Negligence action against Slaughter and May can go ahead

A property investment company can continue with its negligence claim against Slaughter and May over a lease extension granted to a flat in Piccadilly, the High Court has ruled.

The court heard that St Anselm Development Company, owner of the head lease, lost the right to recover a proportion of the ground rent after agreeing to a lease extension by an underlessee of two flats.

The law firm argued that the negligence claims relating to both flats were time-barred. The High Court agreed that the company had no prospect of showing that its claim fell within the limitation period in respect of one flat but not the other.

Delivering judgment in St Anselm Development Company v Slaughter and May [2013] EWHC 125(Ch), Mr Justice David Richards said the claim arose out of the extension of leases under the Leasehold Reform, Housing and Urban Development Act 1993.

He said that the correspondence and the facts showed that Slaughter and May was separately instructed in respect of each lease, the lease for flat 27 being executed before flat 26.

“Their duty was to use reasonable skill and care to safeguard the interest of their client in respect of each lease. The duty continued as regards the lease for flat 26 independently of the lease for flat 27. Agreement of the terms of the lease for flat 27 did not absolve the defendant solicitors from their duty as regards the other lease.”

David Richards J said it appeared clear on the evidence that the law firm gave “active consideration” to the provision on the share of ground rent only once and did not “positively re-visit the issue” when considering the terms of the lease for flat 26.

The judge said that the law firm could have been instructed to advise once on a draft lease to be used for both flats, but that is not what happened.

“On this appeal the claimant need show only that it has a real prospect of showing that its claim as regards flat 26 was brought within the primary limitation period.

“I am satisfied that it does have a real prospect of doing so and that the Master was wrong to conclude otherwise. My own view on the evidence present before the court is that the defendant solicitors will not succeed on a limitation defence on this part of the claim.”

However, David Richards J also said that “on any credible analysis of what occurred in December 1999”, it appeared that the claimant realised that it could not recover a rateable proportion of the ground rent of the head lease for flat 27.

“In my judgment, that was at least sufficient to give the claimant reasonable cause to start asking questions about the advice it had been given.

“The loss for which it now claims is either the absence of an appropriate indemnity provision in the new lease for flat 27 or the loss of compensation if it was to be deprived of the existing provision.

“It was reasonable to have expected the claimant to appreciate at least the possibility that each of those alternative losses were caused by the act or omission of the defendant solicitors.”

David Richards J said that “well before August 2002”, three years before proceedings were commenced, St Anselm had actual knowledge or the knowledge imputed to it under section 14A of the Limitation Act 1980 of the loss in respect of which it claimed damages and the fact that the damage was attributable in whole or in part to the acts or omissions of the defendant solicitors.

David Richards J concluded that the Master was right to hold that there was “no reasonable prospect” of the claimant establishing an extended limitation period in respect of flat 27.

He allowed St Anselm’s appeal relating to the primary limitation period for the claim in respect of flat 26, but dismissed the appeal in respect of flat 27.