AURIUM REAL ESTATE LONDON ULTRA PRIME LIMITED v MISHCON DE REYA LLP

A solicitor’s duty is determined by the retainer and, where relevant, by risks which a reasonably competent solicitor should have identified from the instructions. The scope of duty is governed by the purpose for which the advice was given and the risk it was intended to guard against.

High-level and preliminary advice does not necessarily require the solicitor to anticipate an uncommunicated, specific development proposal. A claimant must prove factual and reasonable reliance on the advice, and loss must fall within the scope of the duty. A loss-of-chance claim requires a real and substantial chance that the counterfactual conduct would have avoided the loss.

Aurium claimed damages from its solicitors, Mishcon de Reya LLP, for allegedly negligent advice concerning the rights of a tenant occupying premises within a proposed development. Aurium alleged that the advice wrongly supported a strategy of demolishing and reconstructing parts of the building around the tenant’s premises.

The principal issues were whether the advice was supplied under a contract with Aurium or with another group company, the scope of any duty, breach, reliance, causation and loss. Aurium claimed loss of a chance to sell its interest in the development to KWG before the tenant commenced proceedings.

1. Claim dismissed. Judgment was given for Mishcon de Reya on its counterclaim for unpaid fees, amounting to £222,399 plus interest from 1 December 2017.
2. The advice was not provided under the existing vacant-possession engagement letter. Nor was that engagement varied. The advice concerned a fundamentally different subject matter: legal analysis of rights and obligations under the lease rather than drafting and negotiating a lease surrender.
3. The contract for the advice was concluded with BRHL, not Aurium. The court assessed objectively the communications before contracting, the parties’ course of dealing, the advice itself and subsequent conduct. The invoice was addressed to BRHL and paid by BRHL. Aurium therefore had no contractual duty claim against Mishcon de Reya.
4. Even assuming a duty to Aurium, the advice was high-level and preliminary. Its purpose was to identify legal rights and obligations which might be overlooked in developing a build-around scheme. It was not advice on a defined scheme involving demolition and reconstruction of the upper parts, nor advice on commercial negotiations or the success of a particular sale.
5. The advice was not negligent. It reasonably stated that the repairing covenant required further consideration in light of specific development plans. The solicitor was not required to anticipate that an uncommunicated build-around scheme would necessarily involve demolition. The wider duty to advise on obvious risks did not require warning about a risk that was not apparent from the instructions.
6. There was no factual or reasonable reliance on the advice as an assurance that demolition would comply with the lease or that litigation risk was absent. Nor was there a real and substantial chance that different advice would have led to an earlier settlement with the tenant, prevented proceedings or enabled the KWG transaction to complete.