A London law firm has successfully defended a negligence claim from a client by arguing that its retainer was limited to legal rather than commercial issues.
The case involved the sale of a commercial property to a developer where the purchase price was dependent on the grant of planning permission.Rentokil Initial 1927 PLC sued London law firm Goodman Derrick for £1.9m after it had to reduce the sale price of commercial office building to developer Taylor Wimpey. A price of £4.4m had been agreed subject to the grant of planning permission for a residential development. Consent was to be sought after exchange with completion dependant on permission with acceptable conditions being granted.
The purchase was being negotiated at a time of significant decline in the commercial property market. Taylor Wimpey argued that the planning conditions imposed after exchange of contracts were unacceptable and that it was entitled to treat the contract as over. A compromise price of £2.5m was reached following arbitration.
Rentokil sued Goodman Derrick for negligence on the grounds that it had failed to advise on the definition of ‘acceptable’ planning conditions. In its defence the law firm argued that its retainer was limited to legal rather than commercial issues and denied it had been negligent in drafting the agreement. It also argued that Rentokil would have been obliged to accept a lower price due to the weak state of the property market and that it could not prove that it had suffered a loss as a result of Goodman Derrick’s actions (see Brunel News article on causation – October 2014).
The judge agreed and dismissed the claim. He found that the defendant was not negligent in its drafting and that the wording used was “not difficult to understand.” He also found that Goodman Derrick did expose Rentokil to unnecessary risks.
“It seems that there was no written retainer in place in this case, and obviously law firms which ensure that the terms of their retainer are clearly understood by both parties will be in a far stronger position to successfully defend themselves against a claim of negligence,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “Providing clients with their terms of business and a clearly drafted client care letter and at the outset can reduce the risk of misunderstanding and provide evidence against any subsequent complaint of inadequate professional service.”
Details of the case have been published by the Law Society Gazette and Development Finance Today. The Law Society has published a practice note about client care information.
