A Midlands law firm is to appeal a finding of professional negligence made after the collapse of a development deal.
Property developer Milford Investments Limited brought proceedings against its former solicitors Lanyon Bowdler after a mistake which allegedly cost the company a share of a potential £6.8m in profits. His Honour Judge Pearce found in Milford Investments Limited v Lanyon Bowlder LLP that the firm’s error created a risk that the scheme may be aborted. The firm has already indicated it is making an application for permission to appeal.
The developer entered into a joint venture with the owners of a plot of land for the construction of 12 homes, with the parties agreeing they would form an LLP to push ahead with the project.
It was claimed that the firm, instructed to advise on the development, was in breach of its duty of care by failing to ensure that the LLP was incorporated prior to other agreements being signed. This failure, it was submitted, enabled the owners to withdraw from the various agreements and sell the development land to a third party. Had the agreements been binding on the owners, the development – which had provisional planning permission from the local authority – would have been completed and the claimant would have made a substantial profit.
During submissions, the firm mounted what His Honour Judge Pearce described as a ‘full blooded attack’ on the claimant, arguing that its owner Christopher Shaw was dishonest in his evidence. But the judge found Shaw to be an ‘engaging’ witness whose evidence was not all implausible.
The firm also argued that it was not negligent in failing to ensure that the LLP was incorporated before other agreements were entered into. The firm’s skeleton made the point that ‘not all mistakes are negligence’. It argued in closing submissions that the risk of other agreements being unenforceable as a result of the later signing of the LLP was not foreseeable.
However, the judge concluded that the order of completing the development agreements and the LLP incorporation did create a risk that the owners could back out. ‘A reasonably competent solicitor would have sought to ensure that the LLP was incorporated first and were it to appear that this was not going to happen, would have advised of the consequent risk of unenforceability,’ added the judge. ‘In failing to take steps to ensure that the LLP agreement was incorporated before the other agreements, or at the very least advising the claimant of the risk of executing those documents before incorporating the LLP, the conduct of the defendant fell below the standard of the reasonably competent solicitor and was a breach of its duty of care to the claimant.’
Giving judgment for the claimant, he said quantum should be calculated as 32% of the profit that the developer would have made if the project had gone ahead.
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