Watkins & Anor v Jones Maidment Wilson (A Firm)

In professional negligence claims, a real chance of obtaining more favourable contractual terms is itself a measurable asset. Damage occurs when negligent advice causes the claimant to enter the transaction and lose that chance, even if the transaction’s benefits exceed its burdens and later events affect quantification. Similarly, loss of a valuable contractual right is actual damage when the right is surrendered, even if its exercise depended on a future contingency. The contingency principle does not postpone accrual where the right lost was an asset capable of valuation. Several heads of loss arising from one breach remain part of one cause of action. A judge may decline hypothetical, vague or unpleaded preliminary issues.

The appellants claimed damages for professional negligence arising from advice given by the respondent solicitors. The pre-agreement claim concerned advice leading to the execution of a building agreement and related documents on 3 April 1998. The post-agreement claim concerned advice which allegedly led to the loss of rights under clause 21(ii), following steps taken before 26 August 1998.

The appellants relied on the principles in Law Society v Sephton and Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2), contending that loss was contingent or that the transaction remained beneficial until a later date. HHJ Behrens answered the first two preliminary issues against them and declined to answer the remaining issues. The central questions were when damage and the causes of action accrued, and whether the remaining preliminary issues should be determined.

Disposition. The appeal was dismissed. The Court of Appeal upheld the judge’s answers to questions 1 and 2 and his decision not to answer questions 3 and 4.

1. Accrual of loss. Under the Limitation Act 1980, damage is necessary for a negligence claim and limitation begins when damage occurs. Where negligent advice causes entry into a transaction without the contractual rights that should have been obtained, a real chance of negotiating more favourable terms is an asset with measurable value. Its loss is immediate damage when the claimant acts on the advice. The fact that the transaction’s benefits exceeded its burdens did not defer accrual.
2. Measure of loss. The approach in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627 requires comparison with the position that would have existed without the transaction and recognises that measurable loss may arise immediately or later, depending on the facts. It did not assist the appellants because their lost chance was independently valuable and immediately measurable.
3. Loss of the contractual right. Clause 21(ii) conferred a valuable right capable of valuation. The loss occurred when the appellants entered the later transaction or took the steps which deprived them of that right. The possibility that the right could only be exercised if the builder failed to complete by a future date did not postpone accrual. Law Society v Sephton [2006] 2 AC 543 was distinguishable because it concerned a contingent liability standing alone, rather than the loss or diminution of an existing asset.
4. Single cause of action. The breach and entry into the transaction completed one cause of action. Loss of the chance to renegotiate was an alternative or additional head of loss, not a separate cause of action. The court followed the reasoning in Hamlin v Evans [1996] PNLR 398.
5. Preliminary issues. The decision whether to determine preliminary issues was a case-management decision. The appellate court should not interfere unless the judge was clearly wrong. Questions 3 and 4 were properly left unanswered because they were hypothetical, vague, difficult to value and not properly pleaded.

• Court of Appeal (Civil Division): On 4 March 2008, the appeal was dismissed. The court held that the causes of action accrued before 26 August 1998 and upheld the judge’s treatment of the preliminary issues.
• High Court of Justice, Queen’s Bench Division, Mercantile Court, Leeds District Registry: HHJ Behrens, by order dated 4 January 2007, answered questions 1 and 2 against the appellants and declined to answer questions 3 and 4.