Maloney v Mundays LLP

In a professional negligence claim concerning the purchase of a business and property, damages must place the claimant in the position it would have occupied absent the breach. The usual diminution-in-value measure and the usual valuation date are flexible where they would produce an artificial result. Where a defect was unknown until later and was then remedied at a reasonable arm’s-length cost, that cost may be the best evidence of diminution in value. A claimant’s failure to detect a solicitor’s error does not establish contributory negligence where the solicitor did not ask the claimant to check the relevant document and the claimant acted reasonably in context.

The claimant, as assignee of Maloneys Retail Stores Limited, sued its former solicitors for negligence arising from the 2006 purchase of a Budgens supermarket and property at Ascot. Liability was admitted shortly before trial for failing to advise that part of the registered title had been retained and for submitting an SDLT return understating the property price. The trial concerned causation and loss.

The court determined the construction of the Budgens agreements and transfer, the counterfactual transaction, the proper measure and date of loss, whether the claimant’s conduct broke causation or amounted to contributory negligence, and the effect of the assignment of the claim.

1. Construction. The Option Deed, read objectively and contextually, entitled Budgens in the second ten-year period to acquire the Business, Assets and Premises at their value as a Budgens supermarket subject to the benefit and burden of the Retailer Agreement. The option could be exercised at any time within the Option Period after termination of the Retailer Agreement. The Right of Way permitted access and egress only while the premises were used as a Budgens store.
2. Causation. Had the retained land been disclosed, Maloneys would have insisted that it be included. Budgens would probably have included it in the transfer. The admitted breach therefore caused loss.
3. Measure and date of damages. The compensatory principle is not applied mechanically. Since Maloneys did not discover the defect until 2017, the appropriate date for assessing diminution in value was 2018, when the defect could and needed to be remedied. The arm’s-length payment of £800,000 for the retained land was the best evidence of the diminution in value. It was not a claim for consequential loss under the second limb of Hadley v Baxendale. A counterfactual 2006 assessment would have produced £426,000, but was artificial on the facts.
4. SDLT breach. Maloneys were not negligent in failing to detect the understated SDLT return or completion statement. The circumstances did not break causation or establish contributory negligence. The recoverable loss was the additional HMRC interest of £18,440 less the interest saved on Maloneys’ borrowing, namely £6,570.
5. Orders. Judgment was entered for £800,000 for the retained-land breach and £6,570 for the SDLT breach. Interest ran at 2% above base rate from 30 November 2018 on the first sum and from 4 January 2019 on the second.