Company surrendering lease of fourth-floor premises and taking lease of third floor – Company pension trustees taking lease and granting licence to assign to company – Trustees personally liable if company defaulted – Trustees claiming they had not been properly advised – Whether solicitors’ retainer had been restricted – Whether trustees had suffered loss – Whether trustees entitled to damages – Plaintiffs awarded £56,000
The first plaintiff was a director of Management Appointments Ltd, (MAL), whose business was finding executives for other companies. In 1982 it moved premises to the fourth floor of 56 Haymarket, London SW1, and was granted an underlease for a period of 20 years from March 25 1982. MAL gave a guarantee to the landlord for five years. In 1988 MAL wanted to expand its business and surrender its fourth-floor lease and move to larger offices on the third floor. MAL’s accountants advised that the most effective way to obtain relief for the premium for the third-floor lease was for the pension trustees of MAL to take the lease and then grant a licence to assign to MAL. The plaintiffs were both trustees of the pension fund. Although the term ran from February 8 1982 to December 24 2005 the provisions of the third-floor lease were essentially similar to those of the fourth-floor lease.
In January 1996 MAL instructed the defendant firm of solicitors, and the transaction was duly completed. Subsequently the plaintiffs issued proceedings and claimed that the defendant had failed in its duty to advise. It was common ground that the plaintiffs were at risk if MAL or any subsequent tenant defaulted or was otherwise in breach of covenant during the remainder of the term of the lease. The defendant claimed that its retainer had been limited to advise only on the terms of the third-floor lease in so far as they differed from the fourth-floor lease, and the fourth-floor lease had contained a similar covenant by way of guarantee. In the alternative, it was contended that the plaintiffs had been aware that they would be liable under the lease for its duration.
Held Judgment was given for the plaintiffs.
1. The defendant’s retainer had not been limited, and therefore it had been under a duty to advise the plaintiffs that their liability might continue after they assigned the lease, and it was in breach of that duty. If the plaintiffs had been properly advised they would not have entered into the transaction.
2. The plaintiff’s had shown actual loss for which they were to be compensated . The correct approach to damages was to try to evaluate the risk to the plaintiffs of being liable under the lease. Although MAL had had good results, there was a risk it might default. £55,000 was an appropriate figure to cover the plaintiffs’ exposure. Although there was a possibility that the lease might be renewed it was remote, and therefore it was appropriate to award an additional £1,000.
3. It was an ordinary claim for breach of contract and accordingly it was not appropriate to depart from the general rule that damages assessed at trial were to be on a once and for all basis.
George Laurence QC and Leigh Sagar (instructed by Bracher Rawlins) appeared for the plaintiffs; Wayne Clark (instructed by Barlow Lyde & Gilbert) appeared for the defendant.
