Negligence on yacht purchase

1 December, 2014

A firm of solicitors avoided paying substantial damages, despite being held to have been negligent, in the case of Hirtenstein and another v Hill Dickinson [2014] EWHC 2711 (Comm).

 

Businessman Michael Hirtenstein purchased a EUR 4.5m yacht from a limited company. Mr Hirtenstein did not inspect the yacht, but was advised by his solicitor that the company had provided a warranty concerning the condition of the yacht, backed by a personal guarantee from the owner of the company. However, within an hour of the purchase, the yacht suffered a major engine failure 12 miles offshore, and expensive repairs were subsequently required.  

 

The solicitor wrongly advised Mr Hirtenstein that the company owner had personally guaranteed the condition of the yacht, when the guarantee did not in fact cover the yacht’s condition. Mr Hirtenstein alleged that he would not have gone ahead with the purchase had he been told about the lack of a personal guarantee.

 

The firm accepted they were negligent in advising Mr Hirtenstein that a personal guarantee of the yacht’s condition had been obtained, but denied that this had any causative effect. The firm maintained that it had not been instructed to seek a personal guarantee, that it had only told Mr Hirtenstein about the guarantee after the exchange of contracts and that he would therefore have proceeded with the purchase in any event.

 

The High Court held that Mr Hirtenstein had not instructed the solicitor to obtain a personal guarantee and that there was no realistic chance of such a guarantee being given. Further, he would have gone ahead with the favourable purchase in any event, whether a personal guarantee as to the yacht’s condition existed or not. He was taking the yacht “as is, where is”. The firm’s negligence in not advising properly about the guarantee had not caused loss to Mr Hirtenstein, and as such only nominal damages were awarded.

This case serves as a good example of where, even if there is a clear (or even an admitted) breach of duty on the part of the professional, unless causation can also be demonstrated a claimant may only recover nominal damages.