Negligence — Solicitors — Limitation period — Whether damage suffered by purchaser of lease on acquisition or later date when entitlement to enfranchise arose
In July 1982
the plaintiff retained the defendant solicitors to act for him in the purchase
of the unexpired 63-year term of leasehold premises. Contracts were exchanged
on October 14 and the purchase completed on October 29 1982. By his action,
commenced on June 22 1990, the plaintiff alleged that prior to his purchase the
defendants did not advise him that as the lease had already been extended under
the Leasehold Reform Act 1967, no further extension was available under that
Act. At the hearing of a preliminary issue, Judge Eifion Roberts QC determined
that the plaintiff’s claim was statute-barred. The plaintiff appealed contending
that he did not suffer any damage until he became entitled to acquire the
freehold in October 1985 and therefore the six-year period of limitation ran
from that date.
until October 1985, the plaintiff suffered damage from the date of his purchase
because he acquired a leasehold which was then worth less to him than it would
have been had he acquired an interest not already extended by the 1967 Act. The
plaintiff’s claim was therefore statute-barred.
The following
cases are referred to in this report.
Cartledge v E Jopling & Sons Ltd [1963] AC 758; [1963] 2 WLR 210;
[1963] 1 All ER 341, HL
UBAF
Ltd v European American Banking Corporation
[1984] QB 713; [1984] 2 WLR 508; [1984] 2 All ER 226; [1984] 1 Lloyd’s Rep 258,
CA
This was an
appeal by the plaintiff, John Lawrence Sullivan, from the decision of Judge
Eifion Roberts QC on the hearing of a preliminary issue in the plaintiff’s
claim in negligence against the defendants, Layton Lougher & Co.
Meirion Davies
(instructed by Peter J Meurig-William & Co, of Cardiff) appeared for the
plaintiff; Peter Wright (instructed by Wansbroughs Willey Hargrave, of Bristol)
represented the defendants.
Giving
judgment, LEGGATT LJ said: The plaintiff, John Lawrence Sullivan,
appeals against a judgment of Judge Eifion Roberts QC given on October 12 1993
whereby he determined as a preliminary issue in favour of the defendants,
Layton Lougher & Co, that the plaintiff’s action against the defendants was
statute-barred.
In July 1982
the plaintiff retained the defendants to act for him in the purchase of a
leasehold interest. That leasehold interest was of an unexpired term of 63
years on a property, 467 Cowbridge Road East, Cardiff. The defendants say that
a solicitor in the firm explained to the plaintiff the significance of the fact
that there had already been given, in relation to the leasehold interest, an
extension of 50 years under the Leasehold Reform Act 1967. If that were so,
then the plaintiff would, in any event have no complaint, but this preliminary
issue has proceeded necessarily upon the assumption that no such advice was
then given.
On October 14
1982 contracts were exchanged for the purchase of the leasehold interest and
the purchase was completed on October 29 1982. The plaintiff’s case is that he
was not told before completion, or at all, so far as the defendants were
concerned, that the interest was, in the way I have mentioned affected by the
Leasehold Reform Act 1967 in so far as an extended lease was already running.
That extension having been given, no further extension was available to a
leaseholder.
Although it
does not appear from the pleadings, the plaintiff states in a statement that is
before the court that, had the solicitors explained to him the potential
problem of the purchase, that is, the lease and particularly the problem of any
future purchase of the freehold reversion, he would most certainly have not
proceeded with the transaction. That pronouncement is of itself obscure, but we
are told by counsel that the preliminary issues were conducted before the judge
upon the footing that the plaintiff would not have proceeded with the purchase
had he known that an extension had already been given of the leasehold interest
under the 1967 Act, with the result that no further extension was available.
The relevance
of the fact that the 63-year period of the interest included already a 50-year
extension was that, the closer that one gets to the end of the term of a lease,
the greater the price payable for enfranchisement by the leaseholder although
the price that he does pay will also be affected by the market price for the
time being.
The defence,
quite simply, is that any claim the plaintiff might have is statute-barred. On
April 23 1987, when the plaintiff sought the defendants’ advice once more, he
was told of his right to buy and warned that the price of enfranchisement was
going up. On October 29 1988 the six-year period from completion expired and on
April 23 1990, the three-year period expired from the date when the plaintiff
had knowledge of the situation in which he had been placed. On June 22 the writ
was issued.
Before the
purchase was completed, either the plaintiff was given the advice which he says
he should have been given relating to the effect of the Leasehold Reform Act
1967 or he was not. If he was given the advice, he has no claim; if he was not
given it, then his position was irremediable in the sense that it was not open
to him to seek any further extension under the Leasehold Reform Act 1967 of the
term of his lease. By then, the giving of the advice (which he says he was not
given) would have been too late.
He had, as is
accepted, bought a leasehold interest which otherwise he would not have bought.
