Broadcaster Merrill Powell has won damages from the conveyancing solicitor who advised her during her purchase of a London property that she had sought to develop and sell on at a profit.
In 1997, Powell purchased the lease of 10 Groom Place, London SW1, a mews house that is part of the Grosvenor Estate, for £382,000.
Powell had previously bought, renovated and sold another property at a profit and had had to pay 40% capital gains tax. She claimed that she had sought advice from Graeme Clark, of Whitman, Breed, Abbott & Morgan, about the consequences of purchasing through a nominated company, which she had been told would incur tax of only 21%.
In March 1997, acting on Powell’s behalf, Clark put forward a proposal to the Grosvenor Estate that the lease be taken in the name of a nominated company, Byrd Properties Ltd. Powell invested £310,413 in the renovation of the property, during which she added a new third storey, and placed it on the market early in 2000 at an asking price of £850,000.
It took a year for the property to sell, at a purchase price of only £820,000. Powell claimed that this was because, once the property had been bought by a company, the Grosvenor Estate would allow it to be sold only to another company, rather than to an individual purchaser.
In June 2002, the buyer, Annanpark Ltd, sold the property for £1.04m, having made little in the way of alterations.
Allowing Powell’s claim, Tugendhat J ruled that if she had been given the correct advice, she would have purchased the property in her own name, and would never have suffered the more limited class of potential purchasers that led to delays and a lower purchase price.
He said: “Mr Clark was not being asked simply to advise on the taking of the assignment. He was being asked to advise on the legal side of the whole project, which he knew to be a business matter in which there was to be a purchase, renovation of the property and resale.
“It was foreseeable that, if Ms Powell were incorrectly advised on the implications of taking a Grosvenor Estate lease in the name of a company, then the consequences of that advice being wrong might include there being a more limited class of potential purchasers, delay and other related losses on the resale of the property.”
Disagreeing with Clark’s claim that, regardless of his advice on this point, Powell would have gone ahead regardless, he continued: “She was taking professional advice, she was concerned about the possibility of a delay and of obtaining a lower sale price.
“Had she been given the correct advice, she would have had to consider whether these risks outweighed her desire to reduce the tax liability upon any profit from 40% to 21%. I find that she would have decided that the potential tax benefit was outweighed by the risk, and that she would have taken the lease in her own name.”
The judge said that she should receive damages so as to put her in the same position as she would have been in had the solicitor discharged his duty, adding that these were to be assessed if not agreed.
Powell v Whitman Breed Abbott & Morgan Queen’s Bench Division Tugendhat J) 23 May 2003.
References: PLS News 3/6/03
