Category Archives: Negligence

Owner owed measured duty of care to contain damp

A person may owe a “measured duty of care” to take reasonable steps to resolve or reduce hazards on that person’s land, which that person either foresaw, or which that person ought reasonably to have foreseen.

Such a liability is to be assessed by reference not only to what the person actually foresaw, but to what the person ought reasonably to have foreseen.

In Bridgland & Anor v Earlsmead Estates Ltd [2016] an old works had been demolished next to the end gable of a terraced house. The house suffered from damp which the owner blamed on the demolition.

The owner pleaded that it was caused by “surface water” i.e. rain water penetrating the upper parts of the now exposed flank wall, and then percolating down inside the flank wall.

But the Technology and Construction Court found that to a significant and/or material extent, the damp to the lower part of the flank wall was caused by penetration of lateral ground moisture coming from the soil or material underneath the ground floor slab of the old works. The hygroscopic salts which had been found inside the house could only have been caused by that.

Given the advice the defendant’s surveyor had given it the defendant either did foresee, or ought reasonably to have foreseen:

1. that the state or condition of it’s property was causing damage to the adjoining house; and

2. that there was at least one reasonable remedial scheme, which their surveyor had identified, (internal tanking) which it could have carried out at it’s own expense to remedy that damage, and which would have been reasonable for the defendant to have implemented in all the circumstances.

In breach of duty the defendant did not take steps to implement and/or pay for that remedial scheme.

However, damage by long-standing lateral ground moisture was not pleaded by the claimants at the earlier proceedings, and so the issue of what was, or should have been, foreseen in those circumstances was not considered at trial.

Instead, the claimants’ case had focused on what was foreseeable in the context of the demolition of the former Trafalgar Works.

So it was difficult, if not impossible, to know what issues on foreseeability might have arisen had the claimants pleaded the correct cause of the damage.

The defendant won the case because the claimants’ pleadings had failed to identify the correct cause so the defendant had successfully defended against those pleadings even though the damage to the claimants’ house had always been caused by long-standing lateral ground moisture coming from the soil or material underneath the defendant’s property.

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

Solicitors’ application to Land Registry was negligent misstatement

What follows is a cautionary tale.

In Chief Land Registrar v Caffrey & Co [2016] clients sent their solicitors a Form DS1 Land Registry discharge purportedly signed on behalf of their bank to discharge a mortgage.

It was a forgery.

The clients told the solicitors that the bank was represented by another firm of solicitors, but that was untrue too.

The solicitors did not contact the bank or the so-called bank’s solicitors to verify the DS1 or that the “bank’s solicitors” were actually instructed on it. They submitted the Form DS1 to the Land Registry with a Form AP1 to apply to delete the mortgage.

The Land Registry asked for evidence that the person signing the DS1 had authority to do so on behalf of the bank.

The client supplied the solicitors with a purported power of attorney seemingly appointing four individuals, including the apparent signatory to the Form DS1, as the bank’s attorneys.

The solicitors sent a certified copy of the purported power to the Land Registry. The Land Registry acted on the application, the copy power and the Form DS1, and removed the mortgage from the property’s land register.

Later Santander UK plc lent money on the security of a charge on the property.

When the original Bank discovered that it’s mortgage had been removed, it applied to reinstate it to the register, but Santander objected. A Land Registry adjudicator decided that the original bank’s mortgage should be reinstated, but ranked it after Santander’s mortgage. The original bank then sought and obtained an indemnity for it’s loss from the Land Registry. The Land Registry then sued the solicitors to recoup their outlay under that indemnity.

The first basis of claim was negligence for having assumed a duty of care to the bank and then having breached it. The Land Registry claimed to be subrogated, by Land Registration Act 2002, s 103, Schedule 8, paragraph 10, to that claim of the bank against the solicitors.

But the High Court Master pointed out that the solicitor was acting for the borrowers in the discharge of the bank’s mortgage, and not for the bank, which had conflicting interests. The solicitors had been told that the bank had its own solicitors and so had no reason:
– to think that the bank was relying on it in any way,
– to disclaim any duty towards the bank or,
– to advise it to take its own advice.
Nor was the bank unsophisticated.

The solicitors were never asked to act on behalf of the bank, and never thought they were doing so. They thought that the bank was independently advised. The solicitors were acting for the borrowers, not the bank. The borrowers were not giving instructions to the solicitors on behalf of the bank, but on their own behalf.

