Solicitors' PI - Scope Of Duty Of Care

A recent Scottish case provides guidance on the scope of a solicitor's duty of care against the background of the fall in the housing market.

Background

The claimant property developer instructed his solicitors, VMH LLP ("VMH"), in 2004 in connection with the acquisition of a site for a proposed development of townhouses and apartments in Edinburgh. Planning consent had been granted on the condition that a new ventilation duct be installed to an adjacent fish and chip shop ("the Codfather"). Missives were concluded in April 2005 after the sellers of the site entered into an agreement with the owners of the Codfather regarding the ventilation duct. In July 2005, the Codfather was sold and the new owner disputed the enforceability of the agreement regarding the ventilation duct. Marketing of the development, which had begun in January 2007, was suspended pending resolution of that dispute. It was not resolved until December 2007. The Edinburgh residential property market was at its height in 2006 but by 2008 had begun to slump due to the global economic crisis. The claimant alleged that had VMH secured an enforceable right to install a ventilation duct, there would have been no dispute and therefore no delay in marketing the properties.

Decision

VMH admitted breach of duty. The question for the Court was whether the scope of VMH's duty to the claimant was sufficiently wide to enable the claimant to recover the various heads of loss claimed. The Court held that, in principal, all of the heads of loss were recoverable: 1. Cost of settling the dispute regarding the ventilation duct; 2. Additional borrowing costs associated with funding the...