Negligence – Breach of contract – Damages – Claimant acquiring property advertised with option to purchase additional land – Defendant conveyancer failing to include option to purchase in conveyance – Claimant’s proposed development depending on option – Claimant seeking damages for loss of chance — Whether claimant establishing substantial chance — Whether claimant failing to mitigate loss — Claim allowed in part
The defendant conveyancing firm acted for the claimant on the purchase of a dilapidated cottage situated on a plot of 0.12ha. The property had been advertised with an option for the buyer to purchase, within 12 months, additional land at the lower end of the garden for £20,000, if the vendor’s application for planning permission to erect one dwelling on that land was unsuccessful. The additional land extended to 0.09ha.
Contracts for the sale of the property were exchanged and completion took place simultaneously. At that time, the claimant believed that the contract contained an option in the form in which it had been advertised. Instead, it contained a seller’s option.
The defendant admitted negligence in: (i) failing to appreciate the nature of the option contained in the contract; and (ii) erroneously advising the claimant that should the vendor fail to obtain planning permission within 12 months of completion, he would be able to purchase the additional land. The defendant also admitted negligence in advising the claimant to enter into the contract when it contained a seller’s rather than a buyer’s option.
The vendor refused to sell the additional land to the claimant. The claimant brought an action for damages, contending that he was entitled to damages for loss of profit that he would have made had he been able to redevelop the property and the additional land together, by building a detached house. The court was asked to determine what, if any, damages, the claimant was entitled to recover from the defendant for its negligence.
Held: The claim was allowed in part.
In principle, there was no reason why the claimant could not recover consequential losses based on the profit that he would have made had he been able to build the new property. That was subject to the proviso that he would be able to recover such damages only if they fell within the second rule in Hadley v Baxendale (1854) 9 Ex 341, namely that damages for breach of contract should be such as might reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as being the probable result of it.
To that knowledge, which a contract breaker was assumed to possess, might have to be added knowledge that the contract breaker actually possessed of special circumstances, outside the ordinary course of things, a breach of which would be liable to cause more loss. Such a case attracted the operation of the second rule so as to make additional loss recoverable. In the instant case, the evidence indicated that the defendant knew that the claimant intended to purchase the property to profit from it development and that the additional land would play a role. That was sufficient to give the defendant knowledge of special circumstances outside the ordinary course of things of such a kind that a breach was liable to cause the claimant loss: Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 followed; Jenmain Builders Ltd v Steed & Steed [2000] Lloyd’s Rep PN 549 distinguished.
In order to succeed in a claim for loss of chance, the claimant had to prove, as a matter of causation, that he had a real or substantial rather than a speculative chance. If he ere able to do so, the evaluation of the chance would form part of the assessment of the quantum of damages. The claimant had to satisfy the court that the loss he had suffered was not nominal; he was not obliged to prove more than that he had lost something of substance: Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 considered.
On the evidence, had the claimant been properly advised, he would have had an 85% chance of being granted the buyer’s option. Moreover, the prospect of obtaining the planning permission for the additional land, at least on appeal, would have been 40%. The claimant had therefore lost a potential profit of £375,000 less a profit of £245,000 that he might have made by undertaking a smaller project, making a total balance of £130,000.
The percentage prospects of any future event that depended on the hypothetical actions of third parties were cumulative and had to be multiplied together; it was appropriate to take a less than entirely mathematical approach where the factors affecting the cumulative future events overlapped or were affected by the same considerations. The claimant was therefore entitled to recover 29% of the balance for the loss of chance of making the additional profit had he acquired the additional land: Hanif v Middleweeks (a firm) [2000] Lloyd’s Rep PN 920 considered.
Accordingly, the claimant was entitled to damages of £37,700 (£130,000 x 29%), which would put him in the position he would have been in had the buyer’s option been granted to him
Simon Williams (instructed by Ross & Craig) appeared for the claimant; Eva Ferguson (instructed by Beachcroft LLP, of Bristol) appeared for the defendant.
Eileen O’Grady, barrister
