Jaison Property Development Co Ltd v Swinhoe

A professional negligence claim fails where the claimant knew, when signing, that he was entering a personal guarantee. A solicitor’s duty to a non-client may arise in tort where the solicitor positively assumes responsibility for communicating a third party’s demand, even though the solicitor acts primarily for a company. Such a limited duty does not necessarily require reliance by the claimant. The existence of a corporate vehicle does not automatically prevent a duty of care, but the retainer and the practical possibility of conflict must be examined carefully. The court also indicated that a claimant who failed to read clear contractual documents or seek clarification could bear contributory responsibility.

Jaison Property Development Co Ltd obtained a consent judgment against Howard Swinhoe under a personal guarantee given in connection with a property development venture. Mr Swinhoe brought Part 20 proceedings against his solicitors, Lass Salt Garvin, alleging that they negligently failed to tell him that the document was a personal guarantee and seeking damages measured by his liability to JPD.

The central factual issue was whether Mr Swinhoe knew of the guarantee before signing it. The court also considered, in the alternative, whether LSG had been retained by him personally or owed him a tortious duty of care, together with causation, mitigation and contributory negligence.

1. Claim dismissed. Mr Swinhoe knew, when he signed the document, that it was a personal guarantee. The 10 August letter, the draft shareholders agreement, the discussions on 17 August, the board minutes and the clear one-page guarantee each supported that conclusion. The court accepted the evidence of Mr Garvin and Mr Pollacchi concerning the relevant meetings.
2. Since Mr Swinhoe knew what he was signing and understood that a personal guarantee imposed personal liability, LSG could not be in breach of a duty to tell him of the guarantee. That finding independently disposed of the professional negligence claim.
3. Alternatively, there was no personal contractual retainer. LSG’s clients were Lydian and subsequently the relevant corporate entities. Mr Swinhoe’s close relationship with Lydian did not create a dual retainer.
4. Nevertheless, LSG owed Mr Swinhoe a limited duty of care in tort to communicate Mr Jason’s demand that he provide a personal guarantee. Mr Garvin had positively assumed responsibility for passing on that demand. The duty was not defeated by the absence of contractual privity, by the fact that Mr Swinhoe did not know he needed advice, or by the general corporate structure. Reliance was not required because the complaint concerned the failure to communicate a demand, rather than negligent advice about the guarantee’s terms.
5. The alternative causation case also failed. Mr Swinhoe had not shown that alternative funding without a personal guarantee would have been available, or that he would have abandoned the profitable project rather than provide the guarantee. There was no failure to mitigate. Had liability otherwise arisen, contributory negligence would have justified a 50 per cent reduction because Mr Swinhoe failed to read or query clear documents.