Lucas v Gilbert [2022] 2 WLUK 177: joint ventures between solicitors and clients, fiduciary duties and undue influence

Judgment has been handed down in Lucas v Gilbert [2022] 2 WLUK 177.

A solicitor and his client entered into a joint venture in respect of the development of a property, by which the solicitor provided the purchase costs and the client agreed to develop the property. The parties agreed to mutually share in the profit generated. The agreement was not reduced to writing. The parties subsequently fell into dispute as what was agreed, and whether the agreement was vitiated by alleged breaches of fiduciary duties or alleged undue influence.

These were the basic facts. The trial took place before HHJ Saggerson. The Judge held that that the Claimants’ case on the agreement was correct; the parties had agreed that the solicitor would be entitled to a 50% shareholding in the property-owning company. In so holding, the Judge referred to and applied the well-known guidance in Gestmin [2013] EHHC 3560 (Comm) and Natwest Markets Plc v Bilta (UK) Ltd (In Liquidation) [2021] EWCA Civ 680 as to the correct approach to witness evidence, in particular where there are gaps in the documentary evidence.

Of more general interest were the Judge’s observations as to whether the agreement was vitiated by alleged breaches of fiduciary duty and alleged undue influence. The basis of these arguments was that the agreement was unenforceable by reason of the solicitor’s fiduciary position, which, it was said: (a) prevented him from profiting under the agreement; and/or (b) meant that the agreement had been entered into by reason of undue influence.

The Judge robustly rejected the Defendants’ argument as to fiduciary duties, citing academic and case-law authority for the (principled) proposition that the scope of fiduciary duties is moulded according to the nature of the relationship and the facts of the case, and the court must be careful not to distort the contractual agreement arrived at between commercially contracting parties by superimposing (strict) fiduciary obligations inconsistent with the contractual bargain.  On the facts, the agreement was outside the scope of any fiduciary relationship between the solicitor and client.

The Judge also dismissed the suggestion that the agreement was entered into by any undue influence, no presumption of which arose because the transaction could readily be accounted for by the ordinary motives of the parties.

There was therefore judgment for the Claimants, and the Court ordered specific performance of the agreement (on the usual basis that the agreement was for the transfer of shares in a private company).

The decision is therefore a salient exemplar of the application of principles applicable whenever a fiduciary and his principal enter into a contractual relationship.

James Goodwin was instructed by IBB Law on behalf of the Claimants.

Click here to view the judgment.