KYC Formalities Do Not, Without Clear Intention, Make an Instructing Law Firm Personally Liable for Fees

Commentary on DAC Beachcroft Claims (Scotland) Ltd v Mohammed Al Dahbashi Advocates, [2025] CSOH 120, Outer House, Court of Session (Lord Lake, 19 December 2025).

1. Introduction

This decision addresses a recurring but legally delicate question in modern cross-border litigation: when a foreign law firm instructs Scottish solicitors to act in Court of Session proceedings, and the engagement letter is addressed to that foreign firm as “the client”, does the foreign firm itself become personally liable for the Scottish firm’s fees, or is it merely acting as agent for its own underlying client?

The case arises in the context of:

email-based engagement between two law firms;
anti-money laundering (AML) and Know Your Client (KYC) compliance;
classic agency law principles about disclosed principals and agents’ personal liability; and
modern contract interpretation principles and the use of extrinsic evidence.

The pursuer, DAC Beachcroft Claims (Scotland) Ltd (“DAC Beachcroft”), sought payment of outstanding invoices for legal services provided in Court of Session litigation styled Leander v McLeish and Bogside Investments Ltd. The defender, Mohammed Al Dahbashi Advocates, trading as ADG Legal (“ADG”), a Dubai law firm, had made the initial approach and received an engagement letter addressed to it as “client”. However, ADG contended that it had acted purely as instructing agent for its own client, Leander CB Consultants Limited, a Hong Kong company, and therefore had incurred no personal liability for DAC Beachcroft’s fees.

By agreement, the Court heard a preliminary proof restricted solely to the question of who was contractually liable to pay DAC Beachcroft’s fees: ADG, Leander, or both. There were no witnesses; instead, the parties adopted a joint bundle of productions and a joint minute admitting their authenticity and dates. The dispute thus turned entirely on the proper analysis of the email exchanges and the engagement documentation.

The judgment is important because it:

clarifies how Scottish law determines the capacity in which an instructing law firm contracts;
explains the relationship between agency presumptions and signatory presumptions;
confirms the role of extrinsic evidence (emails, context) in identifying contracting parties; and
addresses whether KYC/AML-driven choices in engagement documentation can shift fee liability.

2. Summary of the Judgment

2.1 Core Issue

The single question for Lord Lake was:

Whether the terms of engagement (formed through an exchange of emails and a letter of engagement) imposed liability on ADG to pay DAC Beachcroft’s fees and outlays, or whether liability lay only with the ultimate client, Leander CB Consultants Ltd.

2.2 Key Facts in Outline

ADG, a Dubai firm, emailed DAC Beachcroft in December 2021 seeking assistance in what was described initially as a debt recovery matter.
ADG later identified its client as Leander CB Consultants Ltd, a Hong Kong company, and supplied corporate documents and personal identification for Leander’s executive chairman for KYC purposes.
DAC Beachcroft then proposed:
“So far as engagement terms are concerned, I think it’s probably simplest and quickest if we engage your firm as the client, essentially as instructing agents.”
ADG replied that this would “make things easier” and asked what documents were needed “in relation to ADG for that purpose.”
DAC Beachcroft issued a letter of engagement and standard terms and conditions addressed to ADG Legal, noting that:
- “You have instructed us in connection with the matter of Leander v McLeish and Bogside Investments Ltd…”;
- “by your acceptance you will have entered into a contract with us”; and
- standard terms defining “The Client” (without specifying identity) and stating invoices could only be issued to “the Client”.
ADG responded: “This is accepted” and instructed DAC Beachcroft to proceed.
When DAC Beachcroft later issued an interim invoice addressed to ADG, ADG queried why it was not addressed to Leander and insisted it was merely acting as agent. DAC Beachcroft initially accepted to reissue to Leander and mentioned providing a new engagement letter to Leander.

2.3 Decision

Lord Lake held that ADG did not incur personal liability for DAC Beachcroft’s fees. The action was dismissed.

