Appeal judges reject ‘professional negligence’ claim against Scots lawyer

Sajjad Soofi and Rumella Soofi raised an action against Jeffrey Dykes of over the lawyer’s alleged failure to include in the missives a provision to warrant the accuracy of financial information provided by the seller and relied on by buyers in the purchase, but a judge absolved the defender after ruling that the pursuers had failed to prove causation or loss.

The pursuers appealed, but the Inner House of the Court of Session ruled that there was “no basis” for overturning the Lord Ordinary’s decision.

The Lord President, Lord Carloway, sitting with Lord Brodie and Lord Glennie, heard that the “professional negligence” claim related to defender’s role as solicitor to Bonafield Enterprises International Limited (BEI), in which the first pursuer was a director and principal shareholder.

The action concerned the advice given in relation to BEI’s purchase of a petrol station, car wash and shop in Alexander Street, Airdrie in 2008.

The price paid was £850,000, apportioned £450,000 to the heritable property, £385,000 to goodwill and £15,000 to fixtures and fittings.

However, the pursuers averred that the defender was in “breach of contract” and/or in breach of his duty to BEI in failing to advise BEI on the desirability of securing from the seller a warranty of the accuracy and completeness of the financial information provided by the seller. 

As a result, the value of the business had been “overestimated” by BEI to the extent of £385,000.  

It was said that if the defender had exercised the “requisite skill and care” he would have advised BEI to secure such a warranty. 

The seller would have agreed, in which case BEI would have been able to recover their loss from the seller because the warranty would have been breached; the information being “inaccurate”. 

The alternative case was that if the warranty had not been forthcoming, BEI would not have proceeded with the purchase. 

The defender denied negligence, and on each issue of liability, causation and loss, the Lord Ordinary found for the defender. 

The judge’s reasoning was based principally on his preference for the testimony of the defender, contemporaneous documents generated by him, and the evidence of his expert solicitor, namely Donald Reid.  

In particular, at a meeting on 22 August 2008 concerning the terms of the missives, the Lord Ordinary held that the defender had “properly advised” the first pursuer as a director of BEI and had been “meticulous” in explaining all of the changes introduced by the seller’s proposed missive. 

One of these changes had been to delete a term that the seller was to make available all business records as were reasonably necessary to determine the value of goodwill and another was to incorporate a term that the missives constituted the entire agreement, superseded all warranties and representations and that neither party had acted on the basis of any such warranties or representations. 

The Lord Ordinary held that, if BEI had asked the seller to warrant the financial information, she would not have agreed to do so, given the advice which her solicitor would have tendered, and BEI “would have proceeded with the transaction in any event”.

Further, the financial information that had been provided by the seller had not been proved to be inaccurate.

Among the pursuers’ grounds of appeal was that the Lord Ordinary had “erred” in failing to accept the evidence of their expert accountant about the reason for the discrepancy between the accounts produced by the sellers and the annual turnover in the VAT returns.

It was also argued that the Lord Ordinary erred in failing to attach appropriate weight to the view of the pursuers’ expert valuer, who had said that “false accounts” would have a “detrimental effect” on goodwill.

The pursuers further submitted that the Lord Ordinary failed to give appropriate weight to the testimony of their expert on solicitors’ practice, namely Professor Leo Martin, who had said in his report that the defender had been “negligent”.

Refusing the appeal, the judges observed that the Lord Ordinary’s findings in fact in relation to the meeting on 22 August, particularly on the credibility and reliability of the first pursuer and the defender about what had occurred, and Mr Reid’s assessment of the defender’s files, could not reasonably be challenged.

Delivering the opinion of the court, the Lord President said: “The Lord Ordinary considered the testimony of both experts carefully and explained why he concluded that professional negligence had not been made out. Prof Martin accepted that, if the import of the contractual changes had been explained to the first pursuer, the claim effectively disappeared. Mr Reid was preferred, where necessary, on account of his greater familiarity with the defender’s files.

“The Lord Ordinary found that the contemporaneous documents supported the defender whereby, in a meeting which lasted 1 hour and 40 minutes, he had explained the seller’s proposed changes to the missives, paragraph by paragraph. 

“The pursuers’ own expert witness’s view had fallen short of the test for a successful claim for professional negligence. That expert conceded that if, as the defender had suggested, he had discussed the relevant clauses with the first pursuer, the issue came to be one of what had then been instructed. That is sufficient to dispose of the question of liability and the reclaiming motion must accordingly fail.”

Lord Carloway concluded: “The court has not heard any submissions which would persuade it that the Lord Ordinary was plainly wrong in finding in fact that: including a warranty in these circumstances was not a course which any solicitor of ordinary skill would have taken; the seller would not have agreed to the warranty and that BEI would have gone ahead without one in any event. Even if that were wrong, there is no basis for concluding that the Lord Ordinary erred in finding that the pursuers had failed to prove the necessary facts to establish either causation or loss.”