CHANNON v LINDLEY JOHNSTONE

In a professional-negligence claim arising from mishandled ancillary-relief proceedings, loss-of-chance damages require direct assessment of the best order reasonably likely to have been made on proper evidence, followed by a discount for uncertainty. An unsuccessful appeal or the claimant’s settlement proposal does not provide the correct yardstick. A pension fund that is not immediately realisable remains relevant in a clean-break division. Damages for mental distress are generally unavailable for breach of an ordinary commercial retainer. Knowledge of the client’s aims and foreseeability of disappointment do not create an exception without an undertaking to secure a particular result or protect against distress. Physical inconvenience and directly related mental suffering require causation. The court increased the loss-of-chance award, removed the distress award and made limited costs-related orders.

The claimant sued his former solicitors for negligence in preparing and conducting proceedings concerning his former wife’s application for financial relief after divorce. At the 1992 hearing, the District Judge ordered the transfer of both matrimonial properties to the wife and made related costs orders. A subsequent appeal before HH Judge Batterbury failed.

HH Judge Meston QC found that the solicitors had negligently failed to present accurate and coherent financial evidence. He awarded £25,000 for the lost chance of a better outcome and £10,000 for inconvenience, distress and disappointment, together with costs-related relief. Both parties appealed. The central issues were the proper valuation of the lost chance, the relevance of the pension fund, the recoverability of mental distress under a solicitor’s retainer, and the related costs consequences.

Lord Justice Potter delivered the judgment, with Lord Justices Judge and Henry agreeing.

1. Loss of chance. The correct first step was to assess directly the best order reasonably likely to have been made by the District Judge had the financial evidence been properly prepared and presented. The claimant’s later offer and counsel’s advice on the prospects of an appeal were not reliable measures because an appeal was a retrieval exercise and the claimant’s proposal was shaped by his desire to retain Woodlands. The approach was consistent with Allied Maple Group v Simmonds and Simmonds [1995] 1 WLR 1602.
2. The likely order remained a clean-break division. The pension fund was not ordinarily immediately available as realisable capital, but it had to be taken into account in the once-and-for-all division of assets. The best reasonably available outcome was assessed as transferring Sylvanook, valued at £60,000, together with a £10,000 lump sum. The claimant was unlikely to have retained Woodlands because of the lump sum required, the bank’s position and the difficulty of realising Shellcourt’s assets. Discounting the £44,200 difference by approximately 20 per cent produced £35,000. The loss-of-chance award was therefore increased by £10,000.
3. Mental distress. The general rule in Addis v Gramophone Company Limited [1999] AC 488, as stated in Watts v Morrow [1991] 1 WLR 1421 and approved in Johnson v Gore-Wood [2001] 2 WLR 72, was applicable to an ordinary commercial solicitor’s retainer. The retainer required the solicitors to seek the best result reasonably possible. It did not promise a particular result, protect the claimant from distress or secure his retention of Woodlands. Knowledge of his aims and foreseeability of disappointment were insufficient. The £10,000 award was set aside.
4. Damages for physical inconvenience and mental suffering directly related to that inconvenience may be available in an appropriate case under Watts v Morrow. That basis could not support an award here because the claimant had not established that he lost Woodlands through the solicitors’ negligence; even with a better order, he was unlikely to have retained it.
5. The defendants’ challenge to the costs indemnity was dismissed. The claimant was refused permission to add grounds concerning unspecified further costs and the 1996 leave application. Permission was granted in relation to costs payable to the solicitors for the Circuit Judge appeal, for which appropriate damages or indemnity were ordered.

• Court of Appeal (Civil Division): increased the loss-of-chance award from £25,000 to £35,000, set aside the £10,000 distress award, dismissed the defendants’ costs appeal, and granted limited costs-related relief to the claimant.
• High Court, Queen’s Bench Division, HH Judge Meston QC: found the solicitors professionally negligent and awarded £25,000 for loss of chance and £10,000 for inconvenience, distress and disappointment.
• Circuit Judge Batterbury: dismissed the claimant’s appeal from the District Judge and affirmed the financial-relief order.
• Bath County Court, District Judge Rutherford: ordered the transfer of Woodlands and Sylvanook to the claimant’s former wife as part of the ancillary-relief settlement.