England and Wales Court of Appeal (Civil Division) Decisions

Case No: A2/2000/2206

SIR ANTHONY EVANS:

1. The claim is for damages representing financial loss which the claimant company contends that it suffered as the result of alleged negligence by the defendant solicitors.

2. For the purposes of the preliminary issue, it is assumed that the defendant firm was negligent in failing to advise the claimants to obtain a mining engineer's report in 1987 when they purchased the property, Haven Lodge, Edwardsville, Treharris. Such a report would have revealed, they allege, that British Coal had plans for workings in two seams near the property over the subsequent five years within influencing distance of Haven Lodge (s/c para 17).

3. The property was purchased for £80,000 and was extensively refurbished from its then derelict condition and converted for use as a nursing home (para 6). The cost was substantial, said to have been approximately £500,000 (para 20(b)).

4. The nursing home opened in April 1988. It was fully occupied by a total of 44 patients within 3 weeks of opening and remained fully occupied until the end of 1990 when extensive repairs and remedial works became necessary as the result of mining subsidence which then came to light.

5. In late January 1990 there were fears of storm damage and the property was surveyed. We do have the surveyor's report. It is at P 122 of the appeal bundle. The covering letter dated 12 February 1990 reads:

"You will note from the report that there are no serious structural problems associated with the building." (p 174).

However, the surveyor said in a later report dated 11 September 1990 that the February 1990 report had concluded that "hairline cracks in the building may have been caused by past coal mining" (p 181). This is confirmed in the witness statement of the claimant company's managing director, Mr Vernon David Phillips, where he says:--

"I wanted a surveyor to ensure that there had been no storm damage to [Haven Lodge]. Mr O'Connor duly visited the property and a few hairline cracks were noted in the outside wall ... . Mr O'Connor's opinion were (sic) that these were very old were (sic) most likely caused by subsidence many years ago and were now of no structural significance.". (p 66).

6. It appears that in July 1990 cracks in the wall and differences in floor levels became apparent and they were a fresh cause for concern (Mr Phillips' statement, para 8) (p 67). Mr O'Connor reported again on 26 July (p 176). There were small areas where hairline cracks were apparent. These were "more than likely caused by mining subsidence which took place many years ago" (p 177). He was "of the opinion that there is no case for a claim for settlement or subsidence".

7. By 10 August, however, the cracks seen in February 1990 had definitely got larger (p 178). British Coal were asked for a report on past and present coal mining beneath the property (p 179). On 23 August the staff reported cracks in (apparently) new locations, and monitors were installed. The results were dramatic. Cracks which measured 3.5 mm, 6.5 mm and 5 mm on 23 August increased by 6 September to 5.5 mm, 7.5 mm and 7.5 mm, respectively. The British Coal Corporation reported that "workings in the Seven Foot Seam at considerable depth are presently taking place beneath the property". Mr O'Connor reported:--

"We are still monitoring the cracks at the above property and consider that they have occurred as a consequence of present underground coal workings.". (p 182).

8. British Coal assumed full responsibility for the cost of repairs and remedial works which were then carried out. Temporary and, later, permanent repairs were undertaken between 1990 and October 1994. It is a feature of the present case that British Coal have a statutory liability to pay for the cost of repairs, and this explains why the view is expressed in an agreed valuation report dated 4 May 1999 that:--

"Had a mining search revealed evidence of future mine working within influencing distance of the property, then the number of potential purchasers in the market would be restricted but I do not believe that the value of the property would have been less than £80,000 at the date of purchase." (para 7.1(3)).

One reason given by the valuer, Mr Young, was that a purchaser would be aware that, in the event of damage, repairs would be undertaken by the Coal Authority, (para 6.7(ii)). (p 78).

9. Mr Young does not say whether in his opinion the price paid in 1987 represented the market value of the property without such knowledge of possible future mine workings, but the case has proceeded before us, as it did before the judge, in his words, "on the basis that there was no diminution in value and that none is intended to be pleaded". (Judgment p 6). The Statement of Claim contains an allegation that the £80,000 paid exceeded the true market value (para 20(B)(a)), but the judge treated this as having been abandoned by the Reply.

10. The claimants allege that the disruptive effect on the nursing home of the damage and repairs, together with attendant adverse publicity, was such that the business was irreversibly damaged. It ceased to be financially viable and the company was placed in receivership in May 1996.

11. Proceedings were issued on 8 February 1996. The defendants rely upon a limitation defence under section 2 of the Limitation Act 1980. A preliminary issue was ordered to be determined "Whether the claim in these proceedings is statute-barred" (judgment p 1). Stephen Richards J. held on 11 May 2000 that the claim is not barred. The defendants now appeal. The appeal was heard in Cardiff on 29 October 2000.

