11 September 2015 by

Planning ahead to avoid breaching your duty of care

In a recent case, the High Court considered the scope of a buyer’s solicitors’ duty to advise their client of information that may affect the buyer’s decision-making process.

In the case in question, the buyer had an offer of £25 million accepted in relation to the purchase of a property in a highly desirable area in North London. The solicitors duly undertook the relevant pre-contract investigations into the property and provided the buyer with a report on title.

During the solicitors’ investigations, they obtained a planning report which provided details of the proposed redevelopment of two small schools, located on the same street as the property, to create an academy and specialist school for 1,400 children in total. However, when preparing the report on title, the solicitors failed to refer to the contents of the planning report.

After considering the solicitors’ report on title, the buyer exchanged contracts on the purchase of the property and paid the sum of £2.575 million as a deposit.

Shortly after exchange of contracts, the buyer became aware of the plans to develop the academy and specialist school and sought to rescind the contract. The seller refused to allow this, and the parties ended up in dispute, which was eventually settled with the £2.575 million deposit being split between the buyer and the seller.

In order to try and recover the remainder of the deposit, the buyer then started proceedings against its solicitors for professional negligence, on the basis that they had failed to advise the buyer about the proposed plans to develop the academy and specialist school.

The Court ruled that, where a solicitor has information that may materially affect the buyer’s decision-making process, the solicitor has a duty to communicate that information to the buyer. It is then for the buyer to assess the relevance and impact of the information in question. By failing to disclose the information about the proposed redevelopment, the Court ruled that the solicitors had breached their duty to the buyer. The Court also found that there was a causal link between the breach of the solicitors’ duty to the buyer and the damage suffered by the buyer. The buyer’s claim for professional negligence succeeded, and the solicitors were ordered to pay £1.8 million in damages and interest to the buyer.

This is a useful reminder that any information held by a buyer’s solicitor, that may materially affect the buyer’s decision-making process, must be communicated to the buyer.

For any further information on this case, or for advice in relation to professional negligence actions, please contact us on 0207 288 4700 or email us at info@boltburdon.co.uk

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