England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CARDIFF DISTRICT REGISTRY
(HIS HONOUR JUDGE MOSELEY)

		Royal Courts of Justice Strand London WC2 Thursday, 18th April 2002

Thursday, 18th April 2001 H

1. LORD JUSTICE MORRITT: Lord Justice Mummery will give the first judgment.
2. LORD JUSTICE MUMMERY: This is an appeal by Mr and Mrs Hinc from that part of the reserved judgment of His Honour Judge Moseley, dated 11th September 2001, in which he declined to award damages under all the heads claimed by them in their proceedings for professional negligence against a firm of solicitors, Warren Rees & Co. As liability for negligence was obvious, it had been admitted. The only issues concerned quantum of damages. In an order dated 3rd October 2001, the judge, who was sitting as an additional Judge of the Chancery Division, awarded damages totalling £3,077.68, and granted permission to appeal.

The facts

3. At the relevant time (which is nearly 15 years ago) Mr Warren was a solicitor in practice in the firm of Warren Rees & Co in Brecon. The firm was closed down by the Law Society on 26th March 1992 and was taken over by another firm. Mr Warren has since been struck-off, bankrupted and sent to prison.
4. In 1988 Mr Warren agreed to sell a building Plot No.3 Tregraig Road, Bwlch to Mr and Mrs Hinc for £19,000. He also agreed to act as their solicitor. The plot was on the housing estate in the course of development in Bwlch in the Brecon Beacons. The developer was a Mr Samuel, who was also a client of Mr Warren's firm. Mr Warren's managing clerk, Mr Pearson, drafted a transfer of Plot No.3. The transfer was executed by Mr and Mrs Hinc. As Mr Warren knew, Mr and Mrs Hinc planned to build a house on Plot No.3 with the assistance of a loan totalling about £77,000 from Lloyds Bank, to live in the house for a bit and then sell it and use the proceeds to build another house on a better plot already acquired by them on the same estate, Plot No.10.
5. The construction of the substantial four-bedroom house, later named Bryn Awel, was completed by 20th December 1990, and Mr and Mrs Hinc moved in. Unknown to them Mr Warren had no registered title to the plot. As a result of a conveyancing blunder Plot No.3 had not been transferred to him by Mr Samuel who, finding himself in financial difficulties, had agreed to sell four of the plots on the estate (including Plot No.3) to Mr Warren. As a result of the mix-up Mr Samuel retained legal title to Plot No.3 and Mr Warren only had beneficial interest. No steps were taken by Mr Warren or his firm to have the transfer registered. Indeed, the undated unregistered signed transfer was itself mislaid and was not found until March 1994. It was then that Mr and Mrs Hinc became aware that the title to the plot had not been registered.
6. On 15th July 1994 they started proceedings against Mr Warren's trustee in bankruptcy. They claimed damages for breach of the contract of sale, breach of the covenants of title and for negligence, pleading both breach of contract and tort. In June 1995 the writ was amended with leave to add Mr Warren and the firm of Warren Rees & Co as defendants.
7. Mr and Mrs Hinc only became aware of the full position about the title to Plot No.3 in March 1998 in the course of other litigation between them and Mr Samuel about the title to Plot No.10. Attempts were made to resolve the issue of the title to Plot No.3. They had decided to put the property back on the market through agents. At the time they were facing arrears of interest on the mortgage.
8. On 6th February 1998 Mr and Mrs Ayers agreed to purchase the house for £125,000, but they withdrew from the sale on 23rd October 1998, having become frustrated by the delay arising from the inability of Mr and Mrs Hinc to offer good title to the house. In fact this was not the first time that Mr and Mrs Hinc had tried to sell the house. As was their original intention they put it on the market as early as 1991 at an asking price of £225,000. The price was later reduced to £195,000 and then further to £165,000. On 25th October 1991 Mr Lester and Miss Reiser agreed to buy the house for £160,000.
9. On 31st October 1991 Mr and Mrs Hinc agreed to purchase another property in Abergavenny for £175,000 intending to finance that purchase from the proceeds of sale and by remortgage. On 11th November 1991 Mr Lester and Miss Reiser withdrew from the purchase. The judge was not satisfied that the loss of that sale was caused by lack of title on the part of Mr and Mrs Hinc. At that time Mr and Mrs Hinc were still unaware of the problems about title to Plot No.3. No evidence was given by Mr Lester or Miss Reiser and there was no correspondence or other documentary evidence indicating why they withdrew from the sale, nor was there any material from which the judge could draw an inference as to the reason for withdrawal.
10. In January 1992 Mr and Mrs Hinc instructed a new firm of estate agents to sell both the house and Plot No.10 for £175,000 and £70,000 respectively. By now they had given up the original idea of using the proceeds of the sale of the house to build on Plot No.10. The asking prices were in excess of the market value of the properties. The market value of the house at that time was in the region of £150,000 to £155,000. In January 1993 they reduced the asking price of the house to £159,000, still in excess of the market value (then about £135,000 to £140,000).
11. On 18th May 1993 Mr and Mrs Hinc withdrew the house from the market. There was another change of plans at that time while they were still unaware of the lack of good title. It turned out that there was a likelihood of them being able to acquire a property in Coldstream Terrace, Cardiff. It belonged to Mr Hinc's mother, but had been occupied by his brother. The brother died on 26th May 1993. There was also a possibility of retaining and letting out the house on Plot No.3.
12. The judge rejected the evidence of Mr and Mrs Hinc that they became "desperate to sell" the house on Plot No.3. There are passages to this effect in paragraph 9 of his judgment. The judge held that it suited Mr and Mrs Hinc's convenience to keep the house on Plot No.3, making no payment in respect of mortgage interest until 1996, and a limited payment of £150 a month thereafter.
13. The Cardiff property did not become immediately available on the death of Mr Hinc's brother. A claim to an interest in the property was made by a friend of the brother. Mr Hinc's mother had to take proceedings for possession of the property. The proceedings were not resolved until March 1999. In December 1999 Mr and Mrs Hinc purchased the Cardiff property and let out the house on Plot No.3. It was not until 11th May 2001 (about five weeks before the trial started) that Mr Warren signed and sent the confirmatory conveyance to Mr and Mrs Hinc's solicitors. The application for registration was not complete until 16th August 2001, some weeks after the trial had finished.

