Solicitors Bird & Bird were today found liable for breach of duty in failing to tell the prospective purchaser of a mansion in St John’s Wood about a planned academy school development nearby.
Judge Pelling QC said that Orientfield Holdings pulled out of the £25m purchase of the seven-bedroom property at 56 Avenue Road, London NW8 in 2011, after discovering plans for the 1,400 pupil, six-storey academy.
However, the company – a British Virgin Islands vehicle set up by Hong Kong businesswoman Rebecca Chow – had already paid a £2.75m deposit.
Proceedings between Orientfield and the sellers were settled with the deposit being split between them, and Orientfield sought to recover the other half, plus other costs, from the solicitors which had represented it, Bird & Bird.
It sued for a total of around £2m, claiming that Bird & Bird had been in breach of duty in failing to pass on information about the school development, which it was claimed would negatively affect the purchase.
The judge today ruled that the claim succeeds, with the final bill expected to be agreed later today.
The judge ruled that, having carried out a plan search report and discovering the planning permission for the school development, the solicitors came under a duty to explain the results of that search.
He said: “It was a breach of duty to say, as was said, that the information provided did not reveal anything that adversely affects the property.”
He added: “It is for the client to judge the impact of the material, not the solicitor.”
He found that there was no evidence of any diminution in value as a result of the academy, and in fact the property subsequently sold for a “significantly greater” value.
However, he said that Chow was planning to spend £25m on a single property, and a further £4m on refurbishment, so was fully entitled to take the view that the construction of the school was an adverse factor that militated against proceeding and one which “altered the risk profile” of the purchase.
He said that her decision to withdraw from the purchase was not an emotional or irrational one.
Bird & Bird denied liability, claiming it was not under a duty to inform the claimant of the school development, even though it was aware of it from a search of local planning permissions.
The property was purchased by Elisabeth Murdoch last year for £38.5m.
David Golten, partner at Wedlake Bell LLP, which represented Orientfield, said: “We are thrilled that Orientfield has been successful and it is a well-deserved result. Clients rightly expect and should have professional advisers who act diligently to protect their interests. It has been a hard-fought claim, and it is excellent that all of Orientfield’s loss has been recovered, including its legal costs.”
