In this edition of her blog, solicitors negligence specialist Emma Slade looks at a new commercial conveyancing negligence case that has landed on her desk.

My client (who I shall call Mr Cook) is a property developer and when a small property came on the market, he took some interest in it.  It was an old house which had seen better days but which had received planning permission to convert into offices.  The details from the Estate Agent pointed out that the property had a very large rear garden which would be suitable for the parking of 6 cars.  The sale would be of the leasehold only.

Mr Cook had had dealings with his firm of solicitors for a number of years and they had dealt with virtually all his property purchases.  He asked them to oversee the purchase of this property.

The solicitor called for a copy of the Land Registry Office Copy Entries for the property.  For those not in the know, OCE’s are an official document prepared by the Land Registry that contains all the relevant legal details about the property – title owners, title, extent of property, covenants, charges etc.

The OCEs arrived and it confirmed that the title to be purchased was a lease currently held in the name of the vendor who I shall call Mrs Aiken.  The OCEs were also obtained for the freehold which showed that the freeholder was a Mr Aiken – Mrs Aiken’s husband.  Mr Cook was very interested in the opportunity and so discussions were held with Mr & Mrs Aiken where it was agreed that both the lease and the freehold would be sold to Mr Cook.

The transaction went through but as soon as the details of the purchase were sent to the Land Registry for noting on the register, the Land Registry wrote back and asked what Mr Cook was going to do about the headlease.

“What headlease?” wrote back his solicitors.  “Mr Cook has bought it.”

“No,” said the LR, “he has bought the underlease which is for the house only.  It doesn’t include the garden” (or words to that effect).

On further inspection, it turned out that Mr Aiken had owned the freehold of the house.  His neighbours – a dentist’s surgery – had thought the garden would be of considerable use to their business.  Not wishing to part with it, a complicated scheme was set up whereby Mr Aiken gave a lease (the headlease) of the entire property to the dentist’s surgery who in turn gave a lease back (the underlease) of the house to Mrs Aiken.

Why not lease back to Mr Aiken you may ask or even just lease the garden?  Simple.  In certain circumstances, a lessee may ‘enfranchise’ his lease, ie buy out the freeholder which would expunge any intervening leases.  However, he cannot do that if the freeholder and the lessee are one and the same.  By doing it this way, at any stage, Mrs Aiken could have enfranchised her lease, chopping the dentist’s surgery out of the picture.  A complicated transaction but it prevented the dentist’s surgery from enfranchising themselves and it therefore kept the property in the Aiken family.

The Aiken’s had been a bit disingenuous therefore when they sold the property to Mr Cook as they would have known of the headlease but at the same time, Mr Cook’s solicitors should have spotted this.  On the OCE’s, it clearly made reference to the headlease – the solicitors simply hadn’t checked the details against the underlease, just presumed they were one and the same.

Mr Cook was at a loss as to what to do.  Because of restrictions in the lease, he could not raze and develop the house as he had wanted. He didn’t have the garden so would not have the planned-for parking area even if he could have rebuilt. Unlike Mr & Mrs Aiken, as he held both the underlease and the freehold, he could not enfranchise to get rid of the intervening lease.

To mitigate his loss and to get rid of this pup, he negotiated with the dentist’s surgery and he sold the property to them. They are now developing it. However, Mr Cook had to sell the property at a lower price than what he bought it for; the dentists knew of Mr Cook’s difficulties.

And so we are now bringing a commercial conveyancing negligence claim against the solicitor for missing a critical title number and not checking the details properly.  Needless to say, Mr Cook no longer uses them to deal with his other property purchases!

For further guidance on making a commercial conveyancing negligence claim the contact our free legal helpline on 0333 888 0403 or send an email to us at [email protected]

 

Professional negligence solicitor Emma Slade looks at vets negligence claims.

