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Negligence, deliberate concealment and unlawful means conspiracy: three lessons from Adams v Atlas International Property Services

In the current economic climate, the unfortunate facts of Adams v Atlas International Property Services will no doubt sound all too familiar. The claimants were all purchasers of properties in Spain. Despite paying the full purchase price, they did not receive the title to their properties. The seller, Desarrollo, had already become insolvent. The claimants therefore brought proceedings against the agents involved in the purchases, who were in liquidation, and the Spanish lawyers (Aroca). The claimants alleged negligence, breach of fiduciary duty and unlawful means conspiracy.

Although much of the 76 page judgment is a detailed assessment of the facts and an analysis of the witness evidence, I think that three practical lessons can be drawn from the case:

Lesson 1: don’t expect delegation to non-lawyers to reduce a lawyer’s standard of care

Two notable points were raised in the judgment regarding the appropriate standard of care in negligence claims against lawyers.

Firstly, the claimants argued that the standard of care owed by Aroca was that of a reasonably competent English solicitor. The court was quick to reject this. Aroca had to meet the standard of reasonably competent Spanish lawyers holding themselves out as having specialist expertise in property transactions and dealing with clients who were not resident in Spain.

Secondly, and perhaps more interestingly, Aroca suggested that the standard of care should be lower than that of a reasonably competent Spanish lawyer. This was on the basis that meetings with the claimants had been conducted by non-lawyers. However, this was firmly rejected by the court: it was Aroca’s choice to use non-lawyers and they could not abrogate their responsibility in this way.

In my view, a useful reminder to lawyers in all jurisdictions that delegating work to non-lawyers can have unfortunate consequences.

Lesson 2: lay consumers will not be expected to instruct a second lawyer to satisfy “reasonable diligence” under section 32 of the Limitation Act 1980

Part of the claimants’ negligence claim against Aroca related to the period before completion of the purchases. The court found, with the assistance of expert evidence on Spanish law, that Aroca was under a duty to advise the claimants that there was no proof that Desarrollo was able to pass unencumbered title and that the claimants should not pay the full purchase price without such proof.

When the action against Aroca was commenced, the six year limitation period in respect of this claim had long since expired.

The claimants argued that there had been deliberate concealment by Aroca of the facts relevant to their right of action. Consequently, time would only start to run when they learnt of this concealment or, with reasonable diligence, could have discovered it, pursuant to the well-known provisions of section 32 of the Limitation Act 1980.

In response to this point and as an alternative to its primary case that it had not been negligent, Aroca argued that the claimants had not exercised reasonable diligence. Aroca boldly, in my view, asserted that the claimants could, and should, have discovered Aroca had been negligent much earlier by instructing another independent lawyer. Unsurprisingly, in my opinion, this argument was soundly rejected by the court. For lay consumers such as the claimants, instructing a second lawyer would be an exceptional measure which would not fall within the bounds of reasonable diligence.

Lesson 3: the only damage that is relevant in unlawful means conspiracy is that which flows from the unlawful means itself

The principles of the tort of unlawful means conspiracy are far less well known than those relating to negligence. Perhaps for that reason, the court recapped some key principles:

  • Parties can only be liable for unlawful means conspiracy if they know that what they propose to do in combination is unlawful.
  • There are different tests for intention for unlawful means conspiracy and conspiracy to injure. Where parties conspire to use unlawful means, causing damage to the claimant does not need to be their main purpose. However, to be liable for conspiracy to injure, it does.
  • The court found that it flowed from this distinction that a defendant is only liable under the tort of unlawful means conspiracy for damage which flows from the unlawful means itself.

The claimant disagreed with the third point. It argued that, once there is a conspiracy to use unlawful means, the defendants will be liable for any acts carried out under that conspiracy, even if the act itself is not unlawful. The court rejected this submission, finding that such a principle would blur the distinction between unlawful means conspiracy and conspiracy to injure.

 

39 Essex Chambers Melissa Shipley

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