The judgment

14. The judge held that Mr Warren's breach of duty consisted of failing for an unreasonable length of time to secure the transfer of the title to Mr and Mrs Hinc. He said that they were entitled to be placed in the position in which they would have been if no such breach of duty occurred. He awarded them damages for the cost of obtaining title, which was agreed in the sum of £2,725.18. He also awarded them indemnity for the costs of Gabb & Co, a firm initially retained by Mr and Mrs Hinc in 1992 to check the whereabouts and security of the title deeds, which resulted in the tracking down of the missing transfer in March 1994. That amounted to the sum of £300 plus VAT. The judge held that the conveyancing costs of the abortive sale to Mr and Mrs Ayers (£244.40) were irrecoverable, as they had been incurred unreasonably at a time when Mr and Mrs Hinc knew that they had no title to Plot No.3 and that the problem of acquiring it had not been sorted out. Mr and Mrs Hinc were not, in his view, justified in incurring costs in attempting to sell the house at that time and in those circumstances.
15. The judge rejected more substantial claims made by Mr and Mrs Hinc in respect of breach of duty and the defect in title. The following bases for awarding substantial general damages under this head were proposed.

(a) That there should be awarded the difference between the price paid for Plot No.3 in 1988 (£19,000) and the value of the plot and the house without title (nil), plus interest. This head was not seriously pressed at the trial and it was not pursued on the appeal.

(b) That an award should be made of the interest paid by Mr and Mrs Hinc to the bank from March 1994 (that being the date when the unregistered transfer was discovered) on the money that they had borrowed to finance the building of the house (about £77,000) plus interest on the damages. This head of damage of not pursued at the hearing of the appeal.

(c) What is described as "loss of equity", being the difference between the value of the house in March 1994, less the mortgage debt, and the present value of the house, less the mortgage debt at the present time, plus interest. This is the head of damage which has been relied upon by Mr Jarman QC on behalf of Mr and Mrs Hinc on the appeal. The judge did not deal in any detail with this head of damage. He accepted the submission made on behalf of Warren Rees & Co that Mr and Mrs Hinc had to give credit for the value of their enjoyment of the occupation of the property and the rent received from letting. In the absence of any attempt to quantify the value of the occupation by Mr and Mrs Hinc, the judge assumed that the credit to be given for occupation equalled or exceeded the amount payable to the bank, so that no loss was suffered and it was accordingly academic whether the headings (b) or (c) were the proper measure of damages. The judge expressed the view that (c) was the most appropriate measure. That would produce a figure of £27,000, but that was subject, as I have explained, to giving credit for the occupation enjoyed in the property.

Appellants' Submission

16. On the appeal Mr Jarman submitted that the judge should have awarded a further sum of damages in the region of £27,000 for lack of title for 13 years (from 1988 to 2001). He explained that this should be calculated in a manner to which I shall return later in this judgment. He also submitted that the judge was wrong to hold that, in assessing the loss, credit should be given for value of the occupation enjoyed by Mr and Mrs Hinc and that the judge was wrong in assuming that the value of that enjoyment equalled or exceeded the interest owed by them to the bank in respect of their borrowing to finance the building of the house. He said that the judge had ignored the fact that, during this long period, Mr and Mrs Hinc had been unable to sell their property. In performance of his duty to secure a marketable title for them, Mr Warren should have ensured both the market title and the right to occupy the property. He said that Mr and Mrs Hinc should not have to give credit to Mr Warren for the enjoyment of the benefit to which they were entitled in any event.

