Clients can make bad deals and, regrettably, we all know they sometimes seek to blame their solicitors for their mistakes. At times solicitors could be forgiven for feeling like the underwriters of such loss. However three recent cases are illustrations of where the court has looked at the deal done, has analysed the detail and has concluded that the solicitor is not liable for loss arising out of a bad deal.
Hirtenstein v Hill Dickinson
Solicitors acted on the purchase of a yacht which the claimant bought “as is, where is”. Within an hour of purchase (and 12 miles out to sea) the engine failed. The claimant alleged that the solicitor should have obtained the seller’s personal guarantee of the yacht’s condition and that, without it, he would not have proceeded with the purchase.
The judge found the claimant didn’t give instructions to the solicitors to seek a personal guarantee and simply left it to them to do what they could to protect his interests. It was not negligent for them to fail to ask for a guarantee as there was no realistic prospect of getting it and to insist upon it would have risked disrupting the deal. The claimant thought he was getting the yacht at a price that was a “steal” and was always going to proceed.
Credit & Mercantile PLC v Nabarro
Nabarro acted in relation to the claimant’s advance to Mr Sahota to purchase a property, the Coach House. They negligently failed to spot that the planning permission to demolish the property and build a new one also related to land that did not fall within the title and so could not be implemented. The claimant advanced £1.6 million and Mr Sahota defaulted. After the sale in possession there was a shortfall of £1.5 million, which the claimant sought to recover.
It was argued that the SAAMCo cap applied and that the recoverable loss should be limited to the difference between the value of the Coach House had it been possible to implement the planning permission and the actual value of the property as it stood. The Judge agreed – the judgement makes much of the fact that the solicitor’s default did not go to the value of the covenant of Mr Sahota and, on that basis, the solicitors were not responsible for the whole of the shortfall caused by his default.
Young v Hamillton
Solicitors acted for the claimant in the purchase of a building plot with a right of way over a lane giving access. The claimant was unaware of the extent of a dispute between the vendor and the neighbours relating to the use and ownership of the lane and alleged the solicitors ought to have uncovered its full detail.
The judge commented, in determining whether the solicitors had complied with their duty: “…it is important to analyse the question without the benefit of the facts as we know them. Liability does not depend on hindsight”. On the facts, he found that while there were steps that might have been taken which would have exposed the true circumstances, the enquiries made actually made by the solicitors were, nonetheless, sufficient.
What is welcome in all of these cases is that the court has been prepared to pick through the detail of the transactions and to judge the solicitors’ conduct based on what was known at the time and not through the prism of what happened subsequently. Clients can, and inevitably will, still do dodgy deals but the cases demonstrate that it is reasonable to argue that they do so at their own risk and not their advisors’.