The critical findings were:

ADG instructed DAC Beachcroft on behalf of a disclosed principal, Leander, as was made clear in the 22 December 2021 email naming Leander as “the client” and providing KYC material.
The later proposal to “engage [ADG] as the client, essentially as instructing agents” was adopted purely as a KYC/AML convenience to expedite matters, not as an intention for ADG to interpose its personal credit and assume fee liability.
Although the engagement letter and terms, taken in isolation, would suggest ADG as “the Client” and thus liable, they could not be read in isolation. Read in light of the earlier emails and their rationale, they did not alter the underlying agency relationship.
Post-contract correspondence about invoices did not alter or clarify the original capacities in a way that could shift liability.
On an objective assessment of all communications and context, there was no evidence that ADG intended to interpose its own credit or undertake personal liability to DAC Beachcroft.

Accordingly, the defender’s first plea in law was sustained and the action dismissed.

3. Analysis

3.1 Precedents and Authorities Cited

3.1.1 Lindsay v Craig 1919 SC 139

The central Scottish authority deployed by the pursuer was Lindsay v Craig, where Lord Cullen explained the dual principles governing agents acting for disclosed principals:

“…an agent acting for a disclosed principal may interpose his own personal credit and obligation in the transaction. The rule of law is succinctly stated in Pollock on Contracts to the effect that an agent ‘is personally liable if he undertakes to be so: such an undertaking may be inferred from the general construction of a contract in writing, and is always inferred where the agent contracts in his own name without qualification.’”

Two key ideas flow from this:

Baseline rule: an agent for a disclosed principal normally creates a contract between principal and third party, not between agent and third party.
Exception: an agent may nevertheless become personally liable if they undertake to be so, and such an undertaking may be:
- express; or
- inferred where the agent contracts in their own name without any qualification.

This case underpinned DAC Beachcroft’s argument: ADG had signed/accepted the engagement letter “in its own name” and so, on Lindsay, there was at least a presumption of personal liability unless the rest of the documentation made it clear ADG was not intended to be bound.

3.1.2 Digby Brown & Co v Lyall 1995 SLT 932

A later decision (by another Lord Cullen) in Digby Brown & Co v Lyall reinforced the same principle in the specific context of solicitors’ letters:

“It is well settled that if such an agent signs a contractual document without qualifying his signature there is a presumption that he is contracting personally. In order to avoid this it must be apparent from the other parts of the document that he did not intend to bind himself to perform.”

Lord Cullen there cited:

Stewart v Shannessy (1900) 2 F 1289; and
Lindsay v Craig,

and also aligned Scottish law with English law (referring to Bowstead on Agency and Cooke v Wilson).

In Digby Brown itself, a letter of obligation beginning “we hereby undertake on behalf of our above named clients” was held not to bind the solicitors personally. The crucial wording “on behalf of our above named clients” was enough to rebut the presumption.

In the present case, Lord Lake uses Digby Brown in two ways:

to confirm the general presumption about personal liability where an agent signs without qualification; and
to illustrate that precise wording in context (e.g. “on behalf of”) may show that a law firm is not undertaking personal obligations even when writing in the first person.

3.1.3 The Starsin [2004] 1 AC 715 (HL)

The House of Lords decision in The Starsin was cited (via London Executive Aviation) for a crucial distinction drawn by Lord Millett between:

the identity and capacity of contracting parties; and
the terms and conditions of the contract.

Lord Millett said:

“The identity of the parties to a contract is fundamental… It is a question of fact and may be established by evidence. Such evidence is admissible even where the contract is in writing…”

and:

“Where a contract is contained in a signed and written document, the process of ascertaining the identity of the parties and the capacity in which they entered into the contract must begin with the signatures and any accompanying statement which describes the capacity in which the persons who appended their signatures did so… But it is not of the same order as the process of construing the detailed terms and conditions of the contract.”

Lord Lake expressly adopts this approach, applying it to the slightly different question here:

Not “who” are the parties? (they are DAC Beachcroft and ADG: that is not in doubt),
but “in what capacity” did ADG enter the contract, and did that capacity entail personal liability?

