Green & Anor v Alexander Johnson (A Firm) & Anor

For negligence causing loss to property, diminution in market value at the relevant date is the ordinary prima facie measure. It is a convenient method of assessing loss and does not depend on an intended real-world sale. A different basis may be used only where the evidence shows that the ordinary approach is inapplicable, and it must compare like with like.

Where a hypothetical sale of an entire property is assumed, individual unit values cannot simply be aggregated if the evidence indicates a discount for the costs, delay and risks of selling separately. Loss from a procedural difficulty is not attributable to negligent advice where the same risk would have arisen had the advice been correct.

The claimants, trustees of a settlement, owned a block containing residential and commercial units. They sued the defendant firm and barrister after negligent advice led them to accept that a leaseholder was entitled to new leases of two flats under the Leasehold Reform, Housing and Urban Development Act 1993. The negligence was admitted by the second defendant.

Peter Smith J assessed damages at £252,995.36, including capital loss calculated on an investment valuation basis. The defendants appealed, arguing for a vacant-possession or post-negligence valuation. The claimants cross-appealed against the allowance made for the value of the two leases granted on compromise. The central issues were the proper valuation basis and whether the compromise loss was caused by the negligent advice.

Carnwath LJ gave the judgment, with Neuberger LJ agreeing. The appeal and cross-appeal were both dismissed, and the judgment below was upheld.

1. Measure of damages. Diminution in market value at the relevant date is the ordinary prima facie method of assessing loss caused by negligence affecting property. It is a convenient method of measurement and does not depend on an actual or intended sale. The rule applies unless the evidence demonstrates that it is inapplicable. This reflected the approach in Watts v Morrow [1991] 1WLR 1421 and Phillips v Ward [1956] 1 WLR 471 (paras [14], [19]–[20]).
2. Valuation basis. A hypothetical sale must be assessed in the market existing at the relevant date. If the whole property is assumed to be sold, the values of individual flats cannot simply be aggregated where a purchaser would allow for the costs, delay and risks of selling them separately. Any alternative approach must be justified by evidence and internally consistent. A pre-negligence market valuation cannot be compared with a post-negligence valuation based on retaining the property for letting or later sale (paras [17]–[20]).
3. Causation on the cross-appeal. The reasonable consequence of correct advice would still have been that the claimants used the statutory procedure under the Leasehold Reform, Housing and Urban Development Act 1993. The risk of an error in the counter-notices would therefore have remained. The additional loss arising from the compromise was not attributable to the admitted negligence. The analogy with The Oropesa [1943] P 32 was unhelpful because the factual situations and the principles governing personal injury and financial loss differed. The reasoning in South Australia Asset Management Co v York Montague Limited (SAAMCO) [1997] AC191 did not alter that conclusion (paras [24]–[28]).
4. Case preparation. Parties should identify their proposed valuation bases in the pleadings or before the hearing, and expert evidence should address those bases clearly. Otherwise the court may be invited to construct an unsupported composite valuation case (para [21]).

• Court of Appeal (Civil Division): The defendants’ appeal and the claimants’ cross-appeal were dismissed. The judgment below was upheld.
• Chancery Division: Peter Smith J assessed damages against the second defendant for admitted negligence and awarded £252,995.36, including £202,765 for capital loss.