Mansion Estates Ltd v Hayre & Co [2016] EWHC 96 (Ch); [2016] PLSCS 32 is a sorry tale of a transfer of part that went badly wrong. The claimant acquired land with the intention of sub-selling part simultaneously, and developing the remainder. But, following completion of the transaction, it discovered that its retained land was blighted – either because the wrong plan had been attached to the transfer of the land that had been sub-sold, or, if that was not the case, because the sub-sale transfer did not reserve sufficient rights of access for the benefit of the retained land.
In addition, the claimant complained that its solicitor had failed to take advantage of the stamp duty land tax rules that offer tax relief on sub-sales. The purchase price for the site was £1.7m and the claimant had sub-sold part at once in return for £450,000. Nonetheless, its solicitors had calculated and paid stamp duty land tax on the whole of the purchase price, instead of paying tax on £1.25m only, and it was now too late to recover the overpayment from HMRC.
The claimant stated that it had supplied its solicitor with a signed plan for use in the transfer of part. It drew the court’s attention to a plan on the solicitor’s file, which was signed by one of its directors, and to the fact that the transfer of part included an unsigned plan, which was entirely different. The claimant’s solicitor denied that he had used the wrong plan and tried unsuccessfully to persuade the court that the claimant had been properly advised – but had insisted on proceeding.
After weighing the evidence, the judge decided that the claimant’s solicitor had used the wrong plan – and had added it to the transfer of part after the claimant had executed it. Furthermore, the claimant’s solicitor had tried to conceal his negligence by concocting file notes after the event, to protect himself against a negligence claim.
The judgment does not tell us whether the sub-purchaser ran into any difficulties with his application to register a transfer of part that did not include a signed plan, or, if he did, how he resolved them. However, the transaction had completed, and could not be undone. Indeed, the sub-purchaser went on to take commercial advantage of the situation by negotiating to buy additional land from the claimant at a knockdown price.
The judge held that the claimant was entitled to damages in the sum of £211,500 to compensate it for the diminution in the value of its land caused by the use of the wrong plan, and to an additional £18,000 in respect of the overpayment of stamp duty land tax. The judge ruled that it falls within a solicitor’s retainer to calculate stamp duty land tax accurately and that the claimant’s solicitor should have advised his client about the availability of sub-sale relief in respect of sub-sales of part.
The case provides us with a salutary warning of the dangers of asking clients to sign documents that are incomplete and reminds us that the Land Registry requires plans attached to transfers of part to be signed by the transferor for good reason. Indeed, many would consider it good practice to ensure that plans attached to transfers of part are signed by all parties, to ensure that the land in question has been properly identified.
Allyson Colby is a property law consultant