The actual act which caused the loss was the act of the Land Registry in removing the charge, not the act of the solicitors in supplying the information to the Land Registry. Facilitating the causing of harm by another person was only grounds for negligence liability in exceptional cases e.g. where someone supplies a dangerous object to, or creates a dangerous situation for, someone else who is known to be irresponsible, or where someone’s job is to take reasonable care to prevent someone else’s actions.

“A solicitor asked to do something for his or her client and against the interests of another person is necessarily doing something capable of harming the other person. If it is done carelessly, it may harm that person even more. But that hardly militates for imposing a duty of care.

The solicitors were responsible for submitting the documents to the Land Registry without making checks. But that is what they were asked to do and their clients could have complained had they not done that. That contractual duty was undertaken to the clients alone.

“The act (of submitting the documents without first making checks) would have been easy to avoid, but at the price of not acting for the clients, or at any rate of greater expense to the clients. Moreover, the bank also has another remedy, i.e. against the [Land Registry].”

Registered land was known to property lawyers and to others, at that time, to be insufficiently secure against that kind of fraud. That was not the solicitors’ fault. The real question was how the law should allocate the risks of such fraudulent activity.

The Land Registry claimed to be subrogated to the rights of the bank. So the issue was to be determined as between the bank and the solicitors. The solicitors had not designed or run the system and it was not fair just or reasonable to make the solicitors responsible to the bank for the risk of fraud within an inherently risky Land Registration system. So the claim failed so far as it was based on negligence.

The Land Registry’s second basis for claim was negligent misstatement i.e. that by completing and/or submitting the application to the Land Registry and/or certifying a copy of the purported power of attorney and/or supplying it to the Registry, the solicitors “expressly or impliedly represented to the Land Registry that they had taken sufficient steps or measures and/or knew of sufficient facts to satisfy [themselves] that” the discharge form had been properly executed, solicitors had been instructed, the power of attorney was valid, the bank wished to discharge the charge, and that the property was no longer charged in favour of the bank.

The Land Registry said that the relationship between the solicitors and the Land Registry was such that the solicitors “knew or ought to have known that the Land Registry would rely upon” those representations in dealing with the application to discharge the bank’s charge, and so “the [solicitors] owed to the [Land Registry] a duty to take reasonable care to ensure that the [representations] were true.” The Land Registry said the representations were false, that it had relied on them and that it had thereby been caused loss.

Unlike the first negligence ground where the Land Registry claimed to be subrogated to the rights of the bank, and the question therefore arose as between the bank and the solicitors, here the issues arose directly between the Land Registry and the solicitors.

The Land Registry had professional staff who might be expected to have systems for checking matters themselves. They did not just blindly accept whatever the solicitors told them.

However the High Court Master was narrowly persuaded that, on the peculiar facts of this case, the solicitors had assumed a duty to take care in the representations which they had made to the Land Registry.

So the Master gave default judgment to the Land Registry, on the second cause of action, for damages to be assessed.

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

Removal of planning condition abolished claimants’ loss

In the Court of Appeal case of Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016], the appellants had acquired a residential property in May 2007. The respondent solicitors had negligently failed to advise them that there was a planning restriction attached to the property restricting it’s residential use. Later, after the purchase had been concluded, the appellants successfully secured the removal of the planning restriction.

The appellants claimed the sum of £100,000 (with interest) being the difference between the value of the property in May 2007 without the planning restriction and the value of the property at that date with the planning restriction.

But the trial Judge merely awarded the appellants damages of £250, being the cost of the application to the local authority to remove the planning restriction.

Dismissing the appellants’ appeal, the Court of Appeal said the measure of damages ordinarily is:

“….that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.”

(Lord Blackburn in Livingstone v Rawyards Coal Co.(1880)).

The Court of Appeal in Bacciottini said the core principle set out in Livingstone v Rawyards Coal Co. (cited above) would determine the outcome of the appeal.

In The New Flamenco [2015] Longmore LJ of the Court of Appeal had said:

“The important principle which emerges from these citations is that, if a claimant adopts by way of mitigation a measure which arises out of the consequences of the breach and is in the ordinary course of business and such measure benefits the claimant, that benefit is normally to be brought into account in assessing the claimant’s loss unless the measure is wholly independent of the relationship of the claimant and the defendant. That should be a principle sufficient to guide the decision of the fact-finder in any particular case.”

