Judge allows proof in negligence claim against Scots lawyer

A judge in the Court of Session allowed a proof in the action by Sajjad Soofi against Jeffrey Dykes of Glasgow solicitors’ firm Dykes, Glass and Co, over the lawyer’s alleged failure to have include in the missives a provision to warrant the accuracy of financial information provided by the seller and relied on by buyer in the purchase.

Lord Mulholland heard that the pursuer was suing as assignee of Bonafield Enterprises International Limited (BEI), now in administration.

The action concerns the purchase of a petrol station, car wash and shop in Alexander Street, Airdrie in 2008.

This unincorporated business, known as Airdrie Autopoint, was purchased by BEI from Ms I A Young, who was represented by the defender.

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

In advance of the purchase BEI had obtained from the seller financial information relating to the trading history of the business, which was used inter alia for the purpose of valuing the business including the goodwill.

However, the pursuer averred that the defender failed to have included in the missives a provision to warrant the accuracy and completeness of the financial information.

The pursuer further averred that the defender failed to take any steps to advise BEI as to whether it should seek such a warranty.

Had the defender displayed the skill and care to be expected of an ordinarily competent solicitor, advice would have been tendered to the purchaser that a warranty should be sought from the seller.

The principal case was a “no transaction case”, namely that had such a warranty been sought the seller would not have agreed to it and as a result the purchase would not have taken place.

The alternative case was that had such a warranty been provided, the purchaser would have an action against the seller for breach of warranty.

The defender denies negligence, but the action came before the court for debate on the issue of whether the pleadings gave “fair notice” to the defender of the pursuer’s case.

Counsel for the defender submitted that the central plank of the pursuer’s case was that the financial information provided by the seller was “inaccurate”, but if the pursuer failed to establish this then he will not have established loss and the action would fail.

With regard to the pleadings it was argued that there was a “lack of essential specification” as to the manner in which the financial information provided by the seller was inaccurate, but the defender had not received fair notice as to what the pursuer’s case is on this essential point.

Counsel for the pursuer submitted that for the purposes of the debate the pursuer’s pleadings had to be taken pro veritate, and that the pleadings need only set out what he proposed to prove but not how he proposed to prove it.

It was argued that the pursuer’s case was a “circumstantial one” combining a number of circumstances from which a “legitimate inference” could be drawn that the financial information provided pre-sale was “inaccurate”.

Further, it was submitted that the pursuer did not require to prove that he was bound to succeed but in order for the defender to succeed in his plea he “had to prove that the pursuer was bound to fail on the pleadings”.

Lord Mulholland noted that, according to the pleadings, a firm of accountants engaged by BEI’s lender had concluded on the basis of the financial figures provided by the seller that the loan to purchase the business could manageably be serviced from the anticipated profits of the business, and that neither BEI nor the pursuer had ever been provided with any primary material such as books of account underlying entries in the financial information, provided pre-sale and it was not known whether such primary material exists or ever existed.

The judge refused the defender’s motion for dismissal and allowed a proof after ruling that the pleadings did give fair notice.

In a written opinion, Lord Mulholland said: “The facts and circumstances which the pursuer intends to rely on in proving his case are therefore set out in the pleadings and the defender has fair notice of them. The defender knows the case to be made against him and will not be taken by surprise at the proof.”