Legal Malpractice

Unintended Consequences in Legal Malpractice

By (Andrew Lavoott Bluestone)

Legal representation in even simple matters can lead to unintended consequences. As an ExampleH & J Restaurant v, A & J Grand Enterprises and Leigh, 2009 Slip OP 31544, authored by Justice Edmead, demonstrates how a simple ministerial mistake can end up with a potential $ 400,000 loss, with later judgment against the attorney.

It's a simple transaction, A buys a restaurant from B. As might be expected, Seller exaggerates the sales, or hides underpayment of taxes. Since these commercial transactions have taken place since time immemorial, there are safeguards and protections. Buyer can take the business free of personal liability if it notifies the tax authorities 10 days prior to the sale, in which case the tax authorities have 5 days to assert tax liability. Should it happen, buyer can then back out.

Here, the notification was not made within 10 days, and several months later the tax authorities asserted personal liability to buyer in the neighborhood of $ 400,000. Seller is in default, and no where to be found.

What is the lesson here? Lesson 1: Legal malpractice is everywhere lawyers represent clients. Lesson 2: Know the subject matter of your area of law and don't make simple transactions difficult. Lesson 3: Review lesson 2.
 

Full post as published by New York Attorney Malpractice Blog on August 30, 2010 (boomark / email).