Conclusion

17. In my judgment, this appeal should be dismissed, though not for the reasons advanced by Warren Rees & Co in their skeleton argument nor for the reasons given in the court below. As I see it the position is this. In an action for professional negligence the claimants must establish not only that there has been negligence which, as I have already explained, is admitted, but also that they suffered loss and that the particular breach of duty complained of established or admitted was the effective cause of the loss. As the Vice-Chancellor pointed out during the course of the hearing the relevant question is what loss has Mr and Mrs Hinc established that they have suffered as a result of the unreasonable delay in procuring the transfer to them of the good title to Plot No.3?
18. It is first necessary to disregard a number of matters which had been debated in the submissions and in the judgment below which were, in my judgment, clearly irrelevant to answering this question.
19. First, the occupation of the house. As mentioned, it was held by the judge that no damages could be recovered under the head of "loss of equity" because credit had to be given by Mr and Mrs Hinc for the value of their occupation of the house. There are indeed cases in which a claimant must give credit for benefits which he has received, but they must be benefits which flow from this duty. That does not apply here. The benefit of occupation flowed from the purchase of the plot and of Mr and Mrs Hinc being allowed into possession by Mr Warren, the vendor. It was not related in any way to a breach of duty on his part in failing to procure the transfer of the good title. The fact is that Mr and Mrs Hinc enjoyed the possession of the house and the plot without any disturbance at all resulting from the flawed title.
20. Second, the mortgage. Mr and Mrs Hinc's continuing liability to repay the loan and to pay mortgage interest to the bank was a consequence of them taking a loan from the bank. Their liability under the mortgage was not caused by any negligence of Warren Rees & Co. They would have been liable under the mortgage, even if they had acquired a good title to the property and there had been no breach of duty on the part of Warren Rees. They were liable because they borrowed the money and agreed to pay interest on it, not because of any flaw in the registered title.
21. Third, it is not suggested that when, after the long delay, Mr and Mrs Hinc finally acquired the title to the house that the house and the plot were worth any less than they would have been worth if they had acquired good title to this property in 1988.
22. The way in which Mr Jarman QC puts the case is this. As a result of the breach of duty Mr and Mrs Hinc were unable to sell the house in accordance with their initial intentions, which were known to Mr Warren. He submits that they should be compensated for the loss on the basis of the loss of equity in the house by not being able to sell before the transfer of title to them. He has to accept that, on the facts found by the judge, the attempts to sell the house before March 1994 were unsuccessful for reasons unconnected with Mr Warren's breach of duty. The negotiations before March 1994 never progressed to a stage when title became a factor in the purchaser's decision not to proceed. It is true that the defect in title did play a part in the decision of Mr and Mrs Ayers to withdraw from the purchase. But the judge held that the effective cause of the costs, which had been incurred by Mr and Mrs Hinc in relation to that abortive transaction, was their own decision to proceed with attempts to sell, even though they knew that there was a defect in title which had not yet been remedied. In other words the loss in the form of costs was due to their own action in proceeding to market the property rather than as a result of the solicitors's breach of duty.
23. I will return to another aspect of Mr and Mrs Ayers' purchase in a moment. Mr Jarman explained the claim under the "loss of equity head" by reference to valuations of the house at various dates and to liability under the mortgage. The evidence was that the value of Plot No.3 plus house in March 1994, being the date when they became aware of the lack of title, was £140,000. At that date the mortgage debt was £100,688. So he said the equity at the time was worth £39,312. Mrs and Mrs Hinc were unable to realise the equity because of lack of title resulting in Mr Warren's breach of duty. This was to be compared with the value of the equity at the time of trial. The value of the house and plot at that date was £190,000. The mortgage debt was then £177,422. The equity was therefore worth £12,578, that was £26,734 less than the equity was worth in March 1994. So, Mr Jarman submitted, they should have been awarded that sum as damages for negligence.
24. The difficulty in this submission is not with the figures or the calculations, but with the crucial findings of fact which the judge had made about the intentions and plans of Mr and Mrs Hinc. Although their original intention for the period 1988 to 1993 had been to sell the house and use the proceeds to build on Plot No.10, that was changed even before they had discovered their lack of title. The judge found that they were not desperate to sell after May 1993. They withdrew the house from the market and did not attempt to put it back on the market until 1998. This was because they had switched their intentions from building on plot No.10 to acquiring Coldstream Terrace, and their acquisition of that property was delayed because of the legal proceedings to which I have referred. Soon after those proceedings were resolved they in fact acquired the property.
25. In those circumstances I conclude that it has not been established on the evidence that any loss had been suffered by Mr and Mrs Hinc in addition to that which was awarded by the judge as a result of the breach of duty on the part of the solicitor and the delay in procuring the transfer of good deed title to them. As a result of their change of plan there was no causal link between the admitted negligence of Mr Warren and the loss which they have claimed to suffer under the head "loss of equity". So nothing is recoverable under this head.
26. I return, finally, to the abortive sale to Mr and Mrs Ayers. Mr and Mrs Hinc had gone into the negotiations with Mr and Mrs Ayers before March 1998 when they discovered the full position about the title; but they continued with those negotiation with their eyes open. More importantly, as matters turned out, Mr and Mrs Hinc would have been worse off, not better off, if the sale to the Ayers had in fact been completed in the autumn of 1998 at the price of £125,000. If that had happened they would have had no equity, the mortgage debt then exceeding £135,000. There would have been a negative equity of £10,000. By the time of the trial the value of the house had risen to £190,000 and they would have had an equity of over £12,000; and so no loss had been suffered by Mr and Mrs Hinc in respect of the abortive sale to the Ayers.
27. In conclusion, I am of the view that the judge rightly limited damages in this case to the items covered by the judgment to the sum £3,077.68. Though not in full agreement with all the reasoning of the judge, I would dismiss this appeal.
28. MR JUSTICE LONGMORE: Although I can sympathise with Mr and Mrs Hinc, who have undoubtedly suffered inconvenience from the conveyancing difficulties experienced by them in relation to the loss of a purchase by them in 1988, I agree, for the reasons given by my Lord, that they cannot recover any damages in excess of those already awarded by the judge, and this appeal must be dismissed.
29. LORD JUSTICE MORRITT: I also agree.
(Appeal dismissed; claimant's costs to be subject to detailed assessment on the standard basis for the purposes of the Legal Aid Act 1988 and the Access to Justice Act 1999).