Mallon v Halliwells

Damages for professional negligence compensate actual loss caused by the negligence. They must not provide a windfall based on hypothetical loss. Where a claimant would not have realised an asset until a later date, the asset should ordinarily be valued at that later date. If the claimant cannot establish a substantial value at the relevant date, evidence that someone might have paid something is insufficient. The court may conclude that the loss is speculative and award no more than nominal damages.

Halliwells admitted negligence in failing to include a term giving Frank Mallon the proceeds of sale from a property development. The claim was dismissed by HHJ Raynor QC in the Technology and Construction Court because Mr Mallon failed to prove substantial loss.

On appeal, Mr Mallon argued that the contractual right should have been valued in April 2005, when it would have been acquired, or alternatively that it had a substantial value in autumn 2008. The central issues were the correct valuation date and whether the evidence established a recoverable loss.

1. Appeal dismissed. The court unanimously upheld the decision of HHJ Raynor QC.
2. Mr Mallon suffered no financial loss in April 2005. Damages for breach of contract or tort are principally compensatory. They reflect loss actually suffered, rather than a hypothetical loss. The principle was supported by Kennedy v Van Emden [1996] PMLR 409, where compensation was described as being for real rather than hypothetical loss.
3. The proper valuation date was August 2008, or the autumn of that year. Although the right could theoretically have been sold from April 2005, the judge found that Mr Mallon would not in fact have sought to realise it before 2008. Valuing it at the earlier date would have produced a windfall on hypothetical facts.
4. The judge was entitled to find that the right had no ascertainable substantial value in 2008. The development was in negative equity, the preconditions to payment had not been met, and the evidence showed that the risk of receiving nothing was substantial. Evidence that a cash buyer might have paid something did not establish what sum would have been paid or accepted. Mr Mallon had failed to prove substantial damage.
5. Lord Justice Pitchford agreed that the valuation date was governed by the claimant’s likely conduct and that the evidence did not justify a different conclusion. Sir Stephen Sedley agreed with both judgments. The appeal was dismissed.

• Court of Appeal (Civil Division): Appeal dismissed.
• Technology and Construction Court, Manchester District Registry: HHJ Raynor QC dismissed the professional negligence claim: Mallon v Halliwells [2011] EWHC 3673 (TCC).