I am an animal lover.  I have chickens, ducks and a lame goose in the garden; and an asthmatic cat indoors.  I also volunteer with the British Hen Welfare Trust, initially rescuing battery hens but now rescuing hens at the end of their commercial life and re-homing them.  Some of them I even sneak back home with me!  I therefore find it very upsetting when I get calls from another animal lover whose pet has died at the hands of their vet as invariably, there is so little I can do and I really feel for them.

Unfortunately, it all comes down to the value of the claim. When it comes to a  professional negligence claim, the court will generally only award compensation for your financial loss. Sometimes this might be some of the vet’s fees but also it is the value of the animal itself.  If you got Muffy from the Cat Protection League, or Tonto is a ‘Heinz 57’ dog, their financial value is going to be very limited.

The caller is also usually extremely upset by the loss of their pet. Losing a companion animal can be very distressing but unfortunately the courts decided a number of years ago that for reasons of policy, “a contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party.”  (If it is any consolation, if you lost a human loved one, the statutory bereavement award is capped at just £11,800 – not much I know).

So, invariably, vet negligence claims tend to be worth less than £10,000 which means it will be allocated to the Small Claims Court. The cost consequence of a Small Claim is that regardless of whether you win or lose, you will not be able to recover your legal costs, except in exceptional circumstances.  Given that the cost of a medical report into the death of Muffy or Tonto can run in to many hundreds of pounds and the solicitors bill will be much more, you will appreciate that for most people it is simply not cost effective to sue.

But, while it is relatively rare for vets negligence claims to go to court, the claimant’s loss is sometimes significant enough to justify court proceedings.

One case I dealt with involved a pedigree breeding dog. Not only had this bitch done extremely well at Crufts, she had a long and revered pedigree and her pups were well sought after – there was a waiting list if memory serves correct with each pup being sold for many hundreds of pounds. During a routine internal examination, the vet made an error resulting in the dog having to be spayed.  Because of her previous breeding history, I was able to sue the Vet for the loss of future earnings that the Owner would have received during the dog’s life.  At least the dog had survived in this instance.

Another case I dealt with was in respect of a purebred horse.  If you are a bit squeamish or have a delicate tum, you might want to skip this part!

The Owners brought their mare to breeding stables to be live covered by a stallion. I think I have said in a previous blog entry that I learn a lot of things doing this job and this one was no exception. There is a lot more to covering a mare than you would imagine including a lot of human involvement. My understanding is that a handler actually assists with the act of coitus by guiding the stallion in the act of penetration. In this particular instance, the handler erroneously allowed penetration to occur in the rectum causing the rectal wall to split. This was not detected and by the time the mare showed signs of ill health, faeces had been entering the mare’s bloodstream for a long period of time causing considerable infection and later, death.  It was only on autopsy that the error was discovered. The value of the mare was quite considerable as were all the vet’s fees incurred by the Owner in trying to treat the mare.  I was successful in that vets negligence claim but again, only because of the value of the animal.

We can assist with vets negligence claims and where the value of the claim exceeds £25,000 we are often able to offer No Win, No Fee funding.

Cyber fraud is a growing problem in the legal sector, with the press regularly reporting on the success that scammers have enjoyed at the expense of unwary firms of solicitors.

The estimated loss of client funds in 2016 alone ran into many millions, with three quarters of cyber-crime reports relating to Friday afternoon frauds – the traditional day for property transactions to be completed in a solicitor’s office.

One increasingly common problem is people selling property they don’t actually own to unwary purchasers

Solicitors and their insurers and regulators are understandably concerned, especially as firms can be held legally responsible for their client’s losses.

A solicitor is under a duty of care to keep a careful eye open for unusual features that might cause alarm bells to ring.

Potential red flags include unoccupied properties with a high value, transactions where the seller’s address is not the same as the property being sold, situations where the seller is in a rush to speed the transaction through, sellers with limited knowledge of the property they are selling or who do not hold key documents.

Very high standards of care are expected from solicitors and clients who lose out in these frauds can usually expect to receive the benefit of any doubt.

