England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBENF 95/0351/C

(His Honour Judge Rich QC)

Royal Courts of Justice

Friday, 28th February 1997

Before:

LORD JUSTICE BELDAM

LORD JUSTICE WARD

LORD JUSTICE SCHIEMANN

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LEONARD WILLIAM HARTLE

Plaintiff

-v-

MESSRS LACEYS (A Firm)

Defendants

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(Computer Aided Transcript of the Stenograph Notes of

Smith Bernal Reporting Limited

180 Fleet Street, London EC4A 2HD

Telephone No: 0171-831 3183

Fax No: 0171-404 1424

Official Shorthand Writers to the Court)

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THE APPELLANT/PLAINTIFF appeared in Person.

MR. N. DAVIDSON Q.C. (Messrs Wansbroughs Willey Hargrave, Bristol)

appeared on behalf of the Respondents/Defendants.

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J U D G M E N T

D R A F T

Mr Hartle is an engineer and at the material time during the 1970s and 1980s he was also a dealer in land and a property developer. In the opinion of his Bank manager Mr Hartle was a man of integrity and foresight who was extremely intelligent and the bank had the utmost confidence in him.

Laceys are a reputable firm of solicitors. Since about 1971 Mr Hartle had instructed one of the partners, Mr Wyllys, in the purchase and sale of some 35 properties including those which we are concerned. They had a good professional relationship, each having a healthy respect for the other and they became “almost friends."

By all accounts Mr Hartle enjoyed a fair measure of success in his development business until the transaction which is the subject of this appeal. It has proved to be a catastrophic failure. Mr Hartle has been ruined. His case is that the losses he has suffered were caused by the negligence of Mr Wyllys. That negligence is not now in dispute. Damages are. On 3rd November 1994 His Honour Judge Rich Q.C. sitting as a Deputy Judge of the High Court awarded him £50,000 which, with interest, resulted in judgment being entered for some £81,164.50. Mr Hartle has appealed that judgment and seeks to increase the award of damages in his favour.

The claim arises in this way. On 19th September 1980 Mr Hartle acquired a property at 8-10 Victoria Avenue, Swanage for £16.500 subject to a mortgage of £9,000. The vendor was Rhodaus Property Company, operated by the Sloggett Brothers. They had endeavoured to increase the price to take account of the development potential of the site but, having been unable to agree terms with them, Mr Hartle was required to enter into a covenant recited in the conveyance in these terms:-

"2. The purchaser, with the intent and so as to bind, so far as practicable, the property into whosoever’s hands the same may come, but not so as to render himself personally liable for any breach of covenant committed after he has parted with all interest in the property in respect of which such breach occurs covenants with the Vendor that he (the purchaser and his successors in title) shall at all times hereafter observe and perform the stipulations and restrictions following in relation to the property...

(iii) Not without the Vendor’s written consent to erect or permit to be erected more than four residential flats on the said land and that before undertaking such building development the Purchaser will obtain and produce to the Vendor all requisite planning and by-law consents and his plans of the proposed buildings for approval by the Vendor (which approval shall not be unreasonably withheld).”

This is unregistered land but the covenant was capable of registration as a class D(ii) Land Charge under the Land Charges Act 1972. S.4(2) of that Act provides that such a charge shall be void as against a purchaser for money or money’s worth of a legal estate of the land charged with it unless the land charge is registered in the appropriate register before the completion of the purchase. The problems in this case arose because Rhodaus Property Company did not immediately register that charge.

In January 1988 the adjoining site came on the market. Planning permission had been granted in 1985 for the conversion of the existing hotel to 3 self-contained flats.The plaintiff saw the opportunity for the development of the two sites together. Being a prudent man, he had made tentative enquiries from building contractors which gave him reason to believe that the project was viable. The Bank, as Mr Wyllys well knew, were lending him the whole of the purchase price of £185,000 and insisted on charges not only over this new property, but also a second charge over the original plot and over the Manor House in which he lived. On 27th January 1988 contracts were exchanged with completion to follow on 8th April and Mr Wyllys wrote with obvious sincerity then, though the words now ring hollowly:-

"I will keep my fingers crossed that your negotiations for the development of the site will now proceed satisfactorily.”

His attendance note of that day records Mr Hartle’s intention to sell on to a developer as fast as he could. He was proceeding in a manner notably different from the way many of the deals were taking place at that time in a rising market where, in the intoxicating gallop for riches, very few paused to reflect that every boom must burst. As his note dated 22nd February 1988 makes plain, Mr Hartle made his plans contingent on a possibility that a down-turn in the market was imminent. His cash flow projections presented to the Bank at the beginning of March envisaged a hope to sell Victoria Avenue for £360,000 in June which, after payment of legal costs and £8.000 he earmarked as necessary to discharge his obligations under the restrictive covenant, would nonetheless produce healthy profit.

He was banking on having planning permission for a development of 14 flats and garages by 30th of March, but encountered difficulties. Wessex Water were concerned about the discharge of surface water into the sewers. The application was deferred for amended plans to be submitted. The application was further deferred at the end of May, to address problems relating to parking spaces, the basement levels and the need to provide for roof water to drain into soakaways. The former presented no serious obstacles but the latter could not be overcome without percolation tests. On 29th June the Planning Authority passed the following resolution:-

"Subject to the prior completion of an agreement under S. 52 of the Town and Country Planning Act 1971 to prevent surface water discharge to the combined sewer, to surface water percolation tests to be carried out to the satisfaction of the Director of Technical Services and to the direction of the County Surveyor, outline planning permission be granted."

Meanwhile his agents Wilcox and Cook had begun to market the property. It was common ground that the market was buoyant and the Banks were ready to lend money to developers who were buying land as soon it came on the market. Mr Wilcox approached parties known to be likely to be interested. Berkeley Homes (Dorset) Ltd, part of a national group, certainly were. Their Mr Bawden, their Land and Sales Manager with the approval of the Managing Director of the Dorset company, Mr Vidler, made an offer. The main Board knew and also approved. On 30th June Mr Bawden wrote to confirm the company’s willingness to purchase, subject to contract, for £400,000 with an early exchange of contracts and completion by 16th September 1988 or earlier by mutual consent. He made this stipulation:-

"It is also my understanding that Wessex Water Authority require a porosity test to be carried out as they are not willing to allow the surface water discharge from this property to go into the combined foul and surface water system but that it should run into soakaways within the sites. It would therefore, also be a requirement that this can be accommodated satisfactorily thereby complying with the consent."

Mr Wyllys was instructed by Mr Hartle to deal with the conveyancing. He was aware of the restrictive covenant and on 14th July reminded Mr Hartle of it. He wrote:-

"On referring to my file when you purchased the property, I see that the vendor at that time wished you pay an additional sum of £4,000 in respect of each unit of which you obtained planning permission in excess of 4. You are not prepared to agree to this condition, and after some negotiation it was agreed to limit the use of the property for 4 units only, and for plans of such building to be approved by Rhodaus Property Ltd. I am investigating the possibility of a restrictive covenant indemnity and will write to you again as soon as I have some further news.”

On the same day he sent draft contracts to Berkeley’s solicitors drawing their attention to the restrictive covenant and advising them that he was “presently investigating whether these covenants are enforceable.”