Importantly, The Starsin justifies the use of extrinsic evidence (such as earlier emails and the factual context) to determine capacity, even where there is a written engagement letter.

3.1.4 English Cases: Hamid v Bradshaw Partnership and London Executive Aviation

The defender relied on two English decisions:

Hamid v Bradshaw Partnership [2013] EWCA Civ 470; and
London Executive Aviation Ltd v Royal Bank of Scotland Plc [2018] EWHC 74 (Ch).

From these, ADG drew two propositions:

A person who signs a document is presumed to be the contracting party unless:
- it is clear on the face of the document that they sign as agent for an identified principal; or
- extrinsic evidence shows that both parties knew they were signing only as agent.
Where the issue is identity of the parties, extrinsic evidence is admissible to establish the position, even where the contract is in writing.

These cases dovetail with The Starsin, reinforcing that:

questions about who is a contracting party or in what capacity they contract are fact-sensitive; and
both the document and its surrounding context can be considered, so long as this does not contradict express terms in a way that negates the contract.

3.1.5 Glenfiddich Wind Ltd v Dorenell Windfarm Ltd [2025] CSOH 62

DAC Beachcroft adopted Lord Sandison’s statement of the law in Glenfiddich Wind Ltd v Dorenell Windfarm Ltd as to the general approach to contractual construction: an objective assessment of what a reasonable person, with the parties’ knowledge, would understand the parties to have meant by the language used, taking into account the commercial context.

Lord Lake accepts that those “well-known principles of commercial construction” govern how one interprets the engagement documents, but emphasises (following The Starsin) that the task here is a little different: it is about identifying capacity and true “client” status, which can involve a wider factual inquiry.

3.1.6 Ashtead Plant Hire Co Ltd v Granton Central Developments Ltd 2020 CSIH 2

The defender relied on Ashtead Plant Hire for the role of commercial common sense in contractual interpretation. Lord Lake recognises this factor but is ultimately cautious about invoking it here, as the relevant commercial considerations pull in opposing directions (see below at 3.2.5).

3.2 Legal Reasoning

3.2.1 The Competing Presumptions

Two presumptions sat in tension:

Agency presumption: An agent acting within authority for a disclosed principal ordinarily creates a contract between principal and third party, not between agent and third party.
Signature presumption: A person who signs a contract in their own name without qualification is presumed to have intended to be personally bound.

Both sides accepted that:

these are only presumptions, and
the real question is always one of construction (or, putting it in Lord Millett’s terms, a question of fact: in what capacity did the signatory contract?).

Lord Lake therefore set about reading the full chain of communications to determine whether ADG had, in Lord Cullen’s words, “interpose[d] its own personal credit” in the transaction.

3.2.2 The Early Emails: Establishing a Disclosed Principal

The initial email of 20 December 2021 from ADG to DAC Beachcroft referred vaguely to “debt recovery” and “we need some assistance”. At that point, it was unclear whether the debt was owed to ADG or to one of its clients.

The key turning point came on 22 December, when ADG wrote:

“The client, Leander CB Consultants Limited, is a Hong Kong company”;
it identified the person from whom instructions were taken (Christopher Shute) and supplied corporate and personal documents to satisfy DAC Beachcroft’s KYC obligations.

Lord Lake held that once this email was received:

DAC Beachcroft knew that the beneficiary of the legal services was Leander, not ADG;
Leander was a disclosed principal; and
subject to contrary indication, the agency presumption then applied: ADG was not intending to assume personal liability for DAC Beachcroft’s fees.

The fact that KYC documentation was supplied for Leander was particularly telling: on its face, DAC Beachcroft was undertaking AML checks on Leander as its client, reinforcing that Leander – not ADG – was, at that stage, treated as the real client.

3.2.3 The “Simplest and Quickest” Proposal: KYC Convenience, Not Assumption of Liability

The critical email from DAC Beachcroft later on 22 December said:

“So far as engagement terms are concerned, I think it’s probably simplest and quickest if we engage your firm as the client, essentially as instructing agents.”

