England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE LLOYD)

		Royal Courts of Justice The Strand London Wednesday 21 February 2001

Wednesday 21 February 2001

1. LORD JUSTICE MAY: This is an application on behalf of Mrs Aylwen for permission to appeal against a decision by Mr Justice Lloyd in the Chancery Division on 20 December 2000. Mr Justice Lloyd gave summary judgment for the defendant's solicitors, Taylor Joynson Garrett, on the whole of the claimant's claim under Part 24 of the Civil Procedure Rules, and awarded the defendant its costs.
2. The order was made on an appeal from a decision of Deputy Master Weir given on 17 August 2000. The Deputy Master had dismissed the defendant's application for summary judgment and gave case management directions, but granted permission to appeal.
3. The application for permission to appeal to this court is a second appeal to which section 55 of the Access to Justice Act 1999 and CPR Rule 52.13 applies. Accordingly, the court is not by statute in a position to give Mrs Aylwen permission unless it considers that the appeal would raise an important point of principle or practice or there is some other compelling reason for the Court of Appeal to hear it.
4. It is a complicated and rather unusual case. Mrs Aylwen and her husband bought a very substantial Mayfair property at 39 Green Street. Originally it was purchased by her husband, but in 1990 or thereabouts they decided that she should purchase the property from him. They are both United States citizens and this is all tied up with property that they or she have or had in the United States.
5. The contract between Mrs Aylwen and her husband essentially provided that she should pay him £800,000 in cash and should take on the mortgage with the Boston Safe Deposit & Trust Company, which he had taken out for a fixed term of five years for a sum of or about £1 million. The term of this mortgage was due to expire in September 1992. She also assumed responsibility for the mortgage repayments. Her account is that the £800,000 was derived from the sale of a principal home in the United States. Tax consequences in the United States are said to have flowed from that. In short, provided that Green Street was her or their principal home, and provided that it was to be seen that the proceeds of sale of the United States property were reinvested in Green Street, there would be a deferral at least of a US tax liability. In addition, the amounts of mortgage repayment on the Green Street property would be available for tax relief in the United States.
6. The defendants acted as solicitors for Mrs Aylwen's husband (and on her case for both of them) in relation to the sale and purchase as between her and her husband.
7. The proceedings allege that the defendant solicitors were negligent. In August 1992, the mortgagees, Boston Safety Deposit & Trust Co, started possession proceedings in relation to 39 Green Street on the grounds of non-payment of interest instalments under the mortgage and, after the expiry of the fixed term in September 1992, for non-payment of the capital sum. They obtained a possession order in November 1992, suspended on terms until March 1993. In April 1993, Mrs Aylwen's husband submitted to an order giving up possession of the property. In May 1993 Boston, as mortgagees in possession, contracted to sell the property. They did so for a sum of around £1.2 million. The property market at the time was depressed. Once the mortgage was paid off, the sale proceeds produced little or no surplus.
8. Mrs Aylwen's complaints against the defendants are that they were negligent in two respects: first, because they did not complete the contract for sale and purchase as between her and her husband so that she was not the legal proprietor of the property at the time that the mortgagee took the possession proceedings; and second, and perhaps more importantly, that they did not tell her anything about the possession proceedings until it was far too late for her to do anything.
9. In consequence, the Green Street property was no longer available as her home in this country for her and her family. At short notice she had to rent another property. She did that for a four-year period at a total amount of rent of £132,500. Mrs Aylwen says that in consequence she lost the opportunity of selling the Green Street property in a favourable market. It was sold in an unfavourable market and she lost that opportunity. Had she known that these possession proceedings were taking place, she had the means, ability and will to prevent them happening, if necessary by paying off the mortgagees in full. She could have retained this property until the market was more favourable and would then have recovered her outlays on the property. In the event, she lost that opportunity. She says that that is a consequence of the negligence which she alleges against the solicitors.