The Issue

12. Section 2 provides that an action founded on tort cannot be brought "after the expiration of six years from the date on which the cause of action occurred". There is no statutory definition of this date. It depends upon the common law. The cause of action relied upon is the tort of negligence. It is common ground between the parties that this cause of action occurs when, but not before, the claimant suffers actual and relevant loss or damage caused by the negligence alleged against the defendant. The principle was so stated by Lord Nicholls in Nykredit Plc v Edward Erdman Ltd [1997] 1 WLR 1630C-G:--

"Thus the question which has to be addressed is what is meant by `damage' in the context of claims for loss which is purely financial (or economic, as it is sometimes described).

In Forster v Outred & Co [1982] 1 WLR 86, 94 Stephenson LJ recorded the submission of Mr Stuart-Smith QC.

`What is meant by actual damage? Mr Stuart-Smith says that it is any detriment, liability of loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases. They are all illustrations of a kind of loss which is meant by "actual damage". It was also suggested in argument ... that "actual" is really used in contrast to "presumed" or "assumed". Whereas damage is presumed in trespass and libel, it is not presumed in negligence and has to be proved. There has to be some actual damage.'

Stephenson LJ, at p 98, accepted this submission. I agree with him. I add only the cautionary reminder that the loss must be relevant loss. To constitute actual damage for the purpose of constituting a tort, the loss sustained must be loss falling within the measure of damage applicable to the wrong in question."

In that case, the question of the date when the cause of action occurred arose in connection with a claim for interest, where damages were awarded to a lender who relied upon negligent valuation advice, where the borrower's covenant was worthless and the amount lent at all times exceeded the true value of the property (p 1635A). The cause of action therefore arose "at the time of the transaction (12 March 1990) or thereabouts", although interest was awarded from a later date, 12 December 1990 (ibid).

13. Following the statement of principle quoted above, Lord Nicholls considered first the "simple case" of a purchaser who buys a house which has been negligently overvalued or which is subject to a local land charge which his solicitor had overlooked:--

"Had he known the true position the purchaser would not have bought. In such a case the purchaser's cause of action in tort accrues when he completes the purchase. He suffers actual damage by parting with his money and receiving in exchange property worth less than the price he paid." (p 1630G).

Lord Nicholls continued:--

"More difficult is the case where, as a result of negligent advice, property is acquired as security. In one sense the lender undoubtedly suffers detriment when the loan transaction is completed. He parts with his money, which he would not have done had he been properly advised. In another sense he may suffer no loss at that stage because often there will be no certainty he will actually lose any of his money: the borrower may not default. Financial loss is possible, but not certain. Indeed, it may not even be likely. Further, in some cases, and depending on the facts, even if the borrower does default the overvalued security may still be sufficient" (p 1631B-C).

He then proceeded to ask:--

"When, then, does the lender first sustain measurable relevant loss? The first step in answering this question is to identify the relevant measure of loss." (p 1631D).

14. Before reaching the conclusion which I have already quoted, Lord Nicholls twice emphasised the factual nature of the question which arises when the principle is applied to the facts of a particular case (see p 1632B "The basic comparison gives rise to issues of fact" and p 1633G "I recognise that in practice the basic comparison may well not reveal a loss so long as the borrower's covenant is performing satisfactorily").

15 In a recent Court of Appeal decision since Nykredit, Byrne v Pain & Foster [1999] 1 WLR 1849, Simon Brown LJ recognised that a practical difference exists between cases where property is bought and those where loans are made on wrong advice:--

"Because it is altogether less certain whether and when loss will be suffered by badly-advised lenders than in the case of badly-advised purchasers, the cases are treated differently". (p 1856D).

I do not read this sentence as asserting that a different test or principle is applied in the two kinds of cases, but rather that the factual answer to the question posed by the law depends on the facts of the particular case or category of case. The question is, as Simon Brown LJ recognised, when did the injured party suffer "actual (as opposed to potential or prospective) loss or damage of a kind recognised by the law" (per Saville LJ in First National Commercial Bank Ltd v Humberts [1995] 2 All ER 673 at 676), and the answer given to it in Byrne v Pain & Foster, where the claimants acquired a lease, was that:--

"... on exchange [of contracts][they] became committed to acquiring the lease, a lease worth less than they reasonably believed, and one which they would not have committed themselves to acquire but for the defendant's negligent report". (p 1857B).

The authorities which pre-dated Nykredit were summarised in the Law Commission's Consultation Paper No 151. In cases of physical damage, caused by negligent design or construction of a building, the cause of action occurred when the damage came into existence, whether or not it was discovered or discoverable at that time: Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. (This decision remains binding as an authoritative statement of English Law, in my view, notwithstanding that in Invercargill City Council v Hamlin [1996] AC 624 the Judicial Committee of the Privy Council held that the law of New Zealand differs from it.) "The fact that the damage was not at time reasonably discoverable was irrelevant" (para 3.15). When the claim is for economic loss, the rule is "that the cause of action occurs when the plaintiff suffers damage. This is a question of fact in each case". (para 3.20). The paper concludes:--

"These cases show that the economic loss may arise in a variety of different factual circumstances and take a variety of forms. Applying the accrual test, the Courts have been concerned to identify the point at which recoverable loss is actually suffered by the plaintiff as the point at which time begins to run for limitation purposes". (para 3.23).

