Akasuc Enterprise Ltd & Ors v Farmar & Shirreff (A Firm)

A solicitor retained to secure overage payments must use reasonable endeavours to devise and incorporate an effective security mechanism before contracts are exchanged. A charge, caution or contractual obligation is not sufficient if the agreement creates only a personal obligation which cannot bind successors in title or support registration. Available conveyancing devices may include an appropriately drafted restriction or vendor’s lien. Where negligent drafting removes a realistic opportunity to obtain a better transaction, damages may be assessed for the lost chance. The court should assess that chance against the evidence of market conditions, comparable transactions, costs and the parties’ relative bargaining positions.

Akasuc Enterprise Limited and the individual claimants sued their solicitors for negligent drafting of a conditional development sale agreement. The agreement transferred land to Mansard Country Homes Limited for a minimum price and overage, but failed effectively to protect the overage obligation against a later sale to a successor developer. Mansard subsequently sold the land to Charles Church Developments Ltd., which developed it.

The central issues were whether the solicitors had negligently failed to secure the overage, whether an effective mechanism could and would have been agreed, and how any lost opportunity should be valued.

1. Negligence. The solicitor’s retainer required her to use reasonable endeavours to obtain security for the overage. This was a drafting and conveyancing obligation, rather than merely an obligation to advise. The agreement and the proposed caution did not secure the overage because the payment obligation was personal to Mansard and did not bind successors in title.
2. Available mechanisms. A positive covenant alone could not run with the land. Section 79 of the Law of Property Act 1925 had no substantive effect for that purpose, consistently with Rhone Trust v Stephens [1994] 2 AC 310. A right of entry or estate rent charge might provide a route for a positive covenant to run with land, as illustrated by Shiloh Spinners v Harding [1973] AC 691 (HL). A direct contractual obligation supported by a restriction, or a vendor’s lien, could potentially have protected the overage. A second charge for the whole anticipated amount would not have been accepted.
3. Counterfactual agreement. Mansard would have accepted an effective provision securing the overage, provided its bankers’ priority was protected. The claimants therefore lost the opportunity to negotiate either with Mansard and the successor developer or with another developer in the rising 1997 market.
4. Loss. Applying the lost-chance approach in Allied Maples v Simmons and Simmons [1995] 1 WLR 1602, the court assessed the lost opportunity at £250,000. The assessment took account of the arms-length sale price, access and decontamination costs, market recovery and the parties’ bargaining positions.
5. Disposition. The claim succeeded. Akasuc was awarded £250,000 damages, with interest. Contributory negligence was not established.