Veitch & Anor v Avery

In a solicitor-negligence claim arising from advice in possession proceedings, causation and the measure of loss depend on the facts and common sense. There is no universal rule that loss is valued at the breach date. The ordinary measure for negligent conduct of litigation is the value of a real chance of a better outcome. The relevant inquiry is the prospects of retaining the asset or business if competent advice had been given, including the likelihood of further action by the lender and the prospects of trading successfully. A chance must be real or substantial, not fanciful or negligible, and may be below 50 per cent. Where the evidence established that the business was doomed to fail, there was no recoverable chance of continued profitable trading. Loss was therefore confined to the value of the property at dispossession, producing only nominal damages because the secured debt exceeded its value.

Mr and Mrs Veitch sued their former solicitor, Philip Avery, alleging that negligent advice had caused them to lose their hotel, business and home after possession proceedings brought by Barclays Bank. His Honour Judge Overend found liability and causation, but held that the business had been doomed to failure in any event. As the hotel's value at dispossession was less than the bank debt, he awarded £5 nominal damages.

The Veitchs appealed on causation and quantum. Mr Avery cross-appealed on causation. The central issue was whether, absent the negligent advice, the Veitchs had a probable or real chance of retaining and profitably trading from the hotel, and whether damages should be assessed by reference to a later value rather than the value at dispossession.

1. Disposition. Lord Justice Auld dismissed both the appeal and the cross-appeal. Lord Justice Sedley agreed for the reasons given by Auld LJ, and Lord Justice Leveson also agreed.
2. Causation. The failure to comply with the conditional suspended possession order was not necessarily the dominant or effective cause of the loss. The solicitor's negligent advice had deprived the claimants of the opportunity to defend the possession proceedings and negotiate from a stronger position for terms which might not have included a suspended possession order. The distinction between causation and mitigation was material: this was a causation question, not a failure-to-mitigate issue. The judge's conclusion was tenable on the evidence.
3. Loss and valuation. There is no hard and fast rule in negligence that loss must be valued at the date of breach. The appropriate measure depends on the facts and the application of common sense, an evaluative task for the trial judge. The transaction-date approach may be appropriate where it fairly reflects the value obtained, but later valuation raises causation issues: Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 and Smith New Court v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 256.
4. Loss of chance. In negligent conduct of litigation, the ordinary measure is the value of a real chance of a better outcome. The relevant question was the prospects of retaining the hotel, business and home if the proceedings had been defended, rather than merely the likely result of the possession claim. A real, significant or substantial chance may be below 50 per cent, but a fanciful, speculative or negligible chance is insufficient. The court had to consider the likelihood of further possession proceedings, the prospects of successful trading, and the likely level and duration of any recovery.
5. The judge had considered both probability and loss-of-chance formulations. His findings that the business was doomed to failure, that further support from the Bank and Mr Veitch Senior was unlikely, and that the property value was below the secured debt defeated any claim for continuing trading losses or a lost chance of later capital value. The only possible loss was the value of the hotel at dispossession, producing nominal damages. Applications to amend the claim and adduce fresh evidence were refused because they would have reopened liability and were made too late.

1. Court of Appeal (Civil Division). On 12 July 2007 dismissed the Veitchs' appeal on causation and quantum and Mr Avery's cross-appeal on causation. Applications to amend the claim and adduce fresh evidence were refused.
2. Exeter County Court. His Honour Judge Overend found negligent advice on liability on 30 January 2004. In the subsequent causation and quantum judgment dated 24 April 2005, he found causation but held that the business was doomed to failure and awarded £5 nominal damages by order dated 12 May 2005.