England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WORCESTER COUNTY COURT
(HIS HONOUR JUDGE GEDDES)

		Royal Courts of Justice Strand London WC2A 2LL Thursday 23 May 2002

1. LORD JUSTICE ROBERT WALKER: I will ask Lord Justice Clarke to give the first judgment.
2. LORD JUSTICE CLARKE:

Introduction

3. In this action the claimants, who are husband and wife and who were at the relevant time trading as GM and MM Express Parcels, claimed damages against their former solicitors, Messrs Gabb & Co, for negligence and breach of contract. The defendants admitted liability.
4. At the outset of the trial before His Honour Judge Geddes, the judge suggested that three particular questions might be considered as a preliminary issue. As we understand it, that course was accepted on behalf of both parties, as a result of which three particular questions were considered:

Question 1: Whether the defendants' negligent advice caused the claimants' failure to enter into a new lease on business premises situated at and known as Unit 12, Beech Business Park, Hereford, with their landlord, Mr Jay?

Question 2: If, 'yes', what would the terms of the new lease be?

Question 3: What would the claimants have done had they had the option of accepting the new lease on the above terms?

5. In the event, the judge answered the first question in the negative with the result that the two further questions did not arise and the judge did not address them. As we understand it, after permission to appeal had been given, the defendants' solicitors wrote to Judge Geddes asking him whether he would be willing to answer questions 2 and 3. In reply, by a letter from the Court Service, he indicated that the answer was "No", but that the parties should await the decision on this appeal. The judge had refused permission to appeal, but the claimants now appeal to the court pursuant to permission which I granted on 20 December 2001.

The Background

6. The problem in this case arose because the defendants negligently advised the claimants as to the date by which they must apply to the court for the grant of a new tenancy under Part II of the Landlord and Tenant Act 1954 ("the 1954 Act"). They advised them that they had until a date in November 1995, whereas, in fact, time expired on 17 September 1995.
7. The property concerned, namely Unit 12, Beech Business Park, Hereford, was owned by Mr and Mrs Jay ("the landlords"). Mr Jay acted for the landlords throughout, just as Mr Fairbrother acted for the claimants. On 17 May 1995 the landlords served a notice to terminate the claimants' business tenancy of Unit 12 under section 25 of the 1954 Act. By paragraph 3 of the notice, notice was given terminating the tenancy on 30 November 1995. By paragraph 4 the claimants were notified that, within two months after the giving of the notice, they must serve a counter-notice that they were not willing to give up possession of the property.
8. By paragraph 5 the landlord stated that, if the claimants applied to the court under Part II of the 1954 Act, they would not oppose the application for a new tenancy. One of the notes on the back of the notice stated that, if the claimants wanted to apply to the court for a new tenancy, they must give the counter-notice within two months and apply to the court for a new tenancy not earlier than two months but not later than four months after the giving of the section 25 notice.
9. The facts found by the judge as to the relations between the landlords and claimants before the giving of the section 25 notice were substantially as follows. In July 1991 the claimants leased Unit 16, Beech Business Park from Mr and Mrs Jay for the purpose of their parcels collection and delivery business. Within the course of the next two years the business expanded and the claimants decided that they needed larger premises. In the early autumn of 1993 Unit 12 became free. As Unit 12 was about twice the size of Unit 16, the claimants asked Mr Jay if they could move into it. Mr Jay said he was willing that they should do so. He pointed out that, although the rent and service charge would remain the same per square foot, as the unit was larger than Unit 16, the overall charge would be proportionately greater. There would also be one extra parking space. Otherwise the terms of the lease, which was in standard form for every tenant of the 16 units on the estate and was for 3, 6 or 9 years, would be the same as for no 16. Mr Fairbrother agreed to enter a lease on those terms.
10. The claimants never agreed to enter into a lease of Unit 12. Mr Fairbrother said he did not do so because he became unhappy about the service charge. The service charge, as was the case for all the other units, included a sinking fund designed to pay for all future repairs to the estate which went beyond mere maintenance. For Unit 12, it amounted to £78.12 in 1995. The judge expressly held that Mr Fairbrother's reluctance to enter a lease arose not so much from his dislike of the service charge (which was no greater pro rata than it had been for Unit 16), but from a desire to retain the freedom to move quickly to larger premises if his business continued to expand.
11. Mr Jay was unhappy about Mr Fairbrother's refusal to enter a new lease. His evidence was that although Mr Fairbrother had paid the rent and some of the service charge:

"....by May 1995 he still had not signed the lease on terms we had verbally agreed more than once. I saw him as a breaker of his word with no agreement to fall back on."

