A London firm has successfully defeated a High Court challenge from a former client who lost £1.9m in a protracted land sale.

Rentokil Initial 1927 PLC had sued its solicitors London firm Goodman Derrick following the sale of commercial office premises in East Grinstead, Sussex, to developers Taylor Wimpey in 2009.

A £4.4m purchase price was agreed subject to the granting of planning consent for residential development.

Consent was to be sought after exchange of contracts with completion depending on the grant of planning consent with acceptable conditions.

Rentokil claimed that its law firm failed to properly draft and advise on the definition of what planning conditions would not be acceptable.

As a result of these contract conditions, Taylor Wimpey was able to argue that the planning conditions imposed between exchange of contracts and the date of intended completion were unacceptable and it was therefore entitled to treat the contract as over.

At a time of decline in the commercial property market, a compromise price of £2.5m was reached following arbitration.

Rentokil claimed its loss as damages for breach of the retainer and/or professional negligence. 

Goodman Derrick argued that its retainer was limited to legal rather than commercial issues and denied it had been negligent in drafting the agreement. 

Even if negligence could be proved, the claimant could not show it caused a loss as Taylor Wimpey would have sought to agree different terms given the state of the property market at the time of completion.

The law firm submitted that the arbitration and the settlement of it would inevitably have occurred whether the defendant had acted in breach of its duties or not and that there is no causal link between the alleged failings of the defendant and the losses allegedly suffered by the claimant.

Following a hearing in the High Court, His Honour Judge Dight (pictured) said the burden was on the claimant to prove on the balance of probabilities what it would have done if non-negligent advice had been given.

‘Where the result depends on what a third party would have done in a hypothetical situation, the claimant does not have to demonstrate what would have happened on the balance of probabilities but that he had a substantial chance rather than a speculative one,’ he said.

He dismissed the claim, adding that the reason for settlement was ‘not connected’ to the alleged breach of duty.