It is not at all clear what investigations he contemplated. He seems to have proceeded upon an assumption that the covenant was binding and set about tracing Rhodaus. On 18th July he wrote to Mr Hartle saying:-

"On the assumption that more than 4 flats will be erected on this plot, my advice must be to make an approach to Rhodaus Property Company, or Mr Sloggett, on a without prejudice basis in order to negotiate a licence to vary the covenants contained in the conveyance to you. It may well be possible to prove that Mr Sloggett does not own any land in the vicinity capable of benefiting from this covenant, in which case an application the Lands Tribunal to set aside this covenant may well be successful, but such application will take time and expense.”

Mr White, acting for Berkeley, was more alive to the impact of s. 4(2) of the Land Charges Act 1972 and his pre-contract enquiries included asking whether the covenant had been registered. On 29th July 1988 Mr Wyllys learnt on the telephone, and it was formally confirmed on 1st August, that the covenant was not registered. Sadly the significance of this fact completely escaped him. He and Mr Hartle spoke on the telephone. Pursuant to the earlier advice given to him, Mr Hartle was making his own attempts to trace Mr Sloggett. On the conveyancing front, Mr Wyllys reported that Berkeley’s solicitors had raised a query with regard to the covenants and that:-

"Until this matter has been resolved one way or the other, I do not anticipate that an exchange of contracts can take place.”

It is common ground that My Wyllys gave no advice about the effect of S. 42 because he negligently did not think about it. It became common ground at the trial following an admission made on the first day of the hearing (but not formally earlier than that) that Mr Wyllys was negligent as his own expert adjudged him to be in these terms:-

"If acting with reasonable skill and care, the defendant should have appreciated on 1st August 1988, or on receipt of the search certificate dated 29th July 1988 (whichever was earlier) that the restrictive covenant would not be enforceable against a buyer of the (original plot) if the covenant remained unregistered at the time of completion of the purchase, or if the purchaser had the protection of a clear search, a competent solicitor would, at that stage, have discussed the situation with Mr Hartle and explained the relevance of this non-registration. In particular he will have pointed out:-

1. Under the terms of the covenant Mr Hartle would not be liable for any breach of the covenant contained in clause 2(iii) of the conveyance after he had disposed of the building plot.

2. A purchaser of the building plot would not be subject to, or liable under the positive covenant requiring approval of plans because the burden of positive covenants does not run with the land so as to fall upon successors in title to the original covenantee.

3. The restrictive elements of the covenant in clause 2(iii) of the conveyance limiting the number of flats that could be built would continue to bind the land, following a sale, only if it was registered and, if not registered, the purchaser would take free of it.

4. Under these circumstances the possibility existed of seeking to persuade the purchaser to proceed without making any approach to Rhodaus at all. To the extent that it would not, if this course were followed, be necessary to make any payments to Rhodaus, to secure a variation of the covenant which would otherwise be necessary, it would be possible to offer the purchaser a reduction in the price without affecting the amount of the net proceeds of sale which Mr Hartle would eventually receive.

5. The alternative would be to follow the course that was in fact adopted and approach Rhodaus to seek any necessary consent under clause 2 (iii) of the conveyance.”

This approach to Rhodaus was made by Mr Wyllys on 9th August 1988. He wrote to Mr D. Sloggett applying for his written consent to Mr Hartle’s proposal to redevelop the site and the adjoining property by the erection of 14 self-contained flats. Rhodaus immediately registered the charge on 11th August and began a very tough negotiation to take full advantage of the ransom effect of the covenant. Thus through the negligence of his solicitor Mr Hartle had lost the opportunity to sell the land free of the covenant and the result of this case depends upon what might have happened had proper advice been given. The approach take by the learned Deputy Judge was this:-

"That the plaintiff is therefore entitled to compensation for the result and adverse effect upon his title is accepted by the defendants. The defendants say that it should be assessed by reference to diminution in value of his property as at that date. The plaintiff claims that the result of the registration was that he lost the sale to Berkeley, and he is therefore entitled to be compensated for his resulting losses” (p.7 A-B)..."

"In order, therefore, for Mr Hartle to satisfy me that the defendants’ negligent advice caused him to lose a sale which he would otherwise have concluded, between August and December 1988, he has to show on the balance of probabilities that he would have concluded such a sale to some other person...This involves both my accepting that Mr Hartle would probably offered it to someone other than Berkeley, and secondly, that someone other than Berkeley would have accepted such offer and concluded the purchase at a price which Mr Hartle would have accepted, (p.13 D-G)...

I am not satisfied, on the balance of probability, that the plaintiff lost the sale by reason of the defendants’ negligent advice. Mr Davidson, nonetheless accepts that the plaintiff is entitled to damages measured as the diminution in the value of the property as at the date of the negligence. (P.16 F-G)...

I assess the diminution in value of the property, in the actual circumstances of August 1988, due to the registration of the covenants which resulted from the negligence of the defendant, as being £50,000 and it is that sum which I will award by way of damages." (P. 17G-H).

Since that judgment was delivered, the law has been significantly developed and the learned judge, and counsel, did not have the benefit of the clarity of the judgments in Allied Maples Group Ltd -v- Simmons & Simmons [1995] 1 WLR 1602 and Banque Bruxelles Lambert S.A. -v- Eagle Star Insurance Co.Ltd [1996] 3 WLR 87. The significance of these cases is not appreciated by Mr Hartle who appears in person on this appeal. Their impact is, however, not lost on Mr Davidson. I would wish to pay tribute to the way in which he has so admirably managed both to be fair to the litigant in person and assist us whilst at the same time pursuing a resolute and very persuasive defence of his client’s position. He is forced to acknowledge that these recent developments in the law undermine the approach taken in the court below and he acknowledges that the previous misconceptions affected both the way the case was presented and the way it was decided. I have sympathy for counsel and for the Deputy Judge. The approach which in my judgment should have been taken, and which I shall now follow is this:-

1. As Lord Hoffmann explained in Banque Bruxelles at 92 D-E:-

"Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of the measure of damages. For this purpose it is better to begin at the beginning and consider the lender’s cause of action.”

2. The loss here is not the loss flowing from Mr Wyllys’ putting the Sloggetts on notice which resulted in the charge being registered with the consequence that the land with the charge registered was less valuable than the land without registration. The true loss in this case flows from the failure to give advice as to the effect of non-registration and as to the courses of action open to Mr Hartle to take what advantage he could from that situation. It was the loss of the opportunity to complete a sale before the Sloggetts registered.

3 Causation depends on an answer to the hypothetical question, what would the plaintiff have done if he had been given proper advice? Here the judgement of Stuart-Smith L.J. in Allied Maples Group is most helpful. At p.1610 he says:-

"This can only be a matter of inference to be determined from all the circumstances. The plaintiff’s own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. Although the question is a hypothetical one, it is well established that the plaintiff must prove on a balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour.”

The issue here is whether Mr Hartle would have attempted to persuade Berkeley or some other to an early completion to defeat the covenant and also whether he would have reduced the price as an incentive to their doing so.

4. The next step is stated by Stuart-Smith L.J. at p.1611 A-C in these terms:-

"In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of this substantial chance being a question of quantification of damages? Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson’s submission is wrong and the second alternative is correct.”

So the question is whether or not there was a substantial chance of Berkeley or some other completing the purchase before the Sloggetts became aware of the development and before they registered their charge.

5. Then there is the assessment of damages with which Stuart-Smith L.J. dealt at p.1614 D:-

"The plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek lay down in percentage terms what the lower and upper ends of the bracket should be.”

