The Supreme Court is to examine the scope of a solicitor’s duty and whether they are legally required to warn clients about commercial risks.
Property developer Richard Gabriel has been given permission to take his case against Cheltenham firm BPE Solicitors to the top court after his case was thrown out at the Court of Appeal (22 November 2013).
Gabriel alleges that the firm was in breach of it fiduciary duty when it failed to warn him that a business associate was planning on using a £200,000 to pay off personal loans as opposed to developing a property. He further alleged that the firm was “negligent in failing to exercise reasonable care and skill in the advice” it gave him.
In May 2012 the High Court ordered the firm to pay damages of £191,808.44 to Gabriel, a ruling that was later reversed by the CoA.
Three appellate justices, Lord Justice Maurice Kay, Lady Justice Gloster and Lord Justice Fulford, held that the firm was bound to give commercial information but not advice to a client.
Last month the Supreme Court gave Gabriel, who was represented by Thirteen Old Square Chambers’ Michael Booth QC and Clyde & Co partner Paul Bugden at the CoA, permission to appeal the ruling.
The case stems from advice given to Gabriel by then assistant solicitor, now partner Richard Spencer, to write up a £200,000 loan agreement between the businessman and his friend, Peter Little, in order to purchase an airfield site in Gloucestershire.
Gabriel said the money was to be used solely for the development of the site but Little instead used the money to purchase it through one of his companies and pay off a bank debt. Gabriel argued that Spencer had known this information when writing up the loan agreement but failed to inform him.
The project ultimately failed and Gabriel lost his entire investment, retrieving only £13,000 after repossessing and selling the site, which had since plummeted in value.
He immediately pursued BPE, as well as Little and associated companies, for negligence, arguing that the firm knew that Little was to use the money for personal debts and that it should have warned him.
At the CoA BPE successfully argued that the first instance judge was wrong to find that BPE had any duty to advise Gabriel beyond drawing up the facility letter and charge competently. The appeal hinged on the distinction between Saamco category one advice – the duty to inform – rather than category two – the duty to advise what course of action should be taken.
Gloster LJ said: ”It was not a duty to advise Mr Gabriel as to what course of action he should take or as to the commercial risks inherent in the loan.”
The next stage of the case will determine exactly what the scope of the advice was to be given to Gabriel when it is heard at a Supreme Court appeal.
Court of Appeal hearing (brought by Richard Gabriel and BPE Solicitors)
For the claimant/ appellant Mr Richard Gabriel
Thirteen Old Square Chambers’ Michael Booth QC and Adam Chichester-Clark instructed by Clyde & Co partner Paul Bugden
For the respondents/defendants Mr Peter Little and High Tech Ltd
Henderson Chambers’ Patrick Green QC and Matthew Bradley instructed by Maitland Walker partner Rupert Croft
For the appellants/ defendants BPE Solicitors and BPE Solicitors
4 New Square’s Roger Stewart QC instructed by Beale and Company partner Rhian Howell