Some commentators are speculating that the economic fallout from the Covid-19 pandemic will prompt an increase in claims against solicitors. We shall have to wait and see if those predictions prove to be correct.
In the meantime, the recent judgment of His Honour Justice Tipples in Taray Investments & Another v Gateley Heritage (2020) should provide solicitors with some comfort if they were to face a claim for the loss of a chance.
What happened in Taray?
The claimants, Taray Investments Ltd and Bellevue Homes Ltd, entered into a joint venture to purchase and develop a property in Rotherhithe in November 2012. The property had the benefit of planning permission to redevelop the site and build seven new residential units. The vendor agreed to sell the property for £600,000, subject to contract.
Gateley provided a report on title to Taray in October 2012. Gateley subsequently took on Bellevue as a client in early January 2013 and offered to provide a copy of the report to them.
Gateley admitted that in their report on title they had failed to identify a discrepancy between a highways plan and land registry plan which showed that part of a footway encroached on to the property, preventing the development of the property. It was accepted that the only way to resolve the issue was by obtaining a stopping up order from the local authority extinguishing rights to use the footway. Gateley accepted that by early January 2013 it had breached its duty of care to both of the claimants.
Later in January 2013, the claimants received an offer of a loan facility from a finance company of around £1.3 million, which was to be used to fund the purchase and development costs. In May 2013, the lender’s solicitors drew Gateley’s attention to the issue with the footway.
Gateley investigated the footway issue and within two weeks had advised the claimants that a stopping up order was required which could take three to six months to obtain and cost around £9,000. The claimants’ lender was not prepared to proceed until the footway issue was resolved and the vendor proposed that the sale be made conditional on obtaining the stopping up order, but only if the claimants agreed to pay a deposit of £60,000. The claimants refused and the sale collapsed.
The vendor went on to exchange contracts with another buyer, conditional upon the vendor obtaining the necessary stopping up order. The order was obtained and the sale completed.
What did the claimants claim?
The claimants claimed for the loss of the chance to purchase and develop the property. In particular, they alleged that if they had been told about the issue with the footway at an earlier stage they would have either:
- obtained a stopping up order by May 2013; or
- structured the purchase in some other way to enable it to proceed.
The claimants claimed damages of over £800,000, which included a claim for loss of anticipated profits from the development. Gateley admitted breach of duty but denied the claimants’ claim for loss of an opportunity.
How did the court assess the claim?
The court determined the issues by applying the well-established principles laid down in Allied Maples v Simmons & Simmons (1995) and reaffirmed in Perry v Raley Solicitors (2019). His Honour Judge Tipples applied a two-stage test, which required the claimants to show:
- if properly advised, they would have taken the steps required by them to acquire and develop the property (assessed on the balance of probabilities); and
- if they had done so, that there was a “real and substantial” chance they would have succeeded in acquiring and developing the property.
The claimants failed to clear both of these hurdles. The events in question took place seven years ago and so it is perhaps unsurprising that Tipples J relied heavily on the contemporaneous emails and documents when determining what did and would have happened. That said, and despite the passage of time, he did accept the evidence given by Gateley’s partner who he described as a careful and measured witness. In dismissing the claimants’ claim, Tipples J reached the following conclusions:
- The claimants had been prepared to spend money applying for the stopping up order, but only if the vendor had committed to sell the property to them on specific terms;
- The claimants’ evidence that they could have agreed an option or exclusivity agreement or a “no money down” conditional exchange of contracts with the vendor was unrealistic;
- The vendor was unlikely to have changed their position that they were prepared to proceed on the basis of exchange conditional on the obtaining of a stopping up order;
- The claimants’ lender would have responded in the same way that they did – they would have refused to lend until the issue with the footway had been resolved;
- The claimants would not have incurred the cost of applying for an order – the outcome was uncertain, the vendor was not “tied down” and they had no funding in place;
- The deal fell apart because the claimant refused to enter into a conditional contract and pay the vendor the requested deposit of £60,000; and
- The prospects of the claimants acquiring and developing the property were fanciful and not real and substantial and so their claim failed.
Cases involving the doctrine of “loss of chance” seem to be like buses, with none for a while and then a few coming along at once. In 2019, there were various attempts to push and pull the doctrine in different directions with Perry v Raleys Solicitors, Moda International Brands Ltd v Gateley and Brearley & Others v Higgs.
The decision in Taray is a welcome one and suggests that things have now settled down and normal service has resumed with both the parties and the courts refocussed on the original two-stage test set out in Allied Maples.
In Taray, Tipples J took the view that the claimants’ case was unrealistic and did not get anywhere close to meeting the two-stage test. This decision should serve as a reminder to claimants that loss of chance claims still need to be proven and where they are not supported by the evidence, the courts are quite prepared to say so and dismiss claims. A sobering thought for claimants and a reassuring one for solicitors and their insurers.