In relation to the Pirelli decision, the paper makes this comment:--

"The case remains authority for this point [as regards physical damage] even though today the facts in question would be dealt with as raising an action for pure economic loss". (para 3.15).

16. A number of cases was cited to us, but I need refer only to Knapp v Ecclesiastical Insurance Group plc [1998] PNLR 172 where Hobhouse LJ examined the authorities in some detail. The Court of Appeal decided that the holders of an insurance policy which was voidable for non-disclosure by the insured's brokers suffered loss "as soon as they received an insurance contract which was not binding upon the insurers". (p 186E). Doubt was cast on the correctness of another Court of Appeal decision, Hopkins v Mackenzie [1995] 6 Med LR 26, where it was held that no actual loss was suffered, by reason of negligent delays in the conduct of a personal injuries action, until the plaintiff's claim was ordered to be struck out, however predictable or even inevitable that result may have been as soon as the application for the striking-out order was made (see Knapp at p 187). On the other hand, the judgments in that case had re-affirmed the test of actual rather than potential loss which the authorities establish.

17. Relevant to the question, but not in my view determinative of it, is the fact that when an actual loss has been suffered, the amount of damages may be, and may have to be, assessed by reference to the chances of future events. There is a fine distinction, therefore, between a situation where no actual loss is suffered, notwithstanding a risk of potential loss, and one where there is an actual loss which can only be measured by assessing the present value of future risks.

The present case

18. Mr Davidson QC for the defendants (appellants) submits that the present case is governed by the Pirelli decision. The claimants acquired a property which was subject to the risk of damage caused by future mining subsidence, and the fact that they were unaware of it did not prevent them from suffering actual loss at that time, or at least when the first cracks appeared. On the evidence, that was before 8 February 1990 and therefore was outside the limitation period (six years before 8 February 1996). Mr Christopher Gibson QC for the claimants responds that the physical damage test adopted in Pirelli should not be applied here. The "relevant" damage (Lord Nicholl's caveat in Nykredit) is economic loss caused by the discovery in August 1990 of cracks which resulted from post-1987 mining operations. Moreover, the risk of physical damage occurring after 1987 depended on two distinct contingencies, first, that plans for further mining operations would be implemented, and secondly, that such operations would in fact cause physical damage to this property. Mr Gibson adds a further consideration, which is that on the special facts of this case there was no diminution of value by reason of the existence of these risks when the property was acquired in 1987. The market value of the property at that date, even with full knowledge of them, was at least as great as the price which the claimants paid for it.

Summary

19. The authorities pose the question, when did actual as opposed to potential loss first occur? In my judgment nothing in them prevents the Court from answering it in a practical way. To hold that the claimants suffered actual loss when they acquired the property in 1987, when it was in fact free from damage and when its market value was unaffected by the contingent risks that mining would be carried out and that physical damage would result from it, seems to me to offend common-sense. The claimants made their investment and the business flourished, until the cracks which on the evidence were caused by subsequent mining operations were discovered in July/August 1990. The business then suffered and the sums invested were lost. These are the economic loses for which the claimants seek damages, and they occurred within the limitation period which ran from 8 February 1990.

Conclusion

20. The question, therefore, is, when did the claimants first suffer actual as distinct from potential future loss? The pleadings are unsatisfactory, as I shall explain below, and I would answer this question by considering first, what heads of damage the claimants are or may be entitled to recover on the assumed facts, limitation apart.

21. The principles were set out by Bingham LJ in County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916. The overriding rule stated by Lord Blackburn in Livingstone v Rawyards Coal Company (1880) 5 LR App Cas 25 at 39 is 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 was now getting his compensation or reparation". The application of the rule in cases where damages are claimed as compensation for the consequences of negligent advice is as set out in Lord Nicholls' speech in Nykredit which I have quoted above.

22. The present case is one where, on the alleged facts, the claimants bought the property and invested a large sum of money in the business of running a nursing home there. They succeeded in doing so until August/September 1990. They allege that the business ceased to be profitable and eventually failed because of the disruption caused by the need to repair the cracks which were discovered then. A basic comparison is possible between the financial returns that the business would have shown, if had not been interrupted, and the losses that in fact occurred. Those financial losses were not suffered until after August 1990. They represent the actual loss which the claimant has suffered.

23. Unfortunately for the claimants, that is not how their claim is put in the Amended Statement of Claim. Their "primary contention" (paragraph 20(A)) is that if they had been given non-negligent advice they would not have purchased Haven Lodge. Instead, they could have purchased another premises for the same purpose of converting and running it as a nursing home. So they claim what they allege was (a) the additional cost of purchasing and converting Haven Lodge, compared with some other property, and (b) the amount by which the business would have been more profitable there. The first head (a) was abandoned by the Reply. The second head (b) continues to be relied upon. I find it difficult to understand how the amount claimed could be calculated. It is not alleged that the chance to acquire specific other premises was lost. The formula proposed in sub-paragraph (b) appears to be a circuitous approach to accessing the amount by which the business at Haven Lodge was less profitable than it might reasonably have been expected to be at some other property. But the actual loss is the amount by which the business was less profitable than it would otherwise have been at Haven Lodge. It seems to me that this claim, as pleaded, invites an assessment of losses which were sustained in 1987 when the claimants, as they accept, committed themselves to the Haven Lodge project rather than another.

