Harwood and another v Taylor Vinters (A Firm)

Tuesday, 17 ^th June 2003

This is a renewed application for permission to appeal from a decision of His Honour Judge Seymour QC sitting as a Deputy Judge of the Chancery Division, permission having been refused on the papers by Peter Gibson LJ. The applicants were the claimants in the proceedings in which they alleged negligence and/or breach of duty on the part of their former solicitors, the respondents. The claim arose out of the purchase by the applicants of a property run as a nursing home in St Neots and of the business itself, along with fixtures, fittings and equipment. In the event, the judge found only one instance of negligence, namely the failure of the solicitors to assess the replies to local searches when they became available and then to raise enquiries with Anglian Water. This, I should explain, related to the right to use a drain running across land owned by third parties for the purpose of foul drainage. However, the judge awarded only nominal damages of £2, because he found that, if the matter had been raised with the applicants when it should have been, they would have ignored the advice and proceeded with the purchase.

The applicants at the time of the purchase were in some considerable financial difficulties and were anxious, as the judge found, to acquire a business on which they could then raise a loan, but, not having the funds to purchase such a business, they wanted to be able to pay the purchase price by instalments. As it happened this suited the vendors of this nursing home, Mr and Mrs Issitt. The judge found that the applicants viewed the conclusion of the transaction as an urgent matter. He dealt in detail with the discussions which took place prior to exchange of contract between the applicants' and the respondent's solicitors. There were a number of attendance notes evidencing these discussions. Insofar as there was any conflict between the evidence of Mrs Bostock, a solicitor with the respondents, and Mr Harwood, one of the applicants, the judge generally, but very clearly, preferred that of Mrs Bostock. It is no exaggeration to say that he formed a very adverse view of the credibility of Mr Harwood.

Mrs Bostock's evidence was that the applicants were determined to go ahead with the purchase regardless of the various drawbacks. One of the attendance notes recorded that, when certain risks were pointed out to the applicants concerning the proposed rescission clause, the applicants responded by saying that they:

"… felt that their present financial circumstances were so bad that they were prepared to take risks which they would not normally take and they made it quite clear that they fully realised what those risks were".

The note continued:

"I explained to Mr and Mrs Harwood that I have been unable to get the result of my Local Authority Search and that if we exchange on Tuesday it would have to be on that basis. Agreed that I would try to get the vendors solicitors to agree that contracts could be exchanged subject to satisfactory searches."

The contract, dated 6th May 1993, provided for a total purchase price of £1,250,000 to be paid by monthly instalments over a period of nine years. The purchasers were to be allowed into possession on 10th May 1993, but completion was not to take place until the price had been paid. The vendors had the power, by virtue of a clause in the agreement, to rescind the contract on certain terms if money due remained outstanding for more than 28 days.

Prior to exchange of contracts Mrs Bostock had made a local search application dated 27th April 1993 to South Cambridgeshire District Council. In fact, though the property lay close to the border with that district, it actually lay within Huntingdon District, and a further local search was made with that authority in late May of that year. The eventual response in June referred the solicitors to Anglian Water in respect of the drainage inquiries. None were, in fact, made at this time.

Immediately prior to exchange of contracts, two long meetings took place between Mrs Bostock and the applicants on 4th and 5th May 1993. One lasted 1 hour 18 minutes and the other 1 hour, but no attendance notes were available in evidence. The judge accepted Mrs Bostock's evidence that she would have gone through the proposed agreement clause by clause with her clients on these occasions. One of those clauses dealt with the absence of any results of local searches, that being clause 22. According to Mrs Bostock's evidence Mr Harwood had been uninterested in that clause.

The judge found that the applicants were firmly resolved to proceed no matter what, and he spelt out his reasons for that finding at paragraph 25. He held that it was inconceivable that Mr Harwood would have sought to avoid concluding the agreement over the lack of formal rights to utilise the drain. The judge added this at the same paragraph:

"If Mrs Bostock, as in my view she should have, had followed up the results of the local search when they became available and had enquired of Anglian Water Services Ltd, discovered that the Drain was a private drain which connected to a public sewer, found out that there was no formal right to use the Drain and reported to Mr Harwood, I am confident that he would probably have said that it did not matter because the Nursing Home was using the Drain without any problem. If it had been pointed out to him that the lack of formal rights might prove a complication in the event that he sought to raise funds to enable him and his wife to complete the purchase of the Property earlier than the nine years contemplated by the Agreement, I am sure that he would have said that he had no present plans to do that, which was true, and would deal with the problem as and when it arose, which was his general approach to difficulties."

That is of importance because eventually the applicants did wish to borrow on the security of the property so as to pay off the outstanding instalments early. But when the prospective lender, UCB Bank Plc, came to consider the title to the property, it was discovered in February 1996 that the foul drainage ran across third party land and that no easements for that existed. Sorting this out caused some delay. The formal deeds were executed in...