Since the case was not approached with these questions in mind, the evidence adduced is not as clearly focused as it might otherwise have been but neither party wishes the matter to be reheard and both urge us to give judgment on the basis of the contemporaneous documents and the evidence as recorded in the transcripts placed before us. Since so much is a matter of conjecture as to what might have been, we have agreed to follow that course. I have carefully read the witness statements and the whole of the transcripts of the evidence over the four effective days of the hearing. I have also read the three bundles which were before the learned judge. The learned judge had the inestimable advantage of seeing and hearing the witnesses so that he could form his own view of them and he would inevitably have developed a "feel" for the case which it is difficult to capture from the written word. If follows that his judgment commands our great respect. Mr. Hartle has attacked his findings of fact but the attack was not sustained and cannot be sustained. Stating it broadly, the judge's findings must be honoured wherever possible. At the same time we must be astute to recognise that the findings were shaped by his approach to the case which was, as we now know the law, erroneous in several respects as, for example, is apparent from the following passage to which I have added the emphasis to show how it conflicts with the Allied Maples judgment set out above:-

"In order for, therefore, for Hartle to satisfy me that the defendants’ negligent advise caused it lose the sale which he would otherwise have concluded, between August and December 1988 he has to show on the balance of probabilities that he would have concluded such a sale with some other person.”

Since he was assessing probability, not chance, his finding must be treated with respect tinged with caution. It does not make our task any the easier.

Before putting myself so far as possible in the shoes of the judge, I must summarise what actually happened. Rhodaus demanded £60,000 as their price to release the covenant. It was flatly rejected by Mr Hartle. He was prepared to pay no more than £20,000 and was threatening to go to the Lands Tribunal if agreement could not be reached at that price. So far as Berkeley were concerned, their solicitor, Mr White, advised that the prudent course for them to adopt would be to insist on the covenant being cleared. Mr Wyllys continued to labour under a mistaken view of the law and gave inconsistent and incorrect advice. By 23rd September Mr Hartle was recorded by Mr Wilcox as becoming concerned at the delay. On 11th October an open offer was made in the sum of £20,000 with a further threat to go to the Lands Tribunal if it was not accepted. On 16th November counsel was instructed to advise. He recommended an offer of £30,000 which was put forward on 22nd November. By 5th December Mr Hartle was, as Mr Wyllys recorded, worried and distraught. He had discussed his anxieties with a solicitor friend who had apparently seen quite quickly that Mr Hartle had been receiving the wrong advice. He challenged Mr Wyllys about it and on the following day 6th December 1988, Mr Wyllys wrote suggesting that Mr Hartle seek independent advice.

Meanwhile, slow progress was being made to secure planning permission. On 22nd July Berkeley instructed Mr Burgess, who had been acting for Mr Hartle, to submit their plans for twelve as opposed to fourteen flats. On 10th August he submitted a detailed planning application. On 6th September he put to Wessex Water a proposal for a catchment soakaway and bore hole which Wessex Water found satisfactory subject to the Local Authority’s approval. On 28th September 1988 Berkeley’s application for planning permission for their twelve flats with garages underneath was approved subject to satisfactory resolution of the following points:

1. It would be necessary to carry out surface water percolation tests on the site in order to demonstrate that the soak-away drainage would work satisfactory,

2. If the surface water soak-away drainage was found to be satisfactory, a Section 52 agreement would be necessary to prevent surface water discharge into the combined sewer.

On 26th October excavations carried out on the site revealed that the type of soil would not allow satisfactory soakaway drainage and Berkeley had then to suggest that large soakpits be constructed with bore holes in their centres to a depth that would accommodate percolation. On 17th November the Director of Technical Services confirmed that the proposals for the on-site disposal of surface water appeared to be satisfactory.

On 9th December Berkeley told Mr Wilcox that they would not proceed with the purchase and gave three reasons for their decision, the unresolved problem with the covenant, the depressed market and their preference to develop individual sites rather than flats. The judge accepted that the real reason was the realisation that the boom market had peaked. They formally withdrew on 12th December. On that day Mr John Cruse offered £350,000 which was not acceptable. On 13th December the Director of Technical Services indicated his agreement to the soakaway problem. On that day Mr Turner offered £380,000 with completion as soon as possible but subject to planning permission and the Covenant problems being resolved. Mr Wilcox received an offer of £400,000 from a Mr Bishop and £380,000 from F. H. Cummings, neither of which could proceed until the new year. It was not until 3rd February 1989 that Mr Hartle reached agreement with the Sloggetts for the release of the covenant at a price of £35,000. On the 10th February formal planning permission was given. Despite the agreement as to the price, there was much wrangling over the conveyancing and in June Mr Turner withdrew his offer. He did eventually buy and the staggered sale was completed as to part on 5th February 1993 for a price of £70,000 and the remainder on 27th January 1994 for £80,000.

Against that background I turn to the vital questions:-

1. What, on the balance of probabilities, would the plaintiff had done had he be given full and proper advice?

2. Was there a substantial chance of a sale being completed before registration?

3. How do we evaluate the loss of that chance?

1. WHAT WOULD THE PLAINTIFF HAVE DONE?

The question needs a little refinement. The question is what he would have done had he received the proper advice which in this case is what would Mr Hartle have done if he had been told that neither he nor the purchaser would be bound by the terms of the covenant if a sale could be completed before it was registered and that it would be possible to offer the purchaser a reduction in the price without affecting the net proceeds which Mr Hartle would receive were he obliged to negotiate with the Sloggetts.

His evidence dealing with this aspect was partly contained in his witness statement in paragraph 10 of which he said this:-

"I was not advised that I might be able to sell to somebody else who took a different view of the lack of registration of the covenant. If I had been so advised, I would certainly have considered selling to somebody else. I would in the first instance have told Berkeley Homes that I wanted to get on with the purchase as agreed or that I would sell elsewhere...”

Under cross examination, which was well recorded by the judge in his judgment, there were these exchanges:- (T. 17th p.50,51)

"Q. Who is it, you might ask yourself, who might take a different view of the covenant who I should be selling it to?

A. Well I would not know. I would have to seek legal advice, wouldn’t I, on that score, but I certainly know that Robbie Turner was interested in purchasing the sites,”

...

Q. What I would suggest is that the reality is that there was every reason to try to meet Berkeley Homes’ requirements, whatever they were, and only to withdraw from Berkeley Homes as the absolute last resort if you did not feel you could do a deal with them at all.

A. I had already given my word to Berkeley Homes that I would continue with them, and obviously I would have given them the opportunity, but if they had said they didn’t want to know, or they couldn’t go ahead, then obviously I would have had to have sought another purchaser.

Q. The crunch comes, I would suggest, when Berkeley say, they had said, “Sorry Mr Hartle but you have got to get rid of this thing with Mr Sloggett, because this is what we want.” Then you have to take your decision whether to approach Mr Sloggett or not.

A. No. I had to take the decision as to whether to sell to Berkeley Homes or not.

Q. You have these decisions? Do I try to meet Berkeley Homes by talking to Mr Sloggett? Or do I say, now I am not going to sell to Berkeley Homes I am going to try and find another purchaser?

...

