Talisman Property Co (UK) Ltd v Norton Rose (a firm)

In a professional-negligence claim for loss of a negotiating chance, hypothetical evidence must be assessed against the commercial circumstances in which the decision would have been made. A judge may reject speculative evidence, but must confront material evidence from witnesses with no apparent interest in the outcome and explain its rejection. A judge cannot eliminate every contrary possibility without evidential justification. Where the evidence provides no basis for preferring competing outcomes, a 50 per cent chance may be appropriate. Separate contingencies must be multiplied, but no further discount should be made without supporting evidence. Applying those principles, the appeal was allowed and damages were increased.

Talisman appealed against an assessment of damages in its professional-negligence claim against its former solicitors, Norton Rose. The admitted negligence consisted of serving an opposed rather than an unopposed notice under the Landlord and Tenant Act 1954 in relation to the renewal of a business tenancy.

The Chancery Division awarded £53,700 plus interest for the lost chance of avoiding statutory compensation, but rejected the alleged loss of the chance to secure a new tenancy with Wyko. The judge found that Wyko would probably have obtained counsel’s advice and would then have recognised Lewis as the tenant. The unappealed finding was that Lewis remained the tenant. The central issue was whether the judge was entitled to treat the chance that Wyko would not seek counsel’s advice as negligible.

1. Disposition. Moses LJ delivered the leading judgment, with Carnwath LJ and the Chancellor agreeing. The appeal was allowed. Talisman was awarded £123,450, comprising £89,500 for the lost chance of avoiding statutory compensation and £33,950 for property loss.
2. The parties accepted that the judge’s general approach to loss-of-chance damages, based on Allied Maples Group v Simmons & Simmonds [1995] 1 WLR 1602, was sound. The appeal concerned the evidential basis for the finding that Wyko would have consulted counsel.
3. The first-instance findings that Lewis remained the tenant under section 42 of the 1925 Act, despite becoming dormant while Wyko carried on its business, and that no tenancy arose by estoppel, were not appealed. They formed the legal background to the counterfactual negotiations.
4. A court assessing hypothetical evidence may test it against the actual circumstances and commercial reality. However, the judge must address material evidence from witnesses who had no apparent interest in the litigation and explain why it is rejected. Alliance & Leicester Building Society v Robinson (transcript of 4 May 2000) (transcript of 4 May 2000) supported assessing hypothetical evidence in that way, but the witnesses in that case were materially different from Mr Davidson and Mr O’Brien, who had no comparable interest in justifying an earlier decision.
5. The judge was entitled to consider Wyko’s commercial incentive to establish that Lewis was the tenant and to seek counsel’s advice. He was not entitled, however, to eliminate altogether the contrary possibility that Wyko would rely on Mr O’Brien’s strongly held advice and not seek counsel, without explaining why the evidence of both witnesses was rejected. On the evidence, there was no proper basis for choosing between the two possibilities, so each was assessed at 50 per cent.
6. The statutory compensation figure of £179,000 was therefore discounted by 50 per cent. The property loss was assessed at £97,000, comprising £17,000 capital loss and £80,000 rent loss. The chance of not seeking counsel and the 70 per cent chance of reaching agreement were multiplied, producing £33,950. No further discount was justified because there was no evidence that Wyko would have rejected Mr O’Brien’s advice if counsel had not been consulted.

• Court of Appeal (Civil Division): The appeal from the Chancery Division was allowed and damages were assessed at £123,450 under [2006] EWCA Civ 1104.
• Chancery Division: HH Judge Behrens, sitting as a deputy judge, awarded £53,700 plus interest, representing 30 per cent of the statutory compensation, and rejected the property-loss claim.