Property Protea Holdings Ltd v 119 Molyneux Road Ltd & Ors

A claimant may recover as damages the reasonable costs foreseeably incurred in responding to loss caused by a solicitor’s breach, including litigation against third parties. Where the costs were incurred in the same proceedings, their assessment remains subject to the court’s costs jurisdiction, but that does not prevent a damages claim in principle.

On summary judgment, the defendant need show only a real, rather than fanciful, prospect of establishing a defence which cannot be addressed on detailed assessment. The court must not conduct a mini-trial. In assessing mitigation, hindsight is impermissible, but the claimant must keep the cost and prospects of recovery under review and avoid unreasonably exacerbating its loss.

The claimant acquired commercial property from the first defendant. Its conveyancing solicitor failed to register the transfer within the priority period. The property was then charged to a lender, leaving the claimant’s interest diminished by the secured debt.

The solicitor admitted breach and liability for the sum required to redeem the charge. The remaining dispute concerned the claimant’s damages claim for the costs of pursuing the seller and its director, which had produced no recovery. The claimant sought summary judgment for those costs, alternatively an order for them under the court’s costs discretion. The central issue was whether the solicitor had a real prospect of defending liability for those costs on mitigation grounds.

1. Disposition. Summary judgment was granted only to the extent conceded: liability for the sum required to redeem the fourth defendant’s charge. Summary judgment for the costs of pursuing the first and second defendants was refused.
2. Under CPR 24.2, the relevant question was whether the defendant had a real prospect of establishing a defence which could not be pursued on detailed assessment. The evidential burden was on the defendant, but it was not heavy. The court must avoid a mini-trial while considering evidence reasonably expected to become available, including disclosure.
3. The claimant’s failure to follow the professional-negligence Pre-Action Protocol did not establish a real defence. There was no evidential basis that compliance would have avoided the costs. Nor did the administration moratorium provide a real mitigation defence, since the defendant’s solicitors knew of the administration but did not identify the issue until shortly before the hearing.
4. Following Banco de Portugal v Waterlow [1932] A.C. 452, a claimant placed in difficulty by the defendant’s breach is allowed reasonable latitude in adopting remedial measures. Hindsight cannot justify criticism of the decision to litigate. Nevertheless, it may be unreasonable to continue expensive litigation without reviewing whether the prospects of recovery justify further expenditure.
5. The claimant had spent more than £200,000 pursuing defendants who had produced no financial return, while its evidence gave little explanation for continuing the litigation. The information imbalance and the possible importance of disclosure meant that the mitigation defence was real and merited a trial. It was also wrong to ignore an unpleaded defence where there was a real prospect of permission to amend. The alternative application for costs under the court’s discretion was likewise premature.