It is sometimes said, in the context of the
assessment of damages, that ‘the court should not speculate when it knows’.
This means that where, as quite often occurs, compensation for some wrong done
(be it a breach of contract or a tort) falls to be assessed on the basis of the
likely effect on the plaintiff, the court must make an estimate of what that
effect will be on the basis of the evidence provided. But, if the delay before
a case comes to trial is such that the actual effect on the plaintiff is known,
damages should be assessed on that basis and not on what earlier seemed
probable.
All this
seems reasonable and logical. However, legal principles are seldom that simple
and straightforward, and this one is no exception.
Two recent
cases of solicitors’ negligence in conveyancing transactions, both decided by
the Court of Appeal, illustrate how difficult it is to predict just when
subsequent events will be allowed to alter the assessment of damages which
would otherwise have been made.
The first of
these cases, Wapshott v Davies Donovan & Co; Kidd v Dale
& Newbery [1995] EGCS 199, arose out of the purchase in 1986 by the
plaintiffs, two young couples, of single-bedroomed flats in west London. Each
flat was purchased on a 999-year lease for some £38,000, and in each case the
buyers obtained a building society mortgage.
Unfortunately,
what the solicitors of each purchaser negligently failed to discover (and which
came to light only when the plaintiffs, having started families, wanted to
sell) was that the flats had been built on a strip of land to which the
developer had no title. As a result, the flats were effectively unsaleable; the
two young couples were ‘locked in’ to cramped and unsuitable living conditions.
When the
plaintiffs sued their respective solicitors for negligence the trial judge
awarded them the difference in value between what their flats should have been
worth and what they were in fact worth at the date of purchase in 1986. He
assessed the lower figure as nil, unswayed by the fact that the whole of the
land on which the flats were built had since been acquired by a company which
had negotiated with the plaintiffs and was close to granting them valid leases.
This ruling
was confirmed on appeal, despite the fact that by this time (ie 1993) the
leases had actually been granted and duly registered! In effect, therefore, the
court insisted that there was no good reason to depart from the normal
‘diminution in value at date of purchase’ measure of damages.
The approach
of the Court of Appeal in Wapshott is in stark contrast to that taken by
the same court some three months later in Kennedy v Van Emden
[1996] NPC 56.
Here the
plaintiff complained that when, in 1983, she purchased the underlease of a flat
at a premium of £49,000, her solicitors negligently failed to advise her that
the premium was unlawful, and that she would thus be unable to recoup her money
if she assigned the flat. The plaintiff accordingly claimed on the basis of
‘diminution in value at date of purchase’ and argued that, since her lease at
the date of purchase was in fact worthless, her damages should consist of the
entire purchase price.
This claim
raises strong echoes of Wapshott, but the court on this occasion was not
prepared to ignore the fact that, in 1989, the Housing Act 1988 made premiums
lawful. Since the plaintiff had not, in fact, been prevented from assigning and
recouping her capital, she was entitled to nothing under this head of damages.
complications
According to
section 1(1) of the Civil Liability (Contribution) Act 1978, ‘any person liable
in respect of any damage suffered by another person may recover contribution
from any other person liable in respect of the same damage’. Thus, for example,
where a mortgage lender sues a valuer for negligence, he or she may be entitled
to turn on the lender’s solicitors and say: ‘Since the lender could just as
easily have sued you for negligence in respect of this loan, you must
contribute to the damages which we have been ordered to pay.’
In fact, the
1978 Act has not been much used in cases involving mortgage valuations,
although Bristol & West Building Society v Christie [1996]
EGCS 53, on which we commented on May 4 1996, is a good example.
However,
construction litigation is a very different matter, for it seems that
dissatisfied clients there routinely take on architects, specialist engineers,
contractors and subcontractors at the same time. A recently reported decision
of the Court of Appeal in that area throws valuable light on just how far the
1978 Act extends.
The case of Birse
Construction Ltd v Haiste Ltd [1996] 2 All ER 1 arose out of a
contract made in 1988 between the plaintiff company and Anglian Water Authority
for the design and construction of a reservoir. Like most such contracts, this
one required an ‘engineer’ to supervise the works and Anglian duly appointed a
Mr Newton, one of its employees, to this position. The design of the reservoir
was carried out on behalf of the plaintiffs by the defendants, a firm of
consulting engineers.
When the
reservoir was completed it proved to be seriously defective and Anglian started
proceedings against the plaintiffs for breach of contract. This action was
settled on terms that the plaintiffs constructed a replacement reservoir at
their own expense; the plaintiffs in turn sued the defendants for the cost,
claiming that it was their defective design which had caused the problem. Then
came an unexpected twist: the defendants issued a third-party notice against Mr
Newton, arguing that he was guilty of breach of contract and negligence towards
Anglian, was thus ‘liable in respect of the same damage’ as they were and could
therefore be called upon to contribute to whatever damages they might have to
pay.
This
argument, despite succeeding at first instance, cut no ice with the Court of
Appeal. As Nourse LJ explained, the 1978 Act deals with the situation where A
is liable to B for some damage and seeks contribution from C, who is liable for
‘the same damage’. In his lordship’s view this can mean only ‘damage suffered
by that other person, ie B’. It was simply not possible to regard Newton’s
liability (if any) to Anglian as ‘the same’ as Haiste’s liability to Birse, and
so no statutory right to contribution arose.
