The Defendants, Bircham Dyson Bell admitted breach of duty for the inclusion of an all monies clause in an agreement due to the negligence of its property partner Mr Michael Parker.
The Claimants, Harding Homes (East Street) Limited had borrowed £9.458 million from GMAC – RFC Property Finance Limited (‘GMAC‘) to finance a development in East Street, Colchester, purchased through the Claimants’ company, and instructed the Defendant’s solicitor to draft a bank guarantee between the Claimant and GMAC. The drafted guarantee included an all monies clause instead of the original agreement between the parties which should have included a clause limiting the guarantee liability to cost overruns and interest.
A default on one of the milestones under the terms of facility led to a demand from GMAC for the full amount owed under the all monies clause.
Success does not consist in never making mistakes but in never making the same one a second time.”
George Bernard Shaw
The Claimants argued that the final settlement of £5.922 million could have been much smaller had there not been an all monies clause. It was alleged that they would have a “real and substantial” chance of selling the development site released from GMAC’s charge for £2 or £3 million and that but for the Deed of Forbearance they would have made a substantial profit on the development. The claim, therefore, was for this loss of opportunity.
The Defendants admitted to the negligence but denied that the all monies clause had any real effect or caused the Claimants a loss of opportunity to obtain a more favorable negotiation with GMAC.
Mrs Justice Proudman said that Mr Parker, of Bircham Dyson Bell, “plainly cut corners all the time“. She added that Mr Parker was “sloppy in dating documents” and “did not take full notes of meetings“.
However, she accepted that Mr Parker was “ashamed of his mistake and sought to minimise it” and therefore, the firm should be held to pay nominal damages to the Claimants. Mrs Justice Proudman, however, did not agree with the Claimants about the effect the all monies clause had on their negotiations with GMAC.
She stated that the Claimants “often misled” GMAC and their other clients and that lies were “part of the regular negotiation practice.”
The Judge went on to say, “This meant that as untruths were such a part of the Claimants’ lives I was not able to tell whether and when they were telling me the truth either. I have no doubt that they were so appalled by Mr Parker’s admitted mistake that they convinced themselves of various matters which did not happen.”
The judgment was concluded with her saying: “Although I do think that on the balance of probabilities the Claimants would have acted differently if the error had not been made, I do not think that they have succeeded in demonstrating that they have lost a real and substantial chance to negotiate a different resolution with GMAC which would have resulted in more profit for the Claimants.”
As a result, the damages granted to the Claimants were limited to nominal damages. Therefore, the loss of opportunity claim failed.
Link: Harding Homes (East Street) and others v Bircham Dyson Bell (EWCA) Ch 2015 3329
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