The defendant solicitors in Moda International Brands v Gateley LLP [2019] EWHC 1326 were Gateley LLP (the Solicitors) and the claimants were their client Moda International Brands (Moda) with Mr Wilkinson acting as their agent.  

The decision shows that calling a third party to give evidence in a loss of chance case is not necessarily determinative of what would have happened, unless all relevant material is placed before the court and the evidence is entirely credible. 

Background

Moda are a property development company. With the Solicitors' advice, Moda entered into a joint venture with Mortar Developments (Mortar) in respect of a site in Nottingham, upon which they planned to build student accommodation. They planned to enter into development and participation agreements which indicated that Moda would receive 35% of net profits from the project. 

During the drafting phase, the agreements were amended to state that Moda would not receive any profit from a section of the site called the 'Angel Row' unit. The Solicitors failed to inform Moda about this change. 

There had been no prior agreement or understanding to exclude profits from Angel Row and Moda had not instructed the Solicitors to make this change. They also failed to provide Moda with copies of the agreements and, instead, had advised Mr Wilkinson that the agreement looked 'normal'. When directly asked about payments relating to Angel Row, the question was not answered by the Solicitors and the Development Agreement was sent to Moda with the relevant page of the Agreement excluded, which was noticed by Moda three years later.

Mr Wilkinson claimed that he would not have entered into the agreements in the form executed and that he would instead have required that Mortar share profits of 65/35% in respect of Angel Row.

The Solicitors' case was that Moda had expressly agreed that the Angel Row profits would be excluded and/or alternatively that Moda would still have entered into the deal notwithstanding the exclusion of the Angel Row profits as Moda was under some pressure to do so.

Central issues:

  • what was agreed about the Angel Row profits; and  
  • what would have been agreed had the parties negotiated the relevant term. 

 Decision

It was held that the Solicitors were in breach of contract and negligent for: 

  • failure to take reasonable steps to ensure the agreements were drafted to maintain the entitlement of Moda to 35% of the profits in the site as a whole
  • failing to warn and/or advise Moda in relation to the change to the Development Agreement
  • failing to ensure that Moda understood and agreed to the precise wording and effect of the documents as executed and to supply copies of the agreements and of each draft;
  • advising that the Development Agreement looked 'normal' when with the exercise of reasonable skill and care, it would have been clear that it was not, and it would have been obvious for a solicitor to warn very clearly that the intended deal had been substantially re-written, and 

t was noted that the relevant solicitor's evidence was hampered by his failure to take detailed attendance notes.

On the evidence adduced as to what would have happened had there been no breach by the Solicitors, the judge said that he had come to the view that the decision on loss of chance should not depend on whether a third party has given evidence. However, the fact that a third party has given evidence may be relevant to the assessment of the chance. He held that Moda were entitled to damages for loss of a chance of receiving the relevant share of profits. Each party had a shared desire to complete the development and there was a real and substantial possibility that Moda would have earned all or some part of the 35% profit in respect of Angel Row, in the event that it had been properly advised. 

Moda was awarded 65% of the profit sought.

This decision provides authority as to the weight that will be given to third party evidence as to what would have happened had there been no breach of duty in loss of chance claims – an issue left open following Allied Maples Group Ltd v Simmons & Simmons (a firm[1995] 4 All ER 907 and Perry v Raleys Solicitors [2019] UKSC 5