Emily Navaei hired a solicitor to conduct her acquisition for $206k of a leasehold franchised 7-Eleven business in March 2007.
The deal was subject to her 7-Eleven franchise approval and payment to it of $90k for establishment and application fees.
She consulted lawyer Hakki Sayan, who examined the documents including a lease in favour of 7-Eleven, expiring in September 2008, but which had been described as including a six year renewal option.
The renewal terms were in fact successive options for two further terms each of three years.
Settlement occurred in May 2007. 7-Eleven exercised the first option expiring in September 2011 but decided not to exercise the second option.
In April 2010 Emily’s attempted sale of the business fell through when she realised for the first time that the lease was to expire the following year.
7-Eleven terminated the franchise in March 2011.
Emily sued Sayan, asserting he should have inserted a provision compelling 7-Eleven to exercise all options and should have advised her not to proceed with the purchase, if 7-Eleven refused.
The solicitor conceded he made no mention of the obvious financial risk involved in paying $206k for a business with guaranteed tenure of 18 months only.
When the matter came before the NSW Supreme Court, he confirmed he had done no more than explain the legal effect of the document and left it to the buyers to decide whether they wanted to go ahead or not.
His role, he contended, was not to give other advice and “he had no obligation to do more than he did”.
Emily had – he claimed – expressed confidence in building up the business to make it “sufficiently attractive to 7-Eleven to exercise its options”.
The issue for decision by Justice Stephen Campbell was how far the solicitor was required to guide the buyer when the right to carry on the business was essentially at the pleasure of a franchise owner.
Sayan was, he ruled, entitled to have formed the view that Mrs Navaei was a person “of significant commercial nous and sophistication”. She had after all conducted her own research of 7-Eleven franchises and made her own extensive enquiries.
On the other hand, it was foreseeable that if the lease wasn’t renewed the buyer “would have no significant hope of recouping” her investment and the precaution that could have been taken involved “no more than making a phone call to 7-Eleven”.
Notwithstanding these considerations, Judge Campbell ruled that a reasonable solicitor in such circumstances would have not taken the precautions suggested.
The solicitor had previous experience with 7-Eleven refusing to negotiate. Franchise relationships carry many such risks. The buyer was already committed to the purchase.
Reasonable care “did not require Sayan to slavishly follow steps that were of no practical utility in the circumstances of the present case,” the court decided.
Emily’s claim was dismissed and she was ordered to pay her former solicitor’s legal costs.
JJES Pty Ltd v Sayan  NSWSC 541