Solicitors who unwittingly act for the fraudsters who are selling property are also in danger of facing liability, though in general they don’t owe a duty of care to a buyer or the buyer’s solicitor.

Another type of cyber fraud is where criminals intercept emails between the solicitor and their client and ‘arrange’ for monies intended for a property transaction to be diverted to their account.

Again solicitors are expected to be vigilant and on the look out for signs of the fraud. Suspicion might be aroused for instance where:

1. a solicitor is asked to pay money to a third party,

2. an ‘odd’ email address is given,

3. the solicitor is notified at the last minute of a change to the payee’s bank account.

A solicitor who isn’t alive to these issues and fails to detect signs of fraud could well find themselves facing a claim against them.

If you have suffered loss arising from fraud and think your solicitor is responsible then call our free helpline for initial guidance on the options open to you. Call 0333 888 0403 or email us at [email protected]

Professional negligence solicitor Emma Slade looks at legal costs in a professional negligence case and the costs issues arising in a recent claim involving a negligent architect.

Very few people relish the thought of engaging in litigation, unless they have very deep pockets. Just thinking of the potential costs liability can lead many to suffer sleepless nights. The usual costs rule is that the unsuccessful party will pay the costs of the successful party. However, in so doing, the court “will have regard to all the circumstances including… the conduct of all the parties” . The rule goes on to give examples of the sort of conduct it has in mind, but it is not an exhaustive list. So it will be interesting to be a fly on the wall during the costs arguments following the recent court decision in Riva Properties Ltd & Others –v- Foster & Partners Ltd [2017] EWHC 2574 (TCC).

I have dealt with the main legal issues that arose from the judgment elsewhere on this website. But the costs issues were particularly interesting and it is very clear that the presiding judge, HHJ Fraser, was not impressed by the attitude of the Defendants towards the Claimant’s representative, John Dhanoa, right from the beginning of their collaboration and all the way through the litigation.

According to the judgment, the Claimant had previously been involved in some building development but nowhere near the scale of projects that the Defendants – who are world-renowned architects – were used to. Rather than dealing with Mr Dhanoa as a valued client, it would appear that two of the main architects involved were quite condescending towards him, making (to my mind) unnecessary reference to Mr Dhanoa’s “semi-detached property in Hayes” and that he “used the hackneyed phrase ‘world class architects’” to describe Fosters. (That particular comment was the subject of mild judicial rebuke.) Later in the judgment, HHJ Fraser commented that the two architects “seemed to see Mr Dhanoa as somewhat beneath them as a client” and that they viewed him “with a degree of superiority; he was not the sort of client for whom Fosters was used to acting…[and] not the sort of client that Fosters really wanted” .

It doesn’t end there. The judgment notes that they ignored their client’s wishes about instructing a certain expert, were dismissive of his own choice, were autocratically dismissive of Mr Dhanoa’s proposed designs and unilaterally amended their client’s brief, all whilst ignoring the expressed budget.

Obviously all of that is partly why the claim was brought, but their conduct during the proceedings has also been commented on. The judge found that the two senior architects who were involved – Brooker and Stewart – gave written evidence that was “entirely self-serving” and even inaccurate when considered against contemporaneous documents, seemingly having “been drafted regardless of the facts ” and even twisting them . The Defendants were also disparaging of Mr Dhanoa with opening submissions accusing him of “playing with other people’s money, trying to bluff his way through Court as if civil litigation were some game of high stakes poker. At trial, F+P will expose Mr Dhanoa’s claim for the bluff that it is.”

Importantly, throughout the entire litigation, Fosters had denied that there had ever been a budget for the project or that it was a responsibility of theirs to ask the Client about a budget. HHJ Fraser went through the evidence quite carefully and concluded “In the presence of such clear contemporaneous communications that refer to the budget figure for the project, I simply cannot accept the position advanced by Fosters in these proceedings that no budget was indicated to Fosters by Mr Dhanoa in 2007”.