A. Well I would think I would have sought another purchaser and endeavoured to get the money from someone else.”

The learned judge made these findings at pp. 14/15:-

"I accept that Mr Hartle, on being so advised, would himself have approached Messrs Vidler and Mr Bawden of Berkeley, as he told me in cross examination he would. They, in their turn would have wanted to discuss the matter further with their solicitor, whom they meet on a weekly basis, and with what I may describe as their head office or parent company... They were themselves keen to purchase. I do not therefore think that they would have given any outright refusal to accept, at least within the immediacy. Mr Hartle for his part believed that Berkeley offer was a good offer and, as he said, he wanted to stay with them. I do not believe that he would, in the event, have taken the decision to offer the property elsewhere; he would have remained in negotiation and discussion with Berkeley, at least until the drainage problem was resolved by Berkeley expense. He might, however, I accept, have sought some reassurance for himself, by at least enquiring as to the interest among local builders and maybe even the possibility of other national builders.”

The judge, therefore, accepts that Mr Hartle would not have immediately begun a negotiation with the Sloggetts but would have tried to persuade Berkeley to complete before the covenant was registered. That is an essential finding. Mr Davidson relies upon the judge’s view that he would have remained in negotiations with Berkeley at least until the drainage problem was resolved. The difficulty about relying upon this as a finding binding upon us is that it is predicated upon a view of Berkeley response and immediately one is inquiring into how the third party would have reacted, then one is dealing with chance not probability. The learned judge’s conclusions in this respect are, therefore, tainted. The proper answer to the first question must be that on a balance of probabilities Mr Hartle would not have entered into immediate negotiations with the Sloggetts but would rather have attempted to persuade Berkeley to agree to urgent completion.

The other matter to be decided on the balance of probabilities is whether or not he would have been willing to offer a reduction in the price as the sop for their co-operation. Mr Davidson relies heavily on his stubborn refusal to give in to the Sloggett’s demands. One is inevitably faced with the difficulty of inferring from what happened what might have happened in a wholly different context. It seems to me that the probabilities were:

(I) Mr Hartle had allowed at least £8,000 to meet this contingency.

(ii) He had agreed with Mr Davidson’s suggestions that he realised that “the Sloggetts had you over the barrel...they held a key which you needed...and they could set the price.” He had been advised that in default of reaching agreement with them he would need to apply to the Lands Tribunal and that could take time. Time was precious. He had told his solicitor early on in the transaction that his intention was to sell as soon as he could. He needed to do so because Bank charges were accumulating and his cash flow demands were tight.

(iii) A prospective purchaser was not likely to be as greedy as the Sloggetts and a 5% reduction in the price would have been an added incentive to do the deal.

(iv) Mr Hartle frequently sought advice and he invariably took it. The good advice would have pointed out the advantages of a reasonable discount for an early completion.

I conclude, therefore, that on a balance of probabilities he would have been prepared to reduce the price to achieve that purpose.

2. WAS THERE A SUBSTANTIAL CHANCE OF THE SALE BEING COMPLETED BEFORE REGISTRATION?

The answer to this question depends on a number of imponderables each of which has to be assessed and its effect brought into balance with other questions. It is necessary to consider

(a). Whether and if so when the Sloggetts would have registered?

(b). How would planning matters have been resolved and what was their importance?

(c). Would a sale to Berkeley have been completed in time?

(d). Would a sale to anyone else have been completed in time?

(a). Registration by the Sloggetts. What were the chances of their registering their covenant before completion of any sale? The judge found (p. 7E):-

"If no approach had been made to Rhodaus at that time, the opportunity to convey, free of the covenants, to a purchaser willing to buy the site as it then existed, was available. I make no finding as to whether, if the property had been further marketed, Mr Sloggett might then have been alerted.”

Lawrence Sloggett gave evidence and the judge did not wholly believe him. He kept a flat in Swanage and visited regularly. Nonetheless he did not know that the adjoining property had been sold to Mr Hartle and since it appears to have happened without it being advertised for sale, he may not have realised that the property was sold at all. Although he said he took care to keep his eyes open for planning applications, he failed to spot the application to develop these sites. He may have had little cause to think that development was imminent. He apparently did not know that the covenant was not registered. There was, therefore, nothing to give him any cause for anxiety. Because Mr Wilcox had interested potential purchasers on his books, there was no need to advertise the property and there was no real chance that further marketing would have put Mr Sloggett on notice. As it happened he and his brothers were negotiating the break-up of the Sloggett Group in a way which would have meant that the benefit of the covenant would have passed to one of Mr Lawrence Sloggett’s companies. That conveyancing transaction was completed on 23rd November 1988 and that would undoubtedly have revealed that the covenant had not been registered. It seems to me, therefore, to be fairly clear that there was a substantial chance that the Sloggetts would not have discovered the fact of nonregistration until shortly before the restructuring was completed in November 1988.

(b). Planning permission: The learned judge did not accept the suggestion:-

"that if it had not been for the covenant problems, Berkeley would have taken steps to resolve the surface water drainage problems earlier.”

It seems that this was again a finding made on a balance of probabilities. That causes concern. Moreover the finding was made in the light of the historical facts i.e. without consideration being given to the hypothetical situation that urgency had been injected into the matter by the need to complete before the Sloggetts found out that the covenants were not registered. It would have been to everyone’s advantage to overcome the planning difficulties quickly. In fact some delays were caused by some changing the proposals Mr Hartle had laid before the Local Authority and putting forward an amended Berkeley design. Not much may have turned on the reduction of flats from fourteen to twelve but apparently the new design required different foundations which required different engineering calculations, and matters of this kind might have taken second place to the urgent need to carry out the porosity tests and secure the agreement of Wessex Water and the Technical Division.

Not a great deal of thought seems to have been given to the chance of a sale being completed on some conditional basis that if the difficulties were not overcome then the purchaser would have the right to withdraw and to divest himself of the property. This could not be regarded as a fanciful speculation. The evidence to support it came from the defendant’s own surveyor, Mr Beauchamp. He gave this evidence (T.20th p. 61):-

"Q. Now, if there was not a full planning permission, the difficulties of a quick deal would be more significant.

A. Yes .

Q. Although I suppose they could possibly be overcome by some obligation to buy back or some guaranteed repayment in the event that that which was expect, and reasonably expected, was not achieved.

A. Such has happened on the quarry (?) site.

Q. So it would not make a quick deal solution impossible. It would merely make it a bit more complicated.

A. Yes.

...Q. You would have a completion possibly subject to some guarantee or right of ...

A. ...To buy back, yes - it was covered by buying back (if) planning permission did not come through eventually. Well within a reasonable space of time, one could have been looking at a shortish time on that, and I would have regarded February as being the outside date.”

Mr Bawden gave evidence (19th p. 11/12):-

"Q. Having seen today the position over planning permission would it be your view that the company would not have exchanged contracts unless and until planning permission for either fourteen or twelve flats was actually granted?

A. It would probably have exchanged on the “subject to planning having been granted” basis, if pushed to do so.”

Q. It would depend on the pressures in the market.

A. Yes.

Q. It would depend on whether you were threatened by Mr Hartle with refusing to deal with you and selling elsewhere?

A. I do not think we would (inaudible) on the commercial decision as to whether we wanted to as a company.

Q. You would have to consider how much you actually wanted the site and how real a risk there would be of the site being sold to someone else?

A. On a conditional basis there is very little risk involved other than the fact that you are contracted subject to getting what you want. So the risk factor is non-existent.

Q. But you said, “we would exchange on that basis if we were pushed to do so.”

A. ...If asked to do so and if we felt it was commercially sensible to do so, we as developers will buy sites without planning permission, again subject to commercial viability etc.”

Mr Robert Turner was not asked whether he would contemplate such a conditional purchase. He did say:-

"I wouldn’t lay out the money until I had satisfied myself as to the drainage problems which is what I wanted to dig the hole for.”

