Professional negligence — Breach of duty — Compensation — Solicitors accepted liability for failing to inform appellant of defect in title to property — Court awarded damages on basis of diminution in value — Whether appellant entitled to additional damages for expenditure thrown away — Appeal dismissed
In 1993, the appellant purchased a seaside premises and adjacent unregistered land from S for £240,000, with the intention of converting the property into flats and bed sitting rooms. S had previously purchased the premises for £130,000 from administrative receivers appointed by a bank. The property was subject to a mortgage and debenture in favour of the bank, together with three further charges in favour of three separate charges. These charges had not been overreached when the sale was made by the receivers.
The respondent firm of solicitors acted for both S and the appellant. It accepted liability for failing to inform the appellant, prior to completion, that the three charges would remain after completion of the sale. The appellant issued proceedings against the respondent. An expert appointed jointly by the parties concluded that the open market value of the property, at the time of the appellant’s purchase, was £130,000. The judge accepted that valuation as representing the value of the property without the charges. However. he found that its actual value subject to the charges was £85,000. Accordingly, the appellant was entitled to £45,000 damages for the diminution in value: see Greymalkin Ltd v Copleys (A Firm) [2004] EWHC 1155 (Ch); [2004] PLSCS 130.
The appellant appealed, but permission was limited to the question of whether, in the compensation he had awarded, the judge ought to have allowed for expenditure thrown away by the appellant in the period prior to its discovery of the defective title. The appellant contended it should receive additional damages, inter alia, in respect of the cost of insurance, financing agreements, works to the roof, the guttering and windows, hiring a project manager and professional fees of architects and surveyors.
Held: The appeal was dismissed.
The judge’s decision was one that he had been entitled to make. The diminution in value attributable to the defect in title, measured at the date of breach, correctly represented the loss attributable to that breach. There was no basis for making any award in respect of the additional items claimed by the appellant.
Damages might be awarded for “costs of extrication”. An award could be made, in addition to that made for diminution in value, of expenses incurred by the appellant in extricating itself from the transaction upon discovery of a defect about which it should have been informed. However, the items claimed by the appellant did not constitute costs of extrication. Nor could it be said that the sums claimed had been thrown away. The expenditure had not been wasted but had in fact enhanced the value of the property.
The real problem was that the appellant had failed to establish, on the evidence, the losses for which it was seeking damages.
Geraint Anthony Jones QC (instructed by Darwin Gray, of Cardiff) appeared for the appellant; Andrew Macnab (instructed by Henmans, of Oxford) appeared for the respondent.
Eileen O’Grady, barrister
