Proceedings against a law firm which overlooked instructions sent to its ‘contact us’ email address and subsequently released £377,000 from its client account have been dismissed by the High Court.
Commercial firm DKLM was acting for a party in a property venture when a third party, Vidya Bhushan Goyal, sent £160,000 to the client account. A few hours later, Goyal sent an email to DKLM’s generic ‘contact us’ address saying the money should only be used as proof of funds until further notice.
Six months later, Goyal transferred a further £590,000 to DKLM’s client account and, several weeks after that, sent an email to the ‘contact us’ address to confirm. By that time, however, DKLM had already released £378,000 to its client. Goyal brought legal action against the firm for breach of trust and attempted to sue the client himself.
Mr Justice Morgan dismissed the appeal in relation to DKLM, finding that the solicitors handling the transaction did not necessarily know the contents of the relevant email. ‘The only person identified who might have known of the email was the practice manager who dealt with emails received at the “contact us” address,’ he said.
He added: ‘I see the force of the argument that Mr Goyal had done what he could to communicate with the solicitors and the law should hold that the contents of his email had come to the attention of the solicitors so that they knew of its contents. As against that, it can be said that Mr Goyal’s attempt to impress a trust on the payment of £160,000 left a great deal to be desired.’
Morgan J also raised concerns about the timing of Goyal’s email. When a sum of money is paid by third party to a solicitor, to be held in the client account, the immediate default position is that the money is held on trust for the client, he said. As a result, Gopal could not, even by an e-mail sent a few hours later, have brought that trust to an end.
The judge concluded that even if there had been a trust created in relation to the first payment, there was not one in relation to the second and dismissed the appeal in relation to DKLM. The appeal in relation to the client succeeded.
Andrew Butler QC of Tanfield Chambers, who represented Goyal, said the case contains ‘many nuggets for practitioners’. In a blog post he wrote: ‘The timing point…has far-reaching implications – while, obiter, it suggests that solicitors must be extremely wary of following instructions from a third party funder which are given after the funds have been provided,’ he said.
DKLM was represented by Beale & Company Solicitors LLP and Goyal by Child & Child.