Professional negligence – Damages – Assessment – Claimants seeking damages against defendant solicitors for professional negligence in failing to register restriction at Land Registry to protect claimants’ interest in sale of property – Court of Appeal holding damages to be assessed on conventional rather than loss of chance basis – Claim remitted to judge for assessment of damages – Damages assessed accordingly
The first claimant was the only child of the deceased who died in 2013. The deceased owned a property at 8 Denny Crescent, London, SE11 which she wanted to pass to the first claimant and his wife (the second claimant) on her death. She established a trust to minimise their liability to inheritance tax (IHT) in the event of her death under an estate protection scheme (EPS). However, the deceased changed her will after entering into a civil partnership with her new partner in 2007, leaving nothing to her son.
After her death, the claimants discovered that the property had been sold without their knowledge in 2010. The claimants brought proceedings against the defendant solicitors responsible for drawing up the trust agreement, claiming damages for professional negligence in implementing the EPS. They argued that the defendants were negligent in failing to register a restriction on the property with HM Land Registry, which would have enabled them to control whether or not it was sold.
The judge held that the defendants had been negligent in failing to register a restriction at HM Land Registry to protect the claimants’ interest. However, the claimants had not established that the negligence had caused them any loss: [2019] EWHC 155 (Ch).
The Court of Appeal overturned that conclusion holding that causation and damages should be approached on the basis that, had the solicitors registered the restriction in accordance with the duty of care they owed to the claimants, no sale could have taken place without the claimants’ consent, not on the basis of loss of a chance to persuade the deceased not to sell the property. Accordingly, damages fell to be assessed on a conventional rather than a loss of a chance basis: [2020] EWCA Civ 42; [2020] EGLR 9. The claim was remitted to the judge to assess the damages.
Held: The damages were assessed accordingly.
(1) It was common ground that the first claimant was entitled to recover the value of the property by way of damages. The issue was the date at which the property’s value should be assessed. The default position was that damages should be assessed at the date the wrong occurred, which in relation to the tort of negligence, where damage was of the essence, was when the loss caused by the breach of duty occurred. Equally, a court could and should depart from that rule where it was necessary in order adequately to compensate the claimant for the damage suffered by reason of the defendants’ wrong. The point of principle to be decided in each case was whether it was necessary, in order adequately to compensate the claimant for the damage suffered by reason of the defendants’ wrong, to depart from the default rule. Each case where that question arose involved a fact sensitive analysis of the position. In the present case, if the default rule applied, damages were to be assessed at the date when the property was sold by the deceased: Smith New Court Securities Ltd v Scrimgeour Vickers [1997] AC 254, Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 and County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1986] 2 EGLR 246 considered.
In the present case, it was appropriate for the court to assess loss as at the date of the death of the deceased. That approach reflected the fact that, had the EPS taken effect in accordance with its terms, the first claimant would not have been entitled to receive the property (or the remaining proceeds of sale, if a sale was necessary in order for the deceased’s estate to meet any IHT liability) until after the deceased died.
(2) The object of the assessment of damages was to place the claimant, as nearly as could be achieved, in the position they would have been in had the breach of duty not occurred. An assessment at the date of sale would not achieve that objective assuming, as in the present case, that the property rose in value between then and the date of the deceased’s death; and it would over compensate the claimant if the value of the property dropped.
While the defendants were responsible for the consequences of a sale happening in 2010, those consequences were that the first claimant was deprived of title to the property which he was entitled to have transferred to him on the date of the deceased’s death in 2013. Therefore, a valuation at that date was necessary if the first claimant was to be compensated for the damage suffered. He did not receive what he would have been entitled to had the scheme taken effect in accordance with its terms as a result of the negligent failure by the defendants to register a restriction protecting the interests of the beneficiaries of the EPS.
(3) It was immaterial when the claimant first knew that the property had been lost. That was not relevant to the date when damages were to be assessed. which, where the cause of action was the tort of negligence, would be the later of the date when the loss occurred or such date as it was necessary to adopt in order adequately to compensate the claimant for the damage suffered by reason of the defendants’ wrong.
(4) The property was worth £875,000 at the date of the deceased’s death. If it had been included in the deceased’s estate, the IHT payable would have been £220,000 against which £93,316 was to be credited, giving a tax payable figure of £124,684 to be deducted from the value of the property. Interest on damages ran from the date of the deceased’s death to the date of judgment. Low inflation and interest rates during that period meant that an appropriate rate was 3.5% above base rate. After judgment was entered, interest would run at the judgment rate in section 17(1) of the Judgments Act 1838. It was not appropriate to award a penal rate of interest. Accordingly, there would be judgment for the claimants in the sum of £985,299.45, the figure agreed between the parties in the light of the court’s conclusions.
Teresa Rosen Peacocke (instructed by Blake Morgan LLP) appeared for the claimants; Katherine McQuail (instructed by BLM LLP) appeared for the defendants.
Eileen O’Grady, barrister
Click here to read a transcript of Gosden and another v Halliwell Landau (a firm) and another
