The recent decision in Seventh Earl of Malmesbury and others v Strutt & Parker (a partnership) and another (2007) - a surveyors' negligence case delivered on 11 May 2007 - contains some important lessons for professionals and those who insure them.
The court had much to say about the need for a professional, who has been retained to provide commercial advice over a number of years (here to negotiate terms of a lease), to carefully consider the factual matrix afresh each time work is carried out for the client, and to ensure that any gaps in expertise are filled. The decision also examines the correct measure of damages where an asset is transferred following negligent advice, and highlights the difficulties for defendants facing claims for loss of a chance.
The claimants, tenants for life of an estate that bordered Bournemouth International Airport ("the BIA"), instructed a Mr Ashworth of Strutt & Parker to negotiate the lease of land to the BIA for a car park. Mr Ashworth negotiated the terms of four consecutive leases, which were entered into in 1997, 2000, 2002 and 2003.
The claimants claimed over �100 million on the basis that Mr Ashworth was negligent in failing to negotiate the 2000, 2002 and 2003 leases with turnover based rents, which would have allowed the claimant to benefit from the significant earnings of the car park.
The court concluded that Mr Ashworth had not acted negligently in relation to the 2000 lease. Mr Ashworth had attempted to negotiate a turnover rent but it was refused by the BIA, and he had not insisted further due to concerns about the "bigger picture", including the benefits of a good relationship with the BIA. The court found that, in these circumstances, it was a proper exercise of Mr Ashworth's judgement not to press for a turnover rent.
However, at the time the 2002 and 2003 leases were negotiated, the commercial background had changed to the extent that the BIA would almost certainly have agreed to a turnover rent, and keeping them "on side" was no longer such a key consideration. As a result, the court concluded that Mr Ashworth was in breach of his duty by not taking into account the changes in the commercial background and attempting to negotiate a turnover rent for those leases.
Bridging the skills gap
In considering the standard of care to be applied, the court emphasised the need for professional firms to ensure that work is adequately resourced. The standard of care to be expected from...