Summary

Whether solicitor's failure to advise properly in a takeover caused the plaintiff's loss.

Facts

Defendant solicitors' appeal against a judgment in which they were held liable to the plaintiffs in negligence for losses sustained by the plaintiffs in consequence of defendants' failure to provide adequate advice in the course of their taking over assets and businesses of the Gillow Group of companies. Because there were conditions against alienation and the existence of planning consents personal to one of the Gillow companies in the leases of four properties, the defendants advised the plaintiffs to acquire shares in the company holding the leases and then transfer out of it the properties and liabilities the plaintiffs did not want. Unfortunately after the transfer it transpired that there were first tenant liabilities attaching to some of these unwanted properties which resulted in claims against the acquired company and hence loss to the plaintiffs. The damages which were now the subject of the appeal were awarded to the plaintiffs in respect of those losses.

Held

The judge had defined the question of causation of the plaintiffs' loss as to whether or not, if the defendants had been advised properly, the plaintiffs would have taken other steps and if so, what other steps they could have taken to protect themselves from the consequences of first tenant liability crystallising. He concluded that because it was clearly the shared intention of Gillow and the plaintiffs that the company holding the leases should be acquired "clean", all reasonable efforts to achieve that objective would have been made by both parties to the deal. The least likely of all the probabilities was that the plaintiffs would not have proceeded with the deal. The plaintiffs then proved to the judge on balance that if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection. There was ample evidence to support the judge's conclusion. The judge then accepted that the plaintiffs had shown there was a substantial chance that they would have been successful in negotiating total or partial protection. It was not necessary that he should have held that the chance was greater than 50 per cent. However the judge did go further than he need have done. Paragraph 2 of the judge's order should be substituted by the following paragraph: "There was a realistic chance that such efforts would have been successful in one or other of the following ways: (a) that Gillow would have been prepared to provide a warranty restricted to the four identified properties; (b) that Gillow would have been prepared to provide an indemnity to the plaintiffs in respect of first tenant liabilities up to a maximum of #2.18m".