The High Court has dismissed a claim for professional negligence against a firm of solicitors in Aurium Real Estate London Ultra Prime Ltd v Mishcon de Reya LLP [2022] EWHC 1253 (Ch).
The claimant claimed damages of £48m for a loss of opportunity to exchange contracts to sell its interest in a substantial development project near Hyde Park as a result of negligent advice provided by the defendant.
The dispute arose from negotiations to secure vacant possession of a shop at 125 Bayswater Road, which was part of a larger building. The lease had six years left to run, and the tenant rebuffed the claimant’s offers of inducements to surrender the lease. There was a question as to whether the landlord’s repairing obligation under the shop lease – which required it to keep the main structure of the building and the roof void in good and tenantable repair and condition – meant that demolition and replacement of the upper parts of the building with new residential units would be a breach of covenant. Consideration was given to building around the shop to obviate the need for a surrender of the shop lease. The project collapsed when the claimant’s lenders called in sums due after a prospective buyer of the claimant’s interest in the project withdrew following the issue of proceedings by the shop tenant for a declaration that a “build around” scheme would be a breach of the shop lease.
The claimant argued that in January 2016 the defendant failed, negligently, to advise that a “build around” strategy carried a risk of infringement of the shop lease. Had it received different, non-negligent advice, it would have behaved differently in negotiations with the shop tenant, who would have accepted an inducement to surrender the lease, there would have been no proceedings, the purchaser would not have withdrawn and the sale would have proceeded.
At the time the advice was given there was a transactional engagement between the parties “to act in relation to producing and negotiating vacant possession agreements”. The provision of the advice did not fall within that letter. The contract for the provision of the advice was partly written, partly oral and was between a sub-holding company of the claimant – not the claimant – and the defendant. So, the claim failed.
Even if the defendant owed a duty to the claimant, no specific advice was sought on whether a “build around” scheme would be a breach of the shop lease. Nor was the defendant told that the claimant had in mind such a plan because it was not clear at the time what type of scheme would be viable. The defendant was asked to provide a high-level, preliminary view of the shop tenant’s rights and obligations under the lease and provided it. Had alternative advice been provided, it would have been that there was a 50-50 chance that a “build around” scheme would breach the shop lease. This may have led to higher offers to the shop tenant but there was no real chance that such offers would have been accepted and so the outcome would have been the same.
Louise Clark is a property law consultant and mediator
