Thomas v BPE Solicitors [2010] EWHC 306 (Ch)

Claimants alleged their solicitors were negligent in failing to advise that a share sale transaction had completed, thereby losing their right to enforce undertakings for payment. The court found completion did not occur as no confirmatory telephone call took place between solicitors, and dismissed the negligence claim.

Facts

The claimants, Mr Thomas and Mr Gander, were shareholders in PDP Management Services Ltd alongside Mr Wilson. They agreed to sell their shares to a new company controlled by Mr Wilson for £3 million, funded by bank lending. The transaction was handled by solicitors, with the defendant firm BPE acting for the claimants and Rickerbys acting for the purchaser.

Completion was originally planned for 23 August 2007 but was delayed. On 24 August 2007, all documentation was in place, but the deadline for same-day electronic fund transfers had passed. The parties agreed that completion would proceed via undertakings from the purchaser’s solicitors to transfer funds the following Tuesday, followed by a telephone call between solicitors to confirm completion.

Undertakings were provided by Rickerbys and Knight & Sons. However, BPE’s Mr Dew sent an email requesting interest be added to the transferred sum. No confirmatory telephone call occurred that evening. On 25 August 2007, Mr Wilson learned that a major client (Powergen) was withdrawing substantial business, devastating the company’s prospects. Both claimants agreed the transaction should be cancelled, believing it had not completed.

Issues

1. Did completion occur on 24 August 2007?

2. Were the defendants negligent in failing to advise of completion?

3. Was rejecting or failing to accept the undertaking negligent?

4. Would the claimants have agreed to rescind regardless of completion?

5. What was the value of retained shares for quantum purposes?

Judgment

Blair J held that completion did not occur on 24 August 2007. The court found that the agreement between solicitors required both acceptable undertakings and a confirmatory telephone call. While undertakings were provided, no such call took place:

“I conclude that no call took place between Mr Ward and Mr Cusack at 17:44 or later that evening as regards completion or otherwise. Fifteen seconds (the duration of the 17:44 call) would not have been sufficient even for the briefest of completion calls, and I conclude that Mr Cusack did not pick up the phone, having (as he said) gone home by that time.”

The judge rejected the claimants’ reliance on alleged admissions by Mr Ward in subsequent conversations:

“The question whether a transaction has completed, or a contract has been entered into, or similar, must be determined objectively. Evidence from the parties’ lawyers as to whether particular steps were taken, or particular events occurred, are admissible. But the subjective views of the parties’ lawyers as to the conclusions to be drawn from the facts in question, in the present case whether completion occurred, are neither relevant nor admissible.”

On the issue of email acceptance, the court held that the postal rule does not apply to email communications, following Entores Ltd v Miles Far East Corporation. However, an email received at 18:00 on a working day would be effective upon receipt, even if not read until later.

The court also addressed causation, finding on balance that had the claimants been properly advised of completion, they might have insisted the deal proceed despite the changed circumstances.

Implications

This case provides important guidance on several legal issues:

• Completion of corporate transactions: Where parties agree completion requires specific steps (such as a telephone call), those steps must actually occur for completion to be effective.
• Email communications in contract formation: The postal rule does not extend to emails; acceptance by email is effective upon receipt, not despatch.
• Admissibility of lawyers’ opinions: A solicitor’s subsequent statements about whether a transaction completed are inadmissible as opinions on a question to be determined objectively by the court.
• Professional negligence: Solicitors acting on transactions must clearly communicate the status of completion to clients, particularly where timing affects legal rights.

The decision emphasises that completion of transactions must be determined by objective analysis of what actually occurred, not by later statements or assumptions of the parties involved.

Verdict: Claim dismissed. The court found that completion of the share sale transaction did not occur on 24 August 2007 as the required confirmatory telephone call between solicitors never took place. Accordingly, the defendants were not negligent in failing to advise of completion.

Source: Thomas v BPE Solicitors [2010] EWHC 306 (Ch)