In one of our monthly guest posts by the members of 4 New Square, Benjamin Wood considers the High Court’s judgment in Kandola v Mirza Solicitors LLP. Benjamin acted for the successful defendant in the claim (instructed by Claire Roake at Mills & Reeve, London).
In 2010, Mr Kandola lost just under £100,000 on a property transaction that went wrong. In 2015, he lost about the same amount again when his claim against his conveyancing solicitors was dismissed. What did Mr Kandola do wrong and what did his solicitors do right?
The recent judgment of the High Court in Kandola v Mirza Solicitors LLP contains useful guidance (and reassurance) for transactional lawyers and serves as a reminder to litigators of the evidential hurdles that a claimant, particularly in a professional negligence claim, must overcome.
The facts of the case were straightforward. Mr Kandola was a successful and experienced property owner who was offered the chance to get a good deal on a property through a family connection. The deal involved his paying a 25% deposit on exchange of contracts and his agreeing to this being held by the seller’s solicitor as his (the seller’s) agent. Needless to say, Mr Kandola’s solicitors advised against this, but Mr Kandola went ahead anyway and his deposit was lost when the seller was declared bankrupt following a petition that had been presented before exchange of contracts.
Mr Kandola sued his conveyancing solicitors. A plank of his case was that a bankruptcy search, costing less than £5, would have revealed the petition and should have been carried out.
Although he wasn’t in the habit of making a note of every phone call, the experienced conveyancer made a bullet point note for himself shortly after the meeting at which he had gone through the main terms of the transaction with his client. As a Circuit judge commented in his judgment against a solicitor in Beer v McMillan Williams Solicitors, “One of the features of this case is [the lawyer’s] apparent inability or unwillingness to keep attendance notes. She appears to have no understanding of their importance… It was ill advised of her not to do so. In the absence of such attendance notes I am not prepared to accept [the lawyer’s] account of events”.
Mirza’s Mr Elahi, on the other hand, went one step further. Recognising that he was obliged to follow his client’s (lawful) instructions, Mr Elahi jotted down a short statement that Mr Kandola went on to sign, saying that he had been advised against proceeding for various reasons but nevertheless wanted to go ahead and do the deal.
That quick-thinking on the part of the solicitor, inspired by his training for police station attendances (where lawyers will routinely get their clients to indorse the brief to confirm what advice has been given) probably served two significant purposes. First, it led the judge to reject the suggestion that the client misunderstood what he had been told (because the judge could see for himself the very words that had been used). Second, and perhaps just as importantly, it probably strengthened the resolve of the firm and its insurers to defend the case to trial.
At trial, Mr Kandola accepted that he would have gone ahead with the transaction even if he had been told about the bankruptcy petition, because he would have been fobbed off with an explanation from the vendor. That was fatal to his claim as a matter of fact, and serves as a salutary reminder that causation is often the weak link in a professional negligence claim.
However, the judge said in the context of the bankruptcy search that “just because a solicitor (or other professional) could take a particular step does not mean that it is his duty to do so. His duty is always defined by his retainer. If he advises his client of a risk, it is a matter for the client to decide whether to take that risk, or to obtain further information… before doing so. The solicitor is not, in general, obliged to seek out such further information unless instructed to do so.” Where, as in the world of conveyancing, there is a Law Society Handbook, a claimant will face an uphill struggle to demonstrate that a lawyer is guilty of negligent omission, unless the missed step is one recommended in the textbook. Generally, but not always, compliance with the Handbook will be regarded as discharging one’s duty of care.
Accordingly, and even though it would have been a quick and cheap step to take, the solicitors discharged their duty by advising of the risk: they did not have to evaluate it because they were not specifically instructed to do so. The outcome might have been different if the client had been less experienced and did not appreciate that there were ways to check the counterparty’s solvency. But the judge – rightly, I would suggest – made it clear that there is no general duty to make checks about the risk of future insolvency, because that is inherent in most, if not all, transactions.
In the absence of a supportive textbook or code of practice, and in all but obvious cases, the claimant seeking to prove a lawyer’s negligence ought to get advice and possibly a report from someone qualified to give “expert” evidence on the particular speciality. They run the risk of the evidence not being admitted, but if they don’t at least seek permission then they run the greater risk of lacking the evidential tools with which to prove their case.
On the facts, the claim against Mirza was quite rightly dismissed. It lacked two vital ingredients: (a) evidence to show that the solicitors had not acted reasonably (because the advice and actions were consistent with the Handbook) and (b) convincing evidence that the omitted search would in any event have made a difference to the client’s decision.
Perhaps as importantly, from an internal perspective, the solicitor’s habit of scribbling a note for the client to sign in confirmation that he was acting against advice was invaluable. That note was instrumental in proving not only that advice had been given but also that it appeared to have been understood.
