Negligence — Action against firm of surveyors fails — Claim alleging that loss was caused to plaintiffs by breach of duty on the part of the defendants in the handling of rent reviews not proved — The litigation concerned the valuation of corridors on the 7th and 8th floors of a 9-storey building — The outcome of which the plaintiffs complained was two arbitration awards by the same arbitrator which resulted in the plaintiffs as intermediate lessees having to pay rent to their landlords for certain corridors on these floors whereas they were unable to recover payments in respect of the same corridors from their subtenants — The pleadings expressed the allegations in different forms, but the plaintiffs’ complaint in substance was that the defendants failed to take the necessary steps to ensure that the two reviews dovetailed so as to exclude loss to the plaintiffs in the above respect
plaintiffs, who had a leasehold interest in the whole building, had sublet the
7th and 8th floors — The defendants were instructed to act on behalf of the
plaintiffs in connection with the preparation for both the rent review and
arbitration between the plaintiffs and their landlords and the rent review and
arbitration between the plaintiffs and their subtenants — It was the recognised
practice that some essential feature such as a fire corridor, required by a
relevant authority to be provided, should be excluded from valuation for review
purposes — The defendants agreed with the plaintiffs’ subtenants that the
corridors should be excluded from the subtenancy review and they believed that
the same exclusion would be accepted for the purposes of the superior tenancy
review — In this, however, they proved to be mistaken — Rougier J held that,
although the defendants took a risk in reaching an agreement on this point with
the subtenants without obtaining a firm counterpart agreement with the
plaintiffs’ landlords, this omission did not constitute negligence
however, held that the defendants did fall short of their duty to the
plaintiffs in not placing before the arbitrator at the second arbitration
(concerning the superior tenancy review) the conclusive evidence which was then
available to prove that the disputed corridors were definitely required by the
GLC as fire corridors, because the floors in question were more than 80 ft from
the ground (higher than the maximum which the GLC Fire Brigade could handle
with conventional turntable ladders) — The defendants’ representative knew he
was right and did not guard against the risk that the arbitrator might go wrong
— The defendants in this respect were guilty of a breach of duty, although the
judge did not accept as exact a suggested analogy between a barrister advising
on evidence and a surveyor deciding what evidence to submit to an arbitrator
however, the end of the matter — It had to be shown that the breach was the
cause of the plaintiffs’ loss — The difficulty here was that there intervened
between the breach and the loss the arbitrator’s decision — It was clear from
the reasons given by the arbitrator that his view was that the question whether
the corridors were fire corridors or not was irrelevant; since they represented
floorspace capable of being utilised, they should be valued — Thus any failure
by the defendants to place evidence before the arbitrator had played no
causative part in the plaintiffs’ loss — Action dismissed
The following
cases are referred to in this report.
Coldman v Hill [1919] 1 KB 443
Heywood v Wellers [1976] QB 446; [1976] 2 WLR 101; [1976] 1 All ER
300, CA
McGhee v National Coal Board [1973] 1 WLR 1; [1972] 3 All ER 1008;
(1972) 13 KIR 471, HL
Rondel v Worsley [1969] 1 AC 191; [1967] 3 WLR 1666; [1967] 3 All
ER 993, HL
Saif Ali v Sydney Mitchell & Co [1980] AC 198; [1978] 3 WLR 849;
[1978] 3 All ER 1033, HL
Whitehouse v Jordan [1981] 1 WLR 246; [1981] 1 All ER 267, HL
In this action
the plaintiffs, Thomas Miller & Co (a firm), sued the firm of Richard
Saunders & Partners, surveyors and valuers, for alleged breach of a
contractual duty of care in the handling of rent reviews affecting tenancies of
a building referred to as International House or Mitre House in Mitre Square,
London EC3. Thos R Miller & Son entered the action as second plaintiffs by
a late amendment as explained by Rougier J in his judgment.
Paul Teverson
(instructed by Richards Butler) appeared on behalf of the plaintiffs; Bernard
Livesey (instructed by Barlow Lyde & Gilbert) represented the defendants.
Giving
judgment, ROUGIER J said: The second plaintiffs in this action, Thos R Miller
& Son, are a firm who carry on business as managers of mutual assurance
associations and related enterprises. In 1983 they were the lessees of a
building which has been variously referred to as International House and Mitre
House in Mitre Square, London EC3. They in fact entered this action by reason
of a late amendment, the original plaintiffs having been Thomas Miller &
Co. It was agreed by counsel for both sides that since the first plaintiffs,
the company, did not even exist at the relevant time, they could have no cause
of action. Accordingly, the second plaintiffs as their successors in title were
added, and throughout this judgment when I refer to the plaintiffs I intend the
second plaintiffs.
The
defendants, Richard Saunders & Partners, are a firm of surveyors and
valuers and they were retained in connection with certain rent reviews which
took place affecting the building in 1983.
The plaintiffs
claim a breach of a contractual duty of care in relation to the conduct of the
defendants, in particular of one of their partners, a Mr Jeremy Keeling
[FRICS], in relation to his handling of the rent reviews on behalf of his
clients.
Outline
history
The building
itself seems to have been erected early in the 1970s on behalf of International
Stores Ltd. It was a nine-storey building over 80 ft in height. This meant that
it was what is sometimes called by those who are knowledgeable in these affairs
‘a section 20 building’, that is a building subject to the provisions of
section 20 of the London Building Acts (Amendment) Act 1939. The practical effect
of this is that there would be no consent for those parts of the building which
were over 80 ft in height unless the relevant authority was satisfied
concerning the arrangements to minimise the risk of fire. Effectively, in
modern-day practice, this means that terms and conditions were likely to be
attached to any grant of planning consent.