ADG replied:

“That would certainly make things easier, if that is acceptable for you. Please let us know what docs you would need in relation to ADG for that purpose.”

This is the crux of the dispute. DAC Beachcroft argued that:

by agreeing to be “engaged as the client” and then accepting the letter of engagement, ADG had undertaken personal obligations as the contracting “Client”; and
standard terms stipulating that invoices could only be issued to “the Client” confirmed that liability lay with ADG.

Lord Lake’s reasoning rejects this reading when the emails are considered in context:

Both parties indicated their understanding to the court that KYC rules cannot lawfully be circumvented by simply naming a law firm as the “client” in place of the true underlying client.
The proposal to treat ADG as “the client” was made “because it was seen as being ‘simplest and quickest’ in terms of compliance with KYC/AML rules” and in the context of a degree of urgency about commencing proceedings.
Viewed objectively, the focus of the email exchange was on speed and formality, not on a substantial reallocation of financial risk.

Lord Lake holds that:

“There is nothing in the exchange of emails in paragraph (c) which indicates that there was any intention to innovate upon the position that existed following the email referred to in paragraph (b). Nothing is apparent from either email that the intention is to alter who is to be responsible for making payment.”

In other words, a reasonable person, aware that:

Leander was already identified as “the client”; and
the KYC system was driving the suggested structure;

would not infer that ADG had decided to interpose its personal credit for DAC Beachcroft’s fees.

3.2.4 The Engagement Letter and Standard Terms: Cannot Be Read in Isolation

DAC Beachcroft’s strongest textual point was the engagement letter itself (23 December 2021), which:

was addressed to ADG Legal;
stated, “You have instructed us in connection with the matter of Leander v McLeish… where proceedings are to be raised in Scotland”;
referred in several places to “the work instructed by you”; and
declared that “by your acceptance you will have entered into a contract with us”.

The standard terms then defined “the Client” (without naming ADG or Leander) and stipulated that invoices could only be issued to “the Client”.

Lord Lake accepts that taken alone these documents would support DAC Beachcroft’s position:

“If the letter of engagement and terms and conditions (paragraph (d)) and the response to them (paragraph (e)) were taken in isolation without the emails that precede them, the reasonable inference would be that the defender was ‘the client’, that they had entered into the contract with the pursuer and that they would be liable for the fees.”

However, The Starsin/Lord Millett approach mandates that they not be taken in isolation. One must consider:

the earlier email naming Leander as “the client” and supplying KYC; and
the subsequent proposal to treat ADG as client “essentially as instructing agents” for convenience.

Once those are taken into account, the engagement letter is seen to be:

procedural in character—designed to streamline KYC formalities; and
not intended as a novation of the substantive client relationship from Leander to ADG.

Thus, the presumption created by ADG’s “unqualified” acceptance of the engagement letter is rebutted by the wider email context.

3.2.5 Commercial Common Sense: Inconclusive in this Context

The defender argued that it would make little commercial sense for ADG to assume personal liability for substantial Scottish litigation costs in a matter where the fees were being earned entirely by DAC Beachcroft. DAC Beachcroft, conversely, argued that it was commercially sensible for them to be able to rely on the credit of an established law firm like ADG rather than chasing an overseas corporate client directly.

Lord Lake declines to give decisive weight to “commercial common sense” in either direction:

“On one view it might well be that it makes sense for the pursuer to want to be in a position to rely on the credit of the defender… However, it might also be said that in a transaction where the pursuer rather than the defender were providing the service and earning a fee, there was no economic rationale for the defender assuming a risk.”

Because each side can tell a plausible commercial story, this factor does not resolve the question. Instead, the decision rests squarely on the actual language and objective context of the communications.

3.2.6 Later Invoices and Correspondence: No Retrospective Re-Characterisation

The later emails in May and August 2022, in which:

DAC Beachcroft initially invoiced ADG,
ADG protested that it was merely an agent,
DAC Beachcroft suggested reissuing the invoice to Leander and floated issuing a new engagement letter, and
a later email insisted an invoice could not be addressed to Leander as no terms of engagement existed with it,

might seem, at first glance, to reflect the parties’ evolving views on who the true client was.

