In mid-2006 the claimant instructed the defendant solicitors to deal with the sale of its former headquarters in East Grinstead. Bids ranged between £2.7 million for an unconditional purchase and £4.88 million for a purchase conditional on the local authority’s grant of residential planning permission. The claimant accepted the highest (conditional) bid from Taylor Wimpey although the price was later reduced to £4.388 million.
Completion of the purchase was expressed in the contract drafted by the defendants to be conditional upon the grant of a planning permission which was not subject to “unacceptable planning conditions” (which were defined in the contract).
Contracts were exchanged on 9 March 2007 (after prolonged negotiation of the contract) and (after equally prolonged planning applications) planning permission was finally granted on appeal on 8 December 2008. That permission was subject (as is common) to various conditions. Taylor Wimpey asserted that they were “unacceptable” as defined in the contract. The claimant commenced arbitration proceedings against Taylor Wimpey, which were settled before a hearing when the claimant agreed to accept a reduced sale price of £2.5 million.
The claimant sued the defendants claiming the reduction in the purchase price (£1.88 million) and other costs it had incurred.
The judge (His Honour Judge Dight sitting in the Chancery Division of the High Court) found that:
- As a matter of construction, the terms of the planning permission were not “unacceptable” as defined in the contract and it followed that the claimant would have been successful at the arbitration with Taylor Wimpey if it had not been settled.
- The test for whether the defendants had negligently drafted the contract was whether the drafting was in terms which no reasonably competent practitioner would have adopted (rejecting an argument based on Queen Elizabeth’s High School v Banks Wilson that the test was whether the drafting “exposed the claimant to unnecessary risks”). The contract had not been negligently drafted.
- The claimant, represented throughout by its in-house solicitor, was “a highly sophisticated commercial client” which did not need a “line by line” explanation of the contract – an interesting contrast with recent decisions such as Newcastle International Airport v Eversheds in the Court of Appeal.
- Subject to that, if the judge had found the defendants liable he would have approached causation and loss on conventional loss of chance principles but, on the facts, there had been no chance of negotiating better terms with Taylor Wimpey which had taken “an extremely tough stance, strategically and tactically”. The judge also rejected an alternative case that the property could have been sold to another buyer for £3.505 million in 2007.
- Finally, the judge held that the claimant had failed to mitigate when it settled the arbitration with Taylor Wimpey and acted unreasonably in doing so. He seems to have been unimpressed by the claimant’s refusal to waive privilege in relation to the advice it received on settlement of the arbitration and the reasons for settlement.
The judge seems to have paid close attention to the underlying reality of the transaction. The claimant had consciously opted for a relatively high risk conditional contract at a higher value than a lower risk, and lower value, unconditional contract.
The decision is therefore a helpful one that may make it easier to defend claims alleging negligent drafting. One problem with such claims has been that it is notoriously difficult to predict the outcome of disputes over the construction of documents but here the judge was prepared to adopt a robust approach adopting conventional principles. Likewise, his approach to the level of advice required by sophisticated clients counterbalances other more demanding decisions. It is also noteworthy that the judge concluded the claimant had acted unreasonably in settling the arbitration.
However, our conclusions are tentative at present. The decision is one at first instance. It remains to be seen whether it will be appealed. If so, the approach of the Court of Appeal may be interesting given its approach to construction issues in previous cases such as Levicom.