Green & Anor v Alexander Johnson (a firm) & Anor

In professional negligence, a claimant may recover loss flowing from a reasonable attempt to deal with the consequences of the breach. Recovery does not extend to loss caused by an independent, extraneous matter that would have produced the same result whether or not competent advice had been given. Where negligent advice causes a claimant to concede a legal entitlement, damages are assessed by reference to the loss sustained when the negligence committed the claimant to that consequence. Credit is given for the value that would have been obtained through the statutory process, rather than merely for the amount realised under a later compromise.

The claimants, freehold owners of an investment property, brought professional negligence proceedings against their solicitors and barrister. The second defendant admitted negligently failing to advise that a tenant had no right to acquire new long leases because the leases did not satisfy the statutory term requirement.

The hearing concerned only the assessment of damages against the second defendant. Issues concerning allegedly defective counter-notices and the claims against the first defendant remained stayed. The central issues were causation, mitigation, the proper valuation date, and the appropriate credit for the tenant’s statutory leasehold rights.

1. Causation and intervening acts. The court accepted the principle stated in South Australia Asset Management Corporation v York Montague Ltd [1997] A.C. 191: loss caused by a claimant’s reasonable attempt to cope with the consequences of a breach remains attributable to the breach. However, the difficulties concerning the counter-notices were not a reasonable response to the admitted negligence. They would have arisen whether or not correct advice had been given. Those matters therefore constituted a separate source of loss, arising from the stayed allegation concerning the notices.
2. The decision in The Oropesa [1943] P 32 did not assist the claimants on the facts. The compromise of the notice proceedings was not part of coping with the admitted negligence of conceding the tenant’s status.
3. Valuation and date. The loss was sustained in July 2001, when the negligent act committed the claimants to granting leases they did not wish to grant. The proper credit was the premium that the Leasehold Valuation Tribunal would have determined under the Leasehold Reform, Housing and Urban Development Act 1993, assessed at that date. Credit was not confined to the £190,000 received under the later compromise and was not to be calculated by reference to a later open-market valuation.
4. The claimants’ interest was to be valued as an investment property as a whole. The proposal to divide the property and assess only the affected part was rejected. The barrister’s retainer concerned the property and foreseeable loss affecting the whole investment could be recoverable even though the advice related to two flats.
5. Capital loss was assessed at £202,765. A further £5,598.94 was awarded for recoverable costs of the first proceedings. The costs of the later notice proceedings were not recoverable under the admitted allegation, but £5,000 was allowed for the reasonable cost of obtaining the statutory valuation. Damages were therefore assessed at £213,365, with interest at 6.5 per cent from 18 July 2001.