12. By the time the notice was served, Mr and Mrs Jay were unhapppy with the claimants. It was their view that Mr Fairbrother did everything he could to avoid signing the lease. Mr Jay's evidence was that in February 1994 he had agreed to a three month break clause, which Mr Fairbrother had wanted and that he (Mr Fairbrother) had agreed to pay £25 towards the cost of altering the lease. Mr Fairbrother did not accept that he had agreed a break clause. There had also been disputes about the rent and service charge and indeed about the car parking.
13. It was in those circumstances that Mr and Mrs Jay instructed their solicitors, Messrs Thomas Eggar Verrall Bowles ("TEVB") to serve a section 25 notice on the claimants. The notice was sent to the defendants who regularly acted for the claimants. It was common ground before the judge, and remains common ground, that when the notice was given the claimants had a business tenancy of Unit 12 to which the 1954 Act applied and that the claimants had a right both to serve a counter-notice and to apply to the court for a new tenancy provided they did so within the time limits to which I have referred. There was, however, no written lease between the parties and the terms of the tenancy were not perhaps absolutely clear.

17 May to 16 October 1995

14. The defendants sent the notice to the claimants and sought their instructions. On 6 June the defendants were told on the telephone that the claimants were looking for bigger premises. The partner advising the claimants advised them that they should nevertheless serve a counter-notice and keep their options open. On 30 June and 10 July the defendants sent reminders to their clients as a result of which they were instructed to serve a counter-notice, which they did by letter dated 11 July. TEVB acknowledged receipt by letter dated 14 July. On the same day they asked Mr Jay for instructions. Mr Jay telephoned them and gave his assessment of the position. The memorandum of that telephone conversation on TEVB's file reads as follows:

"Telephoning James Jay returning his call. He said that the tenant of Unit 12 was a particularly awkward character and did not like paying the service charge. He was therefore going to suggest to him, if he did make an application to the Court for a new Lease, that perhaps he should not have a Lease in the standard from but rather a Tenancy at Will - apparently Peter Fellows had knocked out a form of Tenancy at Will. I said that this could be done. I said we could alternatively have a Lease outside the Act containing a break clause which would have much the same effect He said he did not want to have Leases on the Estate in different forms and he thought that once he had granted one in a different form ie with different service provisions, then all the other tenants would latch on to it. I said I thought there was probably a good chance of that.

We agreed to wait and see what happened as regards the tenant's application to the Court."

15. As far as I am aware, there were no telephone conversations between Mr Fairbrother and Mr Jay at that time.
16. On 2 August the defendants wrote to the claimants informing them that a counter-notice had been served, and telling them that at that stage the counter-notice simply preserved their rights to a new tenancy. The letter concluded:

"The notice was served on 11 July and if you wish to have a new tenancy you may have to apply to the court. Again there are very strict time limits for an application to be made. The earliest date for an application is 2 months from the giving of your Notice ie the 10 September 1995 and the latest date for the application is 4 months from the giving of the Notice ie 10 November. If you miss these time limits then you may lose your right to seek a new tenancy.

I have made a note to contact you in mid-September for your instructions on the matter."

17. Unfortunately that advice was incorrect. The periods of two and four months run from the giving of the landlord's notice and not, as the letter states, from the tenant's counter-notice. It is common ground that time in fact expired four months from the giving of the notice on 17 May. It is, in my opinion, of some importance to note that neither the defendants nor their clients (the claimants) were aware of that fact at that time. They all thought that time did not expire until 10 November, as the letter said.
18. On 4 September the defendants again wrote to the claimants. They asked what steps, if any, they wished them to take and again reiterated the wrong dates. It was about this time that there was some discussion between Mr Jay and Mr Fairbrother. Mr Jay had prepared a letter which was to form the basis of a possible tenancy at will. On 5 September Mr Fairbrother faxed it to the defendants for advice. They advised as follows, in a letter of the same day:

"In my view this letter would be sufficient to create a tenancy although the letter itself is not in my view adequate to regulate your future position as a tenant or indeed that of the Landlord. For example, the letter does not provide any details about your rights to use the services or access, your responsibilities with regard to insurance and payment of any premiums and the payment of any outgoings or in respect of repairing and maintenance obligations of the tenant and the landlord in the future. Nor is there any reference to the way in which the rent may be reviewed.