When he did so, his case is that he irrevocably suffered loss because he bought
a leasehold interest less valuable than he was entitled to expect. His case is
that the quantum of loss may have been affected by the extent to which
the cost of the freehold increased and that, in any event, it may be said that
the loss remained inchoate during the three-year period before which he could
seek enfranchisement. The defendants’ case is that the loss was suffered when
completion occurred.
If that be so,
Mr Meirion Davies, who appears for the plaintiff, acknowledges that he must
lose. His case is, on behalf of the plaintiff, that the damage was not suffered
until October 1985 when it first became open to the plaintiff to acquire the
freehold. If time only then began to run, the claim would not be
statute-barred.
For the
uncontroversial proposition that damage is not necessarily incurred when a
tortious act is committed, Mr Davies cites Cartledge v E Jopling
& Sons Ltd [1963] 2 WLR 210 for the comment by Lord Pearce at p219 that
‘… some actual injury must be sustained
before the cause of action in negligence is complete’.
Mr Davies also
relies on the case of UBAF Ltd v European American Banking
Corporation which, though reported in [1984] QB 713, is cited by Mr Davies
in [1984] 2 WLR 508. Giving the first judgment, Ackner LJ referred to the
limitation point arising in that case. It was one, in which I had myself held,
that for limitation purposes the time ran from the moment when an English bank
lent money at the instigation of an American bank and on the strength of the
American bank’s negligent misrepresentation that the borrowers were sound and
profitable. This court held that I was wrong to find that the damage was
thereupon suffered because the value of the chose in action acquired by the
lenders might possibly have been at least equal to what they lent. That
depended on the facts as found at trial. I had taken the view that, but for the
good reference given to them, the English bank would not have made the loan.
But it appears from the passage relied on by Mr Davies that the Court of
Appeal, on the facts of that case, did not share that view.
Ackner LJ said
at p518D:
The plaintiffs
are suing in tort — the tort of negligence. To establish a cause of action they
must establish not only a breach of duty, but that that breach of
duty occasioned them damage. This is axiomatic. It is possible, although it may
be improbable, that, at the date when the plaintiffs advanced their money, the
value of the chose in action which they then acquire was, in fact, not less
than the sum which the plaintiffs lent, or indeed even exceeded it.
This must
depend on the evidence. The mere fact that the innocent but negligent
misrepresentations caused the plaintiffs to enter into a contract which they
otherwise would not have entered into, does not inevitably mean that they had
suffered damage by merely entering into the contract. To take and somewhat
modify an example canvassed during the course of argument: A tells B that he
wishes to sell his vintage Bentley which he innocently but negligently
misrepresents is a blue label long chassis. It is, in fact, a red label short
chassis. If A had known, he would not have agreed to buy the Bentley, because
he only collects blue label long chassis Bentleys. Assume, however, that the
red label short chassis Bentleys were at all material times significantly the
more valuable cars so that he was able to re-sell at a profit. He has then no
cause of action.
In the present
case, what the plaintiff bought was a leasehold interest in respect of which
there had already been an extension for the purposes of the Leasehold Reform
Act. Such a leasehold interest is of its nature necessarily less valuable than
one in respect of which such an extension has not been granted. The difference
is manifest by reference to the figures in this case itself. An unexpired
interest of 63 years, including the only available extension for the purposes
of the 1967 Act, results in a maximum term available for the leaseholder of 63
years, whereas, had such an extension not already been granted, the maximum
term available to him would have been 113 years.
Mr Davies
argues that for the reason that damage does not necessarily occur at the same
time as an act of default, in the cases which involve solicitors, what was
obtained was often not what the plaintiff had intended to acquire. Therein lay
the negligence of the solicitor. In this case, on the other hand, he argues
that the plaintiff got what he bargained for, namely a leasehold interest in
the property. It appears to me, that that wholly overlooks the fact that the
leasehold interest that he got was a less valuable interest than he was
entitled to expect, namely one in relation to which an extension was still available
under the 1967 Act.
Mr Davies
submits that the valuation of the premises would have been similar. Whether
that be so or not, the plaintiff was confronted by the fact that it was a lease
that was incapable of being extended. Mr Davies argues that the loss only
crystallised when the plaintiff came to enfranchise, but the significance of
that submission is only that the loss was quantifiable at that stage; the loss
— for that is what, in my judgment, it constituted — had already occurred at
the date when the leasehold interest was acquired.
In short, what
the plaintiff obtained was not what in argument has been referred to as a
virgin leasehold, but a leasehold already subject to the effect of the
Leasehold Reform Act 1967. That was worth less to the plaintiff than it would
have been had it not been so affected and had he received the appropriate
advice, which he says he did not receive, he would not have proceeded with the
purchase as he did. It must follow, in my judgment, that time ran from
completion and not from any subsequent date, with the result that it had run in
favour of the defendants by the time the writ was issued. The judge plainly
came to the right conclusion for the right reason, pithily expressed and I
would dismiss the appeal.
ALDOUS AND HUTCHISON
LJJ agreed and did not add anything.
Appeal
dismissed with costs