Supreme Court: Damages awarded in negligence claim against LK Shields reduced to €5.2m

About this case:

• Judgment:
  External link
• Judge:
  Mr Justice Donal O'Donnell

Substituting the award of the High Court, Mr Justice Donal O’Donnell said that the title issue which the firm was at fault for had been cured by October 2008, therefore the purchase offer which had been reduced by €4m by this time was the loss attributable to LK Shields’ negligence.

Background

In 1994 Rosbeg Partners bought a unit at Western Industrial Estate, Naas Road, Dublin 12, for a sum of £765,000 from Packaging Resources Limited (PRL). LK Shields acted as solicitors for Rosbeg in the conveyancing transaction.

After the transaction closed, there remained some outstanding matters to be completed, which were covered by undertakings provided by PRL’s solicitors.

However, some of these subsequent steps were not completed by LK Shields, leading to the present proceedings.

Folio 23011F

The property was made of five separate titles, one of which was partly registered and partly unregistered – the registered portion was a part of the property contained in Folio 23011F County Dublin, and LK Shields should have registered Rosbeg as the owner of that portion by opening a new folio by lodging the deed of transfer and a clear map with the Land Registry.

Facilitated by PRL’s solicitors, LK Shields did so in 1996 however the map submitted was rejected by the Land Registry.

Thereafter LK Shields asked PRL’s solicitors to furnish another map, and correspondence between the two firms continued sporadically until 2000. While accepting that the matter continued to be a priority for LK Shields, but not for PRL and their solicitors, Justice O’Donnell criticised both firms for not delivering on what is expected of professional firms.

Registration still not completed by LK Shields; in 2005 PRL sold the balance of the lands in folio 23011F to Bank of Ireland Trust Services, who consequently had documentary title to the entirety of the land in the folio (note they did not assert any entitlement).

It was not in dispute that LK Shields was negligent in failing to secure the registration of Rosbeg’s title, and issues arose in 2007 when Rosbeg began to consider selling the unit.

Potential purchase

In 2006, Pino Harris who owned adjoining land made a verbal offer of €6.5m for the unit, which was rejected by Bob Stewart of Rosbeg who was willing to wait for the value to increase. Justice O’Donnell explained that Rosbeg had a valuation “of €10 million and Mr Stewart apparently believed that the property could achieve a price of €15 million”. The High Court found that Mr Stewart subsequently said that “he would like to get €12 million but the backstop figure was €10 million”.

At the “zenith in the property boom in Ireland” in September 2007, Mr Harris made a formal offer, subject to contract, of €10m with a limited time period. Evidence was that “Mr Stewart wanted to proceed” with this sale.

In the High Court, it was accepted that a decision to sell had been made, and that if the issue with the title had not arisen that the sale would have gone ahead.

Justice O’Donnell said that the problem with the title emerged “in a curious way” when Mr Harris was completing the purchase of adjoining lands.

As a result, Mr Harris informed Rosbeg of the issue and told them to come back “when they had sorted out the problem”.

As such, Rosbeg was “stalled in its desire… to sell the property just at a time when the property market was at a high but would soon start to soften and then go into a precipitous decline”

Registration was completed in October 2008, and due to the decline in the property market, the sale was never completed and Rosbeg retained the property.

Damages

In the High Court, the trial judge concluded that Rosbeg had suffered a direct loss of €8.5m as a result of LK Shields’ negligence; together with CGT and interest Rosbeg was awarded a total of €11m.

In the Supreme Court, Justice O’Donnell said that October 2008 must form the backstop to the period during which it could be said that LK Shields’ negligence prevented or interfered with the sale.

On this basis, the reasonable measure of damage was at least prima facie the difference in value between October 2007 when a sale was “probable”, and October 3008 when the impact of negligence had been definitively removed.

Justice O’Donnell was satisfied from the evidence that Mr Harris had been willing to pay €6m for the unit in October 2008, which represented an attributable loss of €4m.

As such, the Supreme Court substituted the €11m award of damages made by the High Court with one of €5.2m.