Property magnate wins £1.1m from lawyers

By JOHN ROBERTSON
Published on 09/12/2011 12:12

A FIRM of solicitors has been ordered to pay damages of £1.1 million to a property developer who claimed that negligent legal advice had caused him to miss a boom period for house sales in Edinburgh.

Alan Berry had intended to market 19 townhouses and eight apartments in the city’s Slateford area during 2007, but had to put the plans on hold because of a hitch over smells from an adjacent chip shop.

Mr Berry had thought, on the advice of his then lawyers, VMH LLP of Edinburgh, that it would be only a minor problem, but by the time it had been resolved, the housing market had slumped in the wake of the American sub-prime and Northern Rock crises.

He sued VMH for professional negligence and claimed more than £2m in damages. The firm admitted a failure in its advice and that it had breached a duty of care to Mr Berry. However, it disputed the size of his claim.

Lord Doherty ruled at the Court of Session in Edinburgh yesterday that the award should be set at £1,135, 372.

The court heard that the site in Slateford Road had been earmarked for housing in 2004 and Mr Berry’s firm, Kirkton Investments, had been keen to acquire it. Planning consent had been granted, but on condition that a ventilation duct be installed at the rear of the Codfather chip shop. An existing duct was considered to be inadequate.

Missives for the sale of the site to Kirkton were concluded in April 2005. Mr Berry had been advised by his lawyers that Kirkton would have a legal right to install the duct, but he and the owner of the shop become involved in a dispute over the matter.

The owner asked for £75,000 to allow installation. Mr Berry refused, based on his legal advice.

Later, VMH ceased to act for Kirkton, and Mr Berry eventually paid £324,000 for the right to fix the duct to the shop. In the meantime, he had postponed the full marketing of the development. He had wanted to launch in spring 2007, but had to wait almost a year.

Lord Doherty said: “In Edinburgh, the residential property market had experienced record sales volumes in 2006. The market remained strong for most of 2007. In September 2007, market confidence was hit by the American sub-prime crisis, and the Northern Rock crisis. There were many ripple effects. By the second quarter of 2008, it was apparent that the property market had entered a period of slump. The position worsened during 2008.”

Mr Berry claimed that Kirkton had to fund the development for longer than planned because it had not been able to sell the townhouses and apartments until early 2008. Then, the market was in a downturn and lower selling prices were the result. He put the loss in sales at £1.7m.

VMH admitted a breach of duty to Kirkton in respect of a failure, before the conclusion of missives, to advise that it had no enforceable right against the owner of the shop to connect a ventilation duct into the shop’s existing ventilation system.

The lawyers accepted that certain sums claimed by Kirkton were due, such as the £324,000, but disputed the loss in sales figure. The real problem about sales, VMH insisted, was that the properties had been unattractive to potential purchasers.

Lord Doherty said: “The contingencies and uncertainties are such that [Kirkton’s] primary position is untenable. Nor, on the other hand, would it be right on the evidence to hold that [VMH’s] breach made no difference to the sales that could have been achieved.”

The figure for loss in sales was set at £545,000 which was added to other losses and costs to produce a final sum of £1,135,372.