Nahome & Ors v Last Cawthra Feather Solicitors

Where negligent failure to renew a protected business lease causes the business to close, damages are assessed flexibly according to the loss proved. If a capital asset such as the lease, goodwill or business is lost, the usual measure is its capital value at the date of loss, informed by anticipated profitability but not replaced by an aggregate of future profits. Additional losses may be recovered where they are foreseeable, caused by the breach and reasonably incurred, subject to avoiding double recovery and allowing for mitigation. Losses from a separate business are too remote unless the solicitor knew, or ought reasonably to have known, of that business and its relevant dependence on the premises.

The defendant admitted liability for negligently serving an incorrect counter-notice in connection with renewal of business premises protected by Part II of the Landlord and Tenant Act 1954. The claimant sought approximately £1.8 million, including the value of the retail business, projected retail profits, substantial Internet and mail-order profits, relocation expenses and other losses.

The central issues were the proper measure of damages for the lost lease and retail business, whether projected future profits were recoverable, whether losses connected with the Internet business were too remote, and what losses were established and reasonably mitigated.

1. Disposition. Damages were assessed at £43,000, together with interest. The claim for projected retail profits, re-establishment costs and Internet-business losses was rejected.
2. Retail business. The appropriate compensation for the closure of the retail business was its capital value at the date of loss. The accepted evidence valued the lease, fixtures and goodwill at £28,000. The court added reasonably established closure-related losses for advertising the closing-down sale, dilapidations, legal costs and disposal or removal expenses, producing £43,000.
3. The authorities showed that damages in this class of case are flexible. Where a capital asset is lost, its value at the date of loss is the appropriate starting point. Where profitability is impaired rather than the asset lost, identifiable additional costs or reduced profitability may be recovered. Awards based on both approaches require care to avoid double counting. Future earning potential may inform goodwill value, but does not justify simply aggregating projected profits over a later period.
4. The claimant could not recover the cost of recreating the retail business. She had not incurred those costs, and spending substantially more than the value of the lost business would increase rather than mitigate the loss.
5. Internet business. Applying the ordinary remoteness principles, the court held that the defendant had no actual knowledge of the Internet business or its alleged dependence on the shop. General knowledge that some jewellers trade by mail order or online was insufficient. The claimed losses were therefore too remote. The court observed that, if recoverable, the proper measure would have been the diminution in the business’s goodwill value at the breach date, not a loss-of-chance calculation, but no adequate evidence established such a loss.
6. In any event, the evidence did not establish that the loss of the premises caused the claimed finance, sales or profit losses. The comparator methodology was unreliable, the claimant’s evidence lacked documentary support, and the Internet business had in fact made only marginal profits or losses.