24. The alternative claim in paragraph 20(B) is for (a) the amount by which the £80,000 paid for Haven Lodge exceeded its true market value, meaning its value at that date, and (b) the amount spent by the claimants in redeveloping and converting Haven Lodge for use as a nursing home. Sub-paragraph (a) has been abandoned by the Reply. If it stood, it too would invite assessment of an actual loss suffered in 1987. Sub-paragraph (b) does not do this. It refers to sums expended on the property after its purchase in 1987/8, but I do not see on what basis the claimants can be entitled to recover those sums as damages. They were properly invested in the business and for a period (I assume) the investment proved justified. The business then became loss-making and eventually ceased. The investment was lost, but the loss was not suffered in my judgment until the events occurred which had that result; and that was in August/September 1990 when the business began to be interfered with.

25. This conclusion can be tested in a number of ways. I shall take just two. Suppose first, that the nursing home business was interfered with for a period of, say, 12 months after the cracks were discovered. The actual loss would be the amount by which profits were reduced, or additional losses were incurred, during that period. It seems to me that it is little short of fanciful to suggest that that loss was sustained in 1987 when the property was bought, or that the amount of potential loss could sensibly have been ascertained at that date.

26. Suppose, secondly, that in 1987 the defendant solicitors had two clients, an individual intending to purchase the property and a company which would carry on business there under contractual arrangements made with the individual, and that the solicitors owed the relevant duty of care to both parties. If the company was to claim damages for later interference with the business, as in the present case, I do not see how the fact that the individual might be said to have suffered an actual loss in 1987, by reference to a reduced market value of the property if the true facts were known, could be an answer to the company's claim.

27. My conclusion therefore is that the losses for which the claimants are entitled to claim damages as compensation were suffered by them from August/September 1990 and that this claim is not barred by the limitation defence. It is unfortunate for them that the claim is not pleaded in this way, but I for my part would not deprive them of the opportunity to re-formulate their claim by re-amendment of the Statement of Claim. If this is done and the re-amendment is permitted then it seems to me that the claim is not statute-barred and that the preliminary issue should be decided in the claimants' favour.

28. This conclusion makes it unnecessary to rely, in the claimants' favour, upon the unusual fact that the market value of the property in 1987 was no less than the price they paid for it, nor in the defendants' favour on the fact that the relatively small costs of the transaction could be said to represent a loss which the claimants suffered then. Both matters are artificial, in my view, and they provide no guide to the question whether the claimants first suffered actual and (per Lord Nicholls) "relevant" loss before 8 February 1990. In my judgment, they did not.

The date of the capital investment

29. Lord Justice Pill identifies the date when the expenditure on redevelopment and conversion commenced as the time when the claimants' cause of action was complete. I agree with him that the relevant damage is the financial loss which the claimants allege that they incurred. The question therefore arises whether they suffered "actual (as opposed to potential or prospective) loss" of that kind at that date, sometime in 1987. In my respectful view, any attempt to identify the actual loss at that date would have been entirely speculative. Whether or not any financial loss would be suffered, as the result of the mining operations, would depend upon the chances of mining taking place, and of it affecting Haven Lodge, and of it affecting the building sufficiently to cause any, and if so how much, disruption of whatever business was being carried out there at the relevant time. It was impossible to give reasonably definite or even sensible answers to those questions then. I incline to the view that the true measure of loss, and the only actual loss suffered by the claimants, at that date was the diminution in value of the property, if there was any, caused by the prospect that mining would take place.

30. The relevant loss, namely, the financial consequences of the disruption of the business, was not suffered then, nor did it begin until the disruption occurred.

Amendment

31. I would reject the appellants' submissions as to the date when the limitation period began, and direct a stay of the proceedings pending an application by the claimants for leave to amend the statement of claim so as to identify the loss for which they claim damages, and the Court's ruling on that application.

LORD JUSTICE BUXTON:

32. I gratefully adopt the statement of the facts and issues that is set out by Sir Anthony Evans. It is with considerable diffidence that I find myself unable to adopt either the view of the case that commends itself to my Lord or the view of the case that commends itself to Pill LJ, whose judgment I have had the benefit of reading in draft. It will, I hope, make for clarity if I first set out my own conclusions, and then venture to address some observations to my Lords' judgments.