When further pressed he expressed the view that he would have wanted to see the planning permission document before committing himself to pay the price. Because the right questions were not asked of him, his evidence is not as compelling as it might otherwise have been.

Mr Cruse (18th p. 63) was more robust about the planning conditions which he described in these terms:-

"To me this is just normal - in fact it’s not very much of a problem at all compared to what problems we do get with the Local Authority. This is just a fairly standard thing that they were doing prior to issuing the consent, or something like that - a drainage test or whatever test that wants doing. I don’t really see it as a great insurmountable problem.

...Q. Do you believe that there was a realistic prospect that if offered Victoria Avenue you would have been able through one or other of your companies and colleagues, to have purchased both or conducted both developments at the same time?

A. Certainly, if we wanted to.”

The problem with the learned judge’s view on this aspect is that he did not fully answer the question in the light of the hypothetical possibilities. A purchaser’s response would be shaped by the amount of discount that would be offered both in respect of the covenant and in respect of entering into a sale conditional on planning permission. Looking at the evidence as a whole, I am bound to conclude that there were real chances that a conditional sale might have been concluded or at least, as the judge was inclined to view it, that completion would have been effected shortly after the developers agreed the drainage difficulties with the Technical Division on 17th November. If there had been greater incentive to get that agreement earlier, then there seems to me to have been a real chance of succeeding in pushing the Technical Division to an earlier decision.

(c). What were the chances of Berkeley completing before registration? The learned judge found as follows (p.11):-

" Mr Vidler...told me that in the absence of the covenant problem, Berkeley might have gone ahead after 17th November, when the surface water drainage was agreed, but he said (and I accept) that they would have been willing to do so only at a reduced price. Having seen how Mr Hartle met the Sloggetts demands for £60,000, I do not think he would readily have agreed a reduced price, within the couple weeks before Berkeley withdrew. In any case I think it probable that a proposal by Mr Vidler that Berkeley should exchange contracts, even at a lower price than the originally proposed £400,000 would have led to that review by those responsible for approving the exchange of contracts, which clearly took place very shortly after, and would have precipitated an early withdrawal by Berkeley from the deal....I therefore conclude that even if the covenantees had not been alerted and the covenant had remained unregistered, and even if, as Mr White (who acted as Berkeley's solicitor) tells me he would have advised against, Berkeley had been willing to accept the property without formal release of the covenants, other than as a result of the failure to register, I do not think that the plaintiff’s deal with Berkeley could have been completed before Berkeley changed their mind in December 1988.”

Here again I am faced with the difficulty that I do not believe the learned judge was judging chances nor that he was taking all the hypothetical possibilities properly into account. The hypothesis is that Mr Hartle would have offered a drop in the price to secure early completion. They would have had to judge two risks, firstly of a non-effective covenant nonetheless, and however wrongly, causing difficulties to prospective purchasers of the flats, and, secondly, the risk of planning permission not being granted. Mr Bawden’s view about the latter was (T.19th p. 20) that if they had carried out their own porosity test satisfactorily and were confident of the solution then, answering what his recommendation would have been to exchanging and completing on that day,:-

"I would say, subject to our lawyer agreeing that was correct, then my recommendation would be yes, to go with it.”

In fact the lawyer, Mr White, was more cautious. He was aware of the consequences of non-registration but advised that it would be better to clear the covenant. His advice was not fully understood. It is a matter of speculation whether his advice would have been followed if a discount in the price had been offered. I do not find it possible to dismiss as speculative the chances that:-

(i) Berkeley would have acted more urgently to secure a good bargain;

(ii) that they would have gone ahead at least when their porosity test gave them confidence to expect that planning permission would be granted

(iii) this could have been done before the Sloggetts became aware of the non-registration of the covenant when effecting their own conveyancing on 23rd November 1988.

(d). What about some other person purchasing?

The judge did not think that Berkeleys would have given any outright refusal to an overture to try to complete before registration and he did not believe that Mr Hartle would have taken the decision to offer the property elsewhere but would have remained in negotiation and discussion with Berkeley at least until the drainage problem was resolved by Berkeley and at Berkeley’s expense. I cannot agree with that conclusion. The hypothetical position is that Mr Hartle would invite Berkeley to complete in order to defeat the covenant and would be willing to discount the price to achieve that purpose. I do not see how any prevarication was possible. Time was of the essence and a clear answer would have to have been given. Berkeley’s solicitor, Mr White preferred the cautious route of clearing the covenant. His advice was not perfectly understood by his client. They would have taken a commercial decision whether to run the risk as the price of the discount. Even on the judge’s view of the matter, Mr Hartle would have enquired as to the interest among local builders. This would have produced the interest shown in the development by Mr Turner and Mr Cruse.

Turner’s position. The judge did not think:-

"that a transaction is likely to have proceeded with Mr Turner at that time.”

He was again looking at probabilities not chances. On the evidence before him his view was well justified because in cross examination Mr Turner was driven to say that he would not have accepted a conveyance before the grant of planning permission which was not achieved until 10th February 1989. One is left to speculate, however, how he would have reacted to the possibility of purchasing the site, which was opposite one at which he was working if he could get it cheaply. His evidence was (19th October p. 54) that “land was short so when it came up we bought it.” Although he said, :-

"There is no way, I am telling you, that I would owe three quarters of a million pound,”

he also said:-

"If they (the bank) would lend it to me I would take it...If I thought it was a good bet, and they would lend me three quarters of a million to develop something, then I would do it, yes.”...But I wouldn’t lay out the money until I had satisfied myself as to the drainage problems, which is what I wanted to dig the hole for.”

He later went on to require actual planning permission. His interest in this development had been consistent. In June 1988 he put in a bid for the site for £410,000 which was rejected because Mr Hartle was already dealing with Berkeley and was not prepared to go back on that deal. His statement of evidence records that had the property come back on the market in July/August 1988 “we would definitely have been interested in buying, probably still for £410,000.” When the sale to Berkeley Homes fell through he offered the full asking price of £400,000 in March 1989 and went through the early stages of purchase through the solicitors. They only decided not to proceed because the market had started to slow down and they wanted to be cautious. Significantly he says in his statement::-

"This would not have applied in July/August 1988.”

Later in April 1991 he bid £220,000 for the site and again reached close to exchange of contracts before withdrawing from the negotiations.

Eventually he bought the land for £150,000, paying £70,000 for number 12 on 5th February 1993 and £80,000 for the adjoining plot on 27th January 1994. He was not cross-examined about the possibility of the sale being conditional upon planning permission be granted. He was not given any opportunity to express his view as to his interests were he to be offered discounts both for a quick completion to avoid the risk of the covenant biting or a further discount to overcome his anxieties about the planning position.

Mr Cruse : The judge did not accede to Mr Davidson’s invitation to reject his evidence. The judge found:-

"I accept that he was prepared to take a risk on planning permission and indeed on the covenants. But I do not believe he would have done so at the same price as was offered by Berkeley. He did in fact make an offer in December...That offer was at £350,000. If the need for a speedy conveyance had been explained to him, he might, in August, have made an offer. But I am not persuaded it would have been an offer that Mr Hartle would have accepted. He would still have hoped to reach a deal with Berkeley. He had no reason to think that the Sloggetts would prove as difficult as in the event they turned out to be...”

