Advice on a ‘cross roads’ decision for the client, such as whether to proceed with a contract of sale or bring it to an end, should always be recorded in sufficient detail in a file note and confirmed in writing to the client. It is important not to cut corners, even when the advice seems routine in nature.
In one claim, a practitioner acted for the purchaser of an investment property leased to a commercial tenant. The practitioner was retained after the contract of sale was executed.
The completion date was extended several times at the request of the vendor and the sale was not completed until six weeks after the original date in the contract. A few months later, the tenant went into liquidation and the purchaser subsequently sold the property at a loss.
The purchaser then alleged the practitioner failed to advise on its right to issue a default notice to the vendor when it failed to complete the contract on time. It alleged it lost the opportunity to avoid completion and receive the return of the deposit paid. The purchaser then claimed the amount of the deposit, the capital loss suffered on the property, holding costs and costs of the resale less revenue generated on the property.
The experienced practitioner’s file note of the advice given to the purchaser over the phone was simply ‘discussed rescission – 15 mins’. He said he gives a ‘routine spiel’ to all purchaser clients when faced with a vendor who seeks an extension of time to complete the contract of sale.
This claim arose essentially because the client’s purchase was a poor investment which was later regretted. However, the lack of detail in the file note, together with lack of phone records about the timing of the conversation, left the practitioner exposed. The oral advice should have been followed up in writing, even a short email, listing the options discussed with the client.
