In the case of Luffeorm Ltd v Kitsons LLP the claimant company ran a pub called the Highwayman's Haunt. It had purchased the premises using the defendant firm of solicitors to assist. The directors of the company took no advice on the purchase and were very keep to progress with the conveyancing as quickly as possible. One of the sellers of the pub took over a public house in the next village along. Not long after the purchase, the claimant re-sold the premises due to poor return. The company brought a claim against their solicitors.
It was the claimant's case that the downturn in business (necessitating its sale at a price less than was paid for it) was caused by the competition at the other pub. It was claimed that this would have been prevented if their contract of sale had included a covenant from the vendors restraining them from operating a competing public house within a radius of 5 miles for a period of 2 years. It was claimed that the defendant had failed to advise the claimants that they should advise them as to the risk that the trade of the business might be diverted if there was no covenant by the sellers not to compete. It was contended therefore that the defendants had been negligent and had acted in breach of contract.
The issues were: (i) whether the defendant had been negligent; (ii) whether that negligence had cause the loss.
In the Queen’s Bench Division it was held that:
(1) A solicitor's duty was to be measured against his retainer. Nevertheless, a solicitor's duty did not necessarily end at the limits of his retainer. If in the course of doing that for which he had been retained, he became aware of a risk or potential risk to the client, it was his duty to inform the client. In doing that he was neither going beyond the scope of his instructions nor was he doing 'extra' work for which he was not to be paid. He was simply reporting back to the client on issues of concern which he had learned of as a result of, and in the course of, carrying out his express instructions.
Applying those principles, the defendant had no duty to advise the claimant of the risk inherent in the transaction. Nevertheless, he should have noticed the absence of any covenant in restraint of competition and drawn that absence to the attention of the claimants. He had failed to do so and therefore it followed that the defendants had been negligent and in breach of contract.
(2) On the evidence, the claimant's had been determined to proceed with the transaction as quickly as possible. They had taken no advice from any professional valuer in respect of either the business or the premises before making either of the offers to the vendors. The claimant had simply wanted to complete their acquisition as quickly as possible. If the defendant had had drawn the claimants attention to the absence of any covenant by the vendors, the evidence suggested that they would nevertheless have proceeded with the acquisition at the same pace. They would neither have tried to negotiate for a covenant nor withdrawn from the purchase.
Therefore the negligence did not cause the loss and the claim failed.
Published on 07/08/2015