The learned judge was not dealing with a situation where there was no negotiation with the Sloggetts at all and where the whole object of the exercise was to defeat them. Mr Cruse gave evidence (18th 64 - 65):-

"I have two solicitors who are partners of mine, and have been for many years. If we wanted to buy other sites it was not really a problem for us to buy other sites. We did not have rigorous financial constraints in those days....To me this (that which has to done first before planning permission is guaranteed) is just normal - in fact it’s not very much of a problem at all compared to what problems we do get with the Local Authority. This is just a fairly standard thing that they were doing prior issuing the consent, or something like that - drainage test or whatever test that wants doing. I really don’t see it as a great insurmountable problem.

Q. Do you believe that there was a realistic prospect that if offered Victoria Avenue you would have been able, through one or other of your companies and colleagues to have purchased both or conducted both developments at that time?

A. Certainly, if we wanted to.

Q. If you were told that a site was subject to a restrictive covenant, what would be your reaction if you were interested otherwise in purchasing?

A. I would want to know everything about it, obviously, inside and out.

Q. What would that involve, do you think? How would you set about finding every thing about it?

A. Generally through the lawyers, obviously. Probably primarily, for the insurance coverance available for such a problem. Thinking about it, we have actually bought a couple of sites, but we have got insurance cover in place for them...

Q. Assume it is not registered at that time you investigate the position through your solicitor, assume that you are properly advised that if you purchase and there is no registration, or you have a protection for a certificate, it will not bind you, what effect if any on his Lordship’s postulated example would those circumstances have on your decision whether to buy or not to buy.

A. I don’t really think they would have any fundamental bearing, quite frankly.

Q. Why not?

A. I can’t see why they would. If it didn’t affect me at all, didn’t tie me in any way, then I am as free to still do it if (the restrictive covenant was not registered)...Again, to be honest, having solicitors as partners I would tend to err more to them than say well, what do we do, rather than, to be truthful, more than myself taking that decision wholly and utterly.”

Mr Hartle’s reactions : He was aware that the Sloggetts were in a strong bargaining position. It was obvious that the covenant commanded as much a ransom price as a ransom strip of land. In the opinion of the defendant’s valuer, Mr Beauchamp (20th p.60) if the property had the benefit of full planning permission in July/August/September 1988 one would only knock off a small amount money if the deal could be done very quickly. He thought the amount was in the order of £10,000 to £15,000 he did not seem to think that a bigger discount would be necessary as the price to pay for a staged completion subject to the right to buy back if planning permission did not come through eventually. Mr Hartle had allowed £8,000 in his calculations. He was prepared to offer £20,000 to satisfy the Sloggett’s demands. He eventually agreed £35,000. He knew that £400,000 was a “full price”. He had some leeway and was clearly willing to bargain.

Conclusion: Bearing in mind that there was a high demand for development land in the summer of 1988, that the banks lent quite freely, that Mr Wilcox the estate agent, regarded the offers made by Mr Cruse, Mr Turner and a national company F. H. Cummings, who offered £380,000 on 22nd December 1988 as being “genuine and credible,” I have to conclude that there was a real and substantial chance that a sale could have been concluded before the Sloggetts registered their covenant.

Berkeleys never backed down from their £400,000 offer. Turners were interested at £410,000. Mr Cruse offered £350,000 on 12th December 1988. F. H. Cummings offered £380,000 on 22nd December 1988. The expert evidence was that by January 1989 the value had in fact sunk £360,000. In the summer the market was keen. The choice of reducing the price for a quick sale was obviously more attractive than defeating a ransom claim which would have delayed a sale. A full discount for the depreciated value of the land having regard to the covenant which was agreed at £24,000, but Mr Beauchamp thought a reduction in the order of £150,000 to £200,000 would be appropriate. Had good advice been followed it seems to me that there was a good chance that the deal would have been completed very quickly subject to planning permission proving to be satisfactory, and a modest further discount for a conditional agreement may have been required. I consider that there was a real chance of a sale going through at £375,000. Even at the worst scenario, and without allowing for the urgency producing an earlier agreement with Wessex Water Authority and the Technical Services Division in the Local Authority, completion could have been effected by 18th November 1988. In my judgment completing the sale for £375,000 by 18th November 1988 had a slightly better than even chance of being achieved. Taking account of uncertainties, I would assess the chance at 60%.

Counsel invited us to adjourn for further argument all questions of what further damage flowed from the negligence, what damages ought to be awarded and, in particular, how interest ought to be calculated. We readily agreed that it would be better if the parties had sight of our findings in order for the arguments to take account of our conclusions. My Lords having read the draft of my judgment thus far and having indicated their agreement with it, we handed it down in draft and ventured some very tentative views on the remoteness of any further loss and on the various possible ways of making the necessary calculations. We then heard further very helpful submissions.

These questions now arise for our further decision:-

1. What consequential loss has been suffered?

2. Is Mr Hartle entitled to damages for the ill-effect the events have had on his health?

3. Are compound interest and bank charges recoverable or is Mr Hartle only entitled to statutory interest on his damages?

4. How are the damages actually to be calculated?

1. Consequential loss

There is no dispute that Mr Hartle is entitled to recover the following sums which he would not have had to incur had Mr Wyllys acted with proper skill and care:

a. The sum eventually paid to Rhodhaus to release the covenant £9000.00

b. Solicitors' costs to obtain the release £430.63

c. Solicitors' costs in connection with abortive sale £115.00

d. Solicitors' costs for the further attempts to sell £881,25

Total £10,426.88

2. Distress

Mr Hartle submits, "The last 8 years have had a traumatic effect on my life. I now have serious health problems... I have had to sell practically everything,...and have lived on social security...All of this from a position of substance which I had built up over many years. Simple justice demands that I be awarded compensation for this."

I have little doubt that the transition from apparent financial security to dependency on state benefits has proved to be most distressing. I can sympathise, but the court cannot award damages for any such suffering. The law is clear:-

"A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party...But the rule is not absolute. Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will awarded if the fruit of the contract is not provided or if the contrary result is procured instead. If the law did not cater for this exceptional category of case it would be defective. A contract to survey the condition of a house for a prospective purchaser does not, however, fall within this exceptional category:"

per Bingham L.J. in Watts -v- Morrow [1991] 1 WLR 1421, 1445. I am quite satisfied that the retainer of a solicitor to act on the sale of a commercial property is similarly not within the exceptional category.

3. Compound interest and bank charges.

The issue here is not about interest on damages but about interest as damages. The plaintiff's case is, to cite Viscount Haldane L.C. in British Westinghouse Electric and Manufacturing Company Ltd -v- Underground Electric Railways Company of London Ltd [1912] AC 673, 689, that:-

"as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good as a situation as if the contract had been performed."

His case is that had he been able to complete the sale, he would have used the proceeds of sale to discharge his Bank borrowing then excess of £400,000. Not having been able to do so, the Bank have charged interest at base rate plus 4% with monthly additions of interest to principal and have added hefty bank charges to boot. The question for decision is whether such compound interest and bank charges are recoverable or whether only simple interest can be added pursuant to Section 35 A of the Supreme Court Act 1991, as amended, which gives the court a wide discretion to include in any sum for which judgment is given:-

"Simple interest, at such rate as the court thinks fit...on all or any part of the...damages in respect of which judgment is given...for all or any part of the period between the date when the cause of action arose and...the date of the judgment."