If you sign such a letter then I think you should expect the Landlord thereafter to enter into a full Lease with the usual provisions to cover the above matters and other matters that are normally dealt with in Leases. Once you are in possession it might provide difficult to agree the precise terms of such Lease including the responsibility for the expenses of preparation of the Lease."

19. It is by no means clear how far discussions proceeded after that. However, we have seen a telephone note from TEVB's files dated 20 September which is in these terms:

"Speaking to James Jay. He asked if I had yet heard that the tenants had made an application to the Court. I said I had not and I was about to contact him because I had a note in my diary that the 4 months for applying to the Court had run out. However I was proposing to give it a day or two just in case there was a letter in the post to me.

He said that we now had to go for these tenants as he was fed up with them. Either they took a lease in the standard form or he would have to get out on the 30 November."

20. That note strongly suggests an uncompromising approach on the part of Mr Jay if the claimants had missed the deadline for applying to the court for a new tenancy. There is no suggestion there that a new lease might include a break clause or that the landlords might enter into a tenancy at will.
21. On the next day TEVB ascertained that the original notice had been delivered on 18 May. On 22 September there is a further note on TEVB's file which suggests a softening of Mr Jay's approach. It is in these terms:

"Attending James Jay on his telephoning. He said that the tenant of Unit 12, George Fairbrother, had rung to say that he would sign a tenancy at will and James Jay told him that he could do this as long as it had a service charge provision. I confirmed that I had heard nothing from the tenant's solicitors about making an application to the Court for a new lease so I thought that by now they must be out of time because anything they had sent me should have been received by me by now.

He said he would get them to sign a tenancy at will now and sort out a lease later.

He asked if in the circumstances I would not send my letter to the tenant's solicitors. He said he thought all this activity had probably come about by the fact that the tenants had suddenly woken up to the fact that they had not made their Court application in time."

22. In fact that last remark, although it no doubt seemed reasonable to Mr Jay, was not correct because neither the defendants nor the claimants was yet aware of the mistake that had been made.
23. It is not clear what happened between the 22 September and 11 October, but on 11 October the defendants wrote to Mr Fairbrother in response to a telephone message in these terms:

"I write following your telephone message and am sorry not to have been back in touch with you since my letter of the 5 September or our subsequent telephone conversation. As I explained to you in my letter of the 5 September the letter provided by Mr Jay is somewhat inadequate to regulate the future position of you as tenant or indeed of Mr Jay as landlord. Although the letter can be expanded to include additional items that in itself is probably not sufficient to avoid future problems. The only certain way of regulating the position is for a proper tenancy agreement to be prepared, including all the usual provisions. It is normal for the landlord to prepare such an agreement.

However if Mr Jay is insistent that the matter be dealt with by way of a letter then the following items should also be included."

24. The letter then sets out a number of matters which the defendants thought should be included, including a plan, details of rights to use the services, provision of payment for any services, insurance, obligations of maintenance and repair and the like. The letter continued:

"If terms are agreed on these points then I suggest that Mr Jay incorporates them in a letter although my firm advice to you is that it would be in your interests to agree a proper tenancy agreement.

You should also bear in mind that if you wish to preserve your security under your existing tenancy then you must make application to the court by no later than the 10 November. If you miss the time limit for this, then you would lose your legal right to seek a new tenancy if terms cannot be agreed before then."

25. As I read the letter, the claimants were being advised by the defendants not to sign an informal agreement but "a proper tenancy agreement", or, if Mr Jay was insistent, to require detailed provisions in a letter. The wrong date for the application to the court was again included in the letter.
26. In the light of that letter, it could not fairly be held that the claimants acted unreasonably in declining to enter into a tenancy at will.

From 17 October

27. In my opinion, whatever the position before 17 October, the documents show that thereafter Mr Jay was taking a firm position viz a viz the claimants. On that date TEVB wrote a letter in these terms to the defendants on the express instructions of the landlords:

"The notice under section 25 .... was sent to your clients by recorded delivery on the 17th May and the Royal Mail have confirmed to us that it was delivered on the 18 May.

