Negligence — Solicitors — Conveyancing — Damages — Whether damages must be assessed at date of breach
In each of these conjoined appeals the
respective plaintiffs, at different times, acquired the unexpired terms of
leases of flats in the same building; each plaintiff paid a substantial
premium. In each case the plaintiffs claimed damages against the respective
defendant solicitors alleging negligence in, inter alia, failing to
advise that the premiums were unlawful having regard to the provisions of Part
IX of the Rent Act 1977. The underleases were protected tenancies and, by
virtue of section 120(1) and (2) of the 1977 Act, the transferors of the
underleases commit offences by requiring or receiving premiums. The plaintiffs
claimed damages on the diminution in value basis in that they had acquired
leases for premiums and would not be able to charge any premiums to assign on;
each of the plaintiffs was entitled to the difference between the price paid
and the value of the respective underlease at the date of the defendants’
breaches (nil). They appealed the decision of the judge below who held that the
diminution in value rule ought not to be applied and that damages ought to be
assessed at the date of the trial; these were nil as the amendment to section
127 of the Rent Act 1977, abolishing the restriction on premiums, had taken
effect before any further assignment of the underleases.
application of the diminution in value rule and the general rule that damages
are assessed as at the date of the breach would be a mechanistic application.
Assessment of damages at the trial date more accurately reflects the overriding
compensatory rule of damages. Compensation is for real not hypothetical losses;
it is not for the recovery of a loss which might have been, but has not been
suffered. The task of the judge on the date of judgment was to award to each
plaintiff that sum of money which would on that date put him, as near as a money
award could do so, into the position he would have been in, on that date, had
there been no negligence on the part of the solicitor. It was irrelevant that
had the trial been before the amendments to section 127 of the 1977 Act,
damages would then have included the recovery of the unlawful premiums paid.
The following cases are referred to in
this report.
Ailion v Spiekermann [1976] Ch 158;
[1976] 2 WLR 556; [1976] 1 All ER 497; [1976] 1 EGLR 48; (1975) 238 EG 48
Bwllfa & Merthyr Dare Steam
Collieries (1891) Ltd
v Pontypridd Waterworks Co [1903] AC 426
County Personnel (Employment Agency) Ltd v Alan R Pulver & Co
[1987] 1 WLR 916; [1987] 1 All ER 289; [1986] 2 EGLR 246, CA
Curwen v James [1963] 1WLR 743; [1963] 2
All ER 619, CA
Dodd Properties (Kent) Ltd v Canterbury City Council
[1980] 1 WLR 433; [1980] 1 All ER 928; [1980] 1 EGLR 15; [1980] EGD 229; (1979)
253 EG 1335, CA
Johnson v Agnew [1980] AC 367; [1979] 2
WLR 487; [1979] 1 All ER 883; (1979) 38 P&CR 424; [1979] 2 EGLR 146; [1979]
EGD 969; 251 EG 1167, HL
Livingstone v Rawyards Coal Co (1880) 5 App
Cas 25, HL
Miliangos v George Frank (Textiles) Ltd
[1976] AC 443; [1975] 3 WLR 758; [1975] 3 All ER 801; [1976] 1 Lloyd’s Rep 201,
HL
Murphy v Stone-Wallwork (Charlton)
[1969] 1 WLR 1023; [1969] 2 All ER 949, HL
These were appeals by the plaintiffs in
three conjoined appeals, Josephine Kennedy, Neil Patrick Jordan, Frederick
Michael Burdge and Raymond Lavender, in proceedings in negligence and breach of
contract against the respective defendants, Kenneth Bentley van Emden, Gershon
Young Finer & Green and Howard Jacobs, Mary Kane and Anthony Blok.
Edward Denehan (instructed by Seddons)
appeared for the plaintiffs; David Neuberger QC and Anthony Connerty
(instructed by Wansbroughs Willey Hargrave) represented the defendants.
Giving the first judgment, NOURSE LJ
said: These appeals from decisions given by Judge Maddocks, sitting as a judge
of the Chancery Division, in three separate actions against solicitors for
professional negligence raise an identical question on damages. Liability is no
longer in issue. The actions were tried consecutively over about two weeks in
the summer of 1994, judgment in all three being delivered on July 19. The judge
awarded the plaintiffs damages under one head, but held that they had suffered
no loss under another. Against the latter holding the plaintiffs now appeal.
