This recent decision of the High Court considered a solicitor’s liability for breach of retainer and/or negligence in the context of a commercial property transaction. It considered the correct approach to the interpretation of a contractual agreement, together with principles of causation and quantum.
The Claimant instructed the Defendant to act on its behalf in the sale of commercial premises. The purchase of the property was to be subject to the grant of planning consent for development for residential purposes. However, the sale contract allowed the purchaser not to complete the sale if it considered that the planning conditions imposed by the local authority were unacceptable.
The Claimant and the purchaser went to arbitration to decide if the planning conditions were in fact unacceptable, but the dispute was ultimately compromised and the purchase completed at lower price than previously agreed. Subsequently, the Claimant issued proceedings for breach of contract and/or negligence arguing that the Defendant acted in breach of their duties in drafting or approving the sale contract without providing proper advice in relation to the definitions of ‘planning agreement’ and ‘unacceptable planning condition’. It further contended that the Defendant failed to give adequate advice prior to the exchange of contracts. It was the Defendant’s case that it was only retained to act in respect of legal matters and not to provide advice on the commercial merits and planning issues.
The Court dismissed the claim and held that the Defendant was not in breach of its duties. The Court found that on a proper construction of the relevant clauses, the Defendant had not exposed the Claimant to the risks it claimed. In particular, the drafting of the sale contract reflected the common intention of the parties; the meanings of the definitions were clear on their face and achieved the balance the parties had intended.
As part of its case, the Claimant argued that had it been properly advised, it would not have agreed to the relevant terms of the contract as drafted. The Court found that the Claimant’s internal solicitors were fully involved in the transaction and fully understood the risks. On the evidence, the Court found that the purchaser would not have agreed to purchase the property on different terms to those that was agreed and accordingly causation was not proved.
Although a decision confined to its facts, this case highlights the importance of defining the scope of the retainer when instructing solicitors. In this instance, because the solicitors were only instructed in respect to the legal aspects of the sale of the property, and were not engaged to provide advice as to the commercial merits of the transaction and the planning issues, the Court held that they had not acted negligently in relation to the transaction.
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