IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Lloyd)
Tuesday, 3rd July 2001
B e f o r e :
LORD JUSTICE KAY
LADY JUSTICE ARDEN
|BENNIE CHAVEZ AYLWEN|
|- v -|
|TAYLOR JOYNSON GARRETT|
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
appeared on behalf of the Appellant.
MR MICHAEL BRIGGS QC (Instructed by Barlow Lyde & Gilbert, Beaufort House, 15 Boltoph Street, London EC3A 7NJ)
appeared on behalf of the Respondent.
Crown Copyright ©
Tuesday, 3rd July 2001
"At all material times the Defendants by Mr Lewis knew that one of the effects of entering into the Sale Contract was to enable the Claimant to shelter from the United States tax a capital gain arising from the sale of her apartment at 65th Street, New York, and to enable her to set off the mortgage interest payments against rental income arising in the United States for United States purposes."
"(iv)The loss of tax savings in respect of both capital gains tax liability on the sum of £800,000 paid by the Claimant pursuant to the Sale Contract, and in respect of the income tax liability on the Claimant's rental income against which the Claimant has set off the interest payments made to the Boston Safe Deposit and Trust Company, which tax savings are now being challenged by the United States Internal Revenue Service;
(v)Such interest and penalties in respect of late payment capital gains tax and income to which the Claimant may become liable if the said challenge by the United States Internal Revenue Service is successful;
(vi)The loss of the tax saving in respect of income tax liability which the Claimant would have been able to claim by setting off the interest payments to Boston Safe Deposit and Trust Company (or some other mortgagee) against income arising in the United States in the period from June 1993 (when she vacated the Property) to December 1995 (when she purchased her present home and assumed a liability to make interest payments which are available to be set off against the United States income for tax purposes."
"Doing the best I can to assess the matter in the light of the submissions that have been made to me, it seems to me that Mr. Briggs is right that the loss which Mrs. Aylwen seeks to lay at the door of the defendant as being the consequence of their negligence is not, in law, to be regarded as the consequence of their negligence (if it was negligence, which I assume for present purposes), but it is the consequence of the choice that she made in the situation she found herself in, in June 1993, having to find an alternative property, having large resources available for the purpose, of which she could have deployed a larger part than she did in buying an asset in the London property market which would have had the same or a similar prospect of an upturn in value, according to the cyclical operation of the market, as 39 Green Street would have had. She chose, for her own reasons, not to do that with her money, and accordingly, in my judgment, that is the cause of her failure to make the profit that she says she was deprived of by the defendant's negligence, and not the defendant's negligence. For those reasons it seems to me, reviewing the Master's decision, albeit with the benefit of more cogent and no doubt more ample submissions than he had, that he was over-cautious in saying that the matter could not be seen to be clear and had to wait to trial; and in fairness to him it may be that if he had the benefit of listening to Mr. Briggs and Mr. Symons over the length of the period that I have had the pleasure of hearing them make their submissions, he would have come to a different conclusion.
At all events the conclusion that I come to, having excluded, as I say, the factual matter, is that in law Mr. Briggs is right that the case cannot succeed and that judgment ought accordingly to be given under CPR24 for the defendant."
(1) She says she took 38 Trevor Square -- that is the property the subject of the short lease to which I referred -- because she had to act at great speed. She has a young family whom she had to accommodate and it was coming close to the summer holidays. In December 1995 she bought 1 Upper Brook Street. So, in consequence of the defendants' negligence, she was out of the property market for some two and a half years.
(2)She says that 39 Green Street is a unique property, and she describes it at some length. She says there were no similar properties in which to invest.
(3)As regards the loss of tax relief, she says she could not roll over a capital gain which she had made in 1981 and she could not set mortgage payments against her United States income as a result of the defendants' evidence.
"In the present case the measure of damages is the difference between the position in which the appellants would have been if they had been able to exchange contracts for the purchase of the property at £67,500 and the position in which they were having lost the opportunity to purchase the property at that price. The position in which they would have been if they had purchased the property for £67,500 is that they would have had the property; but they would not have had the £67,500 that they would have paid for that property. Unless it is shown that the value of the property on the day that they would have purchased is greater than the £67,500 that they would have had to pay for the property, they have suffered no loss. They have suffered no loss because what has happened is that what they lost is the opportunity to purchase the property at a price that was equal to or greater than its value. In principle, therefore - and in the absence of some special feature - the inability to purchase property at market price will not give rise to an award of damages under this head. It will not give rise to an award of damages because the failure to make the disclosure required by rule 6A(2) will not have lead to a position in which the prospective purchaser has suffered any financial loss."
(1)is there a new cause of action?
(2)is it based on the same or substantially the same facts?
(3)is it appropriate to give permission to amend?
"A cause of action is simply a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person."
(i) it had to be shown that the evidence could not have been obtained with reasonable diligence for use at the trial;
(ii)the evidence had to be such that it again would have had an important influence on the result of the case, although it did not need to be decisive; and
(iii)the evidence had to be such as was presumably to be believed, or, in other words, it must be apparently credible, though it need not be in controvertible.
"Any claim for lost profits would not be a loss falling within the scope of the Defendants' duty to the Claimant. Alternatively, the Defendants did not cause any such loss. The same was caused by the Claimant's failure to embark upon some other equivalent property investment and by the general decline in the property market."
"In the situation arising on an appeal to the House of Lords from a summary judgment the application of these conditions, and perhaps the conditions themselves, will require some modification. It may well be that the standard of diligence required of the defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, would not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered and is sufficient, according to the ordinary principles applied on applications for summary judgment to raise a triable issue. But I see no injustice at all in requiring the defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence; whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but which was not produced."
