.
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Daniel Brumpton is a Partner in our Dispute Resolution team, specialising in commercial litigation.
For more information on the subjects discussed in this article, please contact Daniel or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or contact us via our online enquiry form.
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