LEONARD WILLIAM HARTLE v. MESSRS LACEYS (A Firm)

Where negligent conveyancing advice deprives an owner of the opportunity to complete a sale before an unregistered land charge is registered, the loss is the value of the lost opportunity, not simply diminution in the property’s value after registration.

The claimant must prove on the balance of probabilities what he would have done with proper advice. If the result depends on a third party’s hypothetical response, he need show a real or substantial chance, which is then assessed in the damages. Interest and bank charges caused by delayed repayment may be recoverable as special damages where the solicitor knew of the borrowing and intended application of the sale proceeds. Distress is not recoverable for an ordinary commercial retainer.

The claimant, a property developer, sued his solicitors for negligently failing to advise that an unregistered restrictive covenant could be avoided by completing a sale before registration. The High Court accepted negligence but assessed the loss at £50,000, measured by diminution in value, and rejected the contention that a sale had probably been lost.

On appeal, the parties agreed that the Court of Appeal should decide the case on the existing evidence. The issues were what the claimant would have done with proper advice, whether a purchaser had a real or substantial chance of completing before registration, and how that chance, the retained property and later sale proceeds should affect damages. The appeal also concerned distress, bank interest and charges, and statutory interest.

Ward LJ delivered the leading judgment. Schiemann LJ and Beldam LJ agreed.

1. Appeal and characterisation of loss. The appeal was allowed. The High Court had approached causation by asking whether the claimant would probably have completed a sale. The correct starting point was to identify the loss before considering its measure. The loss was the opportunity to complete a sale before registration of the covenant, not merely the diminution caused by its later registration. The statutory effect of non-registration under the Land Charges Act 1972 made that opportunity legally significant.
2. Causation and chance. On the balance of probabilities, the claimant would have sought urgent completion with Berkeley Homes and would have offered a reasonable price reduction. The claimant’s own conduct therefore required proof as probability. The response of Berkeley or another purchaser was different: the claimant needed to establish a real or substantial chance, rather than a probable transaction. The chance was then assessed in the damages, following Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602.
3. Assessment. The trial judge’s factual findings deserved respect, but caution was required because they had been shaped by the erroneous probability approach. Considering the likely timing of registration, planning difficulties, Berkeley’s position and the interest of other purchasers, there was a 60 per cent chance of a sale for £375,000 by 18 November 1988. After allowing for costs, the notional net proceeds were £360,000. Since the claimant retained the property and later received £150,000, the loss-of-chance damages were 60 per cent of £210,000, namely £126,000.
4. Other losses. The agreed costs and payment for release of the covenant were recoverable. Distress was not recoverable under the ordinary rule stated in Watts v Morrow [1991] 1 WLR 1421, because a solicitor’s retainer to sell commercial property was not a contract whose object was pleasure or peace of mind. Compound interest and bank charges were recoverable as special damages. The solicitor knew of the borrowing and the intended application of the sale proceeds, bringing the claim within the second limb of Hadley v Baxendale 9 Exch. 341 and the principles in President of India v La Pintada Compania Navigacion S.A. [1985] 1 AC 104.
5. Interest and orders. Under section 35 A of the Supreme Court Act 1991, the compound interest and bank-charge loss was to be calculated to the date of the Court of Appeal’s judgment. The order was not antedated, applying Borthwick v The Elderslie Steamship Company Ltd [1905] 2 KB 516. Interest on the special expenditure items was allowed at 1 per cent above base rate to judgment, with judgment-debt interest thereafter. The appellant received the costs in both courts, and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): [1997] EWCA Civ 1130. Appeal allowed. Costs awarded to the appellant in the Court of Appeal and below.
• High Court of Justice: On 3 November 1994, His Honour Judge Rich QC accepted negligence and awarded £50,000, assessed by reference to diminution in value.