Buyer Funded Development claims are well known to the legal profession and its PI Insurers. Law firms have been facing such claims for over a decade and the SRA has issued a number of Warning Notices about solicitors' involvement in Buyer Funder Developments since June 2017. It may therefore be surprising to some that the recent High Court case of Niprose Investments Limited v Vincents Solicitors Limited [2026] EWHC 2320 (Ch) is believed to be the first final judgment concerning a claim in negligence against a firm of solicitors arising from a buyer-funded off-plan purchase.
The essence of a Buyer Funded Development is that it is an ‘off plan’ development that often promises ‘guaranteed’ rental income upon completion of a property where investment purchasers pay high up-front deposits to purchase the property that goes to fund the construction of the development. While some of these developments have succeeded, many have failed due to the developer going into insolvency leading to the loss of these deposits. This has led to large numbers of investors suing the solicitors who acted for them in these transactions on the basis that they would not have entered into the transactions had they been fully advised of the risks.
Niprose Invesment Ltd's (NIL) claim against Vincents arose out of its purchase of eight units in a partly buyer-funded, off-plan residential development scheme in Liverpool. The development was never completed, apparently because the finance company that had been partly funding the development fell into administration in December 2018. On the failure of the development, NIL lost all of its 50% deposits totalling £299,800. It is also worth noting that NIL's claim was part of a series of wider claims where 94 claimants were suing ten separate firms of solicitors. In total, these claimants agreed to purchase over 100 apartments, and paid deposits of more than £6,000,000. However, it was ultimately NIL that brought its claim to trial as the sole lead claimant in the proceedings.
Whilst the Niprose judgment addresses a number of important legal issues, this article identifies three important observations arising from the judgment that have wider implications for negligence claims against law firms and their Insurers.
1. The framework set out in Manchester Building Society v Grant Thornton UK LLP [1] (MBS)
Niprose is a reminder that the Court's usual approach to ascertaining liability and loss in a negligence claim against solicitors involves applying the 6 question framework that the Supreme Court adopted in MBS. This involves the Court asking:
(1) Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? (the actionability question);
(2) What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? (the scope of duty question);
(3) Did the defendant breach their duty by their act or omission? (the breach question);
(4) Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? (the factual causation question);
(5) Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant’s duty of care as analysed at stage 2 above? (the duty nexus question); and
(6) Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause (including novus actus interveniens) in relation to it or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? (the legal responsibility question).
Law firms and their Insurers should keep this framework in mind when they are facing negligence claims.
2. Application of the MBS framework in Niprose
When His Honour Judge Hodge KC considered the 6 questions in Niprose, he held that Vincents breached the duties it owed to NIL by failing to advise that the deposits had no meaningful security or protection through the mechanism that was created for holding and releasing the deposits to the developer during the course of the development (the Deposit Arrangement)[2].
The judge also held that NIL would not have proceeded with the transaction had it appreciated the limited protection that was afforded by the Deposit Arrangement[3]. In turn, that would have given rise to a recoverable loss of £283,800 (reflecting the total lost deposits less a £16,000 credit that NIL received as a cashback incentive at the outset)[4].
However, the claim failed on the grounds that:
(i) The judge held that the deposits were lost due to the developer's insolvency and Vincents had adequately advised NIL about this risk;
(ii) Vincents had breached its duties by failing to adequately advise NIL on the Deposit Arrangement, but there was no evidence to show that the loss of NIL's deposits fell within the scope of that duty[5];
(iii) NIL failed to establish the requisite connection between Vincents failing to advise on the Deposit Arrangement and the eventuation of the lost deposits arising from developer's insolvency. NIL could not therefore establish that the lost deposits "represented the coming to fruition of any risk in respect of which inadequate advice was given"[6]. The duty nexus question therefore fell to be answered in Vincents’ favour; and that was a bar to any recovery; and
(iv) Vincents' breach in failing to adequately advise NIL on the Deposit Arrangement did not extend to embracing the losses that NIL suffered as a result of the developer’s insolvency and the failure of the development. Even if Vincents had advised on the Deposit Arrangement, the result would have been the same.
The Niprose judgment is therefore a reminder to all litigators that successfully establishing a negligence claim against professionals extends beyond duty, breach, and factual causation issues and, in certain types of claim, requires the parties (and the Court) to grapple with complex legal causation questions.
3. Sophistication of the claimant
It was also an important feature of this case that the judge found the claimant’s director, a former relationship manager at Goldman Sachs and Bank of New York, to be a highly intelligent and sophisticated client who was able to engage in the detail of Vincents' legal advice and raise questions about the advice when needed.
This impacted on the level of advice that Vincents was required to provide to Niprose as the extent of the duty to advise is determined by the client's need to receive it. It follows that a solicitor may well have to go further when advising an unsophisticated client rather than a sophisticated one.
This therefore made it harder for Niprose to allege that Vincents' advice was deficient and/or that the firm should have provided additional advice to ensure that Niprose had a sufficient understanding of the relevant issues in the transactions (apart from the inadequate advice on the Deposit Arrangement).
Although it may not always be easy to ascertain, the sophistication of the claimant therefore plays an important role in determining the level of advice required and whether the solicitor breached their duties by not providing that advice.
Conclusion
The Niprose decision is a welcome one for the legal profession. It should also not be regarded as a claim that has succeeded on a legal technicality. Despite His Honour Judge Hodge KC expressing some regret in concluding that the claim failed on legal causation grounds, those grounds have been subject to the scrutiny of the Appeal Courts on a number of occasions over recent years[7] since they were addressed at length by Lord Hoffman in the seminal House of Lords decision of SAAMCO[8]. Although it is not an easy task, it therefore continues to be right that limits are imposed on the extent to which solicitors (and other professionals) are held responsible for losses arising from the advice they give to their clients.
[1] [2021] UKSC 20
[2] Answering question 3 of the MBS framework
[3] Answering question 4 of the MBS framework
[4] Answering questions 1 and 6 of the MBS framework
[5] Answering question 2 of the MBS framework
[6] Answering question 5 of the MBS framework
[7] See MBS [2021] UKSC 20, Hughes-Holland v BBE Solicitors [2017] UKSC 21 and Assetco Plc v Grant Thornton UK LLP [2020] EWCA Civ 1151
[8] [1996] UKHL 10