126 Hamilton Terrace, St John’s Wood,
London NW8, is a house converted into five flats. On July 5 1983 the plaintiff
in the first action, Josephine Kennedy, took a transfer of an underlease of
flat 2 on the ground floor for a term of 55 years less 10 days from June 24
1974 at an annual rent of £350, subject to review. A premium of £49,500 was
paid to the transferor. The solicitor who acted for Mrs Kennedy in the
transaction was the defendant in the first action, Kenneth Bentley van Emden.
After completion, Mr and Mrs Kennedy moved into the flat. In his judgment, the
judge recorded that they were indeed happy and pleased with the accommodation
the flat provided and had no wish or occasion to move.
In March 1990 all that changed when there
arrived a letter from the landlords’ agents which the judge described as
something of a bombshell. It proposed that the rent should be increased on
review from £350 to £4,855.82. That figure was reduced on arbitration, but only
to £4,203. Having consulted other solicitors, Mrs Kennedy caused the writ in the
first action to be issued on July 23 1992. She claimed in negligence against
the defendant on two grounds: first, that he had failed to advise her that, by
virtue of the provisions of Part IX of the Rent Act 1977, the £49,500 was an
unlawful premium; second, that he had failed to advise her as to the onerous
effect of the rent review provisions in the underlease. In regard to the first
of those claims the judge held that Mrs Kennedy had suffered no loss. Against
that holding she now appeals. In respect of the second claim, the judge awarded
her damages of £7,500. That award is not in issue on the appeal.
On October 23 1987 Miss Beverly D’Angelo,
as trustee for the plaintiff in the second action, Neil Patrick Jordan, took a
transfer of an underlease of flat 1 on the lower-ground floor of 126 Hamilton
Terrace, for the like term as before and at an annual rent of £325, subject to
review. Mr Jordan paid a premium of £165,000 to the transferor. The solicitors
who acted for him in the transaction were the defendants in the second action,
Gershon Young Finer & Green. The judge recorded that Mr Jordan was
disappointed with the flat. In 1988 he put it on the market at an asking price
of £175,000, but had no response. In 1989 to 1990 he unsuccessfully sought an
extension of the underlease from the landlords. In March 1990 Mr Jordan
received a similar letter from the landlords’ agents. In his case, the
increased rent proposed was £4,368.69, which was reduced on arbitration to
£3,781. He made claims against the defendants in the second action similar to
those made by Mrs Kennedy in the first. The judge rejected the first claim and,
in respect of the second, awarded Mr Jordan damages of £10,000. The state of
play in this court is the same as in the first action.
On April 30 1982 the plaintiffs in the
third action, Frederick Michael Burdge and Raymond Lavender, took a transfer of
an underlease of flat 4 on the second floor of 126 Hamilton Terrace, for the
like term as before and at an annual rent of £320, subject to review. Mr Burdge
and Mr Lavender paid a premium of £29,000 to the transferor. The solicitors who
acted for them in the transaction were the defendants in the third action, who
were then practising in partnership as Jacobs Blok & Kane. In March 1990,
Mr Burdge and Mr Lavender received a similar letter from the landlords’ agents.
In their case the increased rent proposed was £5,681.88, which was reduced on
arbitration to £4,918. They made claims against the defendants in the third
action similar to those made in the other two actions. The judge rejected the
first claim and, in respect of the second, awarded Mr Burdge and Mr Lavender
damages of £4,500. The state of play in this court is the same as in the other
two actions.
Judge Maddocks gave very careful
judgments extending in the aggregate to more than 40 pages of transcript. He
dealt first and at the greatest length with the first action and, when he came
to deal with the second and third, said that his judgments in those actions
should be read in conjunction with his judgment in the first. Except in respect
of one matter to which I will refer in due course, I find it necessary
henceforth to deal only with the first action. In all other respects, which are
now material, the second and third actions are identical to it.