The judge specifically noted that when “Mr Stewart was questioned about this matter [he] finally accepted that [a budget had been discussed]… This means that the entire defence Fosters adopted on this point was simply factually wrong.” There is more in that vein. Needless to say, judgment was found against Fosters, although the issue of costs has yet to be decided.

It undoubtedly follows that Fosters will have to pay the Claimant’s costs, but how much of them will they have to pay? Usually, a losing party will pay in the region of 70% of the winner’s costs, but with obvious conduct issues like those detailed above, I suspect that they will probably be paying a much higher proportion of the costs. These days, parties are actively encouraged to avoid litigation, to mediate, to – in effect – play nicely. All the while with the threat of a nasty costs order hanging over their head if they don’t.

Just reading through the judgment, it would appear that the Defendants were hostile to the Claimant, were condescending and made many disparaging remarks. The whole premise of their defence failed when they admitted under cross examination that a budget had been mentioned. And importantly, their evidence was at considerable odds with even the written contemporaneous documents of the time. The real sting in the tail though is that the Claimant’s claim was funded by way of a pre-Jackson Conditional Fee Agreement, so Fosters will have to pay the success fee as well.

It is worth reading the judgment if anything to consider the Defendants “rather grubby behaviour” . Even more importantly, it will be worthwhile keeping an eye out for any subsequent costs decisions as it could be an interesting read. Unfortunately, their behaviour is probably going to cost them a pretty penny as well as some adverse publicity albeit that they are “undertaking a review … to see what lessons or actions should be taken from this case.” The moral of the story though is simple: play nicely children!

For further details of costs in a professional negligence case and the availability of No Win, No Fee funding give us a call on 0333 888 0403 or email us direct.

It has been a couple of months since the Grenfell Tower disaster and with the Public Inquiry just around the corner, there are still more questions than answers. At this stage, it is believed that the fire started accidentally in a fridge-freezer on the fourth floor but swiftly spread through the 24-storey public housing tower block, killing at least 80 people, though the final death toll is unlikely to be known for a couple of years.

From various news reports, it is understood that the reason for the rapid spread of the fire is probably due to the new cladding and insulation plates which had been installed over a period of four years by the Royal Borough of Kensington & Chelsea as a retrofit for the property. In layman’s terms, a layer of insulating material was affixed to the building which was then covered with an aluminium-polyethylene cladding with an air cavity between. The problem with this arrangement is that, according to safety experts, the insulation plates should only be used with non-combustible cladding yet in this instance, both the insulation used and the cladding were flammable. Added to that, the gap between the insulation and the cladding acted like a chimney to spread the fire.

Obviously, I am not privy to all the information that the parties involved have access to nor indeed that which will be available to the Public Inquiry, so can only go on what is being reported in the news. This suggests post-disaster testing showed that both the cladding and the insulation plates failed fire safety tests. It is also understood that the Local Authority Building Control had stated in 2014 that the insulation that was used should only be used with fibre cement panels on tall buildings . Further, there is evidence to suggest that there had been intense pressure on the Royal Borough of Kensington & Chelsea to save money and as such, they chose a cheaper cladding as opposed to the more expensive non-combustible alternatives. Yes despite all of this, the cladding on Grenfell Tower was passed as suitable by a council officer.

I cannot say who is at fault – greater minds than my own will need to determine that – but looking at basic principles, one wonders how this passed inspection. The standard test in any claim for negligence is the Bolam test: has the professional acted to a standard that his peers would consider reasonable? Did he act like any other reasonable professional with similar qualifications and experience? In the Grenfell matter – as with any surveying job – would another Council Officer with the same experience have concluded that the cladding was safe given the information that was available to him? This also begs the other question of whether the Council Officer in question had access to the relevant information or had the appropriate knowledge? Did he know (or should he have known) about the previous enquiries? Should he have made it his job to make enquiries about the cladding and insulation plates? If he was holding himself out as being suitably qualified to make the decision, then I would suggest that he, like any other surveyor put in this position, should have known of the other reports.