At some date
International Stores sold the building outright to the General Accident
Assurance Corporation but leased the entire building back. In 1980
International sublet the entire building to the plaintiffs. At that time the
defendants, then through a Mr Neal, acted on the plaintiffs’ behalf and
International’s letting agents were Conway Relf. Some of the discussions and
negotiations between the parties leading up to that letting are in the agreed
core bundle of documents, having been extracted from the defendants’ file. The
extract in fact concerns arguments which took place concerning the extent of
floorspace properly to be regarded as part of the value of the demise on the
7th and 8th floors. These comprise documents 1 to 20 in the core bundle, and I
shall return to them later. From the very beginning, the plaintiffs intended to
sublet those two floors to a company called Esperanza Ltd and did so at a
slight profit rental. At that time and at all subsequent material times a Mr R
D Good [FSVA ACIArb] of Braham Good acted on Esperanza’s behalf. Some time
thereafter, International retained the firm of J Trevor & Sons as their
surveyors and valuers and throughout the subsequent proceedings it was a Mr D R
Lilley [FRICS] of that firm who acted on International’s behalf.
That was the
situation in 1983 when the first set of rent reviews was te. By that time Mr Keeling had taken over
from Mr Neal who, however, was still a partner or at any rate employed, I know
not which, in the defendant firm. Mr Keeling was a specialist valuer of very
considerable experience in commercial properties in the City of London.
Esperanza wished to dispose of their sublease as a matter of some urgency and
consequently they pressed Mr Keeling for a rent review, since they were
unlikely to be able to dispose of their sublease without firm knowledge as to
what the future rent was likely to be. Mr Keeling wanted the sense of urgency
to spread upwards, as it were, and affect the rent reviews as between his
clients and International, but unfortunately the rising tide of urgency from
below was met only by a total lack of urgency filtering down from above, the
reason being that General Accident, the owners of the building, seemed to be in
no hurry and Mr Lilley was unable to get talks going between his client,
International, and General Accident. Mr Keeling tried to get his upward review,
that is to say the review as between the plaintiff company and International,
moving so as to catch up with the downward review with Esperanza. In this,
sadly, he was unsuccessful. The result was that the two reviews proceeded to a
somewhat different timetable, the upward review lagging behind the downward.
The crucial and important events of those two reviews are found helpfully set
out in a timetable, which is to be found at pp 175 to 177 of the bundle. From
there it is worthy of note that the arbitrator in both reviews was the same, a
Mr A H P Gillett [MA ARICS], and by September 20 was known by one and all to be
the same person. To jump for a moment to the end of the story, when the
arbitrator had made his two awards it transpired that whereas the plaintiffs
were having to pay rental for the corridors on the seventh and eighth floors to
International, the award as between themselves and Esperanza stated that no
rent was payable in respect of those features. Therefore they were paying out
to their superior landlords with no recoup from their own subtenants.
Claim and
pleadings
In essence,
the plaintiffs’ claim is that this disastrous, and for them expensive, state of
affairs came about because Mr Keeling’s conduct fell short of that which was
reasonably to be expected from a professional and experienced valuer holding
himself out as having special skill in this type of negotiation. The
allegations made against the defendants via Mr Keeling really fall into two
parts. First, by amendment it is alleged that if, which is denied, the
defendants agreed with International’s surveyor that the same exclusion of the
corridors be made — I pause to say in parenthesis that that is an echo of an
averment made in the defence, to which I shall return — the defendants were
negligent in that they failed to bring the existence of any such agreement with
International’s surveyor to the attention of the arbitrator. Then the
particulars of negligence as originally drawn first of all attacked the conduct
of Mr Keeling in ever agreeing that the corridors should be excluded when he
dealt with Esperanza’s surveyors without a firm agreement to the same effect
from Mr Lilley of International’s surveyors. This is put in alternative ways:
first, it is alleged that by confirming in writing with Esperanza’s surveyors
to exclude the corridors for valuation, without first having established a
binding written agreement with International’s surveyors, Mr Keeling was
negligent; alternatively, it is suggested that if he was unable to obtain Mr
Lilley’s agreement he was negligent in making the agreement which he did with
Esperanza’s surveyors. That is the first limb of the criticism which is made;
in short that Mr Keeling ought to have done his best to ensure, that the
agreements were, as it were, back to back. Additionally, certain more general
allegations concerning his conduct overall are made. By subpara (6) of para 7
it is stated that he failed to ensure that the arbitrator valued the corridors
in the Esperanza arbitration — a statement which presupposes too high a duty in
any event; by subpara (7) that he failed generally to conduct the International
arbitration and the Esperanza arbitration in a consistent manner, and by
subpara (8) that he failed to ensure — again that is overstating the duty —
that the plaintiffs would not have to pay rent in respect of the corridors to
International without being able to recover rent in respect of the corridors
from Esperanza.
During the
course of his final speech, counsel for the defendants took objection to
mention of certain specific omissions on the part of Mr Keeling upon which the
plaintiffs rely, notably his omission during the course of the written
submissions made to the arbitrator to place before the arbitrator convincing
evidence that the corridors in dispute were fire corridors and therefore should
be excluded from the valuation. I cannot accept this objection because, first
of all, it seems to me that, although not particularised, the general
allegations in subparas (7) and (8) of para 7 of the amended statement of claim
do
whole ambit of the way in which Mr Keeling conducted this affair has been under
scrutiny throughout the evidence. Indeed, the defendants’ counsel himself asked
Mr Keeling questions during examination in chief related to that very issue, so
I cannot think that Mr Keeling has been taken by surprise or prejudiced by any
specific features of his subsequent conduct being called in question. If it had
been necessary, I would in any event have allowed a suitable reamendment even
at this late stage.
How did
this imbalance come about?
I propose
dealing with the history in chronological order, making my findings of fact and
my conclusions of law as I go along. It is clear that Mr Keeling, well
appreciating the need for consistency, sought to extract some sort of agreement
from Mr Lilley as to the amount of floorspace on floors seven and eight which
was to be submitted for valuation. Where the letting of business premises is
concerned, what spaces should be valued as chargeable to rent and what should
not are, if not governed, at least fairly firmly subject to a certain code of
practice, and the relevant passage is to be found in p 134 of the bundle under
the title ‘Code of Measuring Practice: Definitions and Recommended
Applications’*; and under clause 3 of that the net internal area, which was
formerly sometimes referred to as the effective floor area (that is to say that
area of any particular floor which should be submitted for valuation in any
lease) is described as:
The usable
space within a building measured to the internal finish of structural, external
or party walls, taking each floor into account, but excluding:
— and I skip
the next few passages for the purposes of this case —
corridors,
where used in common with other occupiers or of a permanent essential nature
(eg fire corridors, smoke lobbies etc).
*Editor’s
note: From Code of Measuring Practice: A guide for Surveyors and Valuers published
by the Royal Institution of Chartered Surveyors and the Incorporated Society of
Valuers and Auctioneers.
In so far as
corridors are concerned, it is, as I find, the practice among landlords, their
tenants and their respective letting agents, surveyors and so forth, to proceed
on the basis that anything which is either a permanent corridor put in the
building from the word ‘go’ for the landlord’s purposes or some essential
feature, like a fire corridor, which is required by the relevant authority or
forms the subject-matter of a condition prior to the granting of any permission
to erect the building, is excluded from valuation. On the other hand, something
which is put in by the tenant in the course of partitioning his holding for his
own purposes is not. That was the evidence of Mr Keeling, which I accept in
that respect. It is noticeable that Mr Keeling and Mr Lilley argued this point
concerning the corridors on the basis that the crucial issue was whether the
corridor areas were necessary, were fire corridors and were required by the
GLC. Additionally, as I understood it, Mr G B Perkins [FRICS], the expert
called on behalf of the plaintiffs, agreed with this test. The entire case has
in fact proceeded upon that basis.
Amplifying
the history to stage I
Under pressure
from Mr Good, Mr Keeling wrote a letter (which is document 31) to Mr Lilley
wherein, having referred to a telephone conversation the week before — the
letter is dated August 16 1983 — he states:
On the topic
of areas, as I mentioned to you, you will appreciate that I have a meeting with
the arbitrator appointed in respect of the Esperanza rent review to be held on
September 6 and I should certainly like to have the areas of those four floors
— that is the
top four floors of the building, including seven and eight —
agreed prior
to that time.
In reply he got
back document 32, dated August 19, from Mr Lilley wherein, without reading out
the document itself, it is quite clear that in outlining the amount of square
footage which Mr Lilley was claiming he, Mr Lilley, was including the
corridors. Mr Lilley told me that at that time the matter was somewhat
complicated by the fact that various surveyors had measured the floorspace and
had all come to slightly differing totals. At this stage of the negotiations,
which were just beginning, Mr Lilley not unnaturally chose the highest
estimate. Mr Good, however, proposed taking out the corridors, claiming that in
fact to do so would be in accordance with the code of measuring practice. Mr
Keeling privately agreed with this view, knowing as he did, since he told me
that he had had the opportunity of considering the file which had come into
existence when his clients had originally acquired the building, that this
being a section 20 building those corridors had been stipulated by the GLC. I
pause here to say that in my judgment Mr Keeling was absolutely right. All the
evidence which I have seen and heard points in one way only, that these were fire
corridors and that if they had not been present on the seventh and eighth
floors the GLC would have made it a condition that either they or something of
a suitable equivalent should be included.
Accordingly,
Mr Keeling wrote at document 38 stating his case to Mr Lilley. The relevant
paragraphs are as follows:
As you are
aware, I am in the process of attempting to agree areas with my client’s
tenants and plainly from the figures which at least one of them have put
forward, the areas which you are quoting are somewhat larger. In particular on
the seventh and eighth floors, you appear to have ignored the fire corridors
which your clients had themselves installed when they were in occupation of the
property.
I pause there
to say that it seems from the way in which that sentence is written that Mr
Keeling and Mr Lilley can have had no discussion about the corridors before
this letter, which is dated August 25.
Mr Keeling
continues:
At the time
that our clients took the building from your clients’ letting agents Messrs
Conway Relf, there was indeed some dispute as to the area of the property
wherein the brochure area of 69,900 sq ft was shown, which figure itself is
smaller than your own, the agents in question did agree that some further
reduction was justified because of the corridors on these two top floors. Our
own figures produced a total area of 67,854 sq ft and there would certainly
seem to be substantial differences on the ground floor where we would appear to
be 600 ft apart and where in fact I noted from your original rating settlement
that you had agreed an area of 9,279 sq ft with the valuation officer.
Two matters
are apparent from that second paragraph which are worthy of note. First of all,
Mr Keeling quite obviously must have been aware from his study of the previous
files that when the building was originally let to his clients, Conway Relf on
behalf of International had indeed conceded that the corridors of the seventh
and eighth floors should be excluded from the rent payable. In point of fact
they had contended that this made so little difference to the overall area that
there should be no reduction in rent, which in fact had been accepted by the
plaintiffs. Second, Mr Keeling knew, indeed he told me himself, that owing to
co-operation from the Revenue he had known that Mr Lilley, when attempting to
agree the rateable value of the building with the valuation officer, had put
forward precisely the same arguments that he, Mr Keeling, was attempting to put
forward to Mr Lilley.
Subsequently,
the arbitrator had his preliminary hearing and we come to September 14, a date
of some importance, when the representatives of the interested parties met to
measure the appropriate areas of the seventh and eighth floors. The measuring
was conducted so as to distinguish between that which was unmistakably office
space and other areas, such as pillars, corridors and so forth. Three persons
attended at the premises: Mr Good and Mr Keeling, both of them mature
professional men of considerable experience, and as Mr Lilley was unable to
attend he sent his assistant Mr Harvey, who at that time was a young man of 23
years of age who, if he will forgive my saying so, was at that stage very much
of a learner and had not yet acquired his ARICS qualifications. It is a matter
of some importance to enquire why the parties decided to hold this measuring.
Mr Lilley told me that since he and Mr Keeling were at loggerheads over whether
these corridors were to be included or not, they had, as it were, agreed to differ
in a telephone call shortly before September 14. Sensibly, they had agreed to
conduct this measuring so that the arbitrator should be presented with the
various material figures and could thereupon translate this award into hard
matters of pounds, shillings and pence, depending on how he decided the point
which was at issue. Mr Keeling in his evidence-in-chief did not actually say in
so many words that Mr Lilley had conceded the point that he, Mr Keeling, was
making, but gave me originally to understand that the measuring was conducted
because, tacitly at any rate, he took the view that Mr Lilley had conceded the
point. What he told me was this. He arranged for a photostat of Mr Good’s
preliminary calculations of the floor area to be produced.
We all
— that is the three of them —
had a copy
and started checking as we went. We started with overall
pillars, radiators and other similar installations. We also deducted the fire
corridors. We put into our deductions everything which I understood we agreed
was not to be included in the valuation.
Then he said
that they had gone to a conference room, having agreed the measurements, worked
out the calculations, sat down together and agreed them. He said:
I was not
aware of any reservation by Mr Harvey about whether the fire corridors should
not be excluded. We all accepted that they were deductible. In my experience
the object of these joint measurements is to try and agree the net area to be
presented for valuation.
On this issue
I think that it is Mr Lilley who is right and my reasons are these. First, in
the defence and the further and better particulars of that defence, which are
to be found in the pleadings, the plea was specifically made by para 4(ii) that
at the same time that Mr Keeling agreed with Esperanza’s surveyor to exclude
the corridors he agreed ‘with International’s surveyor that the same exclusion
of the corridors be made’, and when pressed for further and better particulars
of that the answer was: ‘The agreement was made between Jeremy Keeling of the
defendants and Mr Harvey, who attended on behalf of the surveyors engaged by
International.’ Mr Harvey, as I have
stated, was 23 years of age and quite clearly would not have been empowered to
make any such important decisions. It must have been obvious both to Mr Keeling
and to Mr Good that he was merely there to do the somewhat menial task of
taking the measurements and no more. Second, a small but important point: Mr
Keeling told me that everything which had been agreed, he thought, between
himself and Mr Lilley to be excluded was treated in the same way and taken out
of the calculations. But if one looks at the calculations which were made,
there was one little item, namely the kitchen on the sixth floor, which as Mr
Keeling told me was always in dispute between himself and Mr Lilley, which was
also excluded. In other words, it was treated in exactly the same way as were
the corridors although, as Mr Keeling well knew, it was in dispute. Third, Mr
Keeling was wholly unable to point to any communication or other circumstance
which would suggest that Mr Lilley, who clearly was in charge of negotiations
on behalf of his clients, had expressly conceded the point. Mr Lilley had simply
not replied one way or the other to Mr Keeling’s argument. Finally, it has to
be remembered that at that time Mr Lilley was in exactly the same position as
was Mr Keeling, in that he had no agreement, nor even the vestige of one on the
horizon, with General Accident.
Subsequently,
Mr Good wrote a letter dated September 26 1983, which reads:
Dear Mr
Keeling, Further to our meeting last Friday
— that is the
measuring —
as arranged I
now set out below the various facts that have been agreed between us for the
purpose of our independent submissions to the arbitrator, Mr A H P Gillett.
Floor areas: eighth floor 5,063 sq ft, seventh floor 5,065 sq ft.
These
measurements clearly imply that the corridors had been excluded. After dealing
with the sixth and fifth floors Mr Good goes on:
These are
agreed as net office areas and do not include the tea point on the eighth floor
or the kitchen on the sixth floor.
Mr Keeling
telephoned Mr Lilley and read out that letter (there are other pages which I
have not quoted) in full, as he said, to confirm Mr Lilley’s agreement with its
contents. Mr Lilley did agree. That seems to be fairly clear. But that begs the
question as to what Mr Lilley was agreeing to. Subsequently, Mr Keeling agreed
with Mr Good to exclude the corridors so far as the downward rent review was
concerned.
I return to
the question: Mr Lilley’s agreement to what?
Mr Keeling told me that having put the telephone down at the end of his
talk with Mr Lilley confirming Mr Good’s letter, from that moment he believed
that Mr Lilley had agreed with him that he would exclude the corridors in the
upward rent review. Having, I hope carefully, considered the evidence on this
topic, I fear that I am unable to accept that. I think that Mr Keeling was
highly optimistic that Mr Lilley would agree. He was rightly convinced that his
argument was correct, but I find that he was under no illusion at that or at
any subsequent time that Mr Lilley had actually agreed. I will state my reasons
as follows:
(1) I find that if there had been such an
agreement Mr Keeling’s subsequent conduct was wholly incredible. Going forward
in the history, when he came to make his submissions and counter-submissions to
the arbitrator, Mr Lilley sought to have the corridors on the seventh and
eighth floors included for valuation. This would have been in flagrant and
highly disreputable breach of an agreement made a few weeks before between two
experienced professional men employed by firms of repute. In those
circumstances I cannot think that Mr Keeling would have allowed the point to
pass without any comment whatever. He neither pointed out to the arbitrator
that he had come to a specific agreement with his opposite number nor contacted
Mr Lilley in terms of the most forceful reproach for his breach of faith.
(2) I accept Mr Lilley’s evidence that there was
in fact no agreement. He himself, as I have stated, was not in a position to
agree his downward review, since he had no protection at his back in the shape
of any agreement relating to the upward review.
(3) Mr Keeling’s case on this aspect seems to me
to have shifted more than once. Initially he sought to persuade me that the
measuring on September 14 took place only because, albeit tacitly, Mr Lilley
had agreed that the corridors should be excluded. However, the pleadings
specifically state that the agreement was made during the measurement with Mr
Harvey who, as I have already found, was quite clearly in no position to
negotiate such an important feature. Finally, when he was reading over the document
which is p 57 I think that Mr Lilley was agreeing what had been the results of
the measuring to which he had always acceded, that is to say agreeing the bald
figures as between office space and other spaces and no more. It is noticeable
that in the confirming letter which Mr Keeling wrote, he does not specifically
ask for confirmation that the corridors should be excluded. He merely refers to
‘your agreement to the areas which had been jointly measured by myself’ and
goes on to say that ‘these were net areas measured to the face of the
peripheral heating units and also exclude the fire corridors on the seventh and
eighth floors as well as the kitchen on the sixth floor and tea point on the
eighth floor’. So there again he includes in the phrase ‘net areas’ the kitchen
on the sixth floor which had always been in dispute.
I find as a
fact that at the time when Mr Keeling agreed with Mr Good that the floorspace
for valuation was not to include the corridors, Mr Keeling to his knowledge had
not extracted any similar agreement from Mr Lilley though, not without reason,
he confidently expected that he would be able to do so.
We now have to
apply those findings of fact to the allegations which have been made against
him and see where they lead. I say from the word ‘go’ that any allegations that
Mr Keeling should in some way have compelled Mr Lilley to agree with him are
wide of the mark. By definition a surveyor in Mr Keeling’s position could not
possibly compel Mr Lilley to do that which he was unwilling or unable to do. I
have to consider whether Mr Keeling’s action in coming to this agreement with
Mr Good, with no counterpart agreement from Mr Lilley in his rear, amounted to
a breach of the duty that Mr Keeling as an expert surveyor and valuer claiming
to possess specialist expertise in the field owed to the plaintiffs. I bear in
mind the imperative need to resist the temptation to be wise after the event.
As the case has been unfolded we know in one intake, as it were, the full
facts, facts which only presented themselves to Mr Keeling at various times.
His decision, it is true, turned out badly, but this is a far cry from saying
it was negligent. I was referred by Mr Livesey to the case of Saif Ali v
Sydney Mitchell & Co [1980] AC 198 and Mr Livesey drew the analogy
between the duty of counsel in preliminary advice and tactics in his conduct of
litigation and in that case he urged upon me the distinction which was made
between what was called an error of judgment and negligence. However, I think
that distinction now is very much subject to the dicta of the House of Lords in
Whitehouse v Jordan [1981] 1 WLR 246 wherein it was pointed out,
in forceful language, that all mistakes are in one form or another errors of
judgment. Some of those errors are not of such a degree as to warrant the
stigma of negligence, others, by reason of the fact that they fall into the
category of errors of judgment which should not be made by a professional man
exercising the degree of competence to be expected of him in the particular circumstances
in which he found himself, are rightly classed as a breach of duty.
Applying the
foregoing test or distinction, I am unable to hold that this decision on Mr
Keeling’s part amounted to a breach of his duty. Granted he was taking a risk.
It was a very slight risk indeed. We take some risks every day of our lives,
even when we act on behalf of other people. He was under no little pressure
from Mr Good to get the
was morally certain that he was right and that his view would prevail; either
Mr Lilley would concede the point or the arbitrator would come to what seemed
to him to be the obvious conclusion. Indeed Mr Keeling was right. The documents
which are now available make it quite clear that he was right, and that he
knew, or at any rate strongly believed, he was right is manifest from the fact
that he had under his hand documents 1 to 20 which virtually prove the point
that he was seeking to make, namely that the corridors were fire corridors.
Moreover, Mr Lilley, after the exchange of letters which I have already read
out, although not conceding defeat, had not come back with any contrary facts
or arguments; he had merely remained silent. Mr Keeling knew that Mr Lilley himself
had successfully argued the very same point in front of the valuation officer
in the rating survey which took place in 1978, so that Mr Lilley’s position
could be shown to be wholly illogical or at any rate inconsistent. Finally,
although I do not consider this the most important feature in the
circumstances, if he had argued otherwise in the downward-facing review Mr
Keeling would have been putting forward a wholly unmeritorious point in which
he had no faith and which might in fact, when it was duly decided against him,
have forfeited much of the arbitrator’s sympathy when it came to other disputed
points.
The
history, stage II
To continue,
on October 5 the arbitrator had a preliminary meeting in the International
arbitration and on November 7 Mr Lilley sent Mr Keeling a brief outline
description of what were called the net areas in sq ft wherein it will be seen
that the seventh and eighth floors were divided into offices and corridors. Mr
Keeling tells me that he raised an objection to the words ‘net area’ in view of
the inclusion of the corridors, but, again, finding as I do that Mr Lilley’s
agreement had gone no further than an agreement to measure them separately and
that Mr Lilley still intended to place both before the arbitrator, I do not think
that fact of much significance. It is interesting to compare this document with
the Esperanza document at pp 57 and 58 where, because there was an agreement to
exclude the corridors, no mention of them whatever was made. An extract from Mr
Keeling’s submissions is to be found at p 87, and at p 89 he deals specifically
with this question of the corridors. He says: ‘No value is attributed to the
miscellaneous plant rooms and corridors or the kitchen or tea rooms on the
sixth and eighth floors as these latter would be regarded as tenant
improvements’. Mr Lilley deals with this disputed point in these terms under
the heading ‘Basis of valuation’ and states: ‘All floor space capable of being
utilised should fall to be valued disregarding the individual tenants’ particular
layout’; and, dealing with the second to eighth floors, he writes: ‘Offices —
centrally heated including corridors’.
The Esperanza
award was duly made on November 21 and the corridors, as the arbitrator had
been told, were disregarded. As we see when the arbitrator stated the procedure
he had adopted in a later document, he considered this review, that is to say
the Esperanza review, entirely in isolation. He did not even open the documents
of the International review which, seeing that these reviews were by definition
coupled together, struck the various parties as somewhat surprising.
As is
customary, having received Mr Lilley’s representations, Mr Keeling made
counter-representations in the International award.
It was by this
time clear that, not, as I have found, in breach of any agreement, Mr Lilley
was sticking to his guns where these corridors were concerned and the way in
which Mr Keeling dealt with it is to be found on p 100:
Within the
list of space and areas shown by both Mr Lilley and myself, you will have
noticed reference to corridors on the ground floor and on the seventh and
eighth floors. These corridors are substantially as they existed at the time of
International Store’s own occupation of the property and are understood to be fire
corridors required by the appropriate authorities which therefore in my view
should not be valued. It will be recalled that in the arbitration with
Esperanza Ltd, these areas were not valued by agreement between Mr Good and
myself.
Considering
that Mr Keeling had virtually proof positive that these were fire corridors,
the phrase ‘understood to be fire corridors’ seems to me to be surprisingly
lukewarm in the context in which it was written.
However, back
came Mr Lilley’s counter-representations and this time Mr Lilley introduces a
new factor. He says:
Similarly Mr
Keeling has disregarded the corridors on the seventh and eighth floors — there
is no requirement for these corridors to be provided as is evidenced by
appendix 3 hereof.
Appendix 3 is
in fact a letter from the GLC in response to a specific inquiry which Mr Harvey
had been asked to make as to whether or not these corridors were to be regarded
as fire corridors which had been stipulated by the GLC. The letter I am sorry
to say is a masterpiece of obscurantism. It says as follows:
I confirm
that the Council approved the partitioning arrangements on the seventh and
eighth floors on April 15 1980. This included a corridor around part of the
central core (staircase, lifts, etc) giving access to rooms within those
storeys. There was no requirement for this corridor to be enclosed with
fire-resisting construction.
I find that in
answer to the question ‘Were these corridors required by the GLC?’ document 96 is wholly ambiguous.
It was in fact
open to Mr Keeling to make a further reply but he did not do so. The arbitrator
then dealt with the matter on the material which had been put before him and in
December 1983 he made the award whose effect was that these corridors were
included in the valuation. General consternation followed this decision and
subsequently the plaintiffs took advice from leading counsel on the award in
toto. I was told that it contained some eight or nine features which the
plaintiffs regarded as highly inconsistent and unsatisfactory and consequently
an application was made to the High Court arising out of the award. That
application I was told was ultimately settled between the parties, but the
settlement did not include any alteration to the inconsistency involved in the
floor rental on floors seven and eight and was without prejudice to any further
argument in that regard. It is perhaps somewhat surprising that this error,
which now the facts are known is so obvious, was not put right, but the
reasonableness of that settlement and the omission of this feature from that
settlement was not called in question and since the reasons have not been
explored I do not think it would be right for me to comment any further upon
it.
The second
limb of criticism made against Mr Keeling
It is
necessary to take stock of the position immediately following receipt of the
final submissions. The following features occur to me as highly relevant and
they should have also occurred to Mr Keeling.
(1) Mr Lilley was holding his ground on this
point. Maybe it was, Mr Keeling thought, a try on, but there was an issue being
put to the arbitrator for the latter to decide.
(2) As between Mr Lilley and Mr Keeling, the
decisive argument was, again rightly, thought to be whether these corridors were
fire corridors stipulated by the GLC or some tenants’ partitioning for their
own purposes. That is the battleground upon which the documents show the two
surveyors were fighting.
(3) Mr Lilley had produced a decidedly ambiguous
letter from the GLC and claimed that it supported his case. Ambiguous letters
are capable of being interpreted wrongly.
(4) Mr Keeling knew that it was a section 20
building and therefore that it was 99 per cent certain that these corridors had
been part of the GLC’s stipulation.
(5) Mr Keeling had in his hand the trump card,
virtually conclusive proof that would clinch the argument in his favour by
virtue of his knowledge of his firm’s file during the acquisition of the
premises, namely documents 1 to 20.
I should say
in passing that documents 1a and 1b, perhaps the most decisive documents of
all, were not to hand and they have only appeared during the course of this
case. However, if one looks at the extracts from that file one sees, first of
all, that Gordon Allkins, a partnership at that time acting for interested
potential buyers, stated in terms that they ‘particularly noted that on floors
seven and eight a permanent fire escape corridor has to be provided in ‘race
track’ form around the northern half of the centre core’. Again, in document 12
there is an extract from a message pad circulating internally among the
defendants’ staff: it refers to a telephone call from Gordon Allkins and there
is the entry:
Must retain the race track corridors on these upper two floors because
they are more than 80 feet above street level. 80 feet is the maximum that the
GLC Fire Brigade can fight a fire with conventional turntable ladders —
therefore this means of escape must be retained, even though planning to have
open plan layout. Please note that the corridors would then not be nett
lettable space.
Finally, there
is document 14, written by Mr Neal to Conway Relf, making this very point, to
which the reply states as follows:
Demise: We
have reviewed the discrepancy in the floor area pointed out in your letter of
December 14, and after careful measurement can concede that
area in respect of the seventh and eighth floors and the ground floor.
There, in
fact, are the agents at the time for International conceding that these are
fire corridors.
It would have
taken no great labour or expense to place that evidence before the arbitrator.
Indeed, Mr Keeling could even have done what was done subsequent to the award
and that is to go in person to the relevant fire authority in the GLC and get
the matter sorted out. In the circumstances, it is my view that Mr Keeling, by
doing nothing further, fell short of his duty. Not unnaturally, Mr Keeling was
asked about this both in examination-in-chief and in cross-examination. In
examination-in-chief he told me that he did not think that the
counter-submissions by Mr Lilley incorporating this ambiguous letter from the
GLC concerned him unduly. He said:
Appendix 3
did not make any dramatic sense to me in isolation. I thought there was
confusion with what Esperanza had installed. I still did not believe, despite
this letter, which seemed unclear to me, that these could ever be found other
than fire corridors. I believed that the arbitrator was bound to deal
consistently with the two reviews. So I saw no need to adduce any further
evidence. I thought that if the arbitrator had any worries he would call us
back and sort it out.
In
cross-examination he added this:
By the time
for the counter-submission I decided not to rely on the agreement
— that is the
agreement he claimed to have made with Mr Lilley —
but to rely
solely on the strength of my case. I did not produce any of the documents 1 to
20 because I had to deal with a lot of points in a short time and I believed my
submissions on the question of the corridors were sufficient. If the arbitrator
had the slightest doubt I assumed he would call for further clarification. I
did not give a thought to whether the arbitrator knew about section 20. Despite
the fact that Mr Lilley had included appendix 3 as the only documentary
evidence, I did not see fit to put any contrary documents forward.
It has been
urged upon me that the criticisms in this regard presuppose too high a duty on
a surveyor and valuer in Mr Keeling’s position. Mr Livesey drew an analogy with
the reasoning of the House of Lords in Rondel v Worsley [1969] 1
AC 191. Without claiming the same immunity which the House accorded to
barristers in the actual conduct of litigation both before entry into court and
during, he submitted the position of a surveyor in deciding what evidence to
submit to an arbitrator in these circumstances was really no different from
that of a barrister advising on evidence, deciding which witnesses to call and
so forth. The decision of the House in Rondel v Worsley was
largely on public policy and that means that it was implicit in their
lordships’ reasoning that a barrister might indeed be guilty of conduct which
in other circumstances would fall short of the fulfilment of his duty of care
but would yet be immune from process. I have to say that I consider that for
once during a long career, which I have no doubt has been admirably conducted,
Mr Keeling in this particular instance fell short of the proper standard. He
had, after all, taken a risk, albeit a slight risk, in allowing the Esperanza
arbitration to proceed without a corresponding agreement concerning these
corridors. That risk having been taken, it seems to me that there was all the
more reason to do his utmost to see that nothing went wrong and to leave
nothing to chance. The analogy between his decision not to adduce further
documents and that of a barrister advising on evidence is not, in my view,
exact. Witnesses can be unsatisfactory, they may even be disastrous, they may
depart radically from their proof; but documents do not have these forensic
vices. It would have been so simple and so conclusive to win the argument which
was in process between himself and Mr Lilley. The documents, notably 14 and 15,
would have given proof to that which up to now had only been an assertion on
his part and I think that in this regard he was so convinced that he was right
that he became somewhat blinkered to the danger that the arbitrator might
pursue a course which I think everybody has agreed was incorrect.
It is now
necessary to square up to the question of whether this breach of duty on the
part of Mr Keeling caused or contributed to the loss which was sustained by the
plaintiffs. Since that loss was the direct consequence of the award the
question becomes whether or not it played any part in the arbitrator’s
thinking. Mr Teverson went so far as to urge upon me that, the breach of duty
being established, the defendants could not even be heard to say that it had
not caused the damage. He cited a passage from the case of Heywood v Wellers
[1976] QB 446 at p 459. I need not recite facts of that case other than to
say that it was an action against a solicitor for not conducting a certain
piece of litigation in accordance with the best interests of his client. Lord
Denning MR said:
It was
suggested that even if the solicitors had done their duty and taken the man to
court he might still have molested her. But I do not think they can excuse
themselves on that ground. After all, it was not put to the test: and it was
their fault that it was not put to the test. If they had taken him to court as
she wished — and as they ought to have done — it might well have been effective
to stop him from molesting her any more. We should assume that it would have
been effective to protect her, unless they prove that it would not —
and the learned
Master of the Rolls cited Coldman v Hill [1919] 1 KB 443, an
action very much on its own facts between bailor and bailee in support.
I do not read
that case, or indeed any of the others on this subject, as any authority for Mr
Teverson’s proposition that the defendant found in breach of a similar duty is
not even allowed to argue causation. It seems to me that there is a general
rule of law that proof of causation lies on a plaintiff. To this rule there are
various exceptions, such as the situation between bailor and bailee and also
where there has been a breach of some statutory or other duty which amounts to
a duty to take precautions against a specific event, such as was before the
House of Lords in the case of McGhee v The National Coal Board [1973]
1 WLR 1, which was referred to in argument.
I would hold,
in so far as it is necessary to do so, that this case does not fall within any
of the exceptions and the burden of proof continues to lie upon the plaintiffs.
In my judgment, wherever the burden of proof may lie, the court before making
any award in a plaintiff’s favour must still be satisfied, albeit upon the
narrowest of balance of probabilities, that the breach of duty caused or
contributed to the loss. The significance of the burden of proof in this regard
is no more than that either from a neutral factual position or upon proof of
sufficient facts the court will draw the necessary favourable inferences unless
the defendant calls evidence to gainsay them.
Where the
fault complained of is one of commission its effect is generally relatively
easy to follow. The links in what lawyers like to call the chain of causation
are objectively visible: fire has burnt stick, stick has beaten dog, dog has
bitten pig, pig has got over the stile and the old woman has got to market. But
where the fault is one of omission, as here, the matter becomes more
hypothetical. One has to ask what the omission led to and what would have
happened had the omission not been made. For the present purposes one has to
ask what effect on the arbitrator’s decision did the failure to prove that the
corridors were fire corridors have, and I think that the starting and finishing
point of this inquiry is to determine upon what basis the arbitrator made his
award. The entire award is to be found in bundle 3, section 5, and this is the
sum total of what the arbitrator says on the subject. Reading now from bundle
3, at p 6 he set out the arguments which had been put to him under section 4.00
headed ‘The Dispute’. By 4.01 (iii) the arbitrator wrote: ‘Mr Keeling claims
that certain corridors and two kitchens on the ground, seventh, eighth and
ninth floors totalling 1,520 sq ft are for means of escape in case of fire’ — I
doubt if that applied to the kitchens, but let that pass — ‘and should not be
valued’. When he deals with those arguments, this, in a crucial passage, is how
he put it:
Concerning
the inclusion or exclusion of corridors; I do not accept Mr Keeling’s
submission regarding the seventh and eighth floors that these should be
excluded. I accept Mr Lilley’s view that, in the context of an entire building,
corridors within working areas must be included for rental purposes. However,
in the case of the ninth floor, the corridor is purpose-built and is the only
access to the landing and external we; I have therefore excluded this.
In referring
to Mr Lilley’s argument, the reference was to p 93 of vol 2 wherein Mr Lilley
set out his case, which I have already quoted, for the inclusion of these
corridors in the words:
All floor
space capable of being utilised should fall to be valued disregarding the
individual tenants’ particular layout.
When asked to
state his reasons more fully with a view to the High Court referral the
arbitrator did not elucidate this particular item any further. There is no
mention of it at all in his later reasons. So one must make what one can of the
words used. Counsel and myself have discussed this passage at length. I have
read and reread it to try to test all possible interpretations. After all this,
it seems to me that the only sensible interpretation which I can make of these
words is that the arbitrator had come to the view that whether or not these
corridors were fire corridors was irrelevant, and that since they constituted
floorspace capable of being utilised, to use Mr Lilley’s phrase, they should be
valued. Herein he may well have failed to remind himself that fire corridors
have to be kept clear, but that is beside the point. In other words, he was
saying whether these are fire corridors or not
follows that no further proof of the nature of the corridors would have
affected the decision. Indeed, the arbitrator may well have accepted Mr
Keeling’s contention that they were fire corridors, but the words he used lead,
inescapably in my judgment, to the conclusion that he rejected Mr Keeling’s
submission not upon a factual basis but upon a matter of principle.
For these
reasons I am unable to hold that Mr Keeling’s actionable failure to place the
requisite further evidence before the arbitrator played any causative part in
the plaintiffs’ loss. That loss seems to have been caused because unexpectedly
the arbitrator decided each of the two arbitrations before him without
reference to the other and made a series of findings which the parties are
agreed were inconsistent.
In those
circumstances, in my judgment this claim for that reason must fail and also in
those circumstances it becomes unnecessary to consider the somewhat complex but
by no means uninteresting arguments which were addressed to me on the question
of damages. I have considered those arguments in case it is incumbent upon me
to make any findings of fact should this matter be taken further. At this
stage, subject to anything counsel may say, I do not think that there are any
facts I have to find. The one issue which factually was still in dispute has
yet to be resolved and I think the resolution of that should be left to any
court reconsidering this matter if it comes to it.
Judgment for
defendants with costs.
For further cases on this subject see p 147
