Category Archives: Indemnity Insurance

Court draws line under property solicitor’s liability

In deciding whether a law firm has been negligent towards a property client the court must decide what was the scope of the law firm’s engagement?

Secondly if the engagement covered the relevant service was the law firm negligent in its performance of that service?

Thirdly, if the law firm was in negligent breach was that breach the cause of the claimant’s loss?

Fourthly even if the law firm is on the hook for the above the claimant must not rack up unnecessary additional losses by acting unreasonably in the mistaken belief that the solicitor or his insurers will simply foot the bill.

In the High Court case of Rentokil Initial 1927 Plc v Goodman Derrick Llp [2014] Taylor Wimpey had taken a strong line over the terms of a planning condition when negotiating a conditional purchase agreement for the claimant’s property.

The claimant said the respondent’s negotiation of that clause had left Taylor Wimpey too much latitude to reject the planning permission obtained on the grounds of excessive infrastructure agreement costs when the claimant had been led to believe that the only infrastructure agreement costs to be taken into account were those under the Section 106 Agreement.

The court accepted that the reference to Section 106 Agreement costs was fairly standard short hand embracing all the infrastructure agreement costs associated with the planning stage.

The court also accepted that the respondent’s engagement was limited to advising on the legal issues that did or might arise from the terms of the contract, and not on the planning or commercial issues that did or might arise from it.

Here the planning issues had been devolved to a firm of planning consultants retained by the claimant and the claimant was itself commercially very experienced and sophisticated. Indeed one of the main contacts there was himself a solicitor. Both the planning consultant and the claimant had been kept copied in and informed during the negotiation stage.

The court found the respondent solicitors’ draftsmanship and advice adequate.

The court also accepted that the draftsmanship and advice had not caused any loss because it was generally known that Taylor Wimpey would not have agreed to any different terms and the claimant exchanged contracts with them with that knowledge.

In fact the conditions, imposed by the planning permission, that Taylor Wimpey were using the contract to rail against were to be expected in the circumstances and not such as to prevent the sale from proceeding. Indeed the claimant would have won its case had the issue gone to arbitration under the contract as it should have done.

Given the state of the property market in 2008 and Taylor Wimpey’s financial position it had been inevitable that Taylor Wimpey would have sought to “chip” the original contract price.

In any event the amount of the reduction the claimant had agreed to induce Taylor Wimpey to complete the purchase was too great and reflected an excessive anxiety to get the property off its hands to Taylor Wimpey.

So the claim was not surprisingly dismissed.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.