Spire Property Development LLP v Withers LLP
| Jurisdiction | England & Wales |
| Judge | Lady Justice Carr,Lord Justice Popplewell,Lady Justice King |
| Judgment Date | 19 July 2022 |
| Neutral Citation | [2022] EWCA Civ 970 |
| Docket Number | Case No: CA-2021-000220 & CA-2021-003322 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 970
Lady Justice King
Lord Justice Popplewell
and
Lady Justice Carr
Case No: CA-2021-000220 & CA-2021-003322
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
His Honour Judge Pelling QC (sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Nigel Tozzi QC and Jonathan Scott (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimants/Respondents
Patrick Lawrence QC, Carl Troman and Diarmuid Laffan (instructed by Clyde & Co LLP) for the Defendant/Appellant
Hearing date: 21 June 2022
Approved Judgment
This judgment was handed down remotely at 10am on Tuesday 19 July 2022 by circulation to the parties or their representatives by email and by release to the National Archives.
A. Introduction
This appeal arises out of a claim for professional negligence brought by the Respondents, Spire Property Development LLP (“Spire”) and Hortensia Property Development LLP (“Hortensia”) (together “the Developers”), against the Appellant, Withers LLP, a firm of solicitors (“Withers”). In 2012 Withers was retained on the Developers' purchases of two high-value Grade II listed properties in Fulham, London SW10: the King's Chapel (also referred to on occasion as St Mark's Chapel) and the King's Library (also referred to on occasion as The Sloane Building) (together “the Properties”). Spire purchased the King's Chapel on 6 November 2012 for £7.8million. Hortensia purchased the King's Library on 23 November 2012 for £34million. The two properties share a common boundary and were to be re-developed in parallel. In January 2014 the Developers contacted Withers following their post-acquisition discovery of three extra-high voltage electric cables (“HVCs”) running under both development sites and owned by UK Power Networks (“UKPN”).
In 2018 the Developers commenced proceedings against Withers alleging breach of contract and/or negligence on its part, in summary:
i) In failing to make sufficient searches or enquiries so as to identify electrical lines and/or wayleaves and/or electrical apparatus on the Properties prior to purchase in 2012 (“the 2012 claim”);
ii) In failing to investigate and advise adequately in 2014 as to the Developers' rights and remedies upon the discovery of the HVCs (“the 2014 claim”).
Following a nine-day trial in January 2021, in a judgment dated 24 September 2021 (“the Judgment”), HHJ Pelling QC (“the Judge”) found in the Developers' favour on both the 2012 and 2014 claims. He determined:
i) That Withers had acted in breach of contract and negligently in 2012 in failing to carry out relevant searches which would have revealed the existence of the HVCs prior to the exchange of contracts. He dismissed the claim for damages in respect of a lost opportunity to secure a price reduction and various other claims for additional costs, save in respect of one element of additional expenditure. Damages (and interest) in the sum of just over £584,000 were awarded;
ii) That Withers had also acted negligently in 2014 in failing to advise the Developers of their rights in the event that UKPN could not prove that it held a wayleave or other lawful authority in respect of the laying (or maintaining) of the HVCs. Withers should have advised that, in that event, the Developers could require UKPN to move the HVCs at its own expense, or alternatively obtain compensation under the Electricity Act 1989 (“the EA”) by application to the Lands Tribunal. Damages (and interest) were awarded for the value of the Developers' lost chance to obtain compensation, assessed at just under £1.5million.
Withers' challenge on appeal is limited to a challenge to the Judge's finding on the 2014 claim that Withers owed a tortious duty of care to the Developers to advise them as to their rights and remedies against UKPN. Its outcome turns on whether, on the specific facts in question, the Judge was right to hold that Withers did assume such a duty (and whether or not the Developers' reliance on Withers, as found by the Judge and not challenged on appeal, was reasonable).
B. The relevant facts in summary
Background
The Developers were special purpose limited liability partnerships (“LLPs”) owned by Prime London Residential Fund (“the Fund”), a fund managed by Savills Investment Management (UK) Limited (“SIM”), a vehicle for investment in high-value prime residential property developments in London — the “super-prime” market. The Fund's business model was to purchase prime London sites through LLPs and engage a development partner. The development partner would be a corporate entity with a small stake in the relevant LLP and charged with pre-acquisition investigations into the property, acquiring planning permission, and managing the development. Withers was responsible for setting up the Developers and also advised in relation to the corporate and financing aspects of the proposed development of the Properties.
