Scope of retainer — Defendant solicitor instructed by claimant lessee to read break clause in lease and serve appropriate notice of termination — Solicitor complying but neglecting to warn claimant that a stipulated payment had to be made to lessor before termination date of lease — Claimant aware of payment requirement but unaware that time of essence — No payment made — Lessor holding claimant to full term — Whether warning should have been given in the circumstances — Claim allowed
The claimant bank occupied premises at the Highpoint Business Village, Ashford, Kent, under a 25-year lease dated 30 August 1991. The lease gave the claimant an option to break on the third anniversary of the term (the termination date) by giving not less than six months’ notice, such termination to take effect upon the payment of £11,500 to the lessor “not later than the termination date”. The defendant firm of solicitors had, so far as material, entrusted the task of looking after the claimant’s interests to one of their number, S, who claimed no expertise in property law. The claimant had given the responsibility for dealing with the premises and other properties to an experienced employee, E, who possessed no legal qualifications.
On 3 February 1994, E wrote to S, enclosing the original lease and instructing S to try, as a matter of urgency, to negotiate a 12-month extension of the option period. The letter explained that the claimant would probably terminate the lease if no agreement were reached on the requested extension. The letter also mentioned the requirement to make the £11,500 payment “upon termination”. Despite a co-operative response from the lessor, E again wrote to S on 24 February 1994, confirming that the claimant wished to terminate and instructing the defendant to ensure that the requisite notice was served (and acknowledged by the lessor) before the fast-approaching deadline for the exercise of the option. S complied with the instruction. Thereafter, the claimant corresponded with the lessor on the VAT implications of the £11,500, which remained unpaid on the termination date. The lessor subsequently claimed that the option had not been validly exercised. In the event, the claimant had to buy itself out of the lease.
In the claimant’s proceedings for professional negligence, it was common ground that the lessor had acted correctly. The claimant contended that the defendant, in the person of S, had been duty-bound to warn E that timely payment of the £11,500 was an essential precondition of the right to terminate. The defendant submitted that no such duty had been imposed by the two letters of February 1994 or otherwise.
Held: The claim was allowed.
While a solicitor was under no general obligation to expend time and effort on issues outside his retainer, he did become obliged to inform his client of a risk, or potential risk, that came to his attention in the course of doing that for which he was retained. (Compare, as suggested by counsel, the responsibility of a dentist who finds a bad tooth next to the one he was engaged to work on.) By reporting such a matter, he was not going beyond the scope of his instructions, nor was he doing “extra” work for which he was not to be paid. That proposition was quite consistent with the authorities cited to the court: Clark Boyce v Mouat [1994] 1 AC 428, Boyce v Rendells [1983] 2 EGLR 146, Mortgage Express Ltd v Bowerman & Partners [1996] 1 EGLR 126 and White v Jones [1995] 2 AC 207 considered.
On a proper reading of the first letter, there was an express instruction to read at least the relevant clause in the enclosed lease. On doing so, an experienced property lawyer would have been aware of the considerable risk to which his client was exposed, and would have gathered from the terms of that letter that E was unaware that payment before the termination date was a condition precedent to the right to terminate the lease. A further instruction to read the lease was inherent in the second letter, the terms of which were sufficiently wide to include giving advice on how to effect termination.
Jonathan Seitler (instructed by Clifford Chance) appeared for the claimant; David Halpern (instructed by Bond Pearce, of Exeter) appeared for the defendant.
Alan Cooklin, barrister
