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Cite as: [2002] EWCA Civ 194, [2002] Lloyd's Law Rep PN 386

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Petersen v Personal Petersen (Deceased), Representative of [2002] EWCA Civ 194 (31st January, 2002)

		Neutral Citation Number: [2002] EWCA Civ 194
		Case No. A3/01/0326

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CARDIFF DISTRICT REGISTRY
(His Honour Judge Chambers QC)

Royal Courts of Justice

31st January 2002

B e f o r e :

LORD JUSTICE POTTER
LORD JUSTICE MAY
SIR MURRAY STUART SMITH
____________________

	AUDREY CLARICE PETERSEN
	(Personal Representative of Marinus Robert George Petersen (Deceased)	Appellant
	-v-
	THE PERSONAL REPRESENTATIVES OF CYRIL B RIVLIN DECEASED	Respondent

____________________

(Computer Aided Transcript of the Stenograph Notes of
Smith Bernal Reporting Limited
190 Fleet Street, London EC4A 2AG
Tel: 0207 421 4040 Fax: 404 1424
Official Shorthand Writers to the Court)

____________________

MR. WYN WILLIAMS Q.C. (instructed by Messrs Hugh James Ford Simey, Cardiff) appeared on behalf of the Appellant/Claimant.
MR. P. ARDEN (instructed by Messrs Morgan Cole, Cardiff) appeared on behalf of the Respondent/Defendant.
____________________

HTML VERSION OF APPROVED JUDGMENT
____________________

1. LORD JUSTICE MAY: This appeal is the culmination of years of most unfortunate litigation which has seen the bankruptcy of one of those concerned and no doubt much anxiety for others.

It is an appeal from decisions of His Honour Judge Chambers QC sitting in the Mercantile Court in Cardiff. The order appealed against is dated 31^st October 2000. The judge’s decisions were given on 24^th July 2000 and 31^st October 2000. The appeal is brought by permission of this court presided over by Judge LJ, given on 26^th April 2001.

The claimant, Audrey Petersen, represented under power of attorney by Cherry Pickles, is the personal representative of Marinus Petersen. The defendants are the personal representatives of Cyril Rivlin. Mr Rivlin was a solicitor who advised Mr Petersen in relation to a property transaction. In 1990, Mr Petersen purchased the Coach House at 3, Marine Parade, Penarth, South Glamorgan from Clarice Bruton, Colin Squire, Valerie Swinburne and Peter Swinburne, whom I shall refer to as the “vendors”. Contracts for the sale and purchase were exchanged on 20^th February 1990. Completion was on 5^th July 1990. The purchase price was Ł29,950. Mr Petersen was made bankrupt on 4^th March 1994. Unfortunately he died on 8^th January 1996. The cause of action which is the basis of these proceedings was assigned to Mr Petersen by his trustee in bankruptcy by a deed of assignment dated 28^th December 1994. The deed was amended by a deed of 13^th July 1998 to give the estate the benefit of any damages recovered in this action.

The claim is that Mr Rivlin was negligent in relation to advice which he gave or did not give Mr Petersen as to the terms on which he purchased the Coach House. The judge found that Mr Rivlin was negligent in one only of the many allegations of negligence made in the statement of claim. The order of 31^st October 2000 accordingly gave judgment for the claimant on the issue of liability for breach of duty, but the judge found that there was no loss recoverable as damages and the order so records. It is against the judge's award as to damages that the claimant now appeals.

Next door to the Coach House is a property called Oaklands Cottage which was owned by a Mr Bar-Gur. In February 1987, Oaklands Cottage was flooded. Mr Bar-Gur blamed the vendors for the floodings and subsequently maintained that the state of the Coach House constituted a nuisance for which the vendors were liable. At the time of the contract for sale of the Coach House to Mr Petersen in 1990, there were proceedings arising out of the flood and the alleged nuisance between Mr Bar-Gur as plaintiff and the vendors as defendants. After Mr Petersen had purchased the Coach House, Mr Bar-Gur alleged that Mr Petersen was liable for continuing nuisance and Mr Petersen became sixth defendant to the proceedings brought by Mr Bar-Gur. This litigation unfortunately became very expensive. As the judge said, a tragic aspect of the history was that, viewed objectively, Mr Bar-Gur’s claim was never really a weighty one. When it was finally decided on 10^th January 1992, the only adverse judgments that were ultimately upheld were for Ł1,500 against Mr Squire and Ł3,600 against Mr and Mrs Swinburne, a total of Ł5,100 exclusive of interest. There was originally also a judgment against Mr Petersen, but he appealed successfully to the Court of Appeal and the judgment against him was set aside. Nevertheless, as the judge said, the judgment against the defendants had appalling financial consequences for Mr Petersen, since the costs of the litigation had got completely out of hand. In May 1989, Mr Bar-Gur had rejected an offer of Ł10,000 to settle his action against the vendors. The judge said that on the evidence before him:

“...I think it clear that Mr Bar-Gur would never have settled the proceedings (except in the face of a payment into court) at anything that could be described as a reasonable figure in respect of his claim. At least up to the sale to Mr Petersen, Mr Bar-Gur’s aim was to apply as much pressure as he could in order to acquire the Coach House. Thereafter his reasons may have been mixed, but he was an obdurate litigator.”

In selling the Coach House to Mr Petersen, the vendors wanted to be relieved from potential liability to Mr Bar-Gur for damages or costs and for their own costs of the litigation. To this end there was included in the contract for sale and purchase of the Coach House clause 17(1), which relevantly provided:

“The purchaser hereby agrees that... he will indemnify the vendors against nine-tenths of all liability for any judgment awarded against the vendors... in proceedings brought by Jonathan Bar-Gur... and nine-tenths of all legal costs awarded against or incurred by the vendors... in respect of the proceedings arising in the period from the date hereof to the date of judgment (if any) awarded in favour of Jonathan Bar-Gur ...“

The claimant contended that this clause did not accord with Mr Petersen’s intention and understanding, nor did it accord with his instructions to Mr Rivlin. The case was that he had not understood or intended that he should assume an open ended liability, nor that that liability should be both for nine-tenths of any amount which Mr Bar-Gur recovered and for nine-tenths of the vendors’ own costs.

There was much negotiation and correspondence which preceded the sale and purchase agreement. A substantial part of the judge’s judgment contains an account and analysis of this on the road to determining whether Mr Rivlin had been negligent. The critical and only respect in which the judge found that he had been negligent depended on a letter dated 2^nd January 1990 written by Mr Petersen to Mr Rivlin. There was an issue whether this letter had ever been sent and received. The judge held that it had. It said this:

“Please make sure that the purchase price of Ł29,950.00 and the Ł10,000 interest free Mortgage will be the limit of liability for purchase of the Coach House.”

On the issue of Mr Rivlin’s negligence, the judge said:

“Clearly my finding that the letter of 2^nd January 1990 was sent and received puts matters in a different light than in respect of a general allegation of failure to advise. Mr Petersen was an experienced businessman and a careful reader of drafts. In a moment I shall go through the various allegations of negligence. I shall dismiss most of them. But it is well established that a solicitor’s obligation to explain documents depends in large part upon the type of client that he has. Mr Petersen was an intelligent but muddled client. His muddle was in respect of the indemnity as reflected in the draft agreement. He asked for help. He did not get it. I hold that to have been a negligent breach of duty by Mr Rivlin towards Mr Petersen.”

There were no less than 20 particulars of breach of duty of care or negligence alleged in the statement of claim. The judge rejected all of these except that in paragraph (7), which alleged “failing to provide any oral or written advice to the deceased as to the implications and consequences of clause 17”. The judge found that the claimant succeeded on this allegation with specific reference to Mr Rivlin’s failure to answer the letter of 2^nd January 1990.

Under the heading of causation, the judge held that Mr Rivlin’s failure to advise Mr Petersen on the current position as to the indemnity caused Mr Petersen to exchange contracts. Thus the failure to advise was an essential link in the causative chain. Mr Petersen thought that the contract had one meaning, when in fact it had another. Mr Rivlin failed to disabuse him of his misunderstanding. Mr Petersen contracted on the basis of his mistake. The judge found that Mr Rivlin’s negligence caused Mr Petersen to do so and that damage resulted. The judge then considered whether Mr Petersen would have contracted anyway, if he had known of the correct position. He held that he did not think he would have contracted. Contrary to what Mr Swinburne had said, the judge thought that by early 1990 Mr Petersen wanted a cap on his exposure to Mr Bar-Gur. He did not think that he would have gone ahead in the knowledge that he did not have one. The parties did not contend for a middle position, that is, that a sale and purchase agreement would have been entered into but on different terms. He accordingly held that, if Mr Petersen had been properly advised in answer to his letter of 2^nd January 1990, he would not have entered into the agreement.

The judge then considered a question of mitigation. The defendant contended that Mr Petersen had failed to mitigate his loss, because he had stubbornly refused to follow the advice of counsel acting for him and the vendors in the Bar-Gur litigation that they should make a payment into court. The payment in which counsel advised was in the sum of Ł6,400 which was in the event greater than the amount which Mr Bar-Gur eventually recovered. It is to be supposed that this would have had a substantial effect on the eventual position in that litigation as to costs, but, so far as I am aware, the detail of that has not been worked out. The judge considered much evidence and documents on this topic. He concluded that Mr Petersen had been unreasonable in declining to join with the vendors as to the proposed payment in. One of the contingent grounds of appeal before this court is that this finding of the judge was wrong. It is a contingent ground since it has no practical consequence if the judge’s decisions on damages are upheld, as in my judgment, they should be. We have not heard submissions on the mitigation point. And I say no more about it.

The judge then turned to the question of damages. There was a number of pleaded heads of damage, not all of which were pursued at the trial or are pursued in this appeal. As I have said, the judge made no award of damages. The heads of claim which are pursued are (a) legal fees incurred by Mr Petersen in the sum of Ł21,205.13, and (b) a claim for Ł42,500. The appellant also contends that the judge’s decision as to mitigation of damage was wrong. That only arises for decision if the appellant succeeds on one or both of the two heads of claim.

Mr Petersen’s legal fees.

The amount of Ł21,205.13 is apparently made up of Ł8,600 paid by Mr Petersen to Paul Settatree and Ł12,000 paid to Merrils Ede as part of the costs of the defence in the Bar-Gur litigation.

The remaining small amount is made up of a costs draftsman's fee.

The judge held that these were irrecoverable for the reasons given in his supplementary judgment of 31^st October 2000. He explained that he had left much of the question of damages to be dealt with, if possible, by agreement. The parties had done their best to resolve various question, but an important point raised on behalf of the defendant remained unresolved. The judge said:

“The position is that, as the letter written by Mr Petersen and dated the 2^nd January 1990 indicated, Mr Petersen was always willing to shoulder some part of the cost that Dr Bar-Gur might recover in the litigation that he had brought against the defendant vendors and was later to include Mr Petersen in. There was also a willingness on Mr Petersen’s part to pay for all or part of any damages that Dr Bar-Gur might recover. These were both as to costs and to damages, at least in his mind to be limited to Ł10,000. I shall refer later in this judgment to the precise extent of the exposure which he must be held to have been willing to have accepted, that is enough for present purposes.

The defendants say that in deciding whether or not there are recoverable damages and, if so, the amount of any such damages I must make an allowance for that exposure that Mr Petersen must be said in any event to have willingly undertaken, assuming that his understanding of the position was correct.”

The judge referred to and quoted at length from the speech of Lord Hoffman in South Australia Asset Management Corporation v. York Montague Limited [1997] AC 191.

The judge then said:

“As I have held in my judgment and set out principally at page 27 of that judgment at the time that the breach of duty occurred as against the situation that developed after completion of the purchase of the property Mr Petersen must have been writing his letter upon the basis that he accepted that he would be liable for 90 per cent of the vendors’ costs of the litigation with Mr Bar-Gur after the exchange of contracts.”

The transcript of the judge’s judgment on 31^st October has an unfortunate gap in it when the tape was changed at a fairly critical part of the decision. However, after giving this ex tempore judgment, the judge considered that it would be sensible to put his thoughts on this point of law into a more formal setting. So he delivered a short written judgment which, he said, was to be treated as his written ruling, although it differed in no material respect from his oral ruling and reasons. The material part of the written judgment was as follows:

“The issue arose from my findings set out at pages 27 and 28 of the main judgment. These were that the information that Mr Petersen sought from his solicitor Mr Rivlin related to his potential exposure for damages and costs payable to Mr Bar-Gur in respect of the proceedings brought against the vendor defendants by Mr Bar-Gur. By his letter he sought confirmation that that exposure was limited to Ł10,000 and by his silence, Mr Rivlin confirmed that that was so. What Mr Petersen was not requesting was any information relating to his liability for costs incurred in respect of those proceedings either by himself or the vendor defendants. In the event Mr Petersen incurred a substantial liability for costs of that latter type. It is the question of whether or not the defendants’ estate is liable for those costs that is now before me.

It must be treated as a found fact that Mr Petersen was prepared to purchase the property on the basis of a potential liability of 90% of the costs of the vendor defendants. His concern was to limit his exposure to Mr Bar-Gur.

It appears to me that the answer to the question must be found in the case South Australia Asset Management Corporation v. York Montague Limited 1997 AC 191. Although the facts were very different, the principles are of general application. In a case where there has been a negligent failure to provide accurate information, the nature and extent of the duty of care is to be derived from ascertaining the kind of loss which falls within that duty. Although the authority is not entirely helpful in defining what is meant by “kind of loss”, two elements appear clearly to emerge. First it is not enough that the negligent information simply forms part of a chain of events leading to the damage. Recoverable damage must be of the kind that the information is intended to prevent. Second and allied to this, is that neither under the heading duty of care nor by way of quantification of damage can a claimant recover “loss that would have been a consequence of the transactions even if the representation had been true” (page 216A-B and see page 216D-F). In the present case the loss relating to liability for the costs incurred by the vendor defendants was not the kind of loss that the information was intended to prevent and it was loss inherent in the venture that Mr Petersen was prepared to undertake. It is therefore irrecoverable.”

Mr Wyn Williams QC on behalf of the claimant submitted in writing that, as the judge found, Mr Rivlin's duty was to advise Mr Petersen upon the true effect of clause 17. He gave no advice at all. If he had given proper advice, Mr Petersen would not have entered into the contract. The fact that Mr Petersen would have been prepared to enter into a contract under which he was willing to be responsible for 90% of the costs, if any, of defending the action brought by Mr Bar-Gur provided his liability for damages and costs awarded to Mr Bar-Gur was limited to a maximum of Ł10,000 (which was the judge’s finding) is irrelevant in the context of this case, since it was common ground throughout that such a contract would never have been concluded. Mr Rivlin’s failure to advise gave rise to the foreseeable consequence that Mr Petersen would enter into the contract and be bound by clause 17. The respondent is liable for all the foreseeable consequences of his failure. In other words, the submission is that the judge’s decision based on SAMCO was wrong.

Mr Arden on behalf of the respondent pointed in writing out that the skeleton argument prepared by Mr Wyn Williams, and used by the claimant’s daughter at the hearing when permission to appeal was given, conceded that the amount now in issue for Mr Petersen’s legal fees was not recoverable given the judge’s finding in relation to liability. Mr Wyn Williams accepts this and that the SAMCO point did not feature in the Notice of Appeal. But he says that the concession was wrong and seeks to withdraw it and, if necessary, notionally to amend the Notice of Appeal. This court this morning allowed this to be done.

Mr Wyn Williams’ oral submission this morning was to this effect. He points to the letter of 2^nd January 1990. He submits that it is not entirely clear that in it Mr Petersen was attributing the Ł10,000 limit of liability to payments to Mr Bar-Gur only. It may have been intended as a limit to all liability including defence costs in the Bar-Gur proceedings. Mr Rivlin ought to have appreciated that this was a possibility as to Mr Petersen’s state of mind and his advice to him should have been tempered to that possibility. Since this possibility was foreseeable, the measure of damages should have been the difference between Ł10,000 and the actual sums paid out. Mr Wyn Williams accepts and does not challenge the judge’s finding as to Mr Petersen’s actual state of mind. But his submission goes to the scope of Mr Rivlin’s duty in the light of foreseeable possibilities. He should have explained to Mr Petersen the full effect of clause 17 of the agreement and the extent to which it did not accord with Mr Petersen’s possible understanding. Thus the submission is that damages should be based on the difference between the amounts which arose under the indemnity in Clause 17 and the amounts which it was foreseeable might have arisen on one possible version of Mr Petersen’s state of mind.

