Ferrari: Car dealership won injunction
Leading London law firm Withers has fought off a £12m claim on the basis of causation after the High Court ruled that it gave negligent advice to a property developer.
However, His Honour Judge Pelling QC, sitting as a High Court judge, found that the firm gave negligent advice on a settlement agreement, leading to an award of £270,000 in damages.
He was also critical of two partners at the firm for not ensuring there was a proper note taken of a crucial meeting on 29 October 2014.
In Prime London Residential Development Jersey Master Holding Ltd v Withers LLP [2021] EWHC 2401 (Comm) [1], the claimant was the assignee of the causes of action available to Glen House Development, which in 2014 bought Glen House, a building in South-West London, for £26m. It was advised by Withers.
The bottom two floors of the building were occupied by car dealership HR Owen (HRO) and used as a Ferrari showroom.
Prime alleged that Withers litigation partner Andrew Wass gave negligent advice at the October meeting which led it to believe it was entitled to demolish the upper floors of the building notwithstanding HRO’s lease.
As a result, HRO obtained an interim injunction in December 2014 restraining the works. Glen maintained that, if it had been advised correctly, it would not have proceeded other than by prior agreement with HRO.
It said this meant it lost the chance to agree better terms for the redevelopment with HRO than it did following the grant of the injunction, and the redevelopment was delayed and cost more as a result.
HHJ Pelling said that neither Mr Wass nor Emma Copestake – a conveyancing partner who managed the firm’s relationship with Glen – took or arranged for “any meaningful notes” of the meeting.
This was “surprising and contrary to reasonable professional practice, particularly where decisions were being taken as to how to proceed in what had become a commercially sensitive situation”.
He added: “I am critical of this failure on the part of two Withers partners to take this elementary step.”
After completion of the evidence, but before delivery of closing submissions, a senior associate who was not at the meeting discovered a note she had prepared after it that led to a letter to HRO’s solicitors.
The judge said this was “unfortunate”, adding: “The failure to discover this note and disclose its existence as and when it should have been inevitably undermines the confidence that I have in the disclosure processes adopted by Withers.”
HHJ Pelling dismissed the firm’s argument that it advised adopting a legally unsustainable position in the dealings with HRO a bid to bolster Glen’s negotiating position.
He said: “Mr Wass was driven to accept that it would be improper for a solicitor to say in a letter to a third party that he had advised a client that an application [for an injunction] was without merit and likely to fail if he had not given such advice.”
The judge found that Withers had advised Glen that HRO’s right of quiet enjoyment was subject to Glen’s right to develop and was not qualified by the proviso that HRO should suffer no material adverse effect.
“I further find that this was both wrong and was advice that no reasonably competent solicitor in the position of Mr Wass or Withers could have given in the circumstances.
“That it was untenable is apparent both from the comments of Edwards-Stuart J at the hearing, from the advice given by counsel at the hearing and from Ms Copstake’s acceptance of that advice both at the conference at court on the day of the hearing and in her evidence.
“Further and in any event it was plainly wrong applying the basic principles of construction that apply to the construction of all documents in English law, because if right it deprived the language of the proviso of any effect and could plainly not have been what the parties intended by the language they used when the lease is read as a whole as it should have been.”
HHJ Pelling also held that Mr Wass failed to advise on how an application for an injunction would work and its impact on the redevelopment. This was “an omission that no reasonably competent solicitor” could have made given Glen’s concerns.
But the judge went on to find that, even if Mr Wass had given the correct advice, “nothing fundamental would have altered”.
He said: “HRO would have continued to make the demands that it made and either an agreement would have been reached in broadly the terms reached ultimately or Glen would have continued as it was doing with the result that HRO would have applied for the injunction it ultimately sought and obtained.”
He added that Prime failed to prove that Glen had a real or substantial chance of obtaining a better outcome if it had continued negotiations on 29 October as opposed to recommencing them after 14 December.
Prime alleged too that Withers was negligent in the way it conducted the settlement negotiation in three respects, of which the judge upheld one: that the agreement failed to provide for unrestricted works outside HRO’s working hours.
“It strikes me again as close to obvious that this was an issue that a transactional lawyer such as Ms Copestake ought to have spotted during the drafting process and stood firm on…
“I am sure that if this point had been spotted, it would have been eliminated by negotiation between solicitors because HRO had no interest in insisting on the agreement having the effect that in fact it ended up having.”
The damages were £33,000 in relation to costs that would have been saved had the settlement terms been properly drafted and legal costs of £236,272 spent in obtaining a variation of the settlement consent order.