In the recent case of Barrowfen Properties Ltd v Patel & Ors , the High Court has provided important insights into the expected conduct of solicitors when dealing with claims of tort of deceit. This case, which involved allegations of dishonest assistance, deceit, and unlawful means conspiracy, highlights the delicate balance between acting in the best interests of a client and adhering to professional standards.
The strike out application in question arose from a series of claims initiated by members of a wealthy family that owns various companies worldwide. The claimant in this case was Barrowfen Properties Limited (Barrowfen), a company within this network. Girish Patel, a member of the family and former director of Barrowfen, was named as the first defendant. Stevens & Bolton, a solicitor firm that had previously represented Barrowfen, was the second defendant. The third defendant was Barrowfen II, a company controlled by Girish.
The claimant alleged that Girish had attempted to gain sole control of Barrowfen to acquire a valuable commercial property owned by the company. According to Barrowfen, when previous attempts to take over the company failed, Girish devised a plan to place Barrowfen into administration through the establishment of a new company, Barrowfen II. To save Barrowfen from enforcement action by Zurich Assurance, Girish represented that Barrowfen II would take over the loan and debenture owed to Zurich.
The central allegation in the case was that Stevens & Bolton, while representing Girish and Barrowfen II and not Barrowfen itself, misled Barrowfen’s other directors about the true purpose of the assignment. The claimant contended that Stevens & Bolton gave a deliberately misleading impression that the assignment aimed to protect Barrowfen from enforcement, when in reality, it was part of the plan to place the company into administration.
The Tort of Deceit
The tort of deceit, also known as fraudulent misrepresentation, provides a legal basis for individuals who have been deliberately misled or lied to seek redress for the harm they have suffered. To succeed in a claim of deceit, a claimant must establish several elements:
- The defendant made a false representation.
- The defendant knew the representation was false or was reckless as to its truth or falsity.
- The defendant intended for the claimant to act or refrain from acting based on the representation.
- The claimant was indeed induced to act or refrain from acting.
- The claimant suffered a loss as a result.
The Outcome of the Case
The judge ruled in favor of striking out the allegations of dishonesty relating to the representations made in the letter on December 4, 2015. However, the judge refused to strike out the allegations related to the representations made during the meeting on December 9, 2015.
The judge emphasized that the letter’s author had the expectation that the recipients, who were advised by their own lawyers, would fully consider its contents. Although an experienced lawyer might have interpreted the absence of information about Barrowfen II’s plans as a hint, the judge stated that it did not turn the letter into a misrepresentation or a half-truth.
While Stevens & Bolton argued that they owed no duty to Barrowfen at the time, the judge deemed this argument as irrelevant and potentially misleading. It was clarified that regardless of the duty owed, no one is entitled to knowingly make a false representation to another person, intending for them to rely on it to their detriment. Although Stevens & Bolton did not owe a duty to Barrowfen at that specific time, they did have a duty to refrain from practicing deceit.
The case is set to proceed to trial in early 2021.
This case highlights the challenges faced by legal professionals when navigating between their clients’ best interests and professional responsibilities. As acknowledged by Judge Birss, legal representatives often find themselves in difficult positions when confronted with direct questions from their clients’ rivals. Striking a balance between acting in the client’s best interest and adhering to best practices is crucial for maintaining public confidence. As legal professionals, it is our duty to uphold the highest standards of conduct to ensure the integrity of the legal profession.
Please note that this article is not intended to provide legal advice and should not be relied upon as such.