Lord Lake, however, treats these as post-contractual behaviour, of limited or no weight in objectively determining the capacity in which ADG originally contracted:

“It might be said that the fee account was rendered to the defender and this tended to show the pursuer's understanding. That would be to approach the matter subjectively. It could carry no more weight than the defender's own statement in response to it that the letter of engagement was directed to them only as instructing agents.”

As such, these later communications do not alter or clarify the original objective intention in a way that could displace the earlier analysis based on the December 2021 communications.

3.3 Impact and Significance

3.3.1 Clarifying the Status of Instructing Law Firms in Cross-Border Litigation

The decision confirms, in a modern, cross-border context, that:

A law firm which instructs another firm on behalf of a clearly disclosed client will not lightly be treated as personally liable for fees, even if the engagement letter is addressed to it and calls it “the client”.
The underlying client in litigation (here, Leander) remains the substantive client for whose benefit services are provided and who ordinarily bears liability, absent clear language to the contrary.

This is of practical importance for:

overseas firms instructing Scottish solicitors; and
Scottish firms engaging with foreign instructing agents.

It signals that courts will scrutinise the whole course of dealings and will be slow to infer that an overseas law firm has assumed an unforeseen financial risk, unless there is clear evidence that it has agreed to do so.

3.3.2 KYC/AML Formalities and the Identity of the “Client”

An especially notable feature is the Court’s handling of KYC/AML considerations:

The proposal to treat ADG as “the client” was explicitly justified as being “simplest and quickest” for KYC compliance.
Both parties accepted that, in substance, the AML regime could not legitimately be avoided by such a device – if it could, the regime would be rendered largely ineffective.

Lord Lake treats this as context demonstrating that:

the designation of ADG as “client” in the engagement letter was an administrative convenience, not a substantive transfer of liability;
KYC formalities should not be confused with the core contractual allocation of who is the client liable for fees.

This is an important warning to practitioners:

Regulatory onboarding structures do not, by themselves, determine substantive contractual rights and obligations.
If firms intend the instructing firm to be the real fee-paying client, they should say so in clear, unambiguous terms in the engagement letter.

3.3.3 Use of Extrinsic Evidence to Identify Capacity of Parties

The judgment reinforces the principle from The Starsin and the English cases that:

the identity and capacity of contracting parties is a question of fact, and
extrinsic evidence (such as the email chain before the formal engagement letter) is admissible and often crucial.

Practically, this means:

those drafting engagement documents cannot assume that “who the client is” will be determined purely by the address line on a letter or by defined terms in standard conditions;
earlier communications (e.g. where a client is identified as “our client” with supporting KYC documentation) will be examined and may rebut any presumption based on later formal documentation.

3.3.4 Incentive for Clearer Engagement Drafting

The case highlights a clear drafting lesson for Scottish solicitors:

If it is intended that the instructing law firm is to be personally liable as the “Client”:
- the engagement letter should explicitly state that the law firm is assuming personal liability for fees, even where services benefit an underlying client; and
- any reference to “instructing agents” should be reconciled with that intention to avoid ambiguity.
If, conversely, the intention is that the underlying litigant will be the fee-paying client:
- the engagement letter should identify that litigant expressly as “the Client”; and
- the role of the foreign firm as “instructing solicitors” should be clearly described as agency.

Absent such clarity, courts will look beyond the engagement letter to the practical realities revealed in communications – and may reach a conclusion contrary to the drafting party’s expectations.

4. Complex Concepts Simplified

4.1 Disclosed Principal and Agent’s Personal Liability

A principal is the person on whose behalf an agent acts.
A disclosed principal is one whose identity is known to the third party (here, DAC Beachcroft).
As a default rule:
- where an agent contracts for a disclosed principal, the principal is bound and liable; and
- the agent is usually not personally liable unless they undertake to be so.
An agent may become personally liable where:
- they sign documents in their own name without any indication they act as agent;
- or the overall context shows they intended to “interpose their own credit”.