A surveyor’s report in any house purchase is, to my mind, critical. It is there to give you peace of mind, so that if there is a problem with the property, it can be identified and either rectified prior to purchase, a reduction in the house price negotiated or allow you to walk away. You expect to be able to rely upon the professional’s judgment. If that judgment is flawed and the error should have been noted, then there should be recompense.

There can probably never be sufficient recompense for those victims of the Grenfell Tower fire nor for their families and friends and there will always be more questions than answers. One thing that I hope will come out of it is a need for professionals to be more aware of their responsibilities and, where there has been a breach of that responsibility, for there to be some sort of redress.

If you feel that you have been let down by a surveyor who should possibly have known better or indeed, by any expert, then please contact Emma Slade on 0333 888 0403 or email us at [email protected] for s free initial assessment of your case.

When a solicitor has made a mistake, the question on everyone’s lips is usually ‘can I make a negligence claim against them?’

For a free consultation about making a professional negligence claim against a solicitor on a no win no fee basis call us on 0333 888 0403 or email [email protected]

People are often surprised to find out that even when a solicitor has made a mistake it doesn’t necessarily mean that they are entitled to make a compensation claim. In order to have grounds to make a professional negligence claim a number of requirements must be met.

The first thing you need to establish if you feel you have been let down by a lawyer is that they have breached their ‘duty of care’.

Solicitors will be judged by the standard of the ‘reasonably competent solicitor’ in whatever area of law they practice in. So, the conduct of a solicitor who specialises in property conveyancing, for instance, will be considered in terms of what can be reasonably expected of a specialist conveyancing solicitor.

Once it has been established that the solicitor’s mistake amounts to a breach of duty, or negligent act, the next hurdle to overcome is establishing that financial loss has been suffered. If the lawyer’s error did not result in you suffering loss, then a claim cannot be pursued.

For instance, if a conveyancing lawyer fails to give you correct advice in relation to the purchase of a property (such as the effect of a restrictive covenant for example) but you decide not to proceed with the transaction for unrelated reasons, then even if the error was clear-cut, the fact that the purchase did not proceed means that no loss has been suffered.

If loss can be established, a successful claimant must go on to show that it arose directly as a result of the negligence and not some other cause. If the loss would have arisen even if the lawyer’s mistake had not occurred then the claim is unlikely to succeed. This element is known as ‘causation’. A classic example would be someone who has been let down by a solicitor in a litigation case which they would have lost anyway, even if the mistake had not occured. For instance, if a claim were to become statute barred because of undue delay by the solicitor – a clear mistake – but the claim itself had no realistic prospects of succeeding, then the professional negligence action will be likely to fail on causation.

It’s also worth considering the value of the claim. If the loss suffered as a result of a solicitor’s mistake is under £10,000 then it will be classified as a ‘small claim’ (as at February 2025). This means that even if the case is successful in the small claims court you are unlikely to recover your legal costs. It is therefore rarely economic to employ the services of a solicitor in a small claim as the legal costs can quickly outweigh the value of the claim. People can end up losing most, if not all, of what they win in legal fees or even find themselves out of pocket. The likely costs and benefits of a claim therefore need to be carefully weighed up before being pursued. If you decide to appoint us to represent you then we will discuss your funding options with you right at the start.

How we can help you claim compensation if your lawyer has made an error

The key thing to remember about claims against solicitors is that they usually turn on the individual facts of each case. This makes it important to seek guidance from a specialist lawyer. We operate a free professional negligence consultation service. You can call or email us and one of our specialist solicitors will assess your case; free of charge and without obligation. They will also consider your funding options, including no win, no fee.

So, if your solicitor has made a mistake resulting in substantial loss, and you want to know if you have a valid legal claim then contact us for a free consultation on 0333 888 0403 or by emailing [email protected]

Spanish Mortgage ‘Floor Clause’ Claims: Are you entitled to compensation?

