Defendant experts negligently understating impact of intended development on neighbours’ rights to light – Developers modifying plan on discovery of experts’ mistake – Developers shelving plans with onset of recession – Developers restarting with radically new plan – Developers claiming costs of modifying original plan – Trial judge finding for defendants on issue of causation – Plaintiffs’ appeal dismissed
In 1985 the plaintiffs acquired Winchester House in the City of London, which was bounded by London Wall to the north and Old Broad Street to the east. A substantial building owned by Morgan Grenfell stood to the west. In November 1989 the plaintiffs, intending to demolish the existing building, obtained detailed planning approval of their plans for a proposed new building (the Old Broad Street scheme), which would be marketed as “100 Old Broad Street” and would possess an appropriately-sited main entrance. The defendant firm of surveyors had been retained to advise upon the ways in which that scheme might affect rights to light enjoyed by owners of neighbouring buildings. In January 1990 the defendants advised that if the plaintiffs were to be sued by Morgan Grenfell the actionable loss of light would not be sufficient to warrant injunctive relief; consequently, negotiations should proceed on the basis that the outcome would be a relatively modest award of damages. However, in November 1990 the defendants found reason to change their opinion, following which another firm of experts confirmed that the Old Broad Street scheme was indeed injunctable. Morgan Grenfell refused to countenance a monetary solution and, in June 1991, all design work on the Old Broad Street scheme was brought to a halt.
In October 1991 the plaintiffs’ architects brought out a revised scheme for a building fronting Old Broad Street, which, while possessing minor drawbacks, largely avoided the legal problems of the original scheme. By that time, however, the plaintiffs had reached the conclusion that a speculative office building in the City of London had become uneconomic. No relevant design work of any kind was undertaken over the following two years. In November 1993 the writ in the present action, alleging negligence on the part of the defendants, was issued. In January 1994 the plaintiffs, encouraged by a more favourable economic climate, looked at the development afresh. Having regard, inter alia, to a major development to the north of the site as well as a relaxation of local planning requirements, the plaintiffs took the view that the attractions of an Old Broad Street address had diminished and that much was to be gained by a radical redesign, this time for a building fronting London Wall. Full planning permission for a New London Wall scheme (the NLW scheme) was granted in October 1995, and, in due course, the building was constructed.
At a hearing before the Official Referee in 1996 the plaintiffs claimed damages of £11.122m for wasted expenditure on design and other professional fees over the period January 1990 to June 1991. As an alternative head of damages the plaintiffs claimed £2.932m, such amount being the reasonably foreseeable costs that the plaintiffs would have incurred on amending the original Old Broad Street scheme if they had been correctly advised in January 1990. The defendants did not dispute that they were in breach of contract, but contended that neither head of damage could, as a matter of causation, be attributed to the advice they had given. That contention was accepted, and the plaintiffs obtained only nominal damages. The plaintiffs appealed.
Held: The appeal was dismissed.
1. On the evidence before him the judge had rightly found that if the correct advice had been given, the plaintiffs would have: (i) spent money on a scheme not unlike the revised Old Broad Street scheme; (ii) suspended that scheme for the duration of the recession; and (iii) restarted the development in January 1994 with a scheme resembling the NLW scheme, which, when compared with the abandoned Old Broad Street schemes, would provide “an enormous advantage to the developer” in terms of additional floor space. The judge was accordingly correct in finding that the fees expended on the two Old Broad Street schemes would have been wasted in any event. On that finding, and adopting a common-sense approach, the negligence of the defendants, though undoubtedly the immediate reason for incurring the expenditure, could not be described as the “effective” or “dominant” cause of the plaintiffs’ loss: see Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196; Quinn v Burch Bros (Builders) Ltd [1966] 2 QB 370; and Galoo Ltd v Bright Grahame Murray (a firm) [1994] 1 WLR 1360. The defendants could not be held liable for consequences that would have occurred even if the information had been accurate: see per Lord Hoffman in South Australia Asset Management Corporation v York Montague Ltd [1996] 2 EGLR 93.
2. In deciding what the plaintiffs would have done if properly advised, the correct point in time was the date when the cause of action arose, which, in the present case, was June 1991 at the very latest.
3. The claim to the alternative measure rested on the proposition, which the court accepted, that damages might be claimed for the anticipated cost of rectifying a breach, provided that the intention to rectify was both genuine and reasonable in the circumstances: see Imodco Ltd v Wimpey Major Products Ltd [1987] 40 BLR 1 and Radford v De Froberville [1977] 1 WLR 1262, as approved by the House of Lords in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. As at July 1991, therefore, the plaintiff did have such a claim. However, it was a general rule that a change in relevant circumstances between the date when a cause of action arose and the date of the trial should be taken into account when assessing damages: see per Lord Hoffman in SAAMCO (supra) at p97B. An intention to rectify the breach was necessarily abandoned when the plaintiffs adopted the NLW scheme (well before trial) in January 1994. To allow recovery, even on the alternative basis, would compensate them for a loss that they had not suffered.
Christopher Thomas QC and Ian Pennicott (instructed by Norton Rose) appeared for the plaintiff appellants; Richard Fernyhough QC and Sarah Hannaford (instructed by Cameron McKenna) appeared for the defendant respondents.
Alan Cooklin, barrister
