A law firm will not have to pay damages despite a judge finding a limited breach of duty in its advice to an investor client.
His Honour Judge Hodge KC ruled in Niprose Investments Ltd v Vincents Solicitors Ltd that the north west firm had failed ‘to a limited extent’ to advise the claimant that deposits being placed for the property development had no meaningful security or protection.
But the claimant did not establish any more extensive breach of any duty and failed to establish the necessary legal connection between anything Vincents got wrong and the loss of the deposits.
‘The claimant has not established that the loss of its deposits represents the coming to fruition of any particular risk in respect of which inadequate advice was given,’ said Hodge, sitting at Manchester Civil Justice Centre.
‘I reach this conclusion with regret. [Niprose director Ruth] Nickoll was an impressive, and patently honest, witness, and a thoroughly deserving individual, whose company has clearly suffered substantial loss as a result of the failure of this development, for which she is in no way responsible.
‘She deserves to succeed on this claim. Had it been open to me to do so, I would have wished to compensate the claimant for its loss. Sadly, the law constrains me to dismiss this claim.’
The claim arose from the claimant’s purchase of eight units in an off-plan residential development in Liverpool. The development was never completed after the finance company that had been partly funding the development fell into administration in 2018.
On the failure of the development, the claimant lost all of its 50% up-front deposits. Vincents had acted as the claimant’s conveyancing solicitor, having been introduced to it by the developer.
In total, the claimant paid over £299,800 to the seller’s solicitors. It also paid £3,796 for Vincents’ fees, which were payable on exchange of contracts. The claim against the solicitors firm was for the whole value of the deposits, refund of the fees and damages for the breach of duty.
The claimant submitted there had been sufficient red flags about the transaction for the solicitor to have been required to intervene. This was at a time when the SRA had issued a warning notice explicitly warning solicitors that ‘it may well be necessary to strongly advise clients against entering into the transaction’ for dubious investments. It was also submitted there had been a ‘serious mismatch’ between the security promised in the marketing material and the contract.
Vincents submitted that neither the nature of this particular transaction, nor the circumstances of this particular claimant, gave rise to any exceptional duty to advise the claimant not to go ahead with the transaction.
It was offering the services of a conveyancing solicitor for the purchase of an investment property and there was nothing in the retainer to support the implication of exceptional duties, with the claimant never seeking to vary that retainer.
The judge found there was no duty on Vincents to advise the claimant against entering into the transaction and there was nothing known to, or reasonably discoverable by, Vincents to suggest that this was a rash or unwise transaction. There was also nothing to indicate that this development involved any dubious investment scheme, masquerading as an investment in land.
‘Everything indicates that this was a genuine property investment opportunity, which only failed because of the unrelated insolvency of its commercial funder,’ he added.
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