"As you may know we act for Mr and Mrs Aylwen the UK."
"Would you please let me know as a matter of urgency what formal proof of purchase you will require to satisfy the requirements of the Internal Revenue. Mrs Aylwen will be signing a purchase contract in the usual way but the property will not actually be registered in her name until after the deadline.
Could we please speak on the telephone so that I may ensure that you have the necessary paperwork to shelter Mrs Aylwen's gain."
"We said that we intended to have a contract between Mr. and Mrs. Aylwen for the purchase of 39 Green Street for the sterling equivalent of US $3,231,176. As far as the mortgagee was concerned the internal revenue would regard this as being part of the purchase price so that one could deduct the cost of the mortgage from the purchase price.
We asked about the necessity of transferring the property physically from Mr. Aylwen to his wife and Mr. Schulmann said that the sale would need to be a real sale and accordingly we must proceed with the transfer and we would need to have stamp duty paid as well and lodge the transfer at the Land Registry prior to November 3rd.
We said that the Aylwens would not be at all happy about paying 1% stamp duty on the transfer price but Mr. Schulmann thought that it was an unacceptable risk to leave the property unstamped and therefore unregistered. We were after all talking about sheltering tax of approximately $1,000,000 and consequently stamp duty at 1% was a minimal cost in that connection."
"The reason why this is of particular significance in this case is that the Land Registry Charge Certificate (which currently has Mr. Aylwen as the Registered Proprietor) has a Caution registered against it. The reason why there is a Caution entered on the Land Registry Charge Certificate is because in 1988 Mr. Aylwen entered into a Contract to sell the property to a Company known as Riverway Limited. Contracts were duly exchanged on the transaction and Riverway Limited paid a substantial deposit. Completion was due to take place in July 1989 but Riverway were unable to complete due to financial difficulties. Certain legal procedures then followed whereby a Notice to Complete was served on Riverway Limited and when that expired Mr. Aylwen was free to (a) retain the deposit paid and (b) sell the property elsewhere. As Riverway Limited disputed the fact that the deposit was not refundable (litigation is continuing) they have refused to consent to the Caution being removed. As far as the Land Registry are concerned when they receive our application to register Mr. Aylwen as the new owner they will automatically serve a Notice on Riverway Limited advising that an application relating to a sale has been received. Riverway Limited then have the choice of:-
(a)Consenting to the Transfer
(b)Objecting to the Transfer
(c)Consenting to the Transfer subject to the Caution remaining.
Due to the litigious circumstances it is highly unlikely that Riverway Limited will cooperate in agreeing to consent to the Transfer taking place subject to the Caution remaining. In order to obtain the removal of the Caution Court proceedings will need to be commenced. The Land Registrar may throw out the application to transfer the property from Mr. Aylwen to Mrs. Aylwen if Riverway Limited refuse to consent to the transfer with the Caution remaining in place and invite us to submit a fresh application once the Caution has subsequently been removed through Court proceedings. In these circumstances under English Property Law the legal estate would not have passed to Mrs. Aylwen.
Having pointed out the above I think it is worth bearing in mind that from an English Tax point of view it is, for example, the date of exchange of Contracts that is relevant for capital gains tax computations. Is the position the same of U.S. fiscal law?
From the above you can see that there could be an argument as to whether or not the legal title had actually passed to Mrs. Aylwen. However, Mr. Aylwen would have taken all steps to dispose of his interest and Mrs. Aylwen would have an enforceable right to have the property transferred to her. Can you confirm that this would be sufficient for your purposes."
"Dear Mr Lewis:
Reference is made to your fax dated October 26, 1990. Previously to receiving same I met with Axel Aylwen and he advised me of the `Caution' but your memorandum clearly sets forth the problems being faced in effectuating the transfer of title. In my opinion the failure to transfer actual title to the premises before November 4, 1990 would significantly weaken the client's position in meeting the time limit qualifications set forth in a tax free exchange."
"(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced-
(b) ... on the same date as the original action.
(2) In this section a new claim means any claim ... involving either
(a)the addition or substitution of a new cause of action
(4)Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.
(5) The conditions referred to in subsection (4) above are the following-
(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action..."
"Mr Harvey asked us to say that all incidents or items of damage to property arising out of breaches of the same duty by the same defendant give rise to but a single cause of action. That is a proposition which he says is equally true, whether the property be a car (to take an example which he mentioned) a building, or a series of buildings on an estate; whether there be a single breach of the duty in question, or several breaches, and whether the damage occurs on one occasion or on several separate occasions, however widely separated in time. Otherwise, says Mr Harvey, it will be impossible to know where to draw the line in any given case. He submits that his proposition has been established as a matter of principle by the decision of this court in Idyll Limited v Dinerman Davison & Hillman & Ors, to which my Lord has referred, and by which Mr Harvey submits we are bound.
Like my Lord I am unwilling to accept Mr Harvey's proposition whether as a rule of law or even as a rule of thumb. In each case it will depend on the facts whether the damage gives rise to a separate cause of action, or not. I accept that it follows from that that in some cases it will be necessary to draw an awkward line. But so it would, I apprehend, even if Mr Harvey's proposition were correct. In any event, drawing lines in doubtful cases is one of the things that judges are for.
In most cases it will be easy to say on which side of the line the case falls. In Conquer v Boot and Idyll v Dinerman the case fell clearly on one side.
In my judgment this case clearly falls on the other, as the Official Referee has held. But even if it fell in the grey area, where different views were possible, I would hesitate long before reaching a different conclusion from a judge of such wide experience in this field as the judge in the present case."