Kelleher v O'Connor (t/a Don O'Connor & Company)

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 16 July 2010
• Neutral Citation: [2010] IEHC 313
• Date: 16 July 2010
• Court: High Court
• Docket Number: [2004 No. 18539

Kelleher v O'Connor (t/a Don O'Connor & Company)

BETWEEN

EDMUND KELLEHER AND JOAN KELLEHER

PLAINTIFFS

AND

DON O'CONNOR PRACTISING UNDER THE STYLE AND TITLE OF DON O'CONNOR & COMPANY

DEFENDANT

[2010] IEHC 313

[No. 18539 P/2004]

THE HIGH COURT

NEGLIGENCE

Professional negligence

Solicitor - Conveyancing - Duty of care - Purchase of restaurant - Status of restaurant under food hygiene regulations - Pre-contract requisitions - Post-contract requisitions - Whether food hygiene issues proper matters for pre-contract requisitions - Whether negligence in failure to conduct inquiries into food hygiene status of restaurant - Whether causal link between inaction of solicitor and adverse consequences for plaintiffs - Proper approach to assessment of damages - "No transaction" - Measure of damages - Joyce v Bowman Law Ltd [2010] EWHC (Ch) 251, (Unrep, English HC, Vos J, 18/2/2010) and Philp v Ryan [2004] IESC 105, [2004] 4 IR 241 considered - Plaintiffs awarded damages (2004/1`8539P - Clarke J - 16/7/2010) [2010] IEHC 313

Kelleher v O'Connor

CASEY & BRENNAN COMPLEX CONVEYANCING 2007 PARA 10.4

LOCAL GOVT (PLANNING & DEVELOPMENT) REGS 1977 SI 65/1977 SCHED 1 PART IV CLASS 1

LOCAL GOVT (PLANNING & DEVELOPMENT) REGS 1977 SI 65/1977 REG 9

GERYANI v O'CALLAGHAN UNREP COSTELLO 25.1.1995 1995/2/785

ACC BANK PLC v JOHNSTON T/A BRIAN JOHNSTON & CO SOLICITORS & ORS UNREP CLARKE 1.6.2010 2010 IEHC 236

JOYCE v BOWMAN LAW LTD 2010 PNLR 22 2010 EWHC 251 (CH)

PHILP v RYAN & ORS 2004 4 IR 241 2004/42/9677 2004 IESC 105

COUNTY PERSONNEL (EMPLOYMENT AGENCY) LTD v ALAN R PULVER & CO (A FIRM) 1987 1 WLR 916 1987 1 AER 289

1. Introduction

2 2 1.1 In 2001 the plaintiffs ("the Kellehers", "Mr. Kelleher" and "Mrs. Kelleher") were interested in buying a restaurant premises at No. 1 Parkwest, Mallow in Cork. Their purpose was to buy same as an investment with the intention being to let it to a restaurant operator. In that regard, they retained the defendant ("Mr. O'Connor") to act as their solicitor.

3 3 1.2 There can be little doubt but that the purchase has turned out to be unsuccessful. The Kellehers say that Mr. O'Connor was negligent in the way in which he handled the transaction on their behalf and bring these proceedings for damages arising out of that alleged negligence.

4 4 1.3 The problem with the restaurant stemmed from its status under the Food Hygiene Regulations 1950 as amended ("the Food Hygiene Regulations"). There is no doubt that the restaurant encountered significant difficulties with the authorities in relation to that status. It is said that Mr. O'Connor's handling of the transaction, insofar as it related to dealing with questions under the Food Hygiene Regulations, was negligent. Some further reliance is placed on behalf of the Kellehers on planning issues and the user covenant in the relevant lease.

5 5 1.4 Against that general background, it is necessary to turn first to the facts.

2. The Facts

2 2 2.1 Mr. Kelleher is involved in the IT business. Mrs. Kelleher, prior to the events which I am about to describe, helped part-time in that business.

3 3 2.2 In 2001, the Kellehers saw a restaurant known as "Pat's Chat" for sale. The restaurant was located in one of a series of shop type units which were built on the same campus as the Tesco Store in Mallow. In that context, the Kellehers approached the auctioneer, Mr. Michael O'Donovan, who had carriage of the sale on behalf of the owner, a Ms. Patricia Piggott. At that time, the evidence establishes that the restaurant being run by Ms. Piggott provided a full, if simple, lunch menu with, for example, Roast Beef, Bacon or the like. The Kellehers went to the restaurant themselves to see how it worked.

4 4 2.3 The Kellehers entered into negotiations with Mr. O'Donovan and agreed a purchase price of IR£120,000.00. The Kellehers then instructed Mr. O'Connor to act as their solicitor.