Mr Wyllys was fully au fait with his client's financial affairs. He had acted for him over the years, and was then currently engaged in giving Mrs Hartle’s solicitors full and frank disclosure of his means in the context of ancillary relief proceedings following the breakdown of their marriage. Having acted in the purchase of this property, Mr Wyllys was aware of the full extent of his client's borrowing not only in connection with this venture, but also for another development in Lyme Regis. He knew that the Bank held charges over all his properties including his home and he knew their terms of business. Moreover he was fully informed by Mr Hartle of his wish and indeed his need for a quick sale, fearing the collapse of the property market. He knew that the proceeds of sale had to discharge the borrowings to prevent the collapse of the whole enterprise. He knew total borrowings exceeded the anticipated sale proceeds.The conclusion is inescapable that Mr Hartle would in fact have applied the whole of the net proceeds of sale not only to repay the whole of the amount borrowed from the Bank to finance this transaction but also to repay part of the outstanding borrowings for the Lyme Regis project. Had he done so, he would not have incurred the loan interest compounded monthly nor the bank charges for servicing the loan which have continued to be added to his overdraft.

On ordinary principles for the assessment of damages, the question would have been whether that loss was too remote. Unfortunately the recovery of interest as damages has not been made as easy as that. The difficulties were fully explored and explained by Lord Brandon of Oakbrook in President of India -v- La Pintada Compania Navigacion S.A. [1985] 1 A.C. 104. The difficulties sprang from the opinion reluctantly expressed in London, Chatham and Dover Railway Company -v- South Eastern Railway Company [1893] AC 429 that at common law, in the absence of any agreement or statutory provisions for the payment of interest, a court had no power to award interest, simple or compound, by way of damages for the late payment of a debt. Notwithstanding the expression of strong sympathy with such a claim, that decision was treated as applying to the award of interest as any form of damages. In 1951 the first tentative judicial inroad into the previously accepted understanding of the scope of that decision was made by Denning and Romer L.JJ. in Trans Trust S.P.R.L. -v- Danubian Trading Company Ltd [1952] 2 Q.B. 257, followed in 1981 by Wadsworth -v- Lydall [1981] 1 W.L.R. 589. Of the latter decision Lord Brandon said:-

"The distinction which Brightman L.J. was there drawing between general and special damages is the difference between damages recoverable under the first part of the rule in Hadley -v- Baxendale 9 Exch. 341 (general damages) and damages recoverable under the second part of that rule (special damages). On the facts of the case before him Brightman L.J. found that, by reason of special matters known to both parties at the time of contracting, the two items of special damages claimed by the plaintiff came within the second part of that rule. Accordingly, treating the London, Chatham and Dover Railway case as applying only to damages falling within the first part of the rule in Hadley -v- Baxendale (general damages), he saw no reason why the plaintiff should not recover the first two disputed items of special damages under the second part of that rule. In my opinion the ratio decidendi of Wadsworth -v- Lydall ...that the London, Chatham and Dover Railway case ... applied only to claims for interest by way of general damages, and did not extend to claims for special damages, in the sense in which it is clear that Brightman L.J. was using those two expressions, was correct and should be approved by your Lordships. On the assumption that your Lordships gave such approval, the effect will be to reduce considerably the scope of the London, Chatham and Dover Railway case by comparison with what it had in general previously been understood to be."

In President of India -v- Lips Maritime Corporation [1988] 1 A.C. 395, 423 Lord Brandon confirmed that the first matter decided in the La Pintada case was that:-

"The application of the principle established in the London, Chatham and Dover Railway Company case was limited to claims to recover interest as general damages under the first part of the rule in Hadley -v- Baxendale ...and did not extend to claims to recover interest as special damage under the second part of that rule."

We are, therefore, bound to ask whether Mr Hartle's claim falls under the first or under the second part of the rule in Hadley -v- Baxendale . Under the first part,

" the damages...should be such as may fairly and reasonably be considered as arising naturally, i.e. according to the usual course things, from such breach of contract itself or such as may reasonably be supposed to have been in contemplation of both parties at the time they made the contract, as the probable result of the breach of it."

Under the second part of the rule,

"if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated."

A more modern statement of the rule was given in Victoria Laundry (Windsor) Ltd -v- Newman Industries Ltd [1949] 2 K.B. 528, 539 as follows:-

"Everyone, as a reasonable person, is taken to know the "ordinary course of things" and consequently what loss is liable to result from a breach of contract in that ordinary sense...But to this knowledge, which a contract-breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses, of special circumstances outside the "ordinary course of things," of such a kind that breach in those special circumstances would be liable to cause more loss..."

The question for us to resolve is what is the result which arises generally according to the ordinary, usual course of things or the result which may reasonably supposed to have been in the contemplation of both solicitor and client of the failure of the solicitor to take due care in the execution of a retainer to act for the client in the sale of a commercial property.

Mr Davidson submits that this is a rule one case because most commercial activity involves the regular use of borrowing, so a sale delayed through negligence is likely to result in a delay in repayment of the borrowing and a continuing liability for interest on the borrowing. There is, he submits, no unusual or special feature which had to be communicated to My Wyllys to distinguish this case from the great multitude of cases dealt with by conveyancers day in and day out. It is a forceful submission made the more so by its contrast with the several concessions which Mr Davidson has had perforce to make in fairness to the litigant in person. For my part I cannot accept his proposition. The contract with which we are concerned is the retainer to act in the sale of a property. "Please act on my behalf in this sale," does not to my mind carry with it any ordinary contemplation that delay in the sale will have any other result than delay in the client enjoying the use of the sale proceeds and it carries no natural conclusion as to the manner in which the proceeds of sale are to be applied. I agree with Mr Davidson that the solicitors’ duties are not usually so limited but that is because another retainer usually follows. Even though it may be, and usually is given at the same time, there is a wholly separate instruction to apply the proceeds of sale to discharge any mortgage by which the property is encumbered. Communication of that information fixes the solicitor with special knowledge of the fact of borrowing and so naturally of the continuing liability to pay interest. "Please sell" carries no ordinary consequence of "please repay" and it is the special circumstances of "please repay" communicated at the time of the retainer which puts the case within the second rule of Hadley -v- Baxendale. It would, as Mr Davidson acknowledges, be an extraordinary result if the instruction to sell had the natural consequence that the money borrowed to purchase the property, £185,000 in this case, should fall within the first part of the rule whereas the balance would fall within the second part of the rule because Mr Wyllys was specifically made aware of facts he might not ordinarily contemplate that the client was indebted to the Bank to a sum in excess of the sale price and that the Bank were, therefore, demanding to be paid the whole amount.

The statement of claim pleads the claim for interest as special damages. It alleges the defendants’ awareness of the extent of the plaintiff's indebtedness to the Bank and of the fact that the plaintiff intended to repay or reduce his indebtedness out of the proceeds of the sale. In my judgment this was a correctly pleaded claim for interest as special damage under the second part of the rule and it is recoverable in accordance with La Pintada.

4. The calculation of the loss:

(a) Identifying exactly what the loss is : We have found that Mr Hartle lost the chance of selling his property before the market slumped. We have decided that he had a real chance of selling for £375,000, that being our valuation of the price which would have been agreed between a willing vendor - Mr Hartle - and a willing purchaser in the market conditions of the day. Had such a sale taken place, only the net proceeds would have enured for his benefit and so the agent’s and solicitors' costs fall to be deducted. Making some estimate of those and perhaps rounding down, I assess the net proceeds of the lost sale to be £360,000. That is my starting point. The parties are at liberty to calculate a more precise figure, but I do not encourage it.

