Loss of profit the right measure for bungled offer
26 Jun 07
Property developer wins claim against solicitors for loss following misdirected fax
Solicitors who missed a closing date by faxing an offer to buy a property to their client instead of to the sellers' solicitors have been found liable for the loss of profit the client would have made on developing the subjects.
Colin MacAulay QC, sitting as a temporary judge in the Court of Session, made the award to Justin Watts following the error by his solicitors Bell & Scott WS in making the offer for the former premises of the Caledonian Club in Abercromby Place, Edinburgh. Mr Watts was a property developer who intended to convert the permises into flats.
Bell & Scott accepted that they were in breach of contract, and that the evidence suggested that Mr Watts' offer would probably have been accepted and he could have financed the development. However they disputed whether he had suffered any legally recoverable loss, arguing that in the absence of special features, loss was measured by the value of the asset at the date when it would have been obtained less the price that would have been paid, plus the wasted costs. This applied even if some further loss such as loss of profit was reasonably foreseeable.
Mr MacAulay however ruled that while the defenders' "diminution in value" approach was the normal one where heritable property was concerned, it was not the universal one and previous decisions recognised that it might not be appropriate if on the facts of a particular case it might lead to injustice if applied mechanistically. "Where the whole purpose of the pursuer's intended purchase of the premises was to generate profit it seems to me that that aim would be frustrated if the diminution in value approach is followed."
He added: "Having undertaken to deliver the pursuer's offer timeously in their state of knowledge at the time it seems to me that the defenders assumed responsibility to protect the pursuer against the kind of loss he suffered."
Applying the pursuer's average percentage profit from similar developments previously carried out, to the projected selling price of the flats, the sum awarded was £412,380.
Mr MacAulay's opinion can be read at http://www.scotcourts.gov.uk/opinions/2007CSOH108.html .