Mr Wyn Williams has a tentative subsidiary submission – tentative because he was not himself sure whether it held water. So far as I understood it, it was this. Regardless of what Mr Petersen thought, Mr Rivlin could never in fact have achieved for him the agreement which he sought. The vendors would never have contracted on the basis that they were to remain responsible for all the financial consequences of the Bar-Gur litigation above Ł10,000. In those circumstances, is it correct, asks Mr Wyn Williams, to limit the damages on a basis of what Mr Petersen believed, when the transaction would never have taken place on the basis of that belief? I confess to finding it hard to see that this submission adds to Mr Wyn Williams’ first and main submission. In so far as it might, it seems to me to take the SAMCO argument no further. In SAMCO, as I shall show, the mortgagees would not have proceeded with the transaction had they been given accurate information. In all probability, the mortgagors would not have proceeded with a transaction if it had to be based on accurate information, that is, in the case of SAMCO itself, if the mortgagees were offering to lend on the basis of a valuation of Ł5m. instead of Ł15m. In either event, as here, the transaction would not have proceeded, but that did not lead in SAMCO to a conclusion that the defendants were saddled with the full actual loss. I return therefore to Mr Wyn Williams’ first and main submission.

In SAMCO, valuers were required by the plaintiffs to value properties on the security of which the plaintiffs were considering advancing money on mortgage. In each case, the defendants considerably over-valued the property. Following the valuations the loans were made, which they would not have been if the plaintiffs had known the true values of the properties. The borrowers subsequently defaulted, and in the meantime the property market had fallen substantially, greatly increasing the losses eventually suffered by the plaintiffs. The plaintiffs brought proceedings against the valuers for damages for negligence and breach of contract. It was established that the valuers had been negligent and in breach of contract. The essential question was whether the plaintiffs were entitled as damages to the entire loss which they had suffered. The House of Lords held that the duty of the valuers in each case, which was the same in tort as in contract, had been to provide the plaintiffs with a correct valuation of the property. Where a person is under a duty to take reasonable care to provide information on which someone else would decide on a course of action, he was, if he was negligent, responsible not for all the consequences of the course of action decided on, but only for the foreseeable consequences of the information being wrong. The measure of damages was the loss attributable to the inaccuracy of the information suffered by the plaintiff through embarking on the course of action on the assumption that the information is correct.

The only substantive speech was that of Lord Hoffman, with whom the other members of the appellate committee agreed. Lord Hoffman emphasised that one of the features common to each case was that, if the lender had known the true value of the property, he would not have lent. In Banque Bruxelles Lambert v. Eagle Star Insurance [1995] QB 375, the Court of Appeal had held in an equivalent case that the valuer bears the whole risk of a transaction which, but for his negligence, would not have happened. Lord Hoffman considered that the reasoning in the Court of Appeal had begun at the wrong place. He said at page 211A:

“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 lenders cause of action.

The lender sues on a contract under which the valuer, in return for a fee, undertakes to provide him with certain information. Precisely what information he has to provide depends of course on the terms of the individual contract. There is some dispute on this point in respect of two of the appeals, to which I shall have to return. But there is one common element which everyone accepts. In each case the valuer was required to provide an estimate of the price which the property might reasonably be expected to fetch if sold in the open market at the date of the valuation.

There is again agreement on the purpose for which the information was provided. It was to form part of the material on which the lender was to decide whether, and if so how much, he would lend. (

On the other hand, the valuer will not ordinarily be privy to the other considerations which the lender may take into account, such as how much money he has available, how much the borrower needs to borrow, the strength of his covenant, the attraction of the rate of interest or the other personal and commercial considerations which may induce the lender to lend.”

Lord Hoffman emphasised, with reference to Caparo Industries v. Dickman [1992] AC 605, that it is always necessary to determine the scope of the duty by reference to the kind of damage from which the negligent defendant must take care to save the plaintiff harmless. Of this Lord Hoffman said at page 212E:

“The scope of the duty, in the sense of the consequences for which the valuer is responsible, is that which the law regards as best giving effect to the express obligations assumed by the valuer: neither cutting them down so that the lender obtains less than he was reasonably entitled to expect, nor extending them so as to impose on the valuer a liability greater than he could reasonably have thought he was undertaking.”

Lord Hoffman did not consider that the valuer should bear all the risks of the transaction, subject only to the limitation that the damage should have been within the reasonable contemplation of the parties. He said that normally the law limits liability to those consequences which are attributable to that which made the act wrongful. In the case of liability and negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate. He gave the now well known example of a doctor carrying out a negligent examination of a mountaineer’s knee and pronouncing it fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering, but has nothing to do with his knee. Lord Hoffman suggested that there was something wrong with a principle which, in that example, would produce the result that the doctor was liable. It would make the doctor responsible for consequences which, though in general terms foreseeable, did not appear to have a sufficient causal connection with the subject matter of the duty. Lord Hoffman then said at page 214C:

“I think that one can to some extent generalise the principle upon which this response depends. It is that a person under a duty to take reasonable care to provide information upon which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.

