Potential pitfalls in acting for both sides: Hilton v Barker Booth and Eastwood

In Hilton v Barker Booth and Eastwood (February 2005), the House of Lords held that where a law firm wrongly acted for both sides in a property transaction (knowing that one party was a bankrupt and convicted of dishonesty offences, and that the other was ignorant of this), the firm put itself in a position where it owed its two clients contractual duties that were inconsistent with each other. This created a conflict of interest contrary to Rule 6 of the Solicitors Practice Rules 1990: there is an unqualified prohibition on the firm acting for both sides if a conflict of interest arises which cannot be waived by informed consent.

It could be no answer to a claim for damages for breach of a contractual obligation that performance of the obligation would have constituted a breach of a contractual obligation owed to someone else. If a firm undertakes to carry out irreconcilable duties, there is no reason why its duties to one client should be impliedly modified to the detriment of the other. A solicitor who acts for more than one party owes a duty of confidentiality to each client but this does not affect his duty to act in the best interests of the other client. Loyalty to a client must be undivided; a firm cannot properly discharge its fiduciary duties to one client whose interests are in opposition to those of another client.

For more information, please contact Claire Cockman at claire.cockman@cms-cmck.competer.maguire@cms-cmck.com or on +44(0)20 7367 2557 or Peter Maguire at or on +44(0)20 7367 2893.