Background
The Claimant, MPP (Services) Ltd, an investment company operated by Steven Reel and Stephen Carroll (“the two Steves”), entered into a joint venture with Ms Lesley Hearne to establish children’s care homes. The venture failed, and the Claimant alleged Ms Hearne accepted liability for £180,000 in wasted expenditure. To secure this liability, Ms Hearne executed a legal charge over her property at 6 Laurel Bank, Hyde, in favour of the Claimant. The Defendant, Ratio Law Solicitors LLP, was instructed to prepare and register the charge.
The Claimant’s director, Mr Reel, completed a draft charge in the standard CH1 form, inserting in panel 9 the words “2nd Charge of £180,000 payable within 24 months of the date of this agreement”. He sent it to the Defendant’s fee-earner, Ms Alberici, asking whether it had been drafted correctly. Ms Alberici removed the words “2nd Charge of £180,000” and did not replace them, so the executed charge stated only “Payable within 24 months of the date of this legal charge”, without identifying any secured sum. The Defendant admitted this deletion was a breach of duty.
After a dispute arose, Ms Hearne challenged the charge, pleading that it was void for uncertainty. Advised that this defence was realistically unanswerable, the Claimant settled at a mediation by agreeing to cancel the charge’s registration, losing its security. The Claimant then sued the Defendant for professional negligence, seeking damages for the loss of the chance to recover the £180,000 from Ms Hearne.
The Court’s Holding
His Honour Judge Stephen Davies held that the Claimant succeeds and is entitled to damages of £100,000 plus interest. The judge rejected the Claimant’s submission that, had the Defendant performed its duty, Ms Hearne could not have contested the amount secured. He found that the chargor is generally entitled to challenge the amount secured, citing Mainland v Upjohn (1889) 41 CH D 126 and Close Asset Finance Ltd v Taylor [2006] EWCA Civ 788. Consequently, he was satisfied that this is genuinely a loss of a chance case, requiring assessment of the value of the lost opportunity to recover from Ms Hearne.
The judge rejected the Defendant’s scope-of-duty argument, finding that the risk of losing the opportunity to rely on the charge to recover Ms Hearne’s true liability was within the scope of the Defendant’s duty, and that there was a sufficient nexus between that loss and the duty. He also rejected the Defendant’s case on contributory negligence, based on his factual finding that the information provided by Mr Reel was not in substance inaccurate. He further rejected the Claimant’s pleaded case at paragraph 17 of the Particulars of Claim regarding a detailed telephone conversation, which Mr Reel had disclaimed in oral evidence.
Assessing the loss of a chance, the judge found that Ms Hearne had very poor prospects of setting aside the charge absent the uncertainty defence, but the Claimant did not have equally strong prospects of establishing that £180,000 was an agreed liquidated sum. He concluded that the most likely outcome, had the charge been effective, was a settlement whereby Ms Hearne would raise £100,000 by remortgage to fund an all-inclusive payment. He therefore awarded £100,000, plus interest provisionally at 3% over base rate from 10 October 2021, subject to submissions on amount and period.
Key Takeaways
- A solicitor’s inadvertent deletion of a crucial term from a draft legal charge, admitted as a breach of duty, can give rise to liability for the loss of the chance to recover the secured sum.
- Where a charge fails for uncertainty, the claim against the solicitor is assessed as a loss of a chance, not on the balance of probabilities as to the underlying dispute with the chargor.
- The court may assess the lost chance by identifying arguments as speculative, weak to strong, or conclusive, and factor conclusions into a blended overall monetary assessment.
- A chargor retains the right to challenge the amount secured by a charge, so a claimant’s recovery is not automatic even if the charge had been properly drafted.
Why It Matters
This judgment illustrates the application of loss-of-a-chance principles in professional negligence claims against solicitors, following Allied Maples Group Ltd v Simmons & Simmons [1995] 1 W.L.R. 1602 and Perry v Raleys Solicitors [2019] UKSC 5. It demonstrates how courts assess the value of a lost opportunity to recover under a defective security, taking into account the underlying merits, the parties’ likely conduct, and settlement prospects.
The case also underscores the importance of careful drafting and checking of legal charges, particularly where a client provides a completed draft for review. Even a simple human error can have significant financial consequences, and solicitors may be liable for the resulting loss of security, subject to the court’s assessment of the chance of recovery.