Mr Bacciottini and Ms Cook had had no realistic option but to make an application for the planning condition to be lifted by way of mitigation. That was the course that any sensible owner and occupier in their position would have taken.

So the act of mitigation, in applying to the council to get the restriction removed, which generated the benefit, “arose out of or was sufficiently connected with [the solicitors’] breach [of duty to the appellants as] to require [it] to be brought into account in assessing damages.” (Mance J in The Fanis [1994].)

By reason of the subsequent removal of the restriction the appellants had suffered no loss and there was nothing in respect of which they could require to be compensated.

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

Solicitor should have disclosed price discrepancy to lender

In the Court of Appeal case of Mortgage Express Ltd v Bowerman & Partners [1996] Millett LJ said;

“…..A solicitor who acts for [buyer and lender in] a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.”

No such conflict was found by the court to exist:

“It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the [lender’s] solicitor. He has the implied authority of his client to communicate all documents of title to the [lender’s] solicitor. In the present case, the information in question appeared on the face of the vendor’s title, which consisted of his agreement, subject to contract, to purchase the flat for £150,000. Had the [lender] instructed other solicitors, [the borrower’s solicitor] would have had to provide them with a copy of that agreement. It would then have been for those solicitors to consider whether they ought to inform their client of the price which [the borrower] was paying for the flat. In the present case [the borrower’s solicitor] was instructed to act both for the buyer and the [lender] and it was his duty to investigate the vendor’s title on behalf of each of his clients. He must, therefore, be taken to have been in possession of the documents of title, including [the vendor’s] purchase agreement, not only as solicitor for [the borrower] but also, with [the borrower’s] implied authority, as solicitor for the [lender]. He then came under a duty to the [lender] to consider whether he ought to disclose the information which that documentation contained to them.”

In the Court of Appeal case of Goldsmith Williams Solicitors v E.Surv Ltd [2015] the court said that the question whether the Solicitors were under the Bowerman duty in the present case depended on whether that duty was excluded by, or was inconsistent with, the terms of the solicitors’ engagement, as contained in the Council of Mortgage Lender’s (CML’s) Handbook.

On the contrary Clause 5.1.2 of Part 1 of the CML Handbook could only be explained on the basis that if:

1. a matter “comes to the attention of the solicitor dealing with the transaction which [the solicitor] should reasonably expect [the Lender] to consider important in deciding whether or not to lend to the borrower” and

2. that matter is not confidential to the borrower

then the solicitor should report it to the lender.

One of the matters then included under Rule 6(3)(c) of the Law Society’s Practice Rules 1990 as being a solicitor’s obligation to the lender was “making appropriate searches relating to the property in public registers … and reporting any results … which the solicitor considers may adversely affect the lender”.

A search of the Land Registry in this case was a search for the purposes of that sub paragraph and had resulted in the information that the property had been purchased recently at a lower price which strongly suggested that the current valuation was excessive. The search in this case had obviously been relevant to the value of the proposed security and the information should have been reported to the lender.

However the solicitors’ appeal was successful. Even if they had provided the information they should have on the purchase price and date of purchase of the property, it had not been proved on the balance of probabilities that the lender would have reacted to the information. This was because on their mortgage application the borrower had provided price history information which was not materially different.

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

Receivers owed no duty of care directly to bankrupt mortgagor

Where a mortgagor is subject to the appointment by the mortgagee of a receiver over the mortgaged property the receiver owes a duty to the mortgagor to look after the property if and to the extent that the mortgagor retains an interest in what remains of the property after the mortgage debt and the receiver are paid off {the equity of redemption).

Where the mortgagor becomes bankrupt, the mortgagor ceases to have any such interest. The equity of redemption becomes vested in their trustee in bankruptcy. Though the mortgagor retains a legal liability under the mortgage, that is limited in nature and duration. Upon his discharge from bankruptcy it is automatically extinguished. The mortgagor walks free from the mortgage and the benefit of the equity of redemption stays vested in the trustee in bankruptcy for the benefit of the general creditors.