33. By section 2 of the Limitation Act 1980, the period of limitation in an action in tort expires six years from the date on which the cause of action accrued. Because negligence is only actionable on proof of damage, the cause of action in that tort accrues, and thus the period of limitation starts to run, on the first occasion on which the Plaintiff suffers a more than minimal amount of the damage in respect of which he claims. It is unnecessary to cite authority for these basic propositions, which are expounded in more detail in Clerk & Lindsell (18^th edition), paragraph 33-07.

34. What that damage is can only be determined from the Statement of Claim, since it is there that the Plaintiff asserts the nature of his claim. In the present case the damage complained of is clearly set out in paragraph 19 of the Statement of Claim. That alleges that if the Defendants had not been negligent as alleged in paragraphs 17 and 18, by failing to obtain a mining report, then the Plaintiff would not have purchased Haven Lodge. The claim then continues

"The sole purpose of purchasing Haven Lodge was to convert it into a commercial nursing home and the risk of any damage to the building in the future made it entirely unsuitable for that purpose."

It is then alleged that by reason of that failure the Plaintiff has suffered "loss and damage", and "Particulars" of that loss and damage are set out. Those Particulars include interference with the running of the nursing home and damage to the reputation of the business; or alternatively loss of the amount spent on converting Haven Lodge to a nursing home, as money in the event thrown away. No claim is now made in respect of any difference between the value of Haven Lodge as a building when purchased and the amount paid for it, since the expert advice was that any threat of interference from mining would not reduce that value. That was because any structural damage from mining would be paid for by British Coal. For the same reason, no claim is made in respect of damage to the building as such: the only claim is in respect of the effect of that damage upon the Plaintiff's business.

35. The correct interpretation in law of these allegations is that the damage to the Plaintiff, which completes the cause of action, is that set out in paragraph 19 of the Statement of Claim. The "Particulars" are the quantification, in the events that have occurred, of the loss caused to the Plaintiff by the damage identified in paragraph 19. That damage was caused by a breach of duty on the part of the solicitors, which took place when the solicitors failed to give the Plaintiff the advice that they should have done, and thus failed to prevent him entering into a transaction that was, as he alleges, entirely unsuitable for the purpose that the solicitors knew him to have. This analysis, it should be emphasised, is not that of the appellants, but rather what flows inevitably from the allegations in the Respondents' pleadings. The analysis is the same as that set out by Hobhouse LJ (as he then was) in Knapp v Ecclesiastical Insurance at p 184E-G of the report in that case. The Plaintiff makes the same complaint as that described by Hobhouse LJ in Knapp at p 184F: "They had acted to their detriment: they did not get that to which they were entitled".

36. If, on the hypothetical assumption that an action was brought at the very moment when the detriment arose, no or only nominal damages would have been awarded, then the cause of action would not have arisen at that moment. But the court will be very slow to assume that that would have been the case. Rather, it will do the best that it can to assess, on the basis of the available evidence, the loss flowing from the breach in the normal course of events: see the observations of Bingham LJ in Moore v Ferrier [1988] 1 WLR 267, 280, cited with approval by Lord Nicholls of Birkenhead in Nykredit plc v Edward Erdman [1997] 1 WLR 1627 at p 1632H. That approach is consistent with the acceptance by Lord Nicholls in Nykredit, at p 1630F, of the definition of actual damage adopted in Forster v Outred [1982] 1 WLR 86 at p 94:

"any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like.....loss of profit, losses incurred from onerous provisions or covenants in leases."

In the present case, applying the approach set out by Bingham LJ in Moore v Ferrier, the damage suffered by the Plaintiff would have been assessable by a judge, using the normal methods for assessing the value in damages of future possible events, at the moment when, because of his solicitors' negligence, he was permitted to take on a transaction wholly unsuitable for his known purposes. That assessment is possible, and thus sufficient to found a cause of action, even though a more certain assessment of the extent of the loss would become available in the events that actually occurred later in the course of the Plaintiff's conduct of the business.

37. These aspects of the case have been to some extent obscured by two errors that permeated the argument before the judge below and, to a lesser degree, before us. The first was that relevance was attached to the fact that at the moment of breach it was the case, or at least was assumed to be the case, that full value had been obtained for the purchase price of the property: the expert evidence being that the market value of the property would be the same whether or not there was a threat of mining damage. But that consideration was simply irrelevant to the case as pleaded. No claim was or could have been pursued in respect of the value of the building as a building: because, as pointed out above, any such loss had already been fully compensated by British Coal. The claim is rather in respect of the money thrown away on converting the building for the purposes of the nursing home business, in which claim the market value of the building plays no part.

38. Second, it was assumed that the claims set out in paragraph 20 of the Statement of Claim under the heading "Particulars" represent the damage claimed by the Plaintiff. If that were so, then it could indeed be argued that the actionable damage did not accrue until the first of those matters eventuated, and therefore that the cause of action only arose on that date: however difficult it might be actually to ascribe a certain date to the beginning of the events set out. But the Particulars do not represent the actionable damage, but rather the quantification in terms of damages, in the events that have occurred, of the claim made by the Plaintiff in respect of the damage alleged in paragraph 19 of the Statement of Claim.

