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27 February 2017

Professional negligence claims in foreign cases

Adams v Atlas International Property Services Ltd and others

Robert Highmore, partner and head of the property litigation group at Charles Russell Speechlys recently gave an interview to say that the recent case of Adams v Atlas International Property Services Ltd [2016] EWHC 3120 (QB) and others is the tail end of a Spanish property boom that saw many consumers get their fingers burnt.

What key issues did this case raise?

The claim was brought by individuals in England who had bought property in Spain after seeing advertisements placed by the English agents for the developer and who later received the purchase price in instalments. Following confirmation that the claimants wanted to buy a property the agent arranged for Spanish lawyers to carry out the conveyancing. The property developers were unable to give clean title to the property, it being affected by a bank charge, and subsequently became insolvent. In the cases before the court, final completion monies were paid at a completion meeting and keys to the property were given to the purchasers but no signed purchase deed was provided. The bank subsequently sought possession against the purchasers who did not have good title. The purchasers therefore claimed against the agents and Spanish lawyer alleging negligence, breach of fiduciary duty and conspiracy.

The claim against the Spanish lawyers included an allegation that they failed to warn the purchasers that there was not a bank guarantee in place (as required by Spanish law) and that there was no proof that the developer could provide good title.

Additionally, the Spanish lawyer should have advised the purchasers that they had a claim against the agent after completion and that all was not in order. A failure to do this meant that the chances of recovery were reduced as the agents’ financial situation deteriorated.

What did the court decide?

The court granted judgment against the agents for the purchase price as well as damages for distress, inconvenience and loss of amenity. As against the Spanish lawyer the court granted judgment for negligence and breach of fiduciary duty. The key points are:

Retainer

The court was prepared to imply a retainer from the agents contacting the Spanish lawyer to arrange a completion meeting after the lawyer sent the purchasers a ‘Dear Client’ letter. This was even though it was not clear in all cases that the Spanish lawyer considered himself subject to a retainer at that point.

Scope of the retainer

The Spanish lawyer argued that the services were limited to seeking to get the completion papers signed and registered but this was rejected as the limitation of the scope of the retainer was not clear on the papers provided to the purchasers.

Standard of care to be observed by the Spanish lawyer

The court rejected the argument that the standard to be expected was of a reasonably competent English solicitor. Instead the standard expected was of the skill and care ordinarily exercised by reasonably competent Spanish lawyers who professed to be specialists in property transactions and in providing services to English speaking clients who were not resident in Spain.

Was the solicitor negligent?

Referring to expert evidence on Spanish law, the court determined that the Spanish lawyer had been negligent in failing to advise the purchasers of the risks. After completion the Spanish lawyer was not negligent for failing to tell the clients that they had a clear claim against the agents because that would have required knowledge of English law.

Loss

The Spanish lawyer argued that the negligence did not cause the loss because in most cases significant sums had already been paid to the agents and if the purchasers failed to pay the remaining sum, the sums already paid could have been forfeited. The court accepted evidence that purchasers who insisted on receiving a signed purchase deed at completion before paying the final instalment did receive a signed deed. Accordingly the purchasers did lose the value of the properties.

Limitation

The Spanish lawyer raised a limitation defence, namely that the claim was brought more than six years after completion. The purchasers relied on section 32 of the Limitation Act 1980 asserting that the Spanish lawyer deliberately concealed the cause of action and so time did not run until, with reasonable diligence, it could have been discovered by the lay clients. On the facts the court found in favour of the purchasers. The Spanish lawyer had argued that a reasonably diligent claimant would have sought advice from another solicitor, but the court found that this would have been an exceptional measure for lay clients to take when already represented.

To what extent does the judgment clarify the law in this area? Are there any grey areas or unresolved issues remaining?

he case does clarify what is expected of lay clients in a case where the cause of action has been concealed. They will not be expected to seek independent advice, but best practice in England and Wales is for a solicitor, who thinks something has gone wrong, to advise a client to seek independent advice.

The case also confirms that you cannot reduce the standard of care by delegating meetings to non-lawyers. A failure by the lawyer to attend such meetings cannot be relied upon to relieve a solicitor of its duties. As always, competent supervision of non-lawyers is expected.

What should lawyers take note of and what should they advise their clients? Do you have any best practice tips?

Clearly it is best for clients to instruct specialist solicitors prior to reaching any agreement or paying any money, but this is a particularly unfortunate set of facts.

Solicitors should take note of the ease with which the court was willing to imply a retainer. Solicitors should ensure that if the scope of the retainer is intended to be limited this needs to be clearly set out. Best practice dictates that there is a clear letter of engagement which specifies the work that will be done in full and any limits on liability to avoid any ambiguity about the retainer.

Are there any trends emerging in this area? Is this decision in line with the trends? Do you have any predictions for future developments?

Solicitors should also be cautious to ensure that best practice is followed, because where parties to a transaction are insolvent or fraudulent, injured parties often look to the solicitor who has the benefit of insurance. This has been true in 3 cases of conveyancing fraud where the money and fraudster have disappeared (see Purrunsing v A’Court & Co [2016] EWHC 789 (Ch), [2016] All ER (D) 95 (Apr) or P & P Property Ltd v Owen White & Catlin LLP [2016] EWHC 2276 (Ch), [2016] All ER (D) 15 (Oct)) and in other cases such as a claim for deceit and negligent misstatement for incorrect replies to enquiries where the seller was insolvent (Francis v Knapper [2016] EWHC 3093 (QB)). Even if those claims can be successfully defended, best practice protects both the solicitor’s reputation, and most importantly the client, from these sorts of unfortunate consequences.


This article was written by Robert Highmore, for more information please contact Robert on +44 (0)20 7203 5201 or robert.highmore@crsblaw.com


This article was first published on LexisPSL Property on 26 January 2017 following an interview by Kate Beaumont.

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