Rentokil Initial 1927 Plc v Goodman Derrick Llp

A solicitor’s duty in drafting a commercial contract is assessed against the terms’ true construction and the circumstances of the retainer. The claimant must show that no reasonably competent practitioner could have drafted or agreed the challenged terms. A mere possibility of an adverse construction or unnecessary risk is insufficient where the wording properly reflects the commercial deal.

The scope of advice depends on the retainer and the client’s experience. A sophisticated commercial client does not ordinarily require a line-by-line explanation of a contract where it understands the transaction and risks. For causation, the claimant must prove what it would have done if properly advised. Where loss depends on a third party’s hypothetical conduct, a substantial, rather than speculative, chance is required.

The claimant instructed the defendant solicitors in connection with the conditional sale of commercial premises to Taylor Wimpey. The contract made completion conditional on satisfactory planning permission and defined both the costs of planning obligations and “Unacceptable Planning Conditions”.

Planning permission was granted subject to conditions. Taylor Wimpey asserted that the conditions were unacceptable and refused to complete. The dispute was referred to arbitration but was settled on revised commercial terms. The claimant then alleged negligent drafting, inadequate advice and causation of the reduced sale price and arbitration costs.

The issues were whether the contractual provisions were defective, whether the defendant’s advice fell below the required standard, and whether the alleged breaches caused the claimed loss.

1. Claim dismissed. The defendant’s retainer was to draft and advise on the legal terms of the transaction. Commercial and planning advice was principally within Rapleys’ role.
2. The court construed the contract in its commercial and factual context. The three-year commencement condition was a usual planning condition and did not limit permission to a set period. The qualification in clause 10 applied to both sub-clauses 10.1 and 10.2. Clause 11 required a reasonable developer to form a reasonable opinion, so immaterial delay did not make a condition unacceptable. Clause 12 had a single commercial purpose: its final words qualified both limbs, and financial viability was assessed when planning consent was granted.
3. The relevant standard was whether the terms were ones which no reasonably competent practitioner could have drafted or agreed in the circumstances. The wording reflected the heads of terms and achieved the intended balance between completion security and planning risk. The defendant therefore was not negligent in drafting or negotiating it.
4. The advice was adequate. The claimant was a sophisticated commercial client acting through an experienced solicitor who understood the transaction, its risks and the contractual provisions. The defendant was not required to explain the contract line by line. The definition of “Planning Agreement” was clear and the claimant knew that “Costs” extended beyond section 106 costs.
5. On causation, the claimant failed to prove that Taylor Wimpey would have accepted different terms. There was no substantial chance of that occurring. An arbitration would probably have occurred in any event, although the claimant would probably have succeeded on the construction issues. The settlement was driven by commercial and financial considerations, not the alleged drafting defect. The claim for costs under the section 106 provisions also failed.
6. The claimant had not shown that it settled the arbitration because of the defendant’s breach. Given the finding that it would probably have won, settlement was unreasonable in the circumstances. The claim was dismissed.