In the event of a surplus in the bankruptcy, then under section 330(5) of the Insolvency Act 1986, the trustee must return that surplus to the bankrupt: But the bankrupt has no right to the mortgaged property as such and his interest in any possible surplus can be and is protected by the duties which both the receivers and the mortgagee will owe the trustee in bankruptcy as to their management of the property and its realisation.

The creditors and the bankrupt mortgagor have a shared interest that the property should be managed and disposed of for the best price reasonably obtainable but that does not mean that they are owed any duty by the receivers.

In the Court of Appeal case of Purewal v Countrywide Residential Lettings Ltd & Anor [2015] all the foregoing factors were in play. The residential property had been subject to water damage but the receivers had failed to take timely action to stop the problem, which the mortgagor had told them about, or to claim the insurance proceeds in time. On getting the property back the mortgagor had spent £16000 fixing it.

The court said no legal precedents suggested the receivers’ duty being owed to a bankrupt mortgagor nor was there any justification for imposing such a duty. The mortgagor has ceased to have any interest in the equity of redemption and his ultimate entitlement under s. 330(5) to any surplus in the bankruptcy did not require the imposition of a duty to anyone beyond the trustee in bankruptcy so the receivers were not liable to him.

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

Time limits in negligence cases: appellants had insufficient actual or constructive knowledge to trigger limitation period

In a claim for damages for negligence the right to sue accrues at the date that damage occurs, even if no-one knows about the damage at the time.

To stop the limitation period for suing running prematurely section 14A of the Limitation Act 1980 disapplies the more general time limit in section 2 of the Limitation Act 1980 and provides for two alternative periods of limitation – 6 years from the date on which the right to sue accrued or 3 years from “the starting date” which is defined in subsection (5).

Section 14A only applies to claims in negligence and has no application to claims for nuisance, misrepresentation. or breach of statutory duty.

Section 14A (5) of the Limitation Act 1980 requires that the starting date is the earliest date on which the claimant had both:

1. the knowledge required for bringing an action for damages in respect of the relevant damage and

2. the knowledge required of their right to bring such an action.

Section 14A(6)(a) then says that “the knowledge required for bringing an action for damages in respect of the relevant damage” includes knowledge of “the material facts about the damage in respect of which damages are claimed”.

Section 14A(7) says “the material facts about the damage” are such facts about the damage as would lead a reasonable victim of such damage to think it serious enough to justify his starting proceedings for damages against a defendant who did not dispute liability and could satisfy a judgment.

In the Court of Appeal case of Blakemores LDP v Scott & Anor [2015] the trial judge had thought that the relevant “damage” for the purposes of section 14A(5)-(7) was the respondent law firm’s failure, in April 2009, to file an objection to the registration of two Land Registry titles affecting a village before the procedural deadline.

The appellants, Ms Carole Scott (“Ms Scott”), Mr Eric Walker (“Mr Walker”) and Mr Christopher Balchin, were villagers. Ms Scott alone knew that the law firm had been negligent in failing to file the objection, but even Ms Scott did not know the consequences of that failure.

So an issue was whether merely knowing that the firm had been negligent in not advising that the objection should be filed before the deadline was enough to lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against the law firm, assuming it to be solvent and unwilling to dispute liability.

The court said knowing the firm’s failure to file the objection before the deadline was insufficient knowledge of a “material fact about the damage” to start time running for the purposes of sections 14A(6)(a) and (7).

The appellants needed to know that the effect of the failure to file the objection was to allow the Land Registry Adjudicator to make a discretionary decision against them in relation to a title.

There were two reasons why the material fact about the damage could not just be the negligent advice or the failure to file the objection before the deadline:

1. the appellants were not experts in land registration or manorial law. They could not be taken to have known the arcane consequences of a failure to file an objection in time without being told what they were.

The consequences of the non-filing of the objection by the deadline were “a fact only ascertainable with the help of expert advice” but the last part of section 14A(10) of the Limitation Act 1980 did not mean that they should “be taken … to have [“extended constructive”] knowledge of [that] fact” because Ms Scott and Mr Walker had in April 2009 and before, taken reasonable steps to obtain expert legal advice.

2. The relevant material facts about the damage have to be such as would lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against a solvent firm, not disputing liability. On the evidence Ms Scott may not have known anything that would have led a reasonable person to sue:

– she had no reason to think she would be worse off. She understood that the costs were to be covered by the law firm and not reclaimed from her

– she had reason to think the case was going to be successful, and

– most crucially she seemed unaware that the firm’s negligence had turned a clear right to have the title closed into a matter for the discretion of the adjudicator.