The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide on a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the advisor must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to insure that the information is correct and, if he is negligent, he will be responsible for all the foreseeable consequences of the information being wrong.”

At page 216D Lord Hoffman contrasted the measure of damages in an action for breach of a duty to take care to provide accurate information from the measure of damages for breach of a warranty that the information is accurate. In the case of a breach of a duty of care, the measure of damages is the loss attributable to the inaccuracy of the information which the plaintiff has suffered by reason of having entered into the transaction on the assumption that the information was correct. “One therefore compares that the loss that he has actually suffered with what his position would have been if he had not entered into the transaction and asks what element of this loss is attributable to the inaccuracy of the information.”

As I have indicted, in the present case there were numerous particulars of negligence, some of which extended to alleging an obligation on the part of Mr Rivlin to advise generally. The only respect in which the judge found that he was negligent was in failing to provide advice to Mr Petersen as to the implications and consequences of clause 17 of the agreement. In my view, this is to be equated with an obligation to provide information, as the judge implicitly held in this case. It was not a duty to advise Mr Petersen as to the general merits and desirability of making the contract. Rather, as in the case of a valuer, it was to provide information for Mr Petersen to take into account together with other considerations for which the judge did not hold Mr Rivlin responsible. In accepting that SAMCO applies in the present case, Mr Wyn Williams is implicitly accepting this part of the analysis.

It is also to be noted that in each of the cases in SAMCO the plaintiffs would not have proceeded with the mortgage transactions if they had been provided with accurate information. The same applies in the present case. Yet the valuers were not awarded damages in SAMCO on the basis that they were responsible for all the consequences of the plaintiffs having entered into the transactions. The fact is that they did enter into the transactions, as did Mr Petersen in the present case, and there is no order that the court could make in these proceedings which could put the parties completely into a position as if the transaction had never happened. That is so, if only because the vendors are not a party to the proceedings. But no one has ever propounded, so far as I am aware, a case for setting aside the sale and purchase agreement in the present case.

Although Mr Wyn Williams asks us to look at what Mr Rivlin might have contemplated as Mr Petersen’s possible state of mind, Lord Hoffmann’s speech in SAMCO requires the court to examine the scope of relevant duty by reference to the kind of damage from which the defendant must take care to save the plaintiff harmless. In the present case, the scope of Mr Rivlin’s relevant duty is defined by the judge’s finding that he was in breach, and only in breach, of the duty contained in paragraph (7) of the particulars of breach of duty of “failing to provide any oral or written advice to the deceased as to the implications and consequences of clause 17”. Although Mr Wyn Williams contends that Mr Rivlin should have contemplated as a possibility that Mr Petersen thought that his Ł10,000 limit was to apply to all costs and damages, Mr Wyn Williams did not therefore contend for a wider scope of duty than that which the judge found. Mr Rivlin should have explained to Mr Petersen the consequences and implications of Clause 17 properly understood and that would necessarily have disabused Mr Petersen of whatever misconception he may have had.

