Death knell for the ‘no transaction’ claim?

The Court of Appeal’s recent decision in Gabriel v Little addresses the question whether a solicitor provides ‘advice’ or ‘information’ and the scope of duty under SAAMCo. A solicitor providing advice is liable for all the foreseeable loss caused by the advice being wrong but a solicitor providing information is liable only for the foreseeable consequences of the information being wrong. The ‘information’ principle may be tested by asking what loss would have ensued if the information had been correct.

Mr Gabriel lent Mr Little, a property developer, £200,000 on terms that £270,000 was to be repaid in just over a year and was secured on a building that Mr Little would convert to offices. Mr Gabriel believed the advance was to be used for the building work. In fact, Mr Little used it to pay off bank lending secured on the property. The venture was a disaster: the building was only worth £13,000.

Mr Gabriel sued Mr Little alleging deceit — the actual use of the loan had been concealed from him. He alleged that the advance was held on a Quistclose trust and was to be used only for conversion work on the building. The facility letter stated the money was for the ‘costs of development’. He also sued his solicitors alleging that they knew how the money had been used but had failed to explain it to him and that their drafting of the facility letter was negligent…

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