39. Mr Gibson said that to conclude that damage occurred at the time of the breach was to ignore the loan cases, where even though there is a future contingency that the loan may fail or security for it prove insufficient, the cause of action is not regarded as arising until those events actually occur. But the loan cases are in this respect regarded as falling into a separate category, as held by this court in Byrne v Pain & Foster [1999] 1 WLR 1849 at p1856C. That observation was in my view part of the ratio of Simon Brown LJ's judgment, it was specifically agreed with by Schiemann LJ, and therefore binds us: quite apart from its being, with great respect, obviously right.

40. Mr Gibson also sought assistance from Hopkins v McKenzie (1995) 6 Med LR 26, a case where a cause of action in respect of solicitors' delay was held not to accrue until the date of striking out of the plaintiffs' action, even though the action had been vulnerable to attack, and therefore economically of less value to the plaintiffs, before that date. It is clear that the actual decision in that case turned on the way in which the case had been pleaded, both Saville LJ and Nourse LJ emphasising that the claim was in respect of the striking out, and the earlier depreciation in value, however much relied on in argument before the Court of Appeal, was not the damage for which recovery was sought in the claim. Reliance was however placed on Saville LJ's insistence, at p30 of the report, that

"what must be shown is actual loss or damage, not future damage however likely it is that this will occur"

and upon his description of such actual damage having been manifested in earlier cases

"through a diminution in the value of the plaintiff's property, or through an increase in the plaintiff's obligations, or through the plaintiff not securing the rights that he should have secured."

Mr Gibson contended that none of these circumstances had arisen in this case at the date of purchase. But, even leaving aside the consideration that Saville LJ was plainly not seeking to formulate a comprehensive list, the present Plaintiff did not, on the purchase, secure the rights or the benefits that he should have secured if the solicitors had done their work without negligence: because, as he himself alleges, he did not secure a property suitable for his business, but one that was entirely unsuitable for that purpose. The situation is exactly the same as that identified by Simon Brown LJ in Byrne v Pain & Foster, picking up, at p 1857B of that report, the foregoing analysis of Saville LJ as expressed by him in an earlier case, First National v Humberts [1995] 2 All ER 673:

"the plaintiffs on exchange became irrevocably committed to acquiring the lease, a lease worth less than they reasonably believed, and one which they would not have committed themselves to acquire but for the defendants' negligent report. That, as it seems to me, plainly resulted in "actual (as opposed to potential or prospective) loss or damage of a kind recognised by law"

41. In our case, the Plaintiff became irrevocably committed to the property when he entered into the contract to purchase it, a purchase which was highly damaging to his interests and to which he would not have committed himself but for the Defendants' negligence.

42. In the event therefore the Plaintiff suffered relevant damage, and therefore the limitation period started to run, at the time of the purchase. The admitted inequity of holding him statute barred on the basis of a legal fact of which he was unaware has been recognised by Parliament, not by altering the basic law of limitation, but by the special relief provided by the Latent Damage Act. However, in this case the Plaintiff has permitted the time allowed by those provisions to elapse.

43. The view of both Pill LJ and Sir Anthony Evans is that damage necessary to complete the cause of action did not arise until a point after the date of the purchase. Pill LJ attributes that to the date at which money was spent on conversion of the building; Sir Anthony Evans to the date in 1990 at which cracking actually appeared. Sir Anthony accepts, I think, that that analysis is not open on the claim as at presently pleaded, but he would grant leave to amend the claim to allege, as the first occurrence of relevant damage, the appearance of the cracks.

44. I would wish to view with some reserve the prospect of permitting the radical amendment of a claim which, through its pursuit on the unamended basis, has already caused substantial costs to the defendants and a substantial use of public resources (the latter loss not being recoupable at all by a costs order); where there has been no application to amend and no suggestion of an application to amend; and where the unamended claim has been strongly advocated before the Court of Appeal by leading counsel. It is, however, not necessary to enter into those considerations, because the case cannot in fact be saved by amendment of the pleadings.

45. The case is pleaded as it is, not by accident or oversight, but because the Plaintiffs' advisers realised that the damage that they allege in paragraph 19 is indeed the damage that flows from the act of negligence on which the claim is founded. The solicitors were not under a duty to prevent cracks from occurring. Nor were they even under a duty to prevent ill-advised expenditure on adapting the premises. Rather, their only duty was to act competently as solicitors: in the present case, not to allow the purchase to go forward without a mining report. They were under that duty because it was foreseeable that without a report there might accrue the damage to the Plaintiff complained of in paragraph 19, that the building that they bought with the solicitors' assistance was entirely unsuitable for its known purpose. That, not the cracks or the expenditure, was what the solicitors were negligent in not preventing. The cracks and the expenditure enter the case at a later stage, as part of the quantification of the loss caused by the unsuitability of the building. They are taken into account at that stage because the defendants have to take the plaintiffs as they find them and are liable for all losses naturally flowing from the original act of negligence. But the original act of negligence, the first element in the cause of action, is rightly alleged to have been a failure to prevent the purchase in respect of which the solicitors were retained to act; and not a failure to prevent acts of the purchasers after the purchase, or subsequent damage to the object purchased. And the damage that completes that cause of action is, as the pleading says, and could only say, the burdening of the plaintiffs with an unsuitable property.