In 1983 Mrs Kennedy’s underlease was a
tenancy under which a dwelling-house of an appropriate rateable value was let
as a separate dwelling and was thus, by virtue of section 1, a protected
tenancy for the purposes of the Rent Act 1977. Accordingly, by virtue of
section 120(1) and (2), the transferor of the underlease committed an offence
by requiring or receiving the premium of £49,500 as a condition of or in
connection with the transfer (he may have committed both offences) and, by
virtue of section 125, it was recoverable by Mrs Kennedy. Although section 127
permits premiums to be required or received as a condition of or in connection
with the assignment of certain long tenancies, Mrs Kennedy’s underlease did not
satisfy the requirements of that section as they then stood. However, as from
January 15 1989 section 127 was amended by section 115 of the Housing Act 1988
in such a way that the requirements were thereafter satisfied. In other words,
Mrs Kennedy could thereafter validly assign the underlease for a premium.
The essence of Mrs Kennedy’s case, as put
before us by Mr Edward Denehan on her behalf, is that she paid a full premium
for the underlease of a flat in the belief that she would be able, if and when
she wished, to assign it to another, again at a premium. But that is not what
she got. Owing to the defendant’s negligence, she acquired an underlease which,
by virtue of sections 120 and 125 of the 1977 Act, could not be assigned for a
premium and therefore had no value. Accordingly, by an application of what has
come to be known as the diminution in value rule, Mrs Kennedy is entitled, by
way of damages, to the difference between the price paid (£49,500) and the
value of the underlease as at the date of the defendant’s breach of duty in
1983 (nil).
As Judge Maddocks pointed out, even if it
is right to apply the diminution in value rule and assess damages as at the
date of the breach in this case, it is quite wrong to treat the underlease as
having had no value in 1983. I agree with the judge that the underlease
conferred on Mrs Kennedy all the attributes of ownership save one, albeit an
important one, that of the right to sell it for a premium. The judge identified
six such attributes, of which the first five were the following:
1. the right to occupy the property on
the terms of the lease paying a less than market rent;
2. the right to dispose of the underlease
otherwise than for a premium, that is to say by will or gift;
3. the right to sublet the property for a
market rent, albeit that it might be limited to a registered rent;
4. the right to surrender the term for a
premium; and
5. the right to surrender the term for a
new lease outside the 1977 Act or a new lease outside the prohibition on
premiums.
The judge then referred to expert
evidence given by the defendant’s surveyor on the final day of the three
trials, to the effect that the value of the underlease as at 1983, including
the onerous rent review
an occupier or £39,897 if sublet. The judge did not say whether he accepted
that evidence, to which we are told no rival evidence was adduced on behalf of
Mrs Kennedy. On the view he took of the matter he did not need to accept it.
Because the amendment to section 127 of the 1977 Act as from January 15 1989
had taken effect before any occasion for the disposal of the underlease had
arisen, the judge thought that the diminution in value rule ought not to be
applied in this case and that the damages ought to be assessed as at the date
of the trial, ie at nil.
Having said that, it would not seem
unreasonable to depart from the rule and to ask how the prohibition affected Mr
and Mrs Kennedy and what it cost them, the judge said:
The answer is it did not affect them at
all and cost them nothing to extricate themselves from it. I am led to the same
conclusion by the following further factors. First, to award damages in such
circumstances appears to me to fly in the face of Lord Blackburn’s dictum,
which I need not repeat. Second, a plaintiff is always limited to the
reasonable cost of mitigating a loss. If the loss can be avoided altogether the
damages are no more than the cost of achieving that. There is no reason why a
different result should follow when the loss has been avoided altogether by
outside intervention without any action by the plaintiff and before she is even
aware of it. Third, as a matter of general principle, the court cannot ignore
facts which are known at the date of trial, certainly where those facts render
certain that which previously had been a matter of conjecture. That appears
from the case of Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v
Pontypridd Waterworks Co [1903] AC 426.
For all these reasons, in my judgment, on
the facts of this case the damages for failure to advise on the Rent Act
prohibition on premiums are nil.
In my opinion, Judge Maddocks’ decision
of this question, as indeed of every other question, was correct. Being in
complete agreement with his reasoning, I will add to it of my own as briefly as
I can.
The leading modern authority on the
application of the diminution in value rule in solicitors’ negligence cases is
the decision of this court in County Personnel (Employment Agency) Ltd v
Alan R Pulver & Co [1987] 1 WLR 916*, where Bingham LJ, at pp925–7,
stated the applicable principles under eight heads. The first was the
overriding rule stated by Lord Blackburn in Livingstone v Rawyards
Coal Co (1880) 5 App Cas 25 at p39, that the measure of damages is:
*Editor’s note: Also reported at [1986] 2
EGLR 246
that sum of money which will put the
party who has been injured, or who has suffered, in the same position as he
would have been in if he had not sustained the wrong for which he is now
getting his compensation or reparation.
