Greymalkin Ltd v Copleys (a firm)

Where solicitors negligently provide defective information about title, liability is confined to the foreseeable consequences of that information being wrong. The claimant must prove both that the negligence caused entry into the transaction and that the claimed loss is attributable to the breach.

The prima facie measure for acquiring property with an undisclosed defect is diminution in value at the appropriate valuation date. A costs-of-extrication or wasted-expenditure award may be available in an appropriate case, particularly where diminution in value is artificial or the claimant genuinely extricates itself from the transaction. It is unavailable where the claimant retains the property, the defect is cured, and later expenditure or sale is not causally connected with the breach.

Greymalkin purchased the Garden House Hotel intending to convert it into flats and bedsits. The defendant solicitors admitted negligence in failing to identify three charges which were not overreached and remained on the property.

The issues at trial were causation and damages. Greymalkin claimed the expenditure incurred in developing, maintaining and ultimately selling the property, contending that damages should be assessed on a wasted-expenditure or costs-of-extrication basis. The central questions were whether the negligence caused the purchase and what measure of loss properly applied after the charges were later discharged.

1. Causation and scope of duty. Greymalkin proved that, but for the negligence, it would not have completed the purchase. The relevant breach was failure to provide non-negligent information in a report on title. The solicitors were not responsible for every consequence which would not have occurred but for the purchase; liability was limited to foreseeable consequences of the information being wrong, consistently with South Australia Asset Management Corp v York Montague Ltd [1997] AC 191.
2. Measure of damages. The prima facie measure was diminution in value, comparing the value with good title and the actual value with the defect. The court could adopt a later valuation date where that better reflected the loss. An alternative award for the costs of remedying the defect and losses caused by its existence was possible, but the evidence did not justify it here.
3. Extrication. Costs of extrication could mean either consequential expenses incurred in escaping from a transaction or an alternative measure where diminution in value was artificial. The latter approach was not available because Greymalkin retained the property, the charges were discharged without cost to it, and its later decision to sell was not caused by the admitted breach.
4. Assessment. The property was worth £130,000 with good title and £85,000 while registration was delayed by the charges. The proper award was therefore £45,000. Claims for borrowing, unsupported expenditure, maintenance, professional fees and management time were not recoverable.