This case is another in a recent stream of negligence cases which highlights the importance of identifying causative loss before bringing a professional negligence claim against a firm of solicitors.
The Claimants were directors of Pink & Lily Limited (“P & L”) and ran a restaurant known as Barn Brasserie. The Claimants decided to open a second restaurant and formed a limited liability partnership known as Blue & Ginger LLP (“B & G”). They identified suitable commercial premises and instructed the Defendant firm of solicitors in connection with the lease.
The landlords required the Claimants to personally guarantee B & G’s obligations under the lease during the guarantee period, being three years from the date of the lease. B & G went into occupation in January 2006, but the lease was not executed until December 2006. The Claimants thought that the date of the lease would be the date of occupation and were not advised that it would in fact be the date of execution, with the result that the Claimants’ obligations under the guarantee were extended by some 11 months.
The Claimants only became aware of their extended liability under the guarantee in November 2008. At this time, the restaurant business was failing and they sought advice from the Defendant as to the extent of their liability if they closed the restaurant down and wound up B & G. The Claimants were advised that if they did so they would be required to take a new lease for the unexpired remainder of the term. Accordingly, faced with the prospect of significant personal liability, the Claimants felt that they had no choice but to keep B & G alive and trading until the expiry of the guarantee. The usual source of funds for B & G was P & L, which at this time was also experiencing financial difficulties. The Claimants took financial advice and arranged for payments, in the form of director’s loans which were to be repayable on demand, to be made to P & L and then for P & L to drip feed monies into B & G.
The Claimants subsequently brought a claim for negligence against the Defendant for failure to advise of the risks involved for the Claimants as sureties in allowing B & G to take occupation before the lease was executed.
In considering whether the Defendant was negligent, the Court looked at what a reasonably competent practitioner would have done having regard to the standards normally adopted in his profession. The Court held that the behaviour of the solicitor concerned must be evaluated by considering the information available to him and the circumstances at the relevant time. The key issue was whether the solicitor’s behaviour was within the range of behaviour open to a reasonable solicitor in those circumstances. The fact that another solicitor may have responded differently, or given better or more helpful advice, does not result in negligence unless what was said or done is outside the range of reasonable behaviour.
Although the Claimants had a justifiable grievance with the Defendant, the Court held that they were unable to claim substantial damages because of the way they mitigated their loss. As the Claimants had decided to provide the necessary funds to keep B & G trading by way of director’s loans to P & L, it was found that they had suffered no loss. The Court held the Claimants could look to P & L to repay the balance of the monies loaned and could demand that money at any time. Accordingly, it was P & L, not the Claimants, that would be out of pocket.
This case provides a useful reminder to litigants that they will need to prove causative loss in order to be successful in a professional negligence claim. In addition, it serves as a warning to litigants to ensure that any steps taken to mitigate loss do not adversely affect the potential negligence claim.
For further information, please contact Georgina Squire or the Partner with whom you usually deal.