Pickersgill & Anor v. Riley (Jersey)

Pickersgill & Anor v. Riley (Jersey) [2004] UKPC 14 (25 February 2004)

Privy Council Appeal No. 12 of 2003

(1) Barry Keith Pickersgill and

(2) David Eldon Le Cornu (together practising as the firm of

Pickersgill & Le Cornu) Appellants

Michael Adrian Riley Respondent

FROM

THE COURT OF APPEAL OF JERSEY

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 25th February 2004

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Present at the hearing:-

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote

Baroness Hale of Richmond

[Delivered by Lord Scott of Foscote]

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At issue in this case is the scope of the duty of care owed by Mr Pickersgill, a solicitor and partner in the appellant firm, to the respondent, Mr Riley, while acting for him as his solicitor in a commercial transaction. The transaction involved, first, the grant of a 28 year lease of business premises in Jersey to Magnet Publications Ltd, the shares in which were owned by Mr Riley, and second, the sale of those shares to an English company, West of England Newspapers Ltd ("WEN").

The lessor of the Jersey property wanted a guarantee to be given by Mr Riley underwriting the due payment by Magnet of the rent falling due under the lease. Mr Riley agreed to give the guarantee and the lease was granted to Magnet accordingly. On the sale of his shares in Magnet Mr Riley naturally wanted to be released from the guarantee he had given. But the lessor, for reasons that are not material, was not willing to accept the substitute guarantors that were on offer and so was not willing to release him. A solution to this difficulty was negotiated between Mr Riley and the individuals who were representing the proposed purchaser of the Magnet shares. It was agreed that WEN, as a term of its purchase of the shares, would undertake to indemnify Mr Riley against any liability he might incur under the lease guarantee. The sale of the shares, at a price of £125,000, proceeded to completion on that basis.

At the time of the transaction both Mr Riley and Mr Pickersgill were under the impression that WEN was a company of substance. But neither of them carried out any investigation of WEN's financial status.

Several years later Magnet became insolvent and rent due under the lease fell into arrears. The lessor claimed against Mr Riley and Mr Riley had to pay the lessor a sum of £56,152 odd to discharge his liability under the guarantee. Mr Riley then tried to obtain re-imbursement from WEN pursuant to the undertaking WEN had given on the sale of the shares. But it transpired that WEN had no assets. It had been a shell company with no assets at the time of the transaction and remained in that state. Mr Riley could not expect to recover anything under WEN's undertaking. So he sued his solicitors in negligence.

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