Seeing thing that aren't there: all part of a lawyer's duty

Luffeorm Ltd v Kitsons LLP, a 2 July decision of Jonathan Acton Davis QC sitting in the Queens Bench Division, Bristol, throws light on every lawyer's nightmare -- getting into trouble for not spotting something that isn't there.

Highwayman's Haunt

In this case, the client was a company run by a couple who were, as the Lawtel note puts it, "experienced in the hospitality industry". The company was buying a pub, the Highwayman's Haunt, from its owner, the pub's chef. After the pub was sold, the chef took over a pub in a nearby village (the Claycutter's Arms, just three miles down the road) where, attracted by the magnetic force of his goodwill, a significant proportion of the old pub's clientele took its business. The couple's takings were far lower than predicted and they sold the business at a substantial loss. Said the couple, their solicitor was negligent because he had not spotted the fact that the contract to purchase their pub did not contain a non-compete covenant that would have protected them from the damage caused by the old chef opening up so close by.

Not only had the solicitor not spotted the absence of a non-compete covenant, but might not even have had the time to do so since the couple were in a great rush to sign up and get the pub in time to cash in on the trading opportunities represented by Easter, Mothers' Day and the May bank holidays.

Claycutter's Arms

Yes, said the judge, the solicitor had been negligent. While he was not under a duty to advise on the commercial wisdom of a transaction, particularly where the client was an experienced business person (as was the case here), that principle was not to be taken too far. If a solicitor becomes aware of a potential risk to the client, he is obliged to inform the client of that risk. In this instance, while it wasn't his job to warn the couple of the commercial risks inherent in the transaction -- which this blogger suspects they would have known anyway -- he should have spotted the absence of any covenant in restraint of competition and drawn that absence to the couple's attention. Failure to do so was both negligence and a breach of contract.

That was the bad news. After that, things took a turn for the better. Said the judge, since the couple were determined to proceed with the transaction as quickly as possible and were convinced that they would make a success of the business, taking no advice from any professional valuer of either the business or the premises before making an offer, it was clear that even if the solicitor had drawn to their attention the absence of any restraint of trade covenant, they would still have gone ahead with the acquisition. He added that they would neither have tried to negotiate for a covenant nor withdrawn from the purchase. In other words, his negligence had not caused their loss.

This blogger is sure that readers need no reminder that we are all -- lawyers and clients alike -- working to a great extent under the pressures of time. Some of these pressures are imposed from outside, such as the duty to file responses in trade mark and patent office actions and in litigation, attending to tax returns, paying utility bills, renewing insurance policies and the like.  Other pressures are of our own or our clients' making: here the pressure was caused by the client's desire to take over a business in time to cash in on a lucrative trading period. Sometimes it can be the need to clear one's desk ahead of a long-planned holiday (or the need to get something done before a colleague or secretary goes away). Either way, pressure of time is bound to fall hardest on small and sole practices, where there is little or no assistance or margin of error.