A solicitor’s firm was held “not responsible for checking the credit status of a vendor” in a property transaction case, according to a recent high court verdict, which dismissed a claim of professional negligence.
Under the agreed terms, a £96,000 deposit, which was paid on an Essex property, was to be held by the solicitor acting as agents for the vendor. However, the transaction failed to complete and the deposit was “lost.” Subsequently, the property seller was made bankrupt and his solicitors disappeared.
At the hearing, the claimant stated that he should have received better advice from his solicitors over the risks involved in the transaction. It was argued that the transaction would have been stopped had he been told that a bankruptcy petition was outstanding against the vendor.
In response, the solicitors said their client was “fully and properly advised throughout”, including a specific recommendation, which had not been followed by the client to not exchange contracts on the basis of the terms of the deal.
The high court judge found that the claimant had “understood the advice he was given and if he had wanted to check the vendor’s credit status he could have taken other steps himself.”
“While there may be circumstances in which a solicitor should check specifically for the commencement of bankruptcy proceedings ... this is not the same as a general duty to make checks about risk of future insolvency” adding that “deciding whom to trust in business was a commercial decision for the client to take, andnot for the solicitor.”
Ruling that the solicitors was “not under any duty to suggest credit-risk searches prior to exchange of contracts’, the judge concluded that a solicitor’s duty “is always defined by his retainer. If he advises his client of a risk, it is a matter for the client to decide whether he wishes to take that risk, or to obtain further information or security before doing so.”