Solicitors advising one of two partners holding business lease of perils of permitting others to occupy under proposed “management agreement” – Advice disregarded by partner authorised to seek advice – Loss suffered following forfeiture threat by landlord – Whether circumstances obliged solicitors to ensure that advice communicated to all partners – Appeal by sleeping partner dismissed
The appellant and his son (the plaintiffs) held high street leasehold premises in London N12, which they operated in partnership as a wine bar, the appellant taking the role of sleeping partner. The lease prohibited any subletting without the written licence of the landlord. In 1989 the son, wishing to be less involved, obtained the appellant’s authorisation to negotiate with a group of individuals (the syndicate) willing to pay a substantial profit rent for the right to run the bar themselves, the appellant making it clear that the son should take appropriate legal advice and do nothing to endanger their security of tenure. The son consulted the respondent solicitors who prepared a “management agreement” which was signed by all relevant parties, including the appellant, on January 25 1990.
In early 1992 the landlords became aware that the bar was occupied by the syndicate, and threatened forfeiture proceedings. Acting on legal advice that the landlords had a good case, the plaintiffs surrendered the lease to the landlords in return for a payment of £1,500. The plaintiffs’ subsequent county action against the respondent solicitors for negligence was dismissed after the judge had found that the respondents had adequately warned the son of the dangers of proceeding with the proposed management agreement. The appellant appealed against a further ruling that the respondents had no duty to ensure that their advice had been communicated to and understood by the appellant in person.
Held The appeal was dismissed.
1. The high risk attending the son’s disregard of the respondents’ advice created no exception to the general rule that a duty to advise a partnership was discharged by properly advising one of the partners who had been authorised to seek the advice in question. To hold otherwise would place an intolerable burden upon solicitors, above all when advising, for example, a major firm of accountants. Nor was there any satisfactory test for this purpose for identifying an exceptionally serious commercial risk.
2. The appellant derived no assistance from Farrer v Copley Singleton [1997] PLSCS 215 CA, as the individual who consulted the defendant firm had no authority to act on behalf of the co-plaintiffs, who did not trade as partners. Nor could the appellant point to any conflict of interest between himself and his son: Mahoney v Purnell [1996] 3 All ER 61 distinguished.
Christopher Coney (instructed by Comptons) appeared for the appellants; Simon King (instructed by Barlow Lyde & Gilbert) appeared for the respondents.
