Demolishing above a Ferrari showroom - what could go wrong?
Withers has been ordered to pay more than £250,000 after a litigation partner's "bullish" advice turned out to be three letters shorter.
Glen House Developments LLP ('Glen') instructed Withers to advise on the partial demolition of Glen House, a property in South Kensington which it bought for £28 million.
A Withers associate correctly advised Glen that its plan to knock down all the upper floors could breach the rights of a tenant, HR Owen ('HRO'), which used the ground floor as a Ferrari showroom.
However, Brian D'Arcy Clark, Glen's advisor at Savills, calculated that HRO was only objecting to the demolition as a negotiating tactic to obtain extra compensation, and asked Withers to find a "rottweiler" to "put HRO back in their box".
Withers selected Andrew Wass, a litigation partner, who held a meeting with Glen in which, said the claimant, he unequivocally advised that actually HRO had no right to protest the redevelopment.
D'Arcy Clark was delighted at being told what he wanted to hear, and by Wass's fierce letter to HRO's solicitors. "To me it is a rare occurrence: a legal document that is absolutely on the button, clear and incontrovertible", he told his Savills team. "It also is his actual opinion as well - not just a letter designed to frighten. This might be an easy win - we will find out - but I am impressed by this guy so far".
Doubts began to creep in when HRO applied for an injunction to halt the demolition. Glen asked Wass whether his argument was contradicted by the wording in HRO's lease stating that Glen could carry out works "provided that they do not materially adversely affect" the tenant's use of the property. Wass wrote back that "ultimately it's a matter of construction", which the client complained was "very different from the emphatic position previously advised".
It got worse when the injunction was granted at a hearing where the judge and Glen's barrister agreed that Withers' advice "was wrong...and both sides had to agree that the lease actually did the opposite".
The claimant, a company which took on Glen's interest called Prime London Residential Development Jersey Master Holding Limited, sued the firm for £12 million.
It argued that Glen would have pursued a more constructive course of action with HRO if not for Wass's advice, and that huge losses were incurred because building work was delayed, new financing was required, and the half-developed property had to be sold at a discount when investors pulled the plug.
Wass conceded in court that his advice had been "bullish", and although the firm argued in court that he raised caveats in the meeting with Glen, the judge preferred the claimant's contention that his advice was provided without qualification. Withers' position was weakened by the fact that no-one took any notes of the meeting, which was "surprising and contrary to reasonable professional practice", said the judge.
However, he also found that Glen would have started knocking down the building whatever Withers advised, and that Wass's imprimatur was only ever regarded as a bonus.
As a result, Withers was held liable for a fraction of the claimed losses, comprising £33k for delays caused by the injunction, and £236k associated with the costs of hashing out a settlement agreement with HRO.
In a statement, Withers said, "We regret that these matters reached trial despite our efforts to resolve them to everyone's satisfaction, but we are nevertheless pleased that the great majority of the claims failed. Given that there is a possibility of appeals it would not be appropriate for us to make any further comment at this stage".