10. The particulars of loss which appear in paragraph 15 of the amended Particulars of Claim are under three heads. First, there is a claim for the sums paid under the contract with her husband, including the sum of £800,000, and also all interest paid by her to keep the existing mortgage on foot and preserve the property. Mr Nash accepts that that is a historical account of Mrs Aylwen's investment in the property, but does not constitute a measure of the loss which she might claim under this head. In essence, she says that she lost an opportunity to make a profit. She would have made a profit and thereby she would have recovered her outlay. But the outlay is not the measure of any loss. It is all bound up with the profit, if profit there would have been, on a later sale.
11. The same applies to the first few words of the second particular of loss, that is to say the sums paid to preserve the property. The rest of that second head in substance says that she lost the opportunity to sell this valuable property in a favourable property market. I shall return to that shortly.
12. The third head of loss is for sums incurred in respect of the alternative accommodation made necessary by reason of the alleged negligence, and particulars are given that the amount of rent for the four-year lease on 38 Trevor Square was £132,500. Mr Nash again is constrained to accept that if that were a proper head of loss, there would have to be set off against it amounts which Mrs Aylwen would have had to pay to sustain ownership of 39 Green Street. That might have been by various means, but essentially it would have meant the cost of financing a loan of the order of £1 million, or alternatively, the loss of not having available capital of that sum or thereabouts. At the very least it seems to me distinctly unpromising to suppose that when that, or something of the kind, were set off against the £132,500, there would be anything left. But, as Mr Nash rightly says, that is a matter of fact, and here we are concerned with summary judgment.
13. The essential basis on which Mr Justice Lloyd decided that it was appropriate to give summary judgment against Mrs Aylwen in this case is that in his judgment (but in my words) the loss of the opportunity to make a profit, alternatively the loss of any profit which might be proved, was not caused by the alleged negligence. Mr Justice Lloyd reckoned that the cause was quite another matter. On the assumption that Mrs Aylwen was in a position financially to retain 39 Green Street had she known about the possessions proceedings, the loss resulted from her choice not to use the money that she would have used to maintain Green Street to purchase another property. If she had chosen to do that, she would in a rising property market have made an equivalent gain to that which she wants to claim as a loss in these proceedings.
14. The application for permission to appeal rests to a large extent on an application to adduce fresh evidence. The fresh evidence is directed towards three matters. The first is that Mrs Aylwen would wish to say that, when she discovered that the possession proceedings were for practical purposes completed in June 1993, she was constrained to take a short lease of 38 Trevor Square because there was a crisis on her hands and she had to do something very quickly for herself and her children. The choice that she actually made was to take the lease. In December 1995 she purchased the property which is currently her home at 1 Upper Brook Street, and she draws attention to the fact that her evidence at an earlier stage was that by some date towards the end of 1994 the property in Green Street was apparently sold for a substantially greater amount than the mortgagees had obtained on their sale in the early summer of 1993.
15. Secondly, the new evidence is directed towards the details of the property at Green Street. It was a very special property of great attraction in a buoyant market, but might be very difficult to sell in a depressed market. Accordingly, it is suggested that the Judge was wrong, at least if the new evidence were admitted, in effectively concluding that the loss which she claims resulted from her choice in ordinary property market conditions.
16. Thirdly, the new evidence is directed to setting up a claim, quite separate from the loss of the opportunity to make a profit on the sale of Green Street, in relation to problems with the United States taxation authorities. She says that since the defendants did not complete the sale and purchase, she never became the legal owner of 39 Green Street, and that the United States tax authorities are challenging that the deferment of capital gains tax and the allowance for taxation of the mortgage repayments as proper tax concessions and there is a battle going on about that. It is said that the defendant solicitors were aware of the reason for the purchase of 39 Green Street and that they were aware of the taxation consequences in the United States to which this evidence refers.
17. On to the question that this would be a second appeal, Mr Nash draws attention to the fact that the point on which the respondents succeeded before Lloyd J was brought in very much at the last minute. It was not on that basis that the application for summary judgment was made to Deputy Master Weir, and for that reason the claimant, Mrs Aylwen, was not given proper opportunity to deal with it. In particular she did not have proper opportunity to address the point evidentially. There may be some force in that, although it seems to me that there is little force in it insofar as it relates to the taxation question.
