AUDREY CLARICE PETERSEN (Personal Representative of Marinus Robert George Petersen deceased) v THE PERSONAL REPRESENTATIVES OF CYRIL B. RIVLIN DECEASED

A professional’s duty to explain the implications of a contractual term may be a duty to provide information rather than a duty to advise whether the transaction should be undertaken. In that event, the recoverable loss is confined to loss caused by the information being wrong and of the kind which the duty was intended to prevent. It does not extend to a foreseeable cost inherent in a risk which the client was prepared to assume.

A transaction which merely converts an estate asset into cash of equivalent value does not, without more, establish loss to the estate.

The claimant, as personal representative of a purchaser, sued the estate of the purchaser’s former solicitor. The solicitor had acted on the purchase of the Coach House. The sale contract contained an indemnity in favour of the vendors concerning litigation brought by a neighbouring owner.

His Honour Judge Chambers QC found a negligent failure to explain clause 17 after the purchaser had sought confirmation that his exposure was capped. He found that, if properly advised, the purchaser would not have contracted, but awarded no damages. The claimant appealed in respect of defence costs incurred in the neighbouring litigation and £42,500 paid to the trustee in bankruptcy to avoid possession proceedings.

The central issue was whether either asserted loss fell within the scope of the solicitor’s duty and was recoverable.

1. Appeal dismissed unanimously. Lord Justice May gave the reasons, with Lord Justice Potter and Sir Murray Stuart-Smith agreeing. The judge had correctly awarded no damages.

2. The breach found at trial was limited to failing to provide oral or written advice on the implications and consequences of clause 17. It was not a duty to advise generally on the merits or desirability of entering the contract. The duty was therefore properly treated as one to provide information, to which the principles in [1997] AC 191 applied.

3. The fact that correct information would have caused the purchaser not to enter the transaction did not make the solicitor liable for every foreseeable consequence of the transaction. The relevant comparison was between the purchaser’s actual understanding and the understanding he would have had if clause 17 had been correctly explained. The trial judge had found that the purchaser understood the £10,000 cap to concern liability to Mr Bar-Gur, while accepting liability for 90% of the vendors’ defence costs. Those costs were consequently not loss which the solicitor’s duty was intended to prevent. They were a risk inherent in the venture which the purchaser was prepared to undertake.

4. The separate claim for £42,500 also failed. Even assuming that sum represented the value of property released from the estate, the estate received money of the same value. The transaction was neutral as to the estate’s assets. It did not establish a loss to the estate or a payment to the vendors.

5. The appeal was dismissed with costs, subject to detailed assessment.

• Court of Appeal (Civil Division): The appeal was dismissed in [2002] EWCA Civ 194. The court upheld the conclusion that no damages were recoverable.
• High Court of Justice, Queen’s Bench Division, Cardiff District Registry: His Honour Judge Chambers QC gave decisions on 24 July and 31 October 2000. He found the solicitor liable for a limited negligent failure to explain clause 17, but held that the claimant had suffered no recoverable loss.