Introduction

Candey Ltd v Bosheh & Anor ([2022] EWCA Civ 1103) is a significant judgment delivered by the England and Wales Court of Appeal (Civil Division) on August 1, 2022. The case revolves around whether a firm of solicitors can bring proceedings against their former client based on an alleged breach of a duty of good faith, particularly in the context of a settlement that negated their entitlement to costs under a Conditional Fee Agreement (CFA).

The key issues addressed in this case include:

• The existence of an implied duty of good faith in solicitor-client relationships under CFAs.
• The extent to which solicitors can rely on privileged and confidential documents when bringing claims against clients.
• The application of legal professional privilege and its safeguards against claims based on alleged client misconduct.

The parties involved are Candey Ltd (the appellant), a firm of solicitors, and Mr. Bosheh and Mr. Salfiti (the respondents), their former clients involved in civil litigation against Sheikh Mohamed.

Summary of the Judgment

The Court of Appeal dismissed the appeal brought by Candey Ltd against Mr. Bosheh and Mr. Salfiti. The original High Court judgment had refused Candey's claims based on fraudulent misrepresentation, deceit, and an alleged implied duty of good faith. The appellate court upheld the judge's findings, emphasizing that:

• The implied duty of good faith could not be established within the CFA framework.
• Candey Ltd could not rely on privileged or confidential documents to substantiate their claims.
• The settlement of the underlying litigation on a 'drop hands' basis did not breach any express or implied duties towards Candey Ltd.

Consequently, the appeal was dismissed, and the original judgment was upheld in favor of the respondents.

Analysis

Precedents Cited

The judgment extensively references and relies upon key precedents to establish the boundaries of implied terms and legal professional privilege:

• Bates v Post Office [2019] EWHC 606 (QB): Defined characteristics of 'relational contracts' where an implied duty of good faith may arise.
• Marks & Spencer PLC v BNP Paribas Securities Services Trust Co. (Jersey) Limited [2015] UKSC 72: Outlined the test for implying terms into contracts.
• Yam Seng Pte v International Trade Corp [2013] EWHC 111(QB): Highlighted the conditions under which an implied duty of good faith may exist.
• JSC BTA Bank v Ablyazov [2014] EWHC 2788: Discussed the iniquity exception to legal professional privilege.
• Paragon Finance PLC & Ors v Freshfields [1999] 1 WLR 1183: Addressed implied waivers of legal professional privilege in litigation between former clients and solicitors.

Legal Reasoning

The court undertook a meticulous examination of whether the relationship between Candey Ltd and the Boshehs constituted a 'relational contract' warranting an implied duty of good faith. Applying the test from Marks & Spencer PLC and further refined in Yam Seng and Bates v Post Office, the court concluded that:

• The CFA between Candey Ltd and the Boshehs did not embody the necessary characteristics of a relational contract.
• The implied duty of good faith was neither reasonable nor necessary for the coherence of the CFA.
• Legal professional privilege remained intact despite allegations of deceit, as the communications did not amount to the iniquity exception threshold.

Furthermore, the court emphasized that:

• Solicitors operating under CFAs do not inherently engage in relationships that necessitate implied good faith obligations.
• The iniquity exception to privilege requires substantial and systemic fraud, which was not evidenced in this case.
• The actions of Candey Ltd in reviewing and utilizing privileged and confidential documents were deemed lawful, as the circumstances did not negate privilege.

Impact

This judgment reinforces the strict boundaries surrounding implied duties of good faith in solicitor-client relationships, especially under CFAs. It underscores the robustness of legal professional privilege, even in scenarios where clients are alleged to engage in deceitful conduct. The decision serves as a precedent affirming that:

• CFAs do not automatically give rise to implied good faith obligations unless the contract is explicitly 'relational'.
• Legal professional privilege remains protected against improper claims, maintaining the integrity of solicitor-client communications.
• Soliсitors cannot leverage privileged information to bring claims against clients absent exceptional circumstances meeting the iniquity exception.

Future cases involving solicitors seeking to claim against clients under similar pretenses will likely reference this judgment to navigate the complexities of implied terms and privilege protections.

Complex Concepts Simplified

Implied Duty of Good Faith

An implied duty of good faith refers to an unspoken obligation requiring parties to act honestly and fairly towards each other within a contractual relationship. In the context of solicitor-client relationships, this duty ensures that both parties uphold integrity in their interactions and decision-making processes.

Relational Contracts

Relational contracts are long-term agreements built on mutual trust, cooperation, and the shared goals of the parties involved. Unlike transactional contracts, relational contracts often encompass aspects that are difficult to fully articulate in written form, making the implication of duties like good faith more feasible.

Legal Professional Privilege

Legal professional privilege is a fundamental principle that protects the confidentiality of communications between a client and their solicitor. This privilege ensures that clients can freely disclose information to their legal advisors without fear of that information being exposed in legal proceedings.

Iniquity Exception

The iniquity exception to legal professional privilege allows for the disclosure of privileged information if the client has engaged in serious wrongdoing, such as fraud, that would render the privilege meaningless or unjust if upheld.

Conclusion

The Candey Ltd v Bosheh & Anor judgment serves as a pivotal reference in delineating the scope of implied duties and the inviolability of legal professional privilege within solicitor-client relationships governed by Conditional Fee Agreements. By rejecting the assertion of an implied duty of good faith and upholding the sanctity of privileged communications, the court has reinforced the existing legal framework that safeguards both the integrity of legal proceedings and the confidentiality essential to effective legal representation.

This decision underscores the importance of clearly defined contractual terms and cautions solicitors against overstepping their roles within the bounds of established legal principles. It also provides clarity for clients and legal practitioners alike, ensuring that the boundaries of implied obligations and privilege protections are well-understood and appropriately respected in future engagements.