4.2 Know Your Client (KYC) and Anti-Money Laundering (AML)

KYC is the obligation on solicitors (and other regulated entities) to verify a client’s identity and understand their circumstances and the purpose of the transaction.
It is part of the AML framework to prevent money laundering, terrorist financing, and other illicit use of legal services.
KYC involves collecting:
- corporate documents (e.g. certificate of incorporation);
- business registration records; and
- personal identification and proof of address for controlling individuals.
In this case, KYC information was first provided for Leander, indicating that DAC Beachcroft initially treated Leander as their client for AML purposes, before later seeking to simplify matters by naming ADG as the “client”.

4.3 Missives and Letters of Obligation (Contextual Illustration)

In Scottish conveyancing:
- Missives are the contractual letters between purchaser’s and seller’s solicitors, forming the contract for the sale of heritable property.
- A letter of obligation is a separate assurance given by a solicitor (typically the seller’s) about matters such as settlement of certain charges or registration.
Generally:
- rights and duties under missives belong to the clients, not the solicitors personally;
- but a letter of obligation may, depending on its wording, bind the law firm itself.
Lord Lake uses this to illustrate that:
- even within a familiar transactional context, the wording of individual communications determines whether the law firm or the client is personally bound.

4.4 Novation

Novation is the substitution of one contracting party for another, with the consent of all involved.
For a novation to occur:
- the original contract must be replaced; and
- the new party takes over the obligations of the old party.
In this case, DAC Beachcroft failed to show that the move to engaging ADG as “the client” was intended as a novation of the client relationship from Leander to ADG. The emails showed only a change in form, not in substance.

4.5 Preliminary Proof and Pleas in Law

A preliminary proof is a hearing restricted to a specific issue (here, liability for fees) before the rest of the case is heard.
Pleas in law in Court of Session practice are concise statements at the end of written pleadings which set out the legal basis for the orders sought.
To sustain a party’s plea in law is to uphold it; the resulting disposal here was dismissal of the action.

5. Conclusion

Lord Lake’s decision in DAC Beachcroft Claims (Scotland) Ltd v Mohammed Al Dahbashi Advocates provides a careful and modern restatement of how Scottish law determines who is the client and who is personally liable for solicitors’ fees when an instructing law firm is involved.

Key takeaways include:

Where an overseas law firm clearly identifies an underlying client and supplies KYC for that client, it is strongly indicative that the underlying client is the principal, with the law firm acting as agent.
The mere fact that engagement documentation is addressed to the instructing firm as “the client” does not, without more, convert that firm into the fee-paying principal, especially where the context shows that this designation was adopted for KYC/AML convenience.
Courts will apply both:
- the agency principle (no personal liability for an agent of a disclosed principal, absent clear undertaking); and
- the signature presumption (those who sign in their own name are presumed to be bound),
- but will resolve any tension by examining the and the objective commercial context.
The decision underscores the admissibility and importance of extrinsic evidence in determining the capacity in which a party contracted, in line with The Starsin and English authorities.
For practitioners, the judgment strongly encourages:
- clear, express wording in engagement letters as to who is “the Client” and whether an instructing law firm assumes personal liability; and
- a separation, in drafting and in thinking, between regulatory onboarding mechanisms and the substantive contractual allocation of liability for fees.

In the broader legal context, this case reinforces traditional agency principles while adapting them to contemporary practice in cross-border litigation and AML compliance. The core principle that emerges is encapsulated in the title of this commentary: KYC formalities do not, without clear and objective intention, make an instructing law firm personally liable for another firm’s fees.

KYC Formalities Do Not, Without Clear Intention, Make an Instructing Law Firm Personally Liable for Fees – Commentary on DAC Beachcroft Claims (Scotland) Ltd v Mohammed Al Dahbashi Advocates [2025] CSOH 120