The second was that, on the authorities,
the diminution in value rule was almost always, if not always, appropriate
where property was acquired following negligent advice by surveyors. The third
was that that was not an invariable approach, at least in claims against
solicitors, and ‘should not be mechanistically applied in circumstances where
it may appear inappropriate’. The fourth was that while the general rule
undoubtedly was that damages for tort or breach of contract are assessed as at
the date of the breach, that rule also ‘should not be mechanistically applied
in circumstances where assessment at another date may more accurately reflect
the overriding compensatory rule’.
I am in no doubt that to apply to this
case the diminution in value rule and the general rule that damages are
assessed as at the date of the breach would indeed be a mechanistic application
of the first rule in circumstances where it is inappropriate, and of the
second, in circumstances where the assessment of damages at the date of the
trial would more accurately reflect the overriding compensatory rule. Mr David
Neuberger QC, for the defendant, submits that an application of these rules to
a case, where the plaintiff now has a fully assignable underlease, would give
her a windfall she does not deserve. Mr Denehan submits that the amendment to
section 127 has given the defendant a windfall, the benefit of which he must
disclaim. My own view of the matter is that damages are to be assessed in the
real world. Compensation is a reward for real, not hypothetical, loss. It is
not to be made an occasion for recovery in respect of a loss which might have
been, but has not been, suffered.
Two further points must be mentioned.
First, in respect of the claim based on the defendant’s failure to advise Mrs
Kennedy as to the onerous effect of the rent review provisions in the
underlease, the judge applied the diminution in value rule and assessed damages
as at the date of the breach. Mr Denehan relies on that as showing that the
judge ought to have adopted the same approach in respect of the claim based on
the payment of the unlawful premium. In my view, the contrary is the case. The
judge could see that the onerous rent review provisions were contained in the
underlease, not only at the date of the breach, but also, in contrast with the
non-assignability defect, at the date of the trial. He was therefore correct to
apply the rule in the one case and not in the other.
Second, the seventh principle stated by
Bingham LJ recognises that it may sometimes be helpful to consider what a
plaintiff in this kind of case might or might not have done if he or she had
been properly advised at the right time. It is at this point that the three
actions must be separately considered. Mr Denehan’s primary submission is that
the plaintiff or plaintiffs in each of the actions would not have purchased the
relevant underlease and would have withdrawn from the transaction;
alternatively, would have contracted to acquire the underlease for a premium
and then sought specific performance of the contract without having to pay the
premium; in the further alternative, would have paid the premium, completed the
contract and immediately sought its recovery.
The evidence and the judge’s findings in
the first and second actions suggest that Mrs Kennedy and Mr Burdge and Mr
Lavender respectively would not have gone ahead, but on that footing they would
have kept their money and the question whether they would have suffered any
loss must be speculative in the extreme. In the second action, we are told that
Mr Jordan’s evidence was to the effect that, if his purchase had been completed
and he had then been given the correct advice, he would have claimed to recover
the premium while asserting a right to retain the underlease. As to that, I
will only say this. It being clear that we must proceed on the footing that the
transferors and their advisers were at the time as ignorant of the unlawfulness
of the premiums as were the plaintiffs and their advisers, Mr Denehan has
completely failed to satisfy me that in 1996 the court would act on the
assumption that Mr Jordan would have had that right. Ailion v Spiekermann
[1976] Ch 158*, on which Mr Denehan relies, is clearly distinguishable from the
present case. For myself, I regard Mr Jordan’s loss as no less speculative than
the other plaintiffs’.
*Editor’s note: Also reported at [1976] 1
EGLR 48
For these reasons, I would affirm Judge
Maddocks’ decision on the principal question argued before us. That makes it
unnecessary to consider an argument raised by the defendants on section 127(1)(a)
of the 1977 Act, which was rejected by the judge but has been raised afresh by
way of the respondents’ notices in all three appeals. Indeed, we have not found
it necessary to hear the argument. All the defendants also cross-appeal on
interest and costs. Having assessed damages for the breaches of duty in regard
to the rent review provisions as at the date of the breach, the judge awarded
the plaintiffs’ interest from that date. In my view, he was right to do so or,
at all events, he exercised his discretion in a manner with which this court
cannot interfere. As to costs, the defendants say that the judge ought not, as
he did, to have awarded the plaintiffs all their costs of the actions, but
ought to have deprived them of part of their costs, on the ground that they had
raised an issue, namely the unlawful premium issue, on which they failed but
which significantly increased the length and cost of the trials. Again that was
a decision well within the judge’s discretion with which this court cannot
interfere.
I would therefore dismiss both appeals
and cross-appeals.
Agreeing, WARD LJ said: None of
the defendant solicitors spotted that the tenancies were protected under the
Rent Act 1977. None of
of the clients was advised that they could not lawfully require payment of nor
receive a premium when in turn they wished to dispose of their tenancy. It was
negligent of the solicitors not to have appreciated the Act’s operation and
negligent not to have advised the clients accordingly. The clients relied on the
solicitor to advise them. None of the clients would have entered into the
contracts nor paid the premium had they been given proper advice. Although no
specific findings seem to have been made about it, it is common ground that the
plaintiffs probably would each have looked for another flat.
The plaintiffs’ primary case is, as it is
pleaded:
After proper advice the plaintiff would
have withdrawn from the purchase, and so they would not have paid and therefore
lost the premium; the plaintiff would give credit for the value of the flat,
but since no premium could be charged upon assignment the value of the flat at
the date of the breach is nil.
The submission has the seductive appeal
of cold logic; judged at the time of completion, there was a loss and if the statutory
changes effected by the Housing Act 1988 had brought benefit to other protected
tenants, why should these plaintiffs not enjoy a similar windfall? The answer
to that rhetorical question is equally appealing: by virtue of the statutory
change, good fortune smiled on the plaintiffs and gave them what they thought
they had — freedom to sell at a proper price.
How then is this conflict to be resolved?
In my judgment, the answer is supplied by application of the principles spelt
out by Bingham LJ, as he then was, in County Personnel (Employment Agency)
Ltd v Alan R Pulver & Co [1987] 1 WLR 916 at pp925–7.
Accordingly:
(1) The overriding rule is that stated by
Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas
25 at p39 that the measure of damages is:
that sum of money which will put the
party who has been injured, or who has suffered, in the same position as he
would have been in if he had not sustained the wrong for which he is now
getting his compensation or reparation.
(2) His second principle is that:
On the authorities as they stand the
diminution in value rule appears almost always, if not always, to be
appropriate where property is acquired following negligent advice by surveyors.
(3) His third principle is:
That is not, however, an invariable
approach, at least in claims against solicitors, and should not be
mechanistically applied in circumstances where it may appear inappropriate.
(4) But for the negligent advice, the
plaintiffs would have had a leasehold interest worth the price they paid for
it. Instead, at the time of completion, they acquired a tenancy with no capital
value — or perhaps a limited value if allowance is to be made for the factors
which, the judge found, gave some value to what they had received. I express no
views about, but point to, all the uncertainties that would be introduced by
the duty to mitigate and claim the return of the premium from the assignor, but
at risk of a claim for rescission fraught with problems.
(5) The fourth principle is:
While the general rule undoubtedly is
that damages for tort or breach of contract are assessed as at the date of the
breach (see, for example, Miliangos v George Frank (Textiles) Ltd
[1976] AC 443, 468, per Lord Wilberforce), this rule also should not be
mechanistically applied in circumstances where assessment at another date may
more accurately reflect the overriding compensatory rule. The Dodd
Properties case [1980] 1 WLR 433, both affirms this principle and
illustrates its application.
(6) In Dodd Properties (Kent) Ltd
v Canterbury City Council [1980] 1 WLR 433*, Megaw LJ said, at p451B:
*Editor’s note: Also reported at [1980] 1
EGLR 15
Indeed, where, as in the present case,
there is serious structural damage to a building, it would be patently absurd,
and contrary to the general principle on which damages fall to be assessed,
that a plaintiff, in a time of rising prices, should be limited to recovery on
the basis of the prices of repair at the time of wrongdoing, on the facts here
being two years, at least, before the time when, acting with all reasonable
speed, he could first have been able to put the repairs in hand. Once that is
accepted, as it must be, little of practical reality remains in postulating
that, in a tort such as this, the ‘general rule’ is applicable. The damages are
not required by English law to be assessed as at the date of breach.
The true rule is that, where there is a
material difference between the cost of repair at the date of the wrongful act
and the cost of repair when the repairs can, having regard to all relevant
circumstances, first reasonably be undertaken, it is the latter time by
reference to which the cost of repair is to be taken in assessing damages.
Although Dodd Properties may have
received more than they would have recovered, had damages been assessed at the
time of the breach, there appears to me to be no reason in principle why these
plaintiffs should not recover less if the circumstances demand it.
(7) The justification for the departure
from the general rule seems to be:
(a) As Lord Wilberforce expressed it in Miliangos
v George Frank (Textiles) Ltd [1976] AC 443 at p468E:
the mere fact that as a general rule in
English law damages for tort or for breach of contract are assessed as at the
date of breach need not preclude, in particular cases, the conversion into
sterling of an element in the damages, which arises and is expressed in foreign
currency, as at some later date. It is for the courts, or for arbitrators, to
work out a solution in each case best adapted to giving the injured plaintiff
that amount in damages which will most fairly compensate him for the wrong he
has suffered.
(b) In Johnson v Agnew
[1980] AC 367*, Lord Wilberforce said, at p400H:
*Editor’s note: Also reported at [1979] 2
EGLR 146
The general principle for the assessment
of damages is compensatory, ie that the innocent party is to be placed, so far
as money can do, in the same position as if the contract had been performed.
Where the contract is one of sale, this principle normally leads to assessment
of damages as at the date of breach — … But this is not an absolute rule: if to
follow it would give rise to injustice, the court has power to fix such other
date as may be appropriate in the circumstances.
The justification, therefore, for a
departure from the general rule seems to be the dictates of fairness and
justice as much to defendant as to plaintiff.
(8) The position here is that if these
plaintiffs had not suffered the wrong or the breach of contract — there being
little difference between the two because both impose a similar duty on the
solicitors — then the plaintiffs would today have a valuable asset capable of
being sold for whatever a willing purchaser would pay for it. By good fortune
that is the very position in which they are placed (and in a sense they are
even more favourably placed because they have managed to keep the property of
their first choice rather than go out and, hypothetically, buy the flat next
door). They would not have enjoyed the windfall that accrued to rent-protected
tenants when the law changed in 1988 because they never wanted to be
rent-protected tenants. They have got exactly what they wanted. They are
precisely in the position they would have been in but for the poor advice. I
agree with the Earl of Halsbury LC’s rhetorical question in Bwllfa &
Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co
[1903] AC 426, at p429:
It is, of course, only an accident that
the true sum can now be ascertained with precision; but what does that matter?
I agree with the analogous approach of
Harman LJ in Curwen v James [1963] 1 WLR 748 at p754,
subsequently approved and applied in, for example, Murphy v Stone-Wallwork
(Charlton) [1969] 1 WLR 1023:
Why should we, when we know that the lady
has married, pretend that we do not know it and assess the damages, as we are
assessing them anew here, on the footing that she may or may not marry? As we
know the truth we are not bound to believe in a fiction.
In my judgment, fairness and justice
demand that we approach this case with an eye to reality, judging by reference
to what is and not what might have been. As the plaintiffs have got what they
wanted, however fortuitously, they have suffered no loss and they are entitled
to no damages.
I therefore agree with Nourse LJ that the
three appeals should be dismissed. I further agree that the cross-appeals on
interest and costs should also be dismissed.
Also agreeing, SCHIEMANN LJ said:
The plaintiffs each acquired a leasehold interest which suffered from two
deficiencies of which they were unaware at the time of acquisition. Their
respective solicitors were negligent in not advising them of those
deficiencies. One deficiency was that the landlords had various rights to put
up the rent. In respect of the solicitors’ failure to advise them of the
existence of those rights, the plaintiffs have been compensated and nothing
arises on this appeal in relation to them save a minor matter as to interest,
as to which I agree with Nourse and Ward LJJ. The other deficiency was that by
statute the plaintiffs were forbidden to assign their leases for a premium —
this deficiency manifestly reduced the market value of the properties. The
plaintiffs did not discover the existence of this deficiency until after
parliament had, by legislation, removed it. There was no evidence that any of
the plaintiffs had at any time, during which it was forbidden, wished to assign
his leasehold interest or otherwise been affected by the effect on market value
of the prohibition on assignments for a premium. The judge held that in those
circumstances the plaintiffs were not entitled to an award of damages in
respect of the undoubted fact that for a period of years their leasehold
interests had, unknown to the plaintiffs, suffered from this deficiency. I
agree with Nourse and Ward LJJ that he was right so to hold.
The overriding rule governing the awards
of damages is that the party who has been injured should be awarded by the
court a sum of money which, in so far as money can do this, will, when it is
paid, fairly compensate him for the wrong which the defendant has inflicted
upon him. That will often involve looking at what happened or might have happened
shortly after the defendant’s breach of duty, what has happened between breach
and trial and what is likely to happen in the future. The concept of fair
compensation, as it has been developed by the courts, includes both the desire
to put the plaintiff into the financial position that he would have been in,
had the wrong not been inflicted and a sense that the wronged plaintiff must
act reasonably to mitigate the loss, which he would otherwise suffer from the
defendant’s wrongful action. The court, when making its award, will look at all
factors known to it at the time of judgment.
In the present cases all the relevant
facts were known by the date of trial. By contrast, in many cases judgment will
be before the wrongful act ceases to have a deleterious effect on the
plaintiff. In those cases, the court has to look into the future and award a
figure which includes the value as at the time of judgment of best estimates of
future loss or damage. The putting of a present figure on future loss, which
exercise will often involve making judgments as to possible future events
rather than waiting to see what happens, is the price that has to be paid for
early finality in litigation and certainty for the parties. Even in such cases,
no one suggests that the court should add to the uncertainties by putting
itself notionally into the position it would have been in had it tried the case
the day after the wrongful act started to inflict damage.
The present case is devoid of all such
uncertainties. There is no advantage in the court, sitting at a time when all
the facts are known, putting itself notionally into the position of ignorance
it would have been in had it been assessing the damages on the day after the
wrong was inflicted. This would be to add pointless and avoidable
uncertainties. In a personal injury case, no one would dream of submitting that
the court should at trial assess damages by putting itself notionally into the
position it would have been in had it been hearing the case on the day after
the accident.
In the circumstances of the present
cases, the task of the judge on the date of judgment was to award to
each plaintiff that sum of money which would on that date put him, as
near as a money award could do so, into the position he would have been in on
that date had there been no negligence on the part of the solicitor. In the
present cases, there is no element of past expenditure made or profit or
pleasure foregone by any of the plaintiffs by reason of the negligence: thus no
compensation falls to be made in respect of such matters. Nor is there any
element of future expenditure necessitated or profit or pleasure foregone: thus
no compensation falls to be made in respect of such matters. As things have
turned out, each plaintiff has lived in the flat in which he wished to live and
has paid no more than he was prepared to pay for that situation and is as free
to assign it for a premium as he wished to be.
In so far as the plaintiffs’ cases are
based on an assertion that they have lost the right to stay in the flat and yet
reclaim the premium — the windfall point — they fail, not least because it is
clear, and indeed expressly pleaded by each of the plaintiffs, that had their
solicitors not been negligent the plaintiffs would not have taken the
assignments of the flats. In so far as the plaintiffs’ cases are based on an
assertion that, had they been alerted to the illegality of any premium, they
would have purchased a similar flat elsewhere for a similar, but legal,
premium, they are presently no worse off than they would have been had their
solicitors not been negligent and thus deserve no compensation.
I fully accept that, had these cases come
on for trial, say, six months after completion, at a time when the statutory
prohibition on assignments with a premium was still in force, the court might
well have awarded compensation for the unforeseen restraint on charging
premiums on any assignment. That is because, at that notional date of trial,
the court would have been faced with the task of putting compensation figures
on the plaintiffs’ then existing disabilities in relation to future
assignments or using the property as security for a loan and so on. (What the
court would have awarded in those circumstances is not clear — not least
because there might well have been an argument that the plaintiffs should have
mitigated their loss by seeking the return of their premiums from the
assignors.) As it seems to me, that whole exercise was irrelevant to the task
which the judge in the present case had to perform which, as I have said, was
to award to each plaintiff that sum of money which would on the date of
judgment put him into the position he would have been in on that date
had there been no negligence on the part of the solicitor.
I also would dismiss the appeals and the
cross-appeals.
Appeals and cross-appeals dismissed with
costs.