Court ruling allows Brits with Spanish property to claim compensation

In December 2016 the European Court of Justice ruled that mortgages containing a ‘floor clause’ are unlawful. This has opened the door for thousands of British people with property in Spain to claim compensation.

What is a ‘floor clause’?

A ‘floor clause’ (known is Spain as a ‘clausula suelo’) is a clause contained in a tracker mortgage agreement. It requires the borrower to pay a minimum interest rate – even if the interest rate being tracked (such as the Euribor rate) is lower.

These floor clauses have resulted in people paying much more interest than they should have.

What can I claim?

If you have one of these mortgages you may be entitled to re-claim the interest you have been wrongly charged. On a mortgage of  €150,000 this could amount to €200 or more per month.

How long will it take?

Once a claim has been filed the Scheme specifies that the bank has 3 months to pay the compensation due. If the bank does not respond or fails to make a satisfactory offer within the 3 month period court action can be commenced.

 

 

Emma Slade, a specialist professional negligence solicitor, looks at No Win – No Fee, CFAs and Legal Expenses Insurance in the context of solicitor’s negligence claims

Whenever a client becomes embroiled in any sort of litigation or lengthy legal dispute, their main concern is – quite understandably – “how much is it going to cost me?” This is never an easy question for a lawyer to answer, but regardless of what the answer is, there is a duty upon a solicitor to give consideration to the most suitable method of funding available to the client.

The Solicitor’s Code of Conduct gives guidance on how a solicitor should deal with his client and legal fees is one of the first issues it addresses. Paraphrasing the Code, it says:

• Any fee arrangement entered into with a client needs to be suitable for the client’s needs and take into account the client’s best interests

• A discussion needs to be had on whether the likely outcome of the work would justify the anticipated expense, especially taking into account the potential risk of being liable for another party’s legal fees

• Consideration must be given as to whether there are alternative methods of funding the case (eg public funding, legal expenses insurance, conditional fee agreements)

• The lawyer must give the client the best information available  – both at the outset of the retainer and throughout the course of the case – concerning the likely overall cost of the matter

It is the last point which can cause some solicitors to become unstuck as many fail to realise (or forget) that there is an ongoing duty to review the issue of costs with their clients.

Most solicitors have a system whereby they will regularly update their clients on the level of costs incurred, but many overlook the fact that the review should consider not only the legal costs incurred to date but also the method of funding and in particular whether the current method of funding continues to be the one that is most suitable for the client.

Some examples of how funding options might develop over time would include:

• A case becomes suitable for No Win – No Fee (CFA funding) – and even if the solicitor is not be prepared to deal with the case on a No Win, No Fee basis they should advise the Client that other solicitors may be willing to do so

• ‘After the Event’ legal expenses insurance (LEI) may become required or the indemnity level of an existing LEI policy may need to be ‘topped up’.

• There is a change in the law which alters funding arrangements

If you feel that you have a claim for professional negligence against your solicitor in relation to a No Win – No Fee claim, please call Emma Slade on 0333 888 0403 for a free case assessment. Alternatively, you can contact us by e-mail at [email protected]

Professional negligence solicitor, Emma Slade, reviews an auditors duty of care

Since snails were found in a bottle of ginger ale and carbolic acid was discovered in bottles of lemonade, the Courts have accepted that there does not always need to be a legal contract between parties for a wrongdoer to owe a level of responsibility to the victim. This “duty of care” as it is called, is the basis of the tort of negligence.

Caparo -v- Dickman

In the famous case of Caparo Industries plc v Dickman, the most senior judges in the land clarified the relationship between a tortfeasor and third parties as follows:

• The damage must be reasonably foreseeable as a result of the actions of the tortfeasor
• The parties must be in a proximate relationship
• It would be fair and reasonable to impose a liability.