The Fund's development partner in relation to the Properties was Tenhurst Limited (“Tenhurst”), a company founded by a well-known property developer, Mr John Hunter (“Mr Hunter”). Mr Hunter was a director of Tenhurst; his fellow director was Mr Barnaby Joy (“Mr Joy”), a qualified solicitor, property developer and consultant. Mr Joy had studied law at undergraduate and postgraduate level. He went on to train and qualify (in 2002) at a London city law firm. He had left full time solicitorial practice a year later in order to work in real estate development and construction. Thereafter he had held various senior management positions in the real estate industry, both in the UK and abroad. He started working for Tenhurst in 2011 and was appointed a director in 2012. His position and working title at Tenhurst was that of “Commercial Partner”, in which capacity he was responsible for all legal issues, as well as for structuring and negotiating real estate transactions, raising equity and debt, investor reporting, troubleshooting sites, and generally trying to ensure the continued viability of the business.
In September and October 2012 Withers was retained to act on the acquisitions by the Developers of the Properties. The client and conveyancing partner in charge was Ms Emma Copestake (“Ms Copestake”), who had qualified in 1999 and became a partner in 2008; her assistant was Ms Hannah Robinson (“Ms Robinson”), a senior conveyancing associate, who had qualified in 2007. Ms Copestake had a longstanding professional relationship with Mr D'Arcy Clark of SIM. Withers had been retained and continued to be retained by the Fund on several other developments, including (in 2013) on the purchase of another property known as Milliner House, located very close to the Properties.
Formal engagement letters were sent out by Withers (in September/October 2012) on each proposed purchase in the normal way. During the course of its retainers, amongst other things, Withers provided reports on title (dated 9 October 2012 on the King's Chapel and 23 October 2012 on the King's Library). The presence of the HVCs was not identified by Withers prior to the Developers' purchases of the Properties.
Subsequent to the purchases, in August 2013 and as a result of specialist investigations into subsoil conditions, the existence of one of the HVCs was discovered. In October 2013 it was established that there were three HVCs along the cable route traversing the Properties. At a project meeting in late October 2013 the Developers instructed engineering consultants, Hoare Lea, to contact UKPN in order to discuss the possibility of moving the HVCs. At the end of November 2013, however, that instruction was put on hold in order to reduce the risk of objection by UKPN to planning permission applications that had been made earlier that month by Hoare Lea to redirect the HVCs.
In November 2013 the Developer's project managers, Martin Brooks Associates (“MBA”), contacted a specialist engineering consultant, Mr Tony Dredge (“Mr Dredge”), to make enquiries regarding the HVCs. On 4 December 2013 MBA asked Mr Dredge, amongst other things, whether he would have expected the HVCs to be shown on any pre-purchase searches. Mr Dredge responded by email the next day to the effect that he would have expected the presence of the HVCs to have been discovered “at the legal stage of any purchase as there should be a Wayleave Agreement in place with UKPN or National Grid (or whoever installed the cables) to allow them access to the cable run throughout its length. This is a legal document and should have come to light on the legal searches”. Within minutes MBA had forwarded this email on to Mr Hunter with the opening remark: “Rotwe[eil]er barks and looks like men in wigs for a mauling!!!!”
On 12 December 2013 Mr Joy asked Ms Robinson for copies of the reports on title on the Properties, which Ms Robinson duly provided to him.
MBA met with Mr Dredge on 28 January 2014 with discussion of timescales for relocating the HVCs, possible routes and works required, budgets and “what is the situation if no way leave [sic] was found in the searches” on the agenda.
The key exchanges between the Developers and Withers between 2 January and 3 February 2014
It is necessary to set out the direct exchanges between Mr Joy and Ms Robinson relating to the HVCs between 2 January and 3 February 2014 in full detail.
On 2 January 2014, Mr Joy called Ms Robinson advising her of the discovery of the HVCs. Ms Robinson's manuscript attendance note read:
“Barnaby Joy call HRR 12.25pm
— Barnaby Joy had asked us to send reports → issue has arisen +...
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