Home Information Cases Ohna v Goldberg (2014)

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Ohna v Goldberg (2014)

Summary

A solicitor had acted negligently in failing to advise an investor that a bank guarantee did not form security for a €3 million investment.

Facts

The claimant (O) brought a claim in negligence against the defendant solicitor (G) for failing to advise him on the effect of a bank guarantee.

It had been proposed that O would invest €3 million in an investment fund, of which a company (W) was the representative. O was to transfer the money to G and enter into an agreement with G where G could only release the €3 million to W once W had arranged for a bank guarantee to be received by O. The bank guarantee, from a New Zealand building society, was to secure 115 per cent of the invested amount. W was to repay the money to O within eight weeks. O expressed concerns to G as to whether he would be protected by the guarantee, and G undertook to hold the funds until he was satisfied that O was protected. O transferred the money to G on the basis of that advice. Upon seeing the bank guarantee, O asked why W was stated as the beneficiary rather than him and why it stated that O would not be repaid until a year later, rather than within eight weeks, as had been proposed. G advised O that he did not have to wait a year to trade the guarantee, that O was protected by the guarantee which was authentic. Unbeknown to O, G had been taking instructions from another person involved in the transaction about how to respond. O transferred the money and never received repayment of the €3 million, or repayment of interest. He commenced proceedings against W, and obtained judgment, but W had no assets. O was informed by the building society that the guarantee was not transferable or assignable under the agreement with W, and further that W had revoked the guarantee prior to the date of demand and therefore it no longer had effect. G did not take part in the instant proceedings.

O submitted that G had been negligent in failing to advise him that the guarantee did not form security for his investment.

Held

Although G had not appeared, O still had to prove his claim. O had asked G to check the guarantee. G did not have the expertise to advise and did not answer O's pertinent questions. Instead, G had been told by somebody else how to respond. The court was persuaded that O would not have gone ahead with the investment had he known those facts. It was crucially important for him that the guarantee was valid and enforceable. If G's retainer had been limited to holding the funds, he would have said so expressly. O had made out his case in negligence. The loss suffered was the amount of the investment. O had asked for interest at two per cent above base rate. Although the court should take a broad brush rate approach, there was no evidence as to what loss O had suffered by not having the money Challinor v Juliet Bellis & Co [2013] EWHC 620 (Ch) considered. In the absence of evidence, the court awarded interest at the commercial rate of one per cent above base rate.

Judgment for claimant

Chancery Division
Penelope Reed QC
Judgment date
12 November 2014
References

LTL 13/11/2014