Although you acknowledged receipt of the Notice in your letter of the 11 July and informed us that your clients are not willing to give up possession of the property or any part thereof on the 30 November 1995, we have not been informed that you have made an application to the court for a new tenancy within the period stipulated by the Act and your clients have therefore lost their right to apply to the court for a new tenancy.

We have discussed this matter with our client and we are instructed to notify you that our client will require your client to vacate the property on the 30 November unless he has, prior to that date, completed a new Lease of the premises in our client's standard form for the Estate.

We look forward to hearing from you."

28. It should be noted that the standard form of lease for the estate was for a period of three years or more without any break clause. On receipt of that letter on 18 October, the partner concerned at the defendants' realised her mistake. She immediately telephoned Mr Fairbrother and told him that she may have made a mistake and prejudiced the claimants' position. She noted his response as follows:

"He confirmed that talking to .... he does not think that there is any real problem over renegotiating. They do not want a long term commitment on a lease. Hope to agree terms to enable him to get out on three months notice either way."

29. On the same day the defendants wrote to the claimants confirming both the telephone conversation and also that what TEVB had said as to the time limit was correct. They also wrote to TEVB:

"We understand that the parties are discussing matters between themselves and our clients have indicated to yours that they do not wish to enter into a long term commitment in respect of these premises. Discussions are continuing about a more short term arrangement and in particular one to enable our clients to remain in occupation with provision for termination on 3 months' notice either way.

We would be grateful if you could please take instructions and let us know the terms upon which your client is now willing to permit ours to remain in occupation."

30. By a letter dated 19 October, TEVB sent that letter on to Mr Jay and added:

"I think you should stick to your guns and insist that he either vacates by the 30 November or completes a new Lease in the standard form for the Estate. However, would you be prepared to include a break clause, even if only exercisable after, say, a year? Perhaps there should be a mutual option to determine but of course in that case we would have to get a Court Order authorising this.

I look forward to hearing from you."

31. On 23 October, according to a TEVB file note, Mr Jay rang to say that he agreed they should "stick to their guns". The note said that they (the claimants) must agree to signing a standard lease or they must get out. Moreover, when they left they must replace the speed ramps which they had removed. As a result, TEVB wrote to the defendants on 1 November:

"Thank you for your letter of 18 October on which we have now received our clients' instructions. These are that your client must either sign a Lease of the property in the standard form for the estate before the 30 November or vacate the property on that date. Please let us know what your client is proposing to do."

32. They added a reference to the ramps. That letter was to my mind a plain rejection of the proposal in the letter of 18 October that a short term arrangement might be reached.
33. On 2 November the defendants sent a copy of the letter of 1 November to the claimants and asked to be told how they were progressing with direct discussions with Mr Jay. The partner concerned spoke to Mr Fairbrother by telephone on 3 November and told him that if he felt that the wrong advice had prejudiced him, he should get advice elsewhere. She recorded Mr Fairbrother as saying:

"Not sure what Mr Jay is up to. There are empty units so can't have other tenants. They do not want to move out - want a short term commitment.

He will try speaking to Mr Jay. Thinks he can agree something."

34. On 7 November the defendants wrote to TEVB asking for a copy of the standard form of lease which TEVB supplied by letter of 9 November. It contained no break clause. On 13 November the defendants asked TEVB what term of years the landlords would seek. TEVB took immediate instructions and replied on the same day saying that Mr Jay would be prepared to grant a lease for 3, 6 or 9 years, depending on what was required, with a rent review on 1 January 1998 and every three years thereafter, as in the case of other leases on the estate. They added that the rent would be the same as the claimants were paying at present until the first rent review date.
35. On 15 November the defendants wrote to the claimants asking for instructions. However none were forthcoming and a reminder was sent on 27 November. On the TEVB file there is an internal note passing between one office and another. The purpose of the note was to put the recipient in the picture with a view to proceedings being commenced against the claimants for possession. The note includes the following:

"However no application was made to the Court for the grant of a new tenancy and therefore the tenants lost their rights.

James Jay is not particularly keen on these tenants. They do not like paying a service charge; they have pulled up the speed humps because they interfered with the use of the fork lift trucks; they park too many cars in the property and are generally a pain.

However, notwithstanