The collapse of a multi-million-pound property development transaction has resulted in City firm Mishcon de Reya being sued for £65m. The trial began on Monday in the High Court, with the claim being made by Aurium Real Estate London Ultra Prime Limited.
They claim Mishcon did not give suitable advice over their approach towards a “hold out tenant”, Berkeley Credit & Guarantee Limited (BCG), who had refused to surrender a lease of premises on the site of a proposed high-end property development, which is now the £500m Park Modern development overlooking Hyde Park.
Aurium obtained £80m in financing to complete the development and aimed to sell it on in the future. They claim Mishcon did not advise them properly over the hold out tenant, with the firm advising a “build around strategy” in which Aurium would be able to demolish the building “from the top down” before rebuilding the new structure. Despite BCG still being in the premises, this would not breach their lease.
BCG then issued proceedings for a declaration that this would in fact breach their lease. This caused a Hong Kong developer, who had agreed to buy Aurium’s interest in the project for £158m, to pull out.
Rupert Reed QC, barrister for Aurium, argued:
“The negligent advice given by Mishcon in 2016 was directly causative of the losses Aurium suffered.
[Aurium] would never have embarked on the build around strategy … if Mishcon had correctly advised that the build around strategy carried a serious litigation risk.”
Ian Croxford QC, Mishcon’s barrister, said Aurium’s claim was a “product of hindsight”, and that Mishcon’s advice “generally described the rights of the tenant under BCG’s lease and the obligations of a landlord”. He argued:
“[Mishcon] did not identify or describe any ‘build around’ scheme… [and it] cannot be said to have been the cause of the loss of a real and substantial chance of recovering the money invested in the project.”
The advice was obviously on its face an abstract exercise and general in its nature and could not conceivably be taken as a green light to a build around scheme free of any conceivable challenge as if such a challenge could be dismissed out of hand.”
Croxford also noted that Aurium also did not manage to obtain vacant possession of two other separate properties. Mishcon is counterclaiming for £300,000 in legal fees plus interest.
