RISK WATCH
Need to know now? “Last minute” is no excuse for lack of clarity of instructions GRANT FEARY, LEGAL RISK COUNSEL, LAW CLAIMS
T
he recent NSW case of About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370 is of critical interest to all practitioners who deal in commercial matters. The judgment contains extensive consideration of solicitors’ duties when acting in commercial transactions involving “side deeds” and demonstrates the high standard of care imposed upon practitioners, especially where matters are being dealt with urgently.
THE FACTS The client company (About Life) was successful – to the tune of some $13m – in its claim against the solicitors (Maddocks) who had acted in relation to an assignment of a lease. About Life ran a chain of organic supermarkets but needed, for cash flow purposes, to sell one of its most successful stores (in Double Bay, Sydney). An agreement was reached with a competitor, Harris Farms, for Harris Farms to purchase the Double Bay store and in particular for Harris Farms to take an assignment of the company’s leasehold interest on the Double Bay store. The Double Bay store was in a prime position in a very good shopping centre and the lease of that store was a valuable commodity. Some three years prior to the transaction in question the company had however granted a right of first refusal (in what was known as a “side deed”) in relation to any assignment of the lease of the Double Bay store to Woolworths. This was part of a separate transaction in which About Life acquired several small grocery
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stores close to Double Bay owned by a subsidiary of Woolworths. When dealing with the sale to Harris Farms, representatives of About Life had, unfortunately, forgotten about the Woolworths’ right of first refusal and the solicitors for the company did not seek full and timely instructions as to whether any such right existed. Woolworths found out about the impending sale to Harris Farms and successfully sought an injunction restraining the sale on the basis that they had not been given the chance to exercise their right of first refusal. The circumstances in which Maddocks acted involved some urgency. Maddocks were instructed on 13 April, 2017 which was the day before the Easter weekend. About Life had received an irrevocable
offer from Harris Farms to buy the Double Bay store for $8m, which offer was open for acceptance until 21 April, 2017. A draft contract prepared by Harris Farms’ lawyers was provided to Maddocks on Thursday 13 April, 2017 however at that time About Life had not yet agreed the purchase price. On 21 April, 2017 (a Friday) Harris Farms agreed to increase the sale price to $10m which price was accepted by About Life. This was communicated to Maddocks by email from About Life at 9:23 am with the sale to proceed that day. At 4:37 pm on 21 April, 2017 Maddocks sent an email to the directors of About Life regarding changes to be made to the contract which included the following question:
