Commercial letting — Expiry of lease — Erroneous service of notice opposing grant of new tenancy — Solicitor admitting negligence — Assessment of damages — Loss of chance — Judge rejecting evidence of witnesses for appellant landlord — Appeal allowed
The appellant instructed the respondent firm of solicitors to act on its behalf on its acquisition of the freehold of an industrial estate. One of the units was occupied by W, which had taken over the business of its dormant sister company, L. Since the tenancy of that unit was imminently due to expire, L had served notice on the previous landlord requesting a new tenancy under the provisions of the Landlord and Tenant Act 1954. The landlord had served a counternotice on L, indicating its wish to redevelop and that it would therefore oppose the grant of a new tenancy on the ground in section 30(1)(f). The effect of the counternotice, if valid, would be to give the tenant a vested right to compensation of £179,000 on vacating.
The appellant did not plan to redevelop and wished to achieve a new letting to W without having to pay compensation to L. It was unclear as to which of W and L was the actual tenant under the existing lease. The appellant hoped that W would accept that it was the tenant, and would consequently negotiate a new lease on the basis that the counternotice served on L by the previous landlord was invalid and did not give rise to a right to compensation. The appellant instructed the respondent to serve a notice on W, indicating that it did not oppose the grant of a new tenancy. However, the notice served on W expressly opposed the grant of a new tenancy on the same ground as before. Negotiations for a new lease failed, and W ultimately vacated the premises. A sum was agreed for dilapidations, but only a fraction of this was paid since W set off against it the right to £179,000 statutory compensation.
The appellant brought proceedings against the respondent in negligence. It contended that the service of the wrong notice had lost it the chance of avoiding the payment of compensation and of achieving a new lease with W. The respondent admitted negligence but disputed the appellant’s assumptions as to the lost chance.
The judge found that if an unopposed notice had been served, W would have sought the opinion of counsel, who would have advised that L was the tenant. In reaching that conclusion, he rejected the evidence of W’s solicitor and its property manager to the effect that W would have accepted that it was the tenant without seeking counsel’s advice. The judge found that W’s only loss was a percentage representing the litigation risk, of which counsel would also have advised, that W might be found to be the tenant. The judge assessed that risk at 30%, and accordingly awarded damages of £53,000, representing 30% of £179,000. The appellant appealed.
Held: The appeal was allowed.
The judge had been entitled to reject the witnesses’ evidence, since they were being asked to speculate on hypothetical facts that had not in fact occurred, and to reach his own conclusion in the light of the commercial circumstances: Alliance & Leicester Building Society v Paul Robinson unreported 4 May 2000 (CA) applied. Had an unopposed notice been served, W would have had every reason for arguing that L was the tenant. However, the judge had not based his conclusion upon any assessment of the credibility or reliability of the witnesses. He had not acknowledged their positions, and had given no reason for rejecting their unchallenged evidence. In the circumstances of the case, he had not been entitled to rule out altogether the chance that W might not have sought the advice of counsel. That being so, there was no evidential basis for distinguishing between the two rival submissions, and the proper conclusion on all the evidence was that there was a 50% chance that W would have sought counsel’s advice and a 50% chance that it would not.
Consequently, £89,000 would be awarded to reflect 50% of the statutory compensation paid by the appellant. Further damages would be awarded to reflect a percentage of the increased capital value and rent that would have resulted from a successful letting to W.
Bernard Livesey QC (instructed by Vizards Livesey Cameron Walker) appeared for the appellant; Roger Stewart QC and David Halpern (instructed by Barlow Lyde & Gilbert) appeared for the respondent.
Sally Dobson, barrister