46. This is not a pleading point, in the pejorative sense of that expression. Much less is it any criticism of those who drafted the pleading. Rather, the pleadings rightly acknowledge that the damage flowing from the alleged negligence was the occurrence of that which the solicitors negligently failed to prevent, as set out in paragraph 19 of the Statement of Claim; and the cause of action alleged against the solicitors accrued on the occurrence of that damage.

47. I would therefore allow this appeal and substitute for the judge's order an order that the claim be struck out.

PILL LJ:

48. To identify the date at which time will run for limitation purposes in an action for negligence it is necessary to identify the point at which recoverable loss is actually suffered by the plaintiff. In Nykredit plc v Edward Erdman Group Ltd [1997] 1 WLR 1627, the plaintiffs lent money on the basis of the defendants' negligent valuation of property. It was held that a cause of action had arisen when a relevant and measurable loss had first been revealed. Lord Nicholls stated, at p 1632B, that the moment at which a loss is first revealed "will depend on the facts of each case. Such difficulties as there may be are evidential and practical difficulties, not difficulties in principle". Lord Hoffmann stated, at p 1639B to D:

"There may be cases in which it is possible to demonstrate that such loss is suffered immediately upon the loan being made. The lender may be able to show that the rights which he has acquired as lender are worth less in the open market than they would have been if the security had not been overvalued. But I think that this would be difficult to prove in a case in which the lender's personal covenant still appears good and interest payments are being duly made. On the other hand, loss will easily be demonstrable if the borrower has defaulted, so that the lender's recovery has become dependent upon the realisation of his security and that security is inadequate. On the other hand, I do not accept Mr Berry's submission that no loss can be shown until the security has actually been realised. Relevant loss is suffered when the lender is financially worse off by reason of a breach of the duty of care than he would otherwise have been."

49. In Knapp v Ecclesiastical Insurance Group PLC [1998] PNLR 172 the question was when a cause of action had arisen when the plaintiffs had, on the negligent advice of brokers, failed to get a binding contract of indemnity from the insurance company. Hobhouse LJ stated, at p 184E to G:

"From these authorities it can be seen that the cause of action can accrue and the plaintiff have suffered damage once he has acted upon the relevant advice `to his detriment' and failed to get that to which he was entitled. He is less well off than he would have been if the defendant had not been negligent. Applying this to the present case, the plaintiffs paid their renewal premium without getting in return a binding contract of indemnity from the insurance company. They had acted to their detriment: they did not get that to which they were entitled. The fact that how serious the consequences of the negligence would be depended upon subsequent events and contingencies does not alter this; such considerations go to the quantification of the plaintiffs' loss not to whether or not they have suffered loss. The risk of loss existed from the outset and in the absence of better evidence would have to be evaluated and assessed as a risk and damages awarded accordingly."

That judgment was delivered before the House of Lords decision in Nykredit.

50. I agree with Sir Anthony Evans that the approach to the problems laid down in Nykredit is not confined to mortgage lenders. Lord Nicholls' statements at p 1631 to 1633, cited by Sir Anthony Evans, demonstrate that analysis of the circumstances of the particular transaction is required. Lord Hoffmann, considering the position of the lender, stated, at p 1638D: "It is of course also the case that the lender cannot recover if he is, on balance, in a better or no worse position than if he had not entered into the transaction at all. He will have suffered no loss." While in the ordinary case of a purchaser who receives property worth less than the price he paid, and he would not have bought had he known the true position, actual damage is suffered when he parts with his money, consideration of the actual circumstances is necessary. That is so whether it is the position of a purchaser, or a vendor, or a mortgage lender is under consideration. Lord Nicholls was not creating a special rule for mortgage lenders. An analysis of the facts of the particular case is required when deciding when loss is suffered.

51. The negligent act of the defendants in the present case was the failure to obtain a mining report. A feature of the case is that, had such a report been obtained, the value of the property would not have been less than the sum of £80,000 paid by the respondents. That is, at least in part, because of the statutory liability of British Coal to pay for the cost of repairs. The appellants' case, accepted by Buxton LJ, is that actual damage occurred when the purchaser completed the purchase and a cause of action in negligence then accrued. The fact that damages were at that moment extremely difficult to assess, because assessment would have depended on so many contingencies, did not prevent the cause of action from arising. The claimant company contend that it was only when cracks attributable to the post-1987 mining operations appeared, which for this purpose I take to be August 1990, was there damage which was actual and recoverable. Sir Anthony Evans accepts the submission that loss was not suffered until the event occurred, the emergence of the cracks, which required work which interfered with the business of the nursing home.

