An action was brought 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 pounds 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 pounds 225 each when he knew that they were worth less. A ‘clean hands’ issue arose from the fact that Moody had paid two sums of pounds 100 to Cox as a sweetener. 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.
Held: The argument was decisively rejected. A fiduciary with two principals must take care not to find himself in a position where there is an actual conflict of duty so that he cannot fulfil his obligations to one principal without failing in his obligations to the other.
Lord Cozens-Hardy MR said: ‘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.’
Scrutton LJ referred to evidence given by the defendant solicitor, Mr Cox to the effect that he, Cox, knew that the price the client, Moody, was paying for the cottages was a good deal more than the value that had been placed on the cottages for probate purposes and that he, Cox, had not told the client the amount of the probate valuation.
He continued: ‘A man who says that admits in the plainest terms that he is not fulfilling the duty which lies upon him as a solicitor acting for a client. But it is said that he could not disclose that information consistently with his duty to his other clients, the cestius que trust. It may be that a solicitor who tries to act for both parties puts himself in such a position that he must be liable to one or the other, whatever he does. The case has been put of a solicitor acting for vendor and a purchaser who knows of a flaw in the title by reason of his acting for the vendor, and who, if he discloses that flaw in the title which he knows as acting for the vendor, may be liable to an action by his vendor, and who, if he does not disclose the flaw in the title, may be liable to an action by the purchaser for not doing his duty as solicitor for him. It will be his fault for mixing himself up with a transaction in which he has two entirely inconsistent interests, and solicitors who try to act for both vendors and purchasers must appreciate that they run a very serious risk of liability to one or the other owing to the duties and obligations which such curious relation puts upon them.’
Lord Cozens-Hardy MR, Scrutton LJ, Warrington LJ
[1917] 2 Ch 71
England and Wales
Cited by:
Cited – Hilton v Barker Booth and Eastwood HL 3-Feb-2005
The claimant had instructed the defendant solicitors to act for him, where he was to contract with another client of the same solicitor in a land development. The solicitor failed to disclose that the other client had convictions for dishonesty, and . .
Distinguished – Hilton v Barker Booth & Eastwood (a Firm) CA 22-May-2002
The firm of solicitors acted for both parties in a conveyancing transaction, in a situation when they were permitted to do so. The firm had previously acted for one party in a case where he had been convicted of a crime. The other party said the . .
Cited – Burkle Holdings Ltd v Laing TCC 23-Mar-2005
The parties had each instructed the same solicitor, but now disputed the entitlement of the other to see documents held by the solicitor. . .
Cited – Mortgage Express v Abensons Solicitors (A Firm) ChD 20-Apr-2012
The claimant lender sought damages against the defendant solicitors alleging negligence and breach of fiduciary duty by them in acting for them on mortgage advances. The defendants now argued that the allowance of an amendment to add the allegation . .
Lists of cited by and citing cases may be incomplete.
Updated: 25 September 2021; Ref: scu.222537 br>