Summary

The court awarded damages for trading losses suffered because of a breach of duty by a solicitor in failing to properly assist and advise a client in respect of the sale of the assignment of a business property lease.

Facts

The claimant company (H) sought damages from the defendant firm of solicitors (E) for professional negligence. H had suffered financial difficulties and instructed E concerning the sale of H's public houses to a purchaser (X). The properties included four leasehold properties, three of which were owned by a company (W) and one which was owned by private landlords (R). The leases provided that W and R could ask for guarantees as a condition of giving their consent to assignment. R wrote requesting guarantees from X but the letter was not forwarded by E to X. Contracts were exchanged in a form which made the agreement conditional upon W and R providing their consent but, by a guarantee clause, absolved X from the need to provide guarantees. W also later requested a guarantee. Guarantees were not provided and consents were not obtained so the sales did not complete on that first contract. A second contract, with a modified guarantee clause was executed which provided for separate sales of the leases. The leases of W's properties were sold to X and, following E's advice that H could agree how dilapidations were to be handled, an amount was agreed and retained for such costs. The lease of R's property was sold to a different purchaser at a lower price. H submitted that (1) if E had advised it with proper care, H and X would have concluded the first contract with terms similar to the second contract, namely requiring X to give a guarantee if required, licences to assign would have been completed before the original completion date, there would have been no retention of the dilapidation money and H could and would have wound down soon after that original completion date; (2) whilst the loss of chance principle was a useful tool in some cases, in the present case the relevant evidence of how the third parties would have behaved if there had been no negligence was available; (3) E's negligence directly caused it to be unable to close its operations and stem its trading losses.

Held

(1) The scope of E's retainer extended to providing legal advice and assistance in connection with the making of the applications to the landlords for consent to assign. E had to attend to the progress of that application and ensure that it was being progressed by H in full knowledge of its obligations and of the landlords' requirements. E had accepted that, unless it was specifically instructed to agree the guarantee clause, it was negligent in drafting the first contract in that form and failing to resolve the positions of the landlords and assignees on the question of guarantees. E did not advise H about the risk of entering into the first contract in that form and H did not accept that risk. There had been a breach of duty in respect of the drafting of the first contract. Further E breached its duty in not communicating the letter from R to X sufficiently early for it to be acted on, not insisting that copies of the relevant applications to W and R were provided to it and not pursuing communications with W and R until it was too late. E also failed to advise H that it was entitled to dispute the incidence of liability for dilapidations. (2) The application of the loss of chance principle should depend on the nature of the loss claimed rather than the evidence which happened to be called. The loss alleged by H was the loss of a contract with different terms at an earlier date, which depended on the extent to which X would have been prepared to enter into that contract and at that time. There was no evidence from X on that and all the evidence relevant to X's decision to complete an alternative contract had not been called. It was therefore appropriate to apply loss of chance principles, 4 Eng Ltd v Harper (2008) EWHC 915 (Ch), (2009) Ch 91 applied. On the balance of probabilities, if E had not been in breach of duty, H would have instructed E to take a tough negotiating position in relation to the guarantee clause and the provision of a guarantee and it would have sought to maintain the earliest possible completion date. Further, it was not mere speculation that the first contract would have been exchanged with a requirement for a guarantee, if requested by the landlord. However, there was no real chance that X would have completed on the original completion date, even in the absence of any negligence. It was also likely that a compromise would have been reached in relation to the dilapidation retention money, Allied Maples Group Ltd v Simmons & Simmons (1995) 1 WLR 1602 CA (Civ Div) followed. (3) The trading losses were caused by E's negligence. The purpose of E's advice and assistance was not just to achieve a prompt completion for its own sake but to achieve a completion of the sale of the entire business and so prevent H from being exposed to the risk of loss. That was loss for which E should properly be held liable, Galoo Ltd v Bright Grahame Murray (1994) 1 WLR 1360 CA (Civ Div), British Racing Drivers Club Ltd v Hextall Erskine & Co (1996) 3 All ER 667 Ch D and Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) (2008) UKHL 48, (2009) 1 AC 61 considered.

Damages assessed