The Court of Appeal has allowed an appeal by solicitors against a ruling that they owed a duty of care to developer clients to advise on their rights and remedies against UK Power Networks in Spire Property Developments LLP and another v Withers LLP [2022] EWCA Civ 970, a decision which will be of interest to all involved in property acquisitions.
The appeal arose from a claim for professional negligence brought by the developers against the solicitors concerning the purchase in November 2012 of two Grade II listed properties in Fulham, London for £7.8m and £34m. The two properties shared a boundary and were to be redeveloped in parallel. Post-acquisition the developers discovered three extra-high-voltage electric cables running under both sites, owned by UKPN.
The developers succeeded in two claims at first instance: in 2012 the solicitors had acted in breach of contract and negligently in failing to carry out searches which would have revealed the existence of the cables prior to exchange of contracts; and, in 2014, they negligently failed to advise the developers of their rights and remedies against UKPN. Damages of £584,000 were awarded for the 2012 claim and £1.5m for the 2014 claim.
A voluntary wayleave would have expired when the developers acquired the properties. The judge found – based on a London Electricity Board drawing of May 1998 – that had a statutory wayleave been granted, it probably would have expired in around May 2003. Assuming that it was not renewed or for a fixed period which was still running, in 2014 the developers had been entitled to serve notice on UKPN requiring the cables to be removed under the Electricity Act 1989. The likelihood was that UKPN would seek a necessary wayleave from the secretary of state for the cables to remain. If their application succeeded, the developers would have been entitled to compensation. The judge decided that in January 2014 the developers requested advice as to UKPN’s rights of access and action which they could take to get the cables moved other than at their expense. The solicitors responded by e-mail in February 2014 but negligently failed to advise on the developers’ rights under the 1989 Act.
The solicitors appealed the decision that they owed a duty of care to the developers to advise them as to their rights and remedies against UKPN. There was no contractual obligation for them to do so as there was no retainer. So, the basis of any liability in tort was an assumption of liability. This required an objective assessment of the e-mail exchanges between January and February 2014. The position in relation to possible wayleaves was not known to the solicitors at the time and their position had to be measured against the facts as they then stood, not on a purely hypothetical situation. On a fair and objective reading of the relevant e-mail exchanges, the solicitors assumed responsibility for the circumstances surrounding the non-discovery of the cables in 2012 and not on potential avenues of redress against UKPN going forward. The judge’s ruling was overturned.
Louise Clark is a property law consultant and mediator
