Professional negligence – Breach of duty – Solicitor – Claimant company retaining defendant form of solicitors to act in sale of commercial premises – Claimant issuing proceedings against defendant for negligence and breach of retainer -Whether defendant acting in breach of duty – Claim dismissed
The claimant company retained the defendant solicitors’ firm to act on its behalf in the sale of commercial premises in East Grinstead to a development company. The developer’s purchase of the property was to be subject to the grant of planning consent for development for residential purposes. The developer intended to demolish the buildings on the site and construct a number of flats. Planning consent was to be sought after exchange of contracts. Completion was dependent on the grant of planning consent with acceptable conditions. The developer refused to complete the purchase of the property on the basis that the planning conditions ultimately imposed were unacceptable, in accordance with the proper meaning of the contract, and that it was entitled to treat the contract as at an end. Arbitration proceedings were compromised, providing for the completion of the sale to the developer at a lower price.
The claimant issued proceedings against the defendant asserting that, in the course of the retainer, the defendant had been negligent and that the claimant was entitled to damages for breach of retainer and/or for professional negligence at common law. In essence the claimant asserted: (i) that the defendant had negligently drafted (or approved or agreed with the purchaser’s solicitors) the terms of the contract for sale of the property in such a way that it enabled the purchaser to avoid completing the contract at a time when the property market was falling; and (ii) that the defendant failed to advise the claimant as to the proper meaning and effect of the terms of the contract with the result that it entered into a contract which it would not otherwise have entered into. At the heart of the allegations was an assertion that the defendant had failed properly to draft and advise on the definition of “unacceptable planning conditions” in schedule 1 to the contract. Further, the defendant was negligent in drafting the definition of “costs” purportedly payable in respect of obligations to be performed under a “planning agreement” between the purchaser and the local planning authority pursuant to section 106 of the Town and Country Planning Act 1990 with the result that the definition was capable of reducing the purchase price when it ought not to have been.
Held: The claim was dismissed.
(1) The principal factual context of schedule 1 to the contract was that the best use of the property was for residential development but that a higher price would be paid for the property if it were made conditional on planning consent than if the contract were unconditional. The contract therefore had to achieve a balance between the security which the defendant sought in ensuring that completion would take place and the risk that planning consent might not be granted (so that the development would not be possible) or the terms of such planning consent might have prevented the development from taking place or materially affected the commercial viability of the project. The key to balancing those competing aims was to build in an objective assessment of the reasonableness of planning consent and any conditions which accompanied it. The court accepted the defendant’s submission that the terms which the local planning authority might impose were significant if and to the extent that they were unusual and unexpected and either effectively prevented the reasonable developer, acting in good faith, from taking up the permission or tipped the developer into regarding the development commercially unviable as a result of the imposition of that condition: Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, Jumbo King Ltd v Faithful Properties Ltd (1999) HKCFAR 279 and Rainy Sky SA v Kookmin Bank [2011] UKSC 50 considered.
In the present case, the true meaning of the relevant clauses was not hard to discern. On their proper construction, they had not exposed the claimant to the risks which it asserted as the foundation of its claim against the defendant. Further, on the construction issues, the claimant would have been successful at arbitration.
(2) On the evidence, as regards the definition of planning agreement and the advice in respect of it, the defendant had not been negligent. The drafting reflected the parties’ intentions and the proper understanding of the heads of terms. The wording and proper meaning of the definition was clear on its face, was not difficult to understand and did not need specific separate explanation to the claimant’s representatives, each of whom knew that the scope of the costs was wider than simply those which might be incurred pursuant to a section 106 agreement.
(3) In respect of the allegation of negligence in the drafting of schedule 1 of the contract, the test was whether the unacceptable planning conditions were terms which no reasonably competent practitioner could, in the circumstances, have drafted or agreed to. The burden was on the claimant to prove that the conditions had been so drafted. In all the circumstances, the defendant had not acted in breach of its retainer or negligently in that respect.
(4) As to the advice given in respect of schedule 1, the claimant was a highly sophisticated commercial client acting through experienced personnel, including a solicitor of considerable commercial experience. As a matter of fact, at all material times and, in particular, when he had instructed the defendant to exchange contracts, the claimant’s representative had had a proper understanding of the risks inherent in the transaction, and the detail and effect of the terms of the contract which had been designed to achieve a balance between the buyer and the seller’s respective interests. The defendant had properly discharged its duties to the claimant. Furthermore, causation had not been established, as the evidence indicated that the developer Taylor would not have agreed other terms and the claimant would probably have won the inevitable arbitration in any event: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979] Ch 384 applied; County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1986] 2 EGLR 246, Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602 and Carradine Properties Ltd v D J Freeman & Co [1999] Lloyd’s Rep PN 403 considered.
David Halpern QC (instructed by Greenberg Traurig Maher LLP) appeared for the claimant; Jonathan Seitler QC and Clare Stanley (instructed by Clyde & Co LLP) appeared for the defendant.
Eileen O’Grady, barrister
