UK: The Sound Of Silence

Last Updated: 15 December 2009
Article by Andrew Blair and Kieran Hamill

In a recession a professional firm may be tempted to keep quiet about the resignation of a key member of the advisory team. But the firm must ensure the client is not misled.

Sir Thomas More, the renowned lawyer and Lord Chancellor, once tried, by his silence, to avoid an early termination of his retainer with Henry VIII. Sir Thomas memorably failed, and was executed as a traitor for refusing to swear allegiance to a parliamentary act impugning the absolute authority of the Vatican. Recently, and in notably less macabre circumstances, the High Court considered whether silence on the part of a professional adviser, which failed to inform the client when a key member of the advisory team resigned, constituted a fraudulent misrepresentation.

The case of Fitzroy Robinson v Mentmore Towers Ltd (2009) concerned a firm of architects but has obvious relevance for solicitors' firms, which can equally face the difficult situation of how best to communicate to clients following the resignation of key individuals. Particularly where, as in Fitzroy Robinson, it is thought that the firm only acquired the business because of the involvement of the individual who has now resigned.

The facts

Fitzroy Robinson, the architects' firm in question, was engaged by the defendant companies in connection with an ambitious scheme to develop a private members' club in Piccadilly and to turn the former home of the Rothschild family into a hotel. Mr Blake was a director of the firm and it was clear from the outset that the defendant companies "liked" Mr Blake. Mr Blake put together much of the bid documentation and was involved in pre-contractual meetings with the defendants. In addition, the defendants were told that Mr Blake would be the team leader on the project throughout.

In March 2006, shortly before contracts were signed with the defendants, Mr Blake gave notice of resignation. Mr Blake was required to work his one year notice period, and the firm did not inform the defendants of the resignation before contracts were concluded. Indeed, the firm did not do so until November 2006, after Mr Blake had set out in a letter to the firm his personal concerns at the client's lack of knowledge.

Understandably, upon being informed, the clients were very concerned by Mr Blake's upcoming departure, but the project was well advanced and, even if the defendants had so wished, changing advisers could have proven detrimental to the progress of the project.

For various reasons the project was never completed and, when the firm subsequently made a claim for unpaid fees, the defendants counterclaimed alleging that the failure to inform them of Mr Blake's resignation was a misrepresentation and/or breach of an implied term of the contract. The defendants also alleged negligence by the firm in relation to the planning application for the Piccadilly properties.

The Court's ruling

The Court found on the facts that the involvement of Mr Blake was a significant factor in the defendants' decision to grant the contract to the firm. Key reasons for the court's decision included:

  • that the initial contact came about as a result of Mr Blake;
  • he was described as "our key player" in the firm's own documents;
  • the bid documents laid stress on a previous project for the defendants overseen by Mr Blake; and
  • there was an admission by one of the firm's witnesses that the reason they got the contract was probably that the defendants liked Mr Blake.

The Court also found that Mr Blake was instructed by the firm to keep silent about his resignation, because there was concern that if the defendants had found out then they might have instructed an alternative firm. The Court found that the fact that a representative of the firm repeatedly told the defendant companies that Mr Blake would be involved for the duration of the project was a fraudulent misrepresentation which was designed to induce the defendants to enter into the contract with the firm. It followed that but for that misrepresentation the defendants would not have entered into the contract.

The defendants claimed they were entitled to damages for the delay, disruption, changes to personnel and loss of continuity that they suffered when Mr Blake departed. However, the Court found that there was no evidence that the departure had caused any delay, or any disruption to the defendants themselves or duplication of the defendants' own work. Therefore, the defendants' claim was restricted to duplication and disruption of the architects' work and was likely to operate by way of a diminution of fees otherwise due.

The Court also found that, even if it had not held that there was a pre-contractual misrepresentation, then it would have held that the architects were in breach of the terms of the contract between the parties, which envisaged that the defendants would be told of the need for a replacement for Mr Blake promptly. The allegations of professional negligence against the firm were, however, rejected.

Conclusion

The judge commented that the judgment may be of limited applicability to other professional contracts within the construction context as it will be relatively rare that the promised involvement of one particular member of a large professional team is so clearly and obviously the major reason why the contract is placed with that particular company. However, it is clear that certain solicitors and other professionals can have significant reputations in the market and expertise which may lead clients to send work directly to a named individual, and then expect that individual to see matters through to resolution.

Although the damages awarded in the Fitzroy case once assessed are unlikely to be high, nonetheless the time and cost of dealing with the successful misrepresentation allegations were no doubt significant, not to mention the potential damage to reputation. Furthermore, the defendants did not in that instance claim for rescission, which the judge foresaw as a possible head of loss in these circumstances. Depending on the facts, there is therefore certainly a risk of more significant losses, extending beyond the duplication costs which many law firms routinely discount from client bills.

Solicitors must be alive to how best to react to the resignation of a key member of staff. This case shows why legally, rather than commercially, any client relationships must be handled very carefully. The temptation may be to keep quiet for as long as possible, particularly if the solicitor in question has a long notice period, but this case demonstrates that it is possible to cross the line so that a client is misled. Even if it is not the case that the client is misled to such a degree that there is a cause of action, it is still likely to cause significant damage to the client relationship. The best approach would seem to be frankness and prompt discussions with the client of any changes in personnel. Certainly, following Fitzroy Robinson, it is clear that, as Sir Thomas More found to his cost, silence is not the answer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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