‘Negligent’ firm escapes payout after court finds no causation

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1 July 2015

Judge: advice negligent but no loss ensued

Judge: retainer breached but no causation

The High Court has dismissed a claim of professional negligence against a firm of solicitors because, although the claimant successfully established liability, no loss or damage was found to have been caused.

Mark Cawson QC, sitting as a deputy judge of the High Court, found that two-partner Kent firm Preston Mellor Harrison was negligent in failing to advise property developer and chartered architect, Andrew Fryatt, properly on a land purchase.

But despite finding that a breach of retainer and negligence had taken place in relation to the transaction, he said Mr Fryatt had failed to prove that he had suffered loss or damage as a result.

The case involved a parcel of land that Mr Fryatt hoped to acquire either to sell on as development land or to develop it himself. The land was owned by a company, Metal Valley Holdings Limited (MVH).

Although he had initially negotiated to take an option over the MVH land and adjoining land, the nature of the agreement changed to one of taking over the entire issued share capital of MVH. But before Mr Fryatt could exercise the option, MVH went into liquidation.

The liquidator subsequently sold the land to a third party and awarded compensation of £100,000 to Mr Fryatt.

The essence of Mr Fryatt’s complaint was that his losses were substantially greater than the compensation he received and that the defendant had failed to advise him as to the significance of taking an option over the shares rather than over the MVH land itself.

The defendant disputed liability, saying it had provided Mr Fryatt with the advice it was required to provide and that, in any event, its actions did not cause any loss, and Mr Fryatt did not, in fact, suffer any loss.

The judge said: “It was incumbent upon a reasonably competent solicitor acting to the appropriate legal standard to ascertain whether Mr Fryatt did in fact understand the true nature of the transaction, and… how an option over the shares materially differed from an option over the MVH land.”

As this did not happen, the firm acted in breach of its retainer and negligently.

However, the judge was “simply not persuaded” that Mr Fryatt would have taken a different course had he been correctly advised. Further, the judge found that even if he had sought and obtained an option to purchase the MVH land, “he would not, in fact, have exercised it”.

The judge continued that he did “not consider that Mr Fryatt has established that he has lost any profit from a possible resale of the MVH Land” and that – due to various difficulties with developing the land – a claim for loss of profits based on the redevelopment of the land himself was “far too speculative to provide a basis for a claim to damages”.

Dismissing the claim, he said: “The result of this judgment is that, although liability has been established, Mr Fryatt has failed to prove that the breach of retainer and the negligence that I have found caused him any loss or damage, or that he suffered any loss or damage.”

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