Claimant's managing director making investment arrangement with assistance of solicitor - claimant alleging deceit and seeking damages for breach of agreement against firm - need to consider both general description and nature and characteristics of acts alongside subjective test of knowledge of solicitor's authority to act

JJ Coughlan Ltd v Ruparelia and another: CA (Lord Justice Peter Gibson, Lord Justice Dyson and Lord Justice Longmore): 21 July 2003

The claimant company's managing director made a financial arrangement to invest a large sum of money with the assistance of a solicitor.

The company alleged it was a victim of fraud and brought an action in deceit and sought damages for breach of an escrow agreement against the first defendant solicitor and the second defendant, his sole partner in a firm of solicitors.

The judge found for the claimant against the first defendant and dismissed the claims against the firm.

The claimant appealed.

Andrew Sutcliffe QC and David Quest (instructed by Woolsey Morris & Kennedy, Sidcup) for the company; Michael Pooles QC and Mark Cannon (instructed by Reynolds Porter Chamberlain) for the second defendant.

Held, dismissing the appeal, that when considering the liability of a firm of solicitors under the Partnership Act 1890 for acts done by a solicitor as the objective part of the test, the court had to consider whether the general description of the act done fell within the ordinary course of business of a solicitor; that it was also necessary to take account of the nature or characteristics of the act and examine the substance so that viewed fairly and properly it was the kind of act in which solicitors ordinarily engaged; that the subjective element of the test was that if the person dealing with the solicitor knew that he was acting without the principal's authority the principal could not be held liable; and that, accordingly, since the judge found that there was nothing normal about the transaction, not only on the basis that the agreement contained false statements but also that the claimant's managing director did not believe the solicitor was engaged in a transaction in the ordinary course of a solicitor's business, he had rightly found for the defendant.