The Court's recent decision in Brook Properties (Birmingham) Limited v Alton & Co [2015] EWHC 3622 (Ch) demonstrates the importance of providing clear advice in writing, and making sure that it has been understood.

The facts

Mr Irfan (the husband) and Mrs Parveen (the wife), agreed to loan £700,000 to the wife's uncle, Mr Afzal, to redeem an existing charge against Mr Afzal's property, which was under threat of repossession. They acquired the Claimant company, Brook Properties (Birmingham) Limited (Brook) which was to be the vehicle for the loan. The Defendant solicitors, Alton & Co, were instructed by Brook to act on its behalf in connection with the loan.

Shortly before the loan was due to be advanced, Alton & Co sent Brook a letter by fax advising Brook that there was an ongoing investigation into Mr Afzal's affairs by the Serious Fraud Office (SFO) and that a restraint order had been placed on the property. Accordingly, Alton & Co advised Brook not to proceed with the loan, given that the restraint order would take priority. Further advice was given by telephone. However, the husband instructed Alton & Co that Brook wished to proceed with the loan notwithstanding these issues, and that Mr Afzal was resolving matters with the SFO.

The loan duly completed and a charge was registered against the property in favour of Brook. However, the charge was subsequently removed as a result of a Crown Court Order, and the entire loan remained outstanding.

The claim

Brook pursued Alton & Co for the balance of the loan on two alternative grounds:

  1. Brook's primary case was that Alton & Co had failed to warn it about the restraint order and the impact that the order may have on Brook's security, on the basis that the critical advice which had been sent by fax had not been received. Instead, it was alleged that Alton had advised Brook that it would take the prior lender's place.
  2. Alternatively, it was argued that, even if Alton & Co had, as contended, advised Brook not to proceed with the loan, Brook should have been advised that Mr Afzal would not be able to resolve matters with the SFO.

Judgment

On 14 December 2015, Newey J found against Brook on its primary case, on the basis that it was probable that the advice sent by fax, which had advised Brook not to proceed with the loan, had been received by Brook. There could therefore be no question that Brook was not advised about the existence of the restraint order and the effect it could have on Brook's security. On the contrary, Alton & Co had expressly advised Brook not to proceed with the loan. Brook's primary case therefore failed.

It appeared at trial that the husband and wife both spoke poor English, and it was therefore alleged by Brook that Alton & Co's advice should have taken this into account (particularly in making sure that the advice had been understood). However, Newey J found that the advice given was adequate, and that it was reasonable for Alton & Co to believe that the husband and wife spoke fluent English, and had understood its advice. The fee-earner at Alton & Co had spoken, and met, with an individual he believed to be the husband, and whom the fee-earner believed to be competent in English. The fee-earner had therefore not been obliged to go further than he had.

As to the alternative case, this was dismissed on the grounds that adequate advice was given and that, even if Brook was not advised that it would have been impossible for Mr Afzal to resolve issues with the SFO, this was reasonable given that the possibility of resolution did exist and indeed, a separate firm of solicitors was dealing with that issue. In addition, Alton & Co had been explicit that the restraint order would take priority and that the loan should not proceed.

Notwithstanding that the claim failed on breach of duty, Newey J also found that the claim would, nonetheless, have failed on causation. Brook had proceeded with the loan without a professional valuation or any assessment of Mr Afzal's ability to repay the loan and therefore, in all likelihood, Brook would have proceeded with the loan in any event.

Comment

There were clearly family reasons which induced Brook to proceed with the loan to Mr Afzal notwithstanding the explicit legal advice to the contrary. In the present case, Alton & Co's position was assisted by having a clear record of both its advice as to the risks of the loan and that it should not proceed, and of its client's instructions to the contrary.

In circumstances where family ties may leave a client deaf to legal advice, it is more important than ever that all advice given is clear, is evidenced in writing and is understood.