Birss: Lawyers have no better right than their own client to commit deceit
The High Court has rejected an attempt by well-known Surrey law firm Stevens & Bolton to strike out allegations against it of dishonest assistance, deceit and unlawful means conspiracy.
Though Mr Justice Birss struck out the allegations as they related to a letter the firm wrote, he refused to do so in relation to an answer one of its partners gave during a subsequent meeting.
“The fact a solicitor does not act for the questioner does not entitle them to give a knowingly misleading answer and practice a deceit,” he said.
As it was a strike-out application, Birss J did not make any findings as to whether the firm actually did give a misleading or deceitful answer.
Barrowfen Properties Ltd v Patel & Ors [2020] EWHC 1145 (Ch) is one of a number of claims brought in different jurisdictions between members of a wealthy family which holds an extensive network of companies around the world.
The first defendant, Girish Patel, is a member of the family. The shares in the claimant company – of which he is a former director and Stevens & Bolton its former solicitors – are held by various family members. The third defendant (Barrowfen II) is a company controlled by Mr Patel.
The claimant contends that Mr Patel tried to take or maintain sole personal control of Barrowfen so as to gain control of a valuable commercial property it owned.
It claims that, after attempts to take over Barrowfen had been unsuccessful, Mr Patel activated a plan to acquire direct control of the property by putting the company into administration.
Barrowfen was indebted to Zurich Assurance for about £850,000, secured by a debenture. The central allegation at the hearing was that the law firm misled Barrowfen’s other directors about the purpose of an assignment of the loan and debenture Barrowfen II had taken, first in a letter on 4 December 2015 and then at a meeting five days later.
It is accused of giving a deliberately misleading impression that the assignment had been taken in order to protect Barrowfen from enforcement of the loan and debenture, when actually the plan was to place Barrowfen into administration.
Stevens & Bolton was not acting for Barrowfen at this point, but was acting for Mr Patel and Barrowfen II.
Stevens & Bolton stressed that it owed no duty to Barrowfen at the time, but Birss J described this as “irrelevant and potentially misleading”.
He explained: “No-one is entitled to dishonestly and deliberately make a false representation to another person, intending that they rely on that to their detriment and, assuming they do rely on it, commit the tort of deceit, but then attempt to excuse it on the ground that no duty was owed to their victim.
“Lawyers have no better right than their own client to commit deceit, so as to favour their own client’s ends to the detriment of a rival.
“Or putting it the other way around, Stevens & Bolton did owe a duty to Barrowfen at the relevant time, that duty being the duty everyone owes everyone else not to practice deceit.”
The judge struck out the allegations in relation to the letter. He said: “The writer of the letter was entitled to have in mind that the clients who would receive the letter would be advised by their own lawyers about it.
“The letter makes no express representation about what Barrowfen II might do and, in my judgment, nor is it more likely than not that the letter makes an implicit representation about that either.
“An experienced lawyer acting for the recipient in this context might well have taken the fact that nothing was being said about what Barrowfen II might do as a hint, and replied with a direct question about Barrowfen II’s plans, but that does not turn the letter into a misrepresentation or a half-truth. In my judgment read in its proper context, it was not.”
But at the meeting, the Stevens & Bolton partner was asked a question by one of the claimant’s directors, and Birss J said it was “more likely than not that the solicitor would have understood that it was a question to which an honest answer would have revealed Girish’s plan”.
He continued: “The fact a solicitor does not act for the questioner does not entitle them to give a knowingly misleading answer and practice a deceit. Honest approaches which were available included giving no answer at all or a full one. There may be other alternatives too.
“[The partner’s] answer was that there was ‘nothing in particular to tell’ about the assignment save that Zurich was pushing for payment. If [he] knew about Girish’s plan based on the assignment, then to state there is nothing to tell would be knowingly to mislead.
“Moreover in that context, the reference afterwards to Zurich may well imply that the reason for the assignment was to neutralise the threat to Barrowfen, whereas the opposite was true.”
Birss J acknowledged that the claimant was making “very grave allegations against a solicitor”, but added: “Legal representatives are often put in a difficult position when asked direct questions by their client’s rivals, as this case demonstrates. This is not the trial and all I am concerned with is whether the claimant’s case is sufficient to go to trial.
“In my judgment the case based on the statements made at the 9th December meeting, set in its overall context and advanced as part of each of the three grounds, should go to trial.”
The trial is due in early 2021. The issues also include a claim that Stevens & Bolton breached its fiduciary duties and/or duties of care owed to Barrowfen by acting at the same time for Barrowfen and Mr Patel despite knowing there was a conflict of interest.
In a statement, Stevens & Bolton said: “The claim has been running since 2018. It concerns a family dispute. Stevens & Bolton is one of three co-defendants.
“The judgment relates to a recent application made by Stevens & Bolton to strike out certain allegations made in the claim against it. In light of the judgment, part of the claim has now been struck out.
“The judge made no concluded findings of fact at all in relation to those parts that he allowed to proceed and the claim is denied in full.”
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