Negligence by a Solicitor is only relevant if it causes a loss.
Purchasers of a property bought for development sued their solicitors for not protecting them against the possibility that the planning permission they had previously obtained might be quashed after they had completed the purchase.
The purchasers agreed in 2003 to buy a house in Manchester at a price of £400,000. The purchase was conditional on the purchasers obtaining planning permission for the conversion of the house into flats and the erection of an additional house. Planning permission was duly obtained and the purchase completed. However, the neighbours then successfully pursued judicial review proceedings against the local authority’s decision to grant planning permission and the permission was quashed and the development never proceeded and the purchasers sold the property at a loss of some £70,000.
The purchasers claimed the solicitors were negligent for not seeking to include a “call in” clause in the sale contract. This would have made the contract conditional on the planning permission not being successfully challenged by way of judicial review.
The solicitors denied they were negligent but argued that, even if they were at fault, the vendor would never have agreed to the insertion of a “call in” clause and the purchasers would have proceeded anyway.
The Court found the solicitors to have been negligent The purchasers were not experienced developers and should have been advised that the grant of planning permission was vulnerable to subsequent challenge and that a “call in” clause would address this risk by allowing the purchasers to withdraw if the planning permission was called in for judicial review. The Court emphasised that solicitors are under a duty to alert their clients to risks which the solicitors should be aware of but which the client may not appreciate.
However, having won on liability, the purchasers lost on causation. The Court was unimpressed by the purchasers’ evidence which it thought was self-serving and it noted that they had not called the vendor to give evidence and drew an adverse conclusion from this. Given the sale was in a rising market, and that the price was fixed at £400,000, the Court did not think the vendor would have agreed to include a “call in” clause as this would have prejudiced his interests by delaying the completion of the sale by at least 3 months and 7 days whilst the period for seeking judicial review ran its course.
The Court then had to consider what the purchasers would have done if the vendor had refused to agree to a “call in” clause. If they would have withdrawn from the purchase if correctly advised, then the solicitors negligence would have been the cause of their loss. Naturally, the purchasers claimed they would have withdrawn but the Court did not accept their evidence.
The Court concluded that the purchasers would have proceeded as the market was buoyant and they were keen to proceed and they would not have thought the chances of any successful judicial review application were high. Furthermore, the property was worth around £400,000 even if a development did not proceed so the purchasers did not have much, if anything, to lose by proceeding speculatively.
Accordingly, the claim failed and the purchasers misery was compounded by them being held liable to pay the defendant solicitor’s costs which were agreed at £135,000.