So the starting date for limitation purposes was not April 2009 when the failure to object occurred. A trial of the facts would be needed before that date could be properly decided.

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

Structural Engineers not liable for Contractor’s negligence

Construction professionals’ duty to warn may be analysed as follows:

1. We must first decide what the scope of the contractual duties and services were.

The scope of the duty to warn and the circumstances in which it may arise should be determined against the context of what the professional person was contractually engaged to do.

2. The professional must exercise reasonable care and skill.

That duty must be looked at in the same context.

The duty to warn is a corollary of the duty to act with the skill and care of a reasonably competent person in that profession.

3. The existence and extent of that duty will depend on all the circumstances.

4. The duty to warn can arise when a careful professional ought to have known of a danger either to life and limb or to property having regard to all the facts and circumstances. It does not have to be an obvious and significant danger.

5. Any duty to warn may well not be engaged if all there is a possibility in future that the contractor may not do the works properly, or of some other danger.

Generally, the engineer or architect is required to design the permanent works and the contractor is responsible for the design of the temporary works necessary to facilitate the permanent works.

But it will always be necessary to consider what services the professional is engaged to provide. There may well be contracts for professional services in which the engineer is employed to consider and approve temporary works’ proposals and, if so, that must be done with reasonable care and skill.

On other contracts the engineer may be engaged to supervise or inspect the works and, also, that will have to be done with reasonable care and the scope of that duty may entail checking how safely the works are being carried out by the contractor.

In the High Court case of Goldswain & Anor v Beltec Ltd (t/a BCS Consulting) & Anor [2015] the Claimants had a leasehold ground floor flat with a cellar which they decided to convert into living accommodation by underpinning the outer walls to create more height. They retained professional engineers, Beltec Ltd (“Beltec”).

Beltec was employed to provide the permanent works design for the excavation of the basement, the underpinning of the perimeter walls and the provision of support to the internal walls and structure as necessary.

That the obligation related and was limited in scope to design was supported by the Letter of Instruction:

“This letter instructs [Beltec] to carry out structural designs…”

This pointed strongly to the scope of the services not covering any supervision or inspection of the contractor. There was nothing referring to any involvement with the contractor.

Later AIMS Plumbing & Heating Ltd (“AIMS”). AIMS installed the underpinning. Following increasing amounts of cracking in the superstructure the building collapsed.

By the legal proceedings AIMS was believed to be insolvent.

The court said, in the contractual context what were the Claimants contractually entitled to expect from Beltec?

Beltec was required to provide the Claimants with the structural designs with reasonable care and skill.

The main issues were whether:

1. the drawing which showed the light well at the rear with the doorway into the light well, created a weakness or risk such that a competent contractor would not necessarily have appreciated it and,

2. therefore whether Beltec should have provided for some way of overcoming such weakness or risk.

No professional negligence in relation to the design and specification of the rear light well or otherwise had been established.

All Beltec had to do was to tell AIMS to follow the requirements set out on the drawings which had been done.

It had not been established on any balance of probabilities that Beltec should have realised that AIMS was completely out of its depth or not competent to do the job which it had been employed to do. They had believed that a company like AIMS would not necessarily need to have a temporary works designer if it had the experience in-house. There was no evidence that AIMS did not have that experience in-house.

The overwhelming probability was that AIMS had failed to carry out their work with reasonable care and skill or in compliance with the drawings which it was provided with. The breaches of contract on the part of AIMS had undoubtedly caused the collapse.

The primary mechanism of failure was a horizontal or sliding movement of the base of the flank wall. There was no propping of the flank wall and the specified sequence had not been followed, particularly in relation to the need to form the subjacent floor slab and kicker under and next to each of the pins.

Although Beltec had provided no specific guidance on how the base slab sections to the pins in the various corners were to be constructed, that was something which could reasonably be left to the contractor to work out, since the contractor had responsibility for how the works were done.

Any competent contractor could and would be expected to read the drawings and correctly interpret and implement the correct thicknesses.

Competent engineers, exercising reasonable care and skill, would have readily assumed that builders would read and understand the drawings in that way and the order in which the works were to be done.

It was unnecessary to decide whether or not AIMS would have followed more detailed advice or design specifications in relation to propping and the like.