In that case, Caparo Industries purchased a company called Fidelity Ltd whose accounts had been prepared by Dickman. Following purchase, it was found that the accounts were not a true reflection of the state of the company. Caparo sued and although the Court of Appeal stated that there was a duty of care owed by the auditor, this was overturned by the House of Lords who felt that whilst the auditor owed a duty of care to the shareholders as a body, he did not owe a duty of care to an individual.

What is an auditor?

Except for small companies and some charities, a company is required to have its accounts audited. The accounts are prepared ostensibly as a report from the directors to its shareholders, telling the latter how the company is doing. It is the auditor’s job to review the accounts and state whether or not they represent a “true and fair view” of the state of the company. That “true and fair view” can be a limited view (and will usually be identified by a disclaimer in the report) depending on how much information the directors have provided. What if the report is wrong? Firstly, you have to ask yourself why the report was wrong. Is it an error by the directors in the information they provided? Or was it the auditors who were at fault in analysing it? Did the auditors put a disclaimer in their report? Importantly, should the auditors have picked up the problem? The auditors’ duty is only to give a “true and fair view” of the accounts, it is not a guarantee.

Watchdogs not Bloodhounds

To use the expression from Re Kingston Cotton Mill Co (No 2), auditors are “watchdogs not bloodhounds”: whilst they have an obligation to detect and investigate obvious errors, they are not obliged to actively seek out questionable activity and neither do they guarantee the accuracy of the accounts. There is therefore a limit on what can be expected of them. The case of Man –v- Freightliner [2007] EWCA Civ 910 is a good example of this. MAN AG, a German holding company, wished to purchase a subsidiary of the American company, Freightliner. Ernst & Young were the auditors of the subsidiary, ERF, a trucking company in the UK. Following purchase of ERF, MAN discovered that the Financial Controller of ERF had been manipulating the accounts of ERF for some time and the company was not as profitable as it was initially thought. MAN brought proceedings against Freightliner who in turn sued Ernst & Young. Interestingly, Ernst & Young admitted that their conduct of the audit would probably be considered negligent but despite this, the Court of Appeal did not find Ernst & Young liable in this instance. The retainer with Ernst & Young was for the accountants to prepare an audit on the company’s accounts. It was not a Due Diligence enquiry for and on behalf of MAN and they could not be expected to know that MAN would have relied on the audit report. Secondly, the Court concluded that the report had not been causative of loss – it was the fraudulent representations of the dishonest Financial Director which had caused that loss. Conclusion There is a requirement under the Companies Act which states that the auditor must not “knowingly or recklessly [cause] a report… to include any matter that is misleading, false or deceptive in a material particular” (s507). It probably does not take the matter much further than the case law as there is still an element of objectivity in the test and of course, the report can most certainly be the subject of a disclaimer.

So where exactly are we?

Although there seemed an element of hope that auditors may be liable to third parties as well as to the shareholders of the companies they serve, this liability is being increasingly curtailed. The Courts seem to be accepting that, provided the auditor is not reckless, disregarding obvious indicators of problems, it is prepared to take a pragmatic view. The Auditors Report is after all, only a brief snapshot of a company, such snapshot being based upon the information provided to the Auditor by the Directors. It is not a guarantee of the state of the company and, unless the Auditors are aware that it is supposed to be a due diligence exercise and relied upon by others, the Courts appear to be reluctant to extend the duty that far. Would it be different if the affected shareholders bring a claim? There is a distinct possibility if the decision in Caparo is anything to go by. There were hints of it in the proposed litigation between Equitable Life and Ernst &Young ten years ago but sadly, that case was withdrawn before it reached the courts. At the end of the day, it is all going to come down to the disclaimers in the report and what the Courts consider would be fair and reasonable in the circumstances.

Free professional negligence helpline

If you feel that you have a claim for auditor negligence, please call solicitor Emma Slade on 0333 888 0403 for a free initial assessment. Alternatively, you can contact us by e-mail at [email protected]

 

Emma Slade, a solicitor who specialises in Professional Negligence law, considers negligence claims against letting agents.