18. Against that background it is necessary to consider whether Mrs Aylwen has any reasonable prospect of success on this appeal and, if she has, whether, this being a second appeal, this court should give permission. I have reached the conclusion, not without some hesitation, that the answer to both of those questions is "Yes", subject to what may be regarded as a qualification which I shall mention in a minute.
19. In my view, although this is a second appeal, it has or may have the following features. First, the Judge and the Deputy Master reached different conclusions. The statute and the rules do not suggest necessarily that a distinction should be drawn between a second appeal where the Judge has reached the same conclusion as was reached at first instance and one where the two previous courts have reached different conclusions. But it does seem to me inherently more satisfactory to regard this as contributing to a decision that permission should be given. I do not say that as a matter of principle to be applied in every case, but in this case it seems to me have some weight.
20. Secondly, it is said that the submission which succeeded before the Judge was not deployed or not fully deployed before the Master and that the claimant was not fully prepared evidentially to meet it. There is some force in that.
21. Taking the matters to which I am about to refer into consideration, it seems to that this is a case where, notwithstanding that it is a second appeal, permission should be granted.
22. As to the substance of the matter, although the basis on which the Judge decided the matter was on one view a straightforward application of settled principle that is that the facts alleged did not and were not capable of causing the loss claimed (and incidentally in substance that was the basis on which Lord Justice Parker on paper refused permission to appeal) on the other hand, this is, in my view, an area of the law of damages which is not straightforward in some of its peripheral applications. There is, it seems to me, a proper argument that this is a matter the answer to which was distinctly fact sensitive. If the new evidence is admitted and accepted, it seems to me that there is at least a reasonable prospect that the taxation part of the damages might succeed. I also think that it is at least fit for consideration by the full court whether, on the basis of the two other main points raised in the new evidence, a case for damages might not be proved. Accordingly, it seems to me that is a case where the claimant may, if permission is given to adduce the fresh evidence, be able to show, at least in principle, that the losses which she claimed (or at least some of them) were caused by the alleged breach of duty.
23. There is, it seems to me, a difficulty over admitting the fresh evidence. I, for my part, would not give permission to adduce it here and now in any event. But, in addition, there was before the Judge an application on behalf of the respondents to adduce evidence that was not put before the Deputy Master. Essentially the respondents would seek to show from documentary evidence that Mrs Aylwen's factual case simply will not stand up and that, contrary to her case, she in fact knew perfectly well that the possession proceedings were taking place during the latter part of 1992 and the early months of 1993. The Judge refused the respondents permission to rely on that evidence. It seems to me appropriate to point out that in circumstances where I, for my part, would (with some hesitation) give Mrs Aylwen permission to appeal on the basis that I have outlined, that consideration at least should be given to whether, in fairness, the respondents ought not also to be entitled to apply to the full court for permission to appeal against Mr Justice Lloyd's order refusing them leave to adduce their additional evidence. After all, the main basis upon which I would give permission to appeal in this case is that Mrs Aylwen should be enabled to make to the full court her application for permission to rely on her new evidence. It seems to me that fairness and general proportionality suggests that the respondents might want to try to do the same.
24. For these reasons I would give permission to appeal. I would not decide here and now the application to adduce fresh evidence, but would adjourn that application to the full court hearing the appeal. I would also give liberty (which may not be necessary) to the respondents to apply for permission to appeal against the order of Mr Justice Lloyd refusing them permission to adduce their fresh evidence. If the respondents choose to avail themselves of that liberty, I would direct that that application is listed at the same time as the appeal in this case and Mrs Aylwen's application to rely on her fresh evidence. I would direct that the respondents should make their application for permission, if they choose to do so, within six weeks from the service upon them of the order of today.
25. LORD JUSTICE DYSON:I agree.
ORDER: (Not part of judgment) Application granted; stay of the operative parts of Lloyd J's order; liberty to the respondents to apply; costs of application to be costs in the discretion of the court hearing the appeal.