Anyway, there was insufficient evidence to establish on the balance of probabilities that AIMS would have followed such advice or further specification because AIMS ignored such advice as was given.

So even if the court had found material breaches of duty on the part of Beltec, it is unlikely that it would have found an adequate causal link between such breaches and the collapse because the intervening and immediate cause of the damage and loss would have been the contractor’s negligence.

So the Claimants’ case against Beltec was dismissed and AIMS was found liable to the Claimants for damages of £287,754.55 – not that that would have been any consolation to them.

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

Losses of solicitor’s negligence largely cancelled by buyers’ damage reduction work

In a legal transaction a solicitor should advise the client on all information, that the solicitor should have gleaned from due diligence, that might have a bearing on the price the client is paying for the property.

This is to give the client the opportunity to pull out or renegotiate the price if there is anything untoward that the solicitor should have found out about.

In Bacciottini & Anor v Goldsmith [2014] the property had been a barn attached to a hall.

The 1974 planning permission for conversion of the barn to a dwelling contained a condition that “the converted barn shall be used only as ancillary accommodation solely in conjunction with the occupation of Snape Hall as a single private dwelling.”

The solicitor who dealt with a later £575,000 purchase of the property failed to tell the buyers about the restriction.

Without the restriction the property was in fact then worth only about £550,000. With the restriction it was only worth £450,000.

That the court found it worth as much as that may seem strange. Now owned separately from the Hall the condition precluded it being lawfully occupied as a dwelling since it could no longer be occupied as part of the Hall as the condition required.

The High Court accepted that the solicitors had breached their duty in failing to provide the information that would have enabled the buyers to renegotiate the price before committing themselves to the purchase. Indeed the solicitors accepted this too.

However the court was far from convinced that the negotiations would have got the price down to anywhere near £450,000 not least because getting the restriction lifted was a relatively simple matter. In fact after discovering it the buyers had no choice but to do this. For one thing they had a legal duty to try and reduce or mitigate their loss and applying to get the restriction lifted was part and parcel of that duty.

Their application to lift the condition had been successful in November 2009. Nearly all the loss they had suffered had been eradicated by that mitigation.

The court agreed with the defendant solicitors that the buyers’ actual loss was a mere £250 and awarded that as damages.

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

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.

Salaried partner not liable to property clients

Section 14 of the Partnership Act 1890 provides for a person to be liable as a partner where:

First, the person in question has been held out as a partner in a firm; and,

Secondly, two further sub-elements have been complied with:

A the claimant must have “given credit” to the firm; and,

B such “credit” must have been “given” in reliance upon (“upon the faith of”) the representation that the defendant was a partner.

In Nationwide Building Society v Lewis [1998] the Court of Appeal said ‘given credit’ was not to be construed restrictively and could apply to ‘any transaction of the firm’.

There is no presumption of reliance in favour of a claimant. The claimant must prove, in every case, that in entering into the contract for legal services with the relevant firm, they had, in some way, relied upon the fact that the headed paper, or other representation, held the employee out as a partner of the firm.

As the High Court said in Sangster v Biddulph [2005] the claimant must satisfy the court that, on the balance of probabilities, the holding out or representation had a material influence on the claimant’s decision to proceed with the proposed transaction through those solicitors.

The holding out or reliance does not need to have had a decisive effect but it must have been a contributing causative factor in the claimant’s decision to use the firm.

In Walsh & Ors v Needleman Treon (A Firm) & Ors [2014] the claimants claimed against Mr N and Mr T, the equity partners of the firm, under an agreement whereby the firm was to act for the claimants in short term bridging finance transactions protected by legal charges over properties.

Thc claimants sought to establish liability, also, against a Mr Prior who resisted this on the basis that, as a “salaried partner”, he was an employee of the firm, albeit also the head of the firm’s property department and held out a “partner” on the firm’s letterhead.

The High Court said the claim did not begin to make out a case of material reliance by the claimants on any holding out of Mr Prior as a partner.

There had been nothing to suggest that any of the claimants would, or might, have done anything differently had Mr Prior not been held out as a partner.

Even when one of the claimants began to become concerned about the prospects of repayment, the most that could be said was that that claimant had felt reassured because of Mr Prior’s specialist skills and seniority- nothing necessarily to do with his status, or otherwise, as a partner.

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