5 5 2.4 Mr. Kelleher gave uncontradicted evidence, which I accept, that when initially instructing Mr. O'Connor, he asked Mr. O'Connor to make sure that everything under the Food Hygiene Regulations was in order, and that the restaurant was in compliance.

6 6 2.5 A contract, dated the 7 ^th July, 2001, was ultimately signed, which provided for a closing date of the 3 ^rd August, 2001. On the Kellehers case it is said that there was a subsidiary agreement to the effect that the premises would be taken over directly by the Kellehers as a going concern. It will be necessary to return to this issue in due course.

7 7 2.6 However, in any event, Mr. Kelleher went to the premises some two weeks or so before the anticipated closing date but found that it had already been closed from a date, apparently, around the 13 ^th July. Thereafter, the sale closed in the ordinary way.

8 8 2.7 Prior to that closing a potential tenant who wished to rent the premises for use of a restaurant had been identified. A tenancy agreement was entered into providing for a term of four years and eleven months, and a rent of IR£250.00 per week. The intention of the tenant concerned was to open an Indian Restaurant. However, at or around the time when the restaurant was due to open, problems with the Health Authority emerged, which meant that the restaurant did not, in fact, open. Not surprisingly the tenant concerned ultimately left. The Kellehers had discussions with officials from the Health Authority which resulted in alterations being carried out to the premises, which in turn resulted in the premises being registered with limitations for the purposes of the Food Hygiene Regulations. It will also be necessary to return to the detail of the dealings by officials from the Health Authority in relation to the premises in due course. Thereafter, the restaurant operated for a period through tenants at a lower rent but was ultimately run by Mrs. Kelleher herself, which position continues to this day. As a result of the limited certification of the premises, to which I have referred, the number of covers permitted was reduced to 24 (it would appear that, in practice, prior to the sale, the seating was 40). In addition, significant limitations were imposed as to the type of food which could be served. Initially all that was permitted was cold food. Subsequently a limited entitlement to serve certain types of hot food was permitted.

9 9 2.8 Against that general background, two other aspects of the sequence of events need to be commented on.

10 10 2.9 First, it is now clear (although it would not have been clear at the time of the sale or the completion of same) that concerns had been expressed to the previous owner, Ms. Piggott, by Health Authority officials, some months prior to the sale which is central to these proceedings. A detailed letter setting out the concerns of the Health Authority had been written. It is clear, therefore, that problems concerning the restaurant had emerged and were already in being, known to Ms. Piggott, but not disclosed to the Kellehers, prior to the events which give rise to these proceedings.

11 11 2.10 On the other hand, it would seem that up to the time when Ms. Piggott closed her restaurant (and, therefore, at the time of the contract for sale), the restaurant was properly registered for the purposes of the Food Hygiene Regulations and did not have any limitation on its ability to trade such as came into place in the circumstances which I have already described. Strictly speaking, therefore, the restaurant was, at the time of the contract, registered and does not appear to have been operating outside the terms of its registration in any material respect. It was, however, clear that trouble was coming down the tracks.

12 12 2.11 So far as the conduct of the conveyancing process is concerned, a number of facts need to be noted. First, it should be said that Mr. O'Connor did not conduct any pre-contract requisition exercise relating to food hygiene matters. This is an issue to which it will be necessary to return. Second, Mr. O'Connor raised requisitions in the standard form recommended by the Law Society, which included requisitions specific to the Food Hygiene Regulations (Requisition 32). I will refer in more detail to those requisitions and the replies thereto in due course. However, for present purposes it should be noted that the reply to Requisition 32.1.b suggested that there was no evidence available of registration under the provisions of the Food Hygiene Regulations 1950, as amended, while the reply to Requisition 32.2.a suggested that no notice had been served by the Health Authority and that the vendor or her agents had no information of an intention to serve any such notice.

13 13 2.12 In general terms it is suggested that those replies ought to have led Mr. O'Connor to conduct further inquiries.

14 14 2.13 Against that background, it is next necessary to turn to the issues in the proceedings.

3. The Issues

2 2 3.1 The conveyancing issues raised on behalf of the Kellehers suggest that Mr. O'Connor was negligent in four respects:-

a A. It is said that he was negligent in failing to raise the food hygiene issues as a pre-contract set of requisitions;

b B. It is said that, in the light of the requisition replies to which I have referred, Mr. O'Connor should have engaged in further inquiries;

c C. It is said that, because of the specific request made by Mr. Kelleher to Mr. O'Connor concerning the Food Hygiene Regulation regime, at the time when Mr. O'Connor was initially instructed, there was an added obligation on Mr. O'Connor to conduct inquiries (or, perhaps, to advise Mr. Kelleher to conduct inquiries) into the food hygiene situation; and,

d D. It is said that Mr. O'Connor was negligent in allowing the premises to shut up for business prior to the closing of the transaction.

3 3 3.2 In addition,...