If you would like expert guidance on making a letting agent negligence claim then contact us on 0333 888 0403 for a free assessment or send an e-mail to [email protected].

The services of a letting agent seem an ideal option for busy landlords. The Agent will take responsibility for sorting out the tenancy agreement, the deposit, rent collection and will be the first port of call when the Tenant has any problems. The biggest headache can be finding the right tenant. Letting agents invariably promise in their terms and conditions that they will find a “suitable tenant”, making sure that references and the like are taken out.

In reality the service provided by the letting agent often fails to deliver and ends up causing the landlord more headaches than it saves. We are regularly contacted by landlords who are dissatisfied with their letting agent and the vast majority of these involve a complaint that the tenant was not suitable. In most instances, there is little that can be done. There is only so much one can do to check the suitability of a tenant at the outset of a rental agreement and it is often with hindsight that the tenant turns out to be a poor choice.

However, one of the other oft-held complaints we hear is that the letting agent promised to take up references but failed to do so or didn’t check a reference properly. Until recently, there hasn’t been any case law testing whether or not a negligence claim can be made against a letting agent for failing to take proper care when investigating a prospective tenant. In Hale –v- Blue Sky Property Group (2016), Bristol County Court heard a case against the a letting agent who had promised to “carry out thorough referencing on all prospective tenants”. The Defendant argued that they had carried out “thorough referencing” which was done by a third party referencing agency and that the subsequent rental arrears and damage to the property was as a result of the breakdown in relationship between the Landlord and Tenant rather than the anything to do with the references. The Court disagreed.

On looking at the Defendant’s file and the tenants’ application forms, the Court found:

• One of the tenants had stated in his application that he did not have a County Court Judgment (CCJ) against him but the returned reference said that he did have a CCJ against him. This should have set alarm bells ringing as the tenant’s credibility was clearly questionable

• The same tenant had said in the application form that he had lived at his last address for three months; the landlord from that property came back and said it had only been for six weeks. The landlord also said he had only been that tenant at the property – not the second tenant as she had claimed

• The other tenant claimed that she was in employment with a salary of £7,800 pa but her “employer” had the same address. The Court found that the “employer” was in fact a relative, primed to answer the questions by giving false information. The tenant’s employment was clearly fictitious

• One of the tenant’s credit scores came back as borderline. The report from the referencing agency contained the warning “Refer” for both this tenant and his girlfriend

Importantly, the Landlord claimed that the Defendant had done nothing to determine the ability of the tenants to pay the rent regularly. Had the letting agents called for the tenants’ last three months bank statements (as they were entitled to do), they would have seen that, not only had the tenants lied about their income but that the male tenant had numerous long standing debts that he was paying for.

The Court had no hesitation in concluding that the letting agents had breached the terms of their own contract as well as the Sale of Goods & Services Act 1982 in failing to act with due care and skill. Interestingly, the Court also felt  there was a breach of The Property Ombudsman’s own guidelines on referencing, which suggests therefore that the Defendant had not acted to an industry standard. There were clearly differences between the referencing report and what the tenants had said. Some simple further checks would have elicited more information and the agents had a duty to the Landlord to undertake those investigations. They seem to have relied on the referencing company’s conclusion without reviewing it themselves, without disclosing it to their Client and without seeking her approval.

This is a heartening outcome and gives hope to those pursuing claims against letting agents, including landlords who suddenly find that it wasn’t just the tenant who was unsuitable. Although this was only a Small Claims Court decision, it does potentially opens up the gates for more claims against letting agents.

For further guidance on claims against letting agents, or if you feel you have a negligence claim against an Estate Agent, please call us on 0333 888 0403 for a free assessment. Alternatively, you can contact us by e-mail at [email protected].

 

This article on claims against letting agents was updated in September 2024.