In determining the measure of damages, SAMCO requires a comparison between the state of affairs upon the inaccurate information which was provided and the state of affairs had the information been correct. These actual and hypothetical states of affairs essentially concern what the recipient of the information thinks, since it is that which became or would have become the relevant ingredient of his decision whether to proceed with the transaction. In SAMCO itself the mortgagees actually thought that the property had a value of Ł15m. If the valuer’s information had been accurate, they would have thought that it was worth Ł5m. The potential measure of damage was the difference, although on the facts the actual damage they suffered was rather less. In the present case if Mr Rivlin had properly performed the scope of his duty, which the judge found he did not, Mr Petersen’s state of mind would have been that he properly understood the extent of clause 17. That is one ingredient of the SAMCO comparison, equivalent to the Ł5m state of mind in SAMCO itself. In fact, Mr Rivlin did not respond to the letter of 2^nd January 1990. To that extent he did not provide information. But he was taken by the judge, correctly in my view, to have left Mr Petersen with the understanding that the contract achieved that which his letter required. Mr Petersen’s actual state of mind therefore, as found by the judge, was that his indemnity was limited to Ł10,000 in respect of potential liabilities to Mr Bar-Gur. According to his understanding, the indemnity did not impinge upon his liability for defence costs. As the judge held, he must have been writing his letter upon the basis that he accepted that he would be liable for 90 per cent of the vendors’ costs of the litigation with Mr Bar-Gur after the exchange of contracts. For the purpose of defining the measure of damages, it is that state of mind which is the other ingredient of the SAMCO comparison, equivalent to the Ł15m. in SAMCO itself. In short, the judge was correct to take what he found to be Mr Petersen’s actual state of mind, and Mr Wyn Williams is, in my judgment, incorrect to urge upon us a possible state of mind which Mr Rivlin might have contemplated. All the losses talked about were foreseeable. The question is whether they are recoverable. The damages under consideration were on any view defence costs in the Bar-Gur litigation. These were not within the scope of the duty which the judge found Mr Rivlin to be in breach of because, had Mr Rivlin acted properly within the scope of that duty, he would not have been guarding Mr Petersen from the loss claimed. On the facts found Mr Petersen was prepared to assume the risk of those costs. In my judgment, the judge properly applied the SAMCO decision to the facts of this case and I would reject this ground of appeal.

The claim for Ł42,500.

Mr Wyn Williams accepts that this point of appeal cannot succeed if this court considers that the judge was correct on the SAMCO point, as I think that he was. I can therefore take it shortly, since I consider that it should fail for other reasons as well.

In the action brought by Mr Bar-Gur, damages and costs were awarded against the vendors. The precise amounts are not known, but they alleged that they were entitled to recover from Mr Petersen under the indemnity in the sale and purchase contract sums which together amounted to approximately Ł89,000. He was unable to pay these amounts and, in due course, a bankruptcy petition was presented and a declaration of bankruptcy made. After protracted proceedings, the trustee in bankruptcy obtained an order for possession for Cartlett Fach, Mr Petersen’s property. In order to avoid possession and sale the claimant paid the trustee the sum of Ł42,500. In due course, the trustee assigned any cause of action against Mr Rivlin’s estate to the claimant. In his first judgment, the judge held that the Ł42,500 was irrecoverable. His reasoning is very short, given in discussion with counsel, and not entirely clear. He appears to have considered that it was a claim for a sum of money paid, not by Mr Petersen or his estate, but by a third party, and that therefore it was not recoverable.

Mr Wyn Williams submits that the judge held that Mr Bar-Gur’s legal proceedings caused Mr Petersen’s bankruptcy. He submits that the judge did not deal with the way in which he put the case at trial. He had submitted that, if Mr Petersen could have raised the money to have reimbursed the vendors the sums paid by them to Mr Bar-Gur, that sum of money would have been recoverable as damages. He could not do so and in consequence was made bankrupt. As a consequence of the bankruptcy he (or rather his estate) was forced to sell property having a value of Ł42,500 and this property was lost to him and his estate. In oral submission today, Mr Wyn Williams submitted that property to the value of Ł42,500 was lost to Mr Petersen’s estate and that the payment of the Ł42,500 should be treated as if it were a payment to the vendors, who instigated the bankruptcy in the first place. Mr Arden made a number of submissions in writing on this point, which included the assertion, which this court has not examined, that the Ł42,500 did not equate to the value of the property. That sum was, he said, a figure paid both for the property and in settlement of claims by the trustee in bankruptcy against the claimant and by the claimant against the estate. But even if the Ł42,500 was the value of the property, it is wrong to say that the value of the property was lost to the estate as a result of the transaction which was entered into. In my judgment, that submission is plainly correct. The transaction relied on did nothing to diminish the assets of Mr Petersen’s estate. On the case which Mr Wyn Williams advances, it was simply that the value of the property was liquidated so that the estate held an amount of money which was the same as the value of the property which was sold. The transaction was entirely neutral as to the value of the assets held by the estate. For the purposes of analysis the sale might just as well have been to an outsider. The transaction does not establish a loss to the estate at all: it certainly does not establish anything which should be treated as a payment to the vendors, who, we are told, received nothing from the bankruptcy.

For these reasons I would dismiss the appeal.

SIR MURRAY STUART SMITH: I agree.

LORD JUSTICE POTTER: I also agree.

Order: Appeal dismissed with costs, to be determined by the costs judge; detailed assessment.