This case comprised a loss of opportunity claim, with the Taray & Bellevue (the ’Claimants’) alleging that had they been made aware by their solicitors of critical information at an earlier stage they would have successfully completed their proposed venture and generated a profit of over £600,000. Mrs Justice Tipples of the High Court dismissed the claim, ruling that the prospect of the venture succeeding in these hypothetical circumstances was “fanciful”.
The proposed venture involved purchasing and developing a residential site in Southwark. Taray Investments Ltd first made an offer for the site in June 2012 and instructed Gateley Heritage LLP to act on its behalf. In October 2012, Gateley sent to Taray its report on title for the site which, crucially, made no mention of a public footpath which encroached on the site and would obstruct the development plans.
Since it lacked the funds to embark on the project alone, in November Taray entered a joint venture agreement with Bellevue Homes Ltd. In December, Bellevue approached Titlestone Property Finance Ltd in search of financing for the project, and in January 2013 Titlestone offered terms for a loan facility which Bellevue promptly accepted.
It was not until April 2013 that Titlestone’s solicitors, carrying out their own due diligence procedures, discovered the existence of the footpath. Enquiries to Southwark Council revealed that a “stopping up order” would need to be granted in order for the proposed development to go ahead. This process would take between three and twelve months, with success not guaranteed.
The best-laid plans of mice and men often go awry.”
Robert Burns
Subsequently the site owner proposed a conditional exchange of contracts (conditional on obtaining a “stopping up order”) but with Taray being unwilling to put down the required deposit the transaction went no further. The owner, by now impatient to sell the property, returned to the market and entered into a conditional contract with a new buyer in July. With the “stopping up order” having been successfully obtained the sale was completed in February 2014.
The Claimants argued that their purchase of the site would not have fallen through if Gateley had discovered the need for a “stopping up order” at the outset and mentioned this in its report on title in October 2012. Had this taken place, the Claimants maintained, they would have had time to negotiate a ‘no-money-down’ agreement with the site owner — either an exclusivity agreement or an option agreement — and would have proceeded to apply for a “stopping up order” in the knowledge that if successful they would be able to buy the site.
The judge rejected this hypothesis, ruling that regardless of timing the owner would not have agreed to anything other than a conditional exchange of contracts, this being what was proposed by the vendor’s solicitors (para 77) to Taray in May 2013 and was finally agreed with the new buyer. The financial position of Taray and Bellevue made them unwilling to put down the deposit of £60,000 required by such an agreement, nor could they have been sure of obtaining (para 80) financing from Titlestone. Upon discovery of the footpath in April 2013 Titlestone had been unwilling to offer a revised loan facility, subject to the granting of the “stopping up order” (para 83), due to the “open-ended nature” of the issue. In these circumstances, without the protection of an exclusivity or an option agreement (para 103), as Bellevue admitted to the court, the Claimants would not have incurred the costs involved in applying for a “stopping up order”. Hence, the judge ruled, there was no real prospect of the venture succeeding even if the Defendant had not failed in its duty of care towards the Claimants.
At no point did Gateley dispute that it had breached its duty of care towards Taray and Bellevue by failing to notice the significance of the footpath. Though this claim was unsuccessful it remains the case that solicitors should exercise a high degree of care when carrying out due diligence checks so as to fulfil their duties to their clients. This is demonstrated by the success of other similar claims, such as that in Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] EWCA Civ 17 (12 May 1995).
A loss of opportunity claim remains a viable option for many potential litigants. As recently confirmed in Moda International Brands Ltd v Gateley LLP [2019] EWHC 1326 (QB), the standard applied to such claims when third parties are involved is not ‘balance of probabilities’ but ‘loss of chance’. In order to meet this standard a claimant must prove not that the specified outcome was probable, but merely that there was a real and substantial chance of it occurring.
Link: Taray Investments Ltd & Anor v Gateley Heritage LLP [2020] EWHC 716 (QB) (27 March 2020)
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