Claimant purchasing lease of business premises with bank loan – Claimant relying upon prompt realisation and release of share of estate to provide capital – Claimant incurring interest liabilities to bank – Share not realised – Whether solicitor negligent in handling of purchase of business – Whether solicitor had duty to advise of possibility that realisation of share may be materially delayed – Claim dismissed
In May 1998 the claimant decided to buy a leasehold shop. She borrowed the necessary funds for the purchase of the business from Lloyds Bank Plc, pending realisation and release of her share of her mother’s estate. The claimant’s share of the estate was dependent upon the sale of her late mother’s house and, in the event, her share was not realised within the time scale she expected. In the meantime the claimant incurred mounting interest liabilities to the bank, which she became unable to pay. The shop made losses and, by August 1991, the claimant felt compelled to surrender the business for no consideration to her landlord, from whom she had bought it.
The claimant brought an action for damages for alleged professional negligence by the defendant, who had acted for her in the purchase. Her ground of complaint was that the firm had negligently failed to advise her that there might be a material delay in the sale of her mother’s property and, therefore, the realisation of her share of the estate. The claimant contended that had the defendant so advised her, she would not have bought the business. It was submitted that the claimant could and should have been regarded as an inexperienced client, and it was obvious that she at least needed to know how long she might have to borrow bridging finance from the bank. The claimant contended that even though it may not have been part of a solicitor’s duty to advise on the commercial prudence of a transaction, he must at least advise the client of material facts or matters of which he was aware and which the client was, or may be, ignorant, so that the client could make a properly informed commercial assessment of the transaction.
Held: The claim was dismissed.
The claimant retained the defendant firm as solicitor to act on her behalf in the taking of a lease of business premises and the acquisition of the goodwill of the business. It was no express part of its retainer to advise the claimant on the commercial prudence or otherwise of the proposed purchase, nor was it an implied obligation of the defendant’s retainer to give such advice: Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 and Clark Boyce v Mouat [1994] 1 AC 428 considered.
The complaint was that the defendant had failed to discuss with the claimant an aspect of the purchase that was material to an assessment of its commercial prudence. As the defendant was not obliged to advise her generally about that, it was also not obliged to discuss that particular aspect of it with her. The defendant was not negligent in failing to advise the claimant of the possibility that the realisation of her share of the house might be materially delayed.
Stephen Acton (instructed by Warner Goodman & Streat) appeared for the claimant; Teresa Peacock (instructed by Blake Lapthorn) appeared for the defendant.
