Duty calls, or does it?

Spire Property Development LLP & Anor v Withers LLP [19.07.22]

The facts

The claimants, special purpose vehicles for the development of high-value prime residential property developments in London, retained Withers to act on their acquisitions of two high-value Grade II listed properties in Fulham.

During the course of its retainers, Withers provided the claimants with reports on title on the two properties which failed to identify the presence of three extra-high voltage electric cables (HVCs) running under both sites and owned by UK Power Networks (UKPN).

Subsequent to the purchases, the claimants learned of the existence of the HVCs, the cable route traversing the properties. Whilst the claimants considered approaching UKPN to seek their agreement to moving the HVCs, that step was put on hold to reduce the risk of objection by UKPN to planning permission applications that had been made on the claimants’ behalves to redirect the HVCs.

The claimants raised the following queries with Withers:

  1. “Should the existence of the cable not have come up on the radar as a result of seller's replies to enquiries, even if it didn't appear on the title docs?
  2. Could you elaborate slightly on the statutory rights of access point? Does this mean that UK Power could have laid the cable at Sloane and KC without having any kind of legal permission from the owners? It would seem impossible that the owners of the sites were not aware of such a large cable being laid on their property.
  3. If, as there surely must have been, there is some kind of legal documentation relating to the laying of the cable on either site, then the question remains as to why this hasn't shown up on our radar? We need to decide how we are going to approach UK Power about this issue, so it would be very helpful to get your thoughts on the above. The better prepared we are the more likely we will succeed in getting the cable moved…”

In response Withers replied:

  1. "The seller can only provide such information as they may have and there were no wayleave agreements or deeds of easement relating to any electricity cable revealed in the seller's replies to enquiries, other than the rights relating to the electricity transformer chambers. In addition, St Mark's was acquired from receivers and therefore the information provided was extremely limited and they had no knowledge of the property whatsoever.
  2. Utility companies have statutory rights of access onto private land to lay pipes, wires, cables and other service infrastructure. Under the Electricity Act 1989, electricity companies can acquire a wayleave to install an electric line on, under or over private land, together with rights of access of inspection, maintenance and replacement. A wayleave can either be agreed or can arise where the owner or occupier fails to respond to a notice requiring him to grant a wayleave or gives it subject to conditions unacceptable to the electricity company. Wayleaves, whether acquired under the Electricity Act 1989 or granted by a landowner, do not need to be registered at the Land Registry. It is therefore possible that a wayleave was granted sometime ago when the cable was originally laid and was not known to the seller. In relation to the Sloane Building, the seller acquired the property in 2010 and before then it had changed hands in 2009 and 1999. Prior to 1999, it appears that the site was owned by the local authority. The seller may therefore not have been aware of the cable. As to St Mark's, the receivers will have had limited information and are unlikely to have known about such matters.
  3. Please see comments above".

Subsequently, unbeknownst to Withers, the claimants raised enquiries with UKPN who could not produce any wayleave or other document supporting its right to lay the HVCs and indicated that they were operating on the assumption that UKPN had no legal right to have done so.

The claimants did not seek further advice from Withers and the HVCs were not moved, rendering the developments of the sites more modest in scope than had been anticipated. It was found by the judge at first instance that the claimants could have served notice on UKPN under the Electricity Act 1989 requiring that the HVCs were moved. HVCs would, thereafter, either have had to remove them or seek a ‘necessary wayleave’ from the Secretary of State which, if granted, would have allowed the claimants to obtain compensation from UKPN.

The first instance decision

Pelling J found that Withers assumed a duty of care to advise the claimants correctly as to their rights by tendering advice that they would rely on, therefore coming under a duty to carry out the task carefully, which required advice as to the remedies available to the claimants. In essence, that Withers were under a duty to highlight the issues (set out above).

Pelling J’s judgment was that:

  • The absence of a retainer between Withers and the claimants, and any contractual duty to advise on their rights against UKPN, was "essentially immaterial".
  • On its proper construction, the query raised by the claimants contained a request for advice concerning UKPN's rights of access and how the claimants might get the HVCs moved otherwise than at their expense.
  • In providing its response, Withers gave advice concerning rights of access under the Electricity Act 1989 but this advice was incomplete.
  • In providing an unqualified substantive answer to the claimants’ query, Withers assumed a duty of care in relation to the content of its advice.
  • That Withers did not charge for the advice was immaterial.
  • Withers knew, or ought to have known, that the claimants would rely on the advice.

Withers appealed these elements of Pelling J’s judgment.

The Court of Appeal’s decision

In allowing Withers’ appeal, the Court of Appeal (on behalf of whom Lady Justice Carr gave the judgment), found that Withers, whilst having assumed a duty of care to respond to the claimants’ specific queries with reasonable skill and care, assumed no wider duty to provide information (concerning the claimants’ potential rights against UKPN) which had not been sought. 

The extent of Withers’ duty and assumed responsibility was, in the Court of Appeal’s view, a matter of objective construction of the relevant exchanges that passed between the parties, which must be considered in the context that they were exchanges between a solicitor and former client who were familiar to each other and involved in ongoing professional relationships on other projects. At the same time, the claimants were both highly experienced and well-resourced, dealing with super-prime market properties and surrounded at all times by a host of property development specialists in multiple disciplines.

Lady Justice Carr observed in the emails dated 28 January 2014 and 3 February 2014 that:

  • The language of the claimants’ email was striking, asking the fee earner at Withers for her "thoughts" and only to "elaborate slightly", which is not the language of a request for definitive advice by a commercial developer on a point of potentially significant financial value.
  • The second question, and Withers’ response, were central to the issue. But the claimants only sought that Withers elaborate slightly on a previous question which concerned the absence of reference to the HVCs on title documents and address UKPN’s ability to lay the HVCs absent permission from the site’s then owners.
  • Withers were asked in terms to provide their thoughts on three specific questions. It was not for them to second-guess how or why their answers to the three questions might assist the claimants when they chose to approach UKPN in due course. In any event, Withers were not privy to the claimants’ strategy.

The Court of Appeal concluded that Withers had not assumed a duty to advise on the wider questions of the claimants’ potential rights and remedies, which matters were not reasonably incidental to the matters upon which Withers’ comments had been sought. Whilst it was reasonably foreseeable that the claimants would rely on Withers’ answers as far as they went, it was not reasonably foreseeable (and the claimants could not reasonably rely) on their answers as amounting to provision of comprehensive advice on the claimants’ actual or potential rights and remedies against UKPN in respect of the HVCs.

Comment

Whilst an intensely fact sensitive judgment, it will nonetheless be a welcome one for solicitors who wish, without fear of creating a legal liability, to respond constructively to former, current and potential clients who may approach them seeking information absent a retainer. The decision also suggests that sophisticated clients will need to be explicit if seeking advice on a particular topic and the Court won’t rush to impose onerous obligations on solicitors faced with an equivocal request.

That said, and as Lady Justice Carr rightly points out, when volunteering any such information or advice, solicitors need to take care to clearly and unambiguously identify the limits of any assumption of responsibility in order to avoid the risk of litigation such as the present.