52. In Hopkins v Mackenzie [1995] 6 Med LR 26 it was held that a cause of action based on delay by a solicitor in pursuing his client's action did not arise until the action was struck out. It had been argued that actual loss had occurred earlier because the prior risk of its being struck out had reduced the action's settlement value.

53. In my judgment, that case does not establish a general principle. All three members of the Court underlined the basis of the claim, loss of "the right to advance a medical negligence claim in a court of law. That loss was not sustained until the action was struck out." (Saville LJ at p 30). Nourse LJ stated:

"The plaintiff sues in respect of the loss or damage suffered by him by reason of the striking out ... on February 4 1986. He does not sue in respect of the loss or damage suffered by him by reason of some earlier deprecation in value of his right of action against the defendant in that action."

The case is an illustration of the need to identify the date at which the relevant loss was suffered; in that case it was the date of the striking out. In this particular case, the claimant was not bound to put the claim in a way, the deprecation in value of the right of action, which would have established a loss at an earlier date. However, there is no general principle that the claimant can delay the arrival of a cause of action by opting to ignore earlier relevant damage.

54. The present claim is put on the basis that, had a mining report been obtained, the company would not have purchased Haven Lodge. In paragraph 19 of the amended Statement of Claim it is stated that "the sole purpose of purchasing Haven Lodge was to convert it into a commercial nursing home and the risk of any damage to the building in the future made it entirely unsuitable for that purpose". If that is taken as an admission that damage occurred at the time of purchase, the admission may be conclusive but further analysis of the sequence of events is in my view required in the context of the pleading as a whole. Damage is pleaded in the following paragraph. In most purchaser cases, damage will occur at the moment of purchase because, as Lord Nicholls stated in Nykredit, the purchaser receives property worth less that the price he paid. Thus the breach of duty (as in this case) is in permitting the purchase (I agree with Buxton LJ that it is not necessary to look to subsequent events to prove the breach) and the damage which completes the cause of action is almost contemporaneous with it.

55 However, in this case the company do not pursue the pleaded claim that the sum of £80,000 paid by them to purchase Haven Lodge exceeded the true market value of the property. It did not. Their claim is for loss of the additional profit which they would have made by running a nursing home at other premises. Alternatively, they claim the amount spent in redeveloping and converting Haven Lodge into a nursing home, about £½M, and other expenses incurred in investigating defects and carrying out repairs. That expenditure would also be relevant to the assessment of loss of profit if the claim is put on that basis. It is submitted that those losses did not arise until the cracking occurred in the Summer of 1990. Until that date there was only the potential or likelihood of future loss and no actual loss.

56. To the extent that there was in my view no relevant loss upon the purchase, I agree with Sir Anthony Evans. The property was purchased at market value. It might have been sold on or used for other purposes with respect to which the mining operation would not have diminished its value. The negligence was in failing to advise that the property was not suitable for the purpose intended at the time of purchase, but loss occurred only when expense was incurred in putting that purpose into effect. That was action to the detriment of the company, to adopt the terminology of Hobhouse LJ in Knapp. There was no recoverable loss at the time of purchase, if one ignores, as I would, the small costs of the transaction. Putting their claim as they do, the company are entitled to ignore that sum.

57. On the unusual facts of this case, actionable loss in my view was suffered when significant sums were spent on the redevelopment and conversion of the property. It was that expenditure rather than the purchase itself which completed the cause of action. The money was spent as a result of negligent advice. That expenditure in the event was abortive because, by reason of later events, it emerged that the property was unsuitable for use as a nursing home. The cause of action was however complete when the money claimed in the Statement of Claim was begun to be spent. It would not have been spent but for the negligent advice. It was when the expenditure of that money commenced that recoverable loss results from the negligent advice.

58. It is important to distinguish between identification of actual loss and attempts to quantify that loss and it is clear that difficulties of quantification do not prevent a cause of action from arising. While I do not find that loss occurred at the moment of purchase, I am not able to hold that the event which revealed that a loss had occurred, the subsidence revealed by emergence of cracks, was itself necessary to complete the cause of action. It was the subsidence which converted the risk of the expenditure having been abortive into a more readily quantifiable loss but the cause of action was complete once the company had taken action to their detriment by the expenditure of money on the redevelopment and conversion of the property. Relevant loss had occurred even though, until much later, it could only have been quantified on the basis of an assessment of the risk of subsidence.

59. The date when the expenditure on redevelopment and conversion commenced has not been identified precisely but was plainly before February 1990. That being so, the cause of action was in my judgment complete before February 1990 and, in the result, I agree with Buxton LJ.

60. I would not have allowed the appeal on the basis of the second argument advanced by the appellants, namely that there was relevant cracking before 8 February 1990, that is, more than six years before the issue of the writ. Sir Anthony Evans has set out the events of 1990 in his judgment. The evidence is that the cracks present on that date were likely to have been caused by earlier subsidence. It was only in the summer of 1990 that, dramatically, the cracking caused by the post-1987 mining operations occurred.

61. For reasons given earlier, I would allow this appeal.