Mr Hartle did not lose £360,000. He lost the chance of making it. Given all the imponderables and uncertainties, the chance of achieving such a sale could not be rated at more than 60%. The damages for the loss of that chance appeared to me at first sight to be £216,000. That sum would of course have to be reduced because, although he lost that chance of a sale he did not lose the property. It was still there to sell. Credit, it appeared to me, would have to be given for the proceeds of the actual sale. We now know he received £70,000 on 5th February 1993 and £80,000 on 27th January 1994. Costs were inevitably incurred in connection with those sales but it would not be right to deduct them for the purpose of these calculations. Having reduced the notional sale proceeds to the net figure, it would be a wrongful duplication to discount the actual proceeds of sale.

When I put my tentative views to the parties, I said, without giving it much thought at all, that credit against the damages of £216,000 should be given for the £150,000 actually received. That would mean judgment for £66,000. But is that the right approach? Prompted by Mr Davidson once again so fairly sowing seeds of doubt about the correctness of that approach, I have wrestled with the mathematics. If “a” is the lost sale proceeds and “b” the actual proceeds, are the damages properly to be awarded (a x 60%) - b or are they (a - b) x 60%. That can be further reduced to either 0.6a - b or 0.6a - 0.6b. On the figures, is it £ 216,000 - £150,000 i.e. £ 66,000 or is it 60% of the difference between £360,000 and £150,000 i.e. £126,000.

Reducing the formulae to appropriate language, is the measure of damages the difference between the value of the opportunity to sell before 18th November 1988 and the value of the opportunity to sell after that date or is it the difference between the price he lost the chance of achieving and the actual selling price, that difference being reduced by 40% to reflect the value of the chance? I confess I have not found it easy to decide.

I have come to the conclusion the the latter approach is the correct one. Take slightly different facts. Assume just for the sake of the argument that Berkeleys were in Mr Wyllys’ office with banker’s draft for £375,000 in one hand and pen poised in the other to sign contract and conveyance when the Sloggets telephoned to say they had registered their charge, so the deal was lost. One might well then say that Mr Hartle had lost a certain sale, or one as certain as certain can be. His damages would be a - b with no discount because the chance is assessed at 100%. If the chance were 99%, one would make the 1% reduction. On the facts we have found a - b is to be reduced by 40%. The unfairness of the former solution can be tested in this way. Assume we had found an 80% chance of a sale. 80% of £375,000 is £300, 000. Assume the property was sold 12 months later for £300,000. It cannot be right that the loss of such a high chance does not sound in damages. If the 0.6a -0.6b formula is adopted, then the loss of the chance always has a value.

Look at it another way. When Miss Chaplin lost the opportunity to participate in Mr Hicks’ beauty contest, there was nothing left for her. She had lost the only chance she would ever have of winning the prize. Having lost the chance, she was left with nothing. Mr Hartle did not lose everything when he lost this sale. He lost the chance of the sale but he did not lose the property itself. He retained the chance to sell it at some indeterminate time for some indeterminate price. He lost the chance of getting the excess of a over b but his chance of getting a - b was only 60% and so he should only recover 60% of it.

In my judgment Mr Hartle is entitled to damages of £126,000 under this head of his claim.

(b). The calculation of interest and bank charges : The object is to put the Plaintiff in the position he would have been in had the retainer been properly discharged. On that basis he would have received £375,000 net on the completion of the sale on 18th November 1988. The assumption should then be that the net proceeds of sale - £360,000 - were paid to the Bank to discharge borrowing then in excess of that sum. We know that the whole of that sum would have been utilised in the partial discharge of the overdraft. Had that happened the interest on the overdraft would have been reduced as would the bank charges incurred in servicing that level of borrowing. To put Mr Hartle in the position in which he would have been had he been to pay £360,000 into his account on 18th November 1988, a calculation must be done of the notional reduction in the compound interest and the bank charges that payment of that sum would have produced. The next assumption is that on 3rd February 1993 £70,000 would have become available to reduce the borrowing. The notional reduction in interest and bank charges is thence forth calculated on that reduced basis. Further crdit for £80,000 must then be given on 27th January 1994 and the calculations made accordingly. Thus a figure should be calculable for the interest and bank charges which would not have been incurred and debited to Mr Hartle’s account if a sale had been achieved for £375,000 in November 1988 and the net proceeds paid to the bank. It may be that these calculations can best be done with the Bank’s help if the Bank will give it and even if a fee (assuming and hoping a not extravagant fee) is charged for the service, it may be money well spent. This figure would represent the amounts which would not have been debited to the account if £360,000 had been available. Since there was only a 60% chance that it would have come into the account, the damages are only 60% of the calculated overcharge.

(c). Statutory interest: The first question is what is to be regarded as the date of judgment for the purpose of calculating statutory interest under section 35A of the Supreme Court Act - is it the date of the judgment in the court below or the date of the judgment of the Court of Appeal? The rule established by Borthwick -v- The Elderslie Steamship Company Ltd [1905] 2 KB 516 is, to quote the head note:-

"Where a plaintiff fails in a court of first instance on a claim for unliquidated damages, but on appeal an order is made that judgment should be entered in his favour for an amount of damages to be ascertained, the judgment does not, as a matter course, take effect from the date of the trial of the action, so as to entitle the plaintiff to interest from that date upon the amount recovered, but it will only take effect from the date at which it was given in the Court of Appeal unless an order is made by that court under (the present RSC Ord. 42 r.3) that its judgment shall be antedated."

Collins M.R. said:-

"The power to antedate ought, in my opinion, only to be used on good grounds shewn, and when I examine the facts of this case I can find no such grounds. There was no delay attributable to one of the parties, no contumacy or unreasonable act of the defendants, who ought not to be treated as in default by reason of the postponement of the question of their liability, if it arose from an act of theirs."

Romer L.J. held that:-

"In deciding on this application it ought to be borne in mind that when a case comes before this court on appeal there is a rehearing of it....If (a plaintiff) succeeds on appeal it cannot, I think, be properly said that the judgment of the Court of Appeal must be regarded for all purposes as if it had been the judgment given by the judge in the court below. The judgment in favour of the plaintiff must be treated as of the date on which it was given in the Court of Appeal, subject to the right of that court to antedate its judgment. That right should, in my opinion, be exercised with caution."

I can see no justification for antedating this order. The delays have not been occasioned by any default of either party but are the inherent delays of the system. The result is that the plaintiff has been kept out of his money. The Bank's computer is still engaged in its monthly calculation of the interest clocking up as a result of Mr Hartle's inability to pay them the proceeds of sale of the property. In my judgment the calculation of that compound interest and the bank charges must be made to the day of judgment of this court. That will be the amount of the judgment for damages under this head, although, if payments have been made by the Defendants on account of damages, then credits can be given for those payments. From the day of the of this court’s judgment, interest at the judgment debt rate will run.

As for the items of special damage which I have allowed under Paragraph 2, we have a broad discretion as to time and rate pursuant to Section 35 A of Supreme Court Act 1991. On those items I would allow interest at a commercial rate which is conventionally fixed at 1% over base rate. That interest is to calculated from the date when the payment of the expenditure was made to the date of this judgment. Thereafter it again carries only judgment debt interest rate until payment.

I would allow the appeal accordingly. I cannot end without again paying tribute to Mr Hartle for his courteous submissions and to Mr Davidson above all for the very great help he has given me.

SCHIEMANN LJ: I agree.

BELDAM: I agree.

ORDER: Appeal allowed; costs in the Court of Appeal and the court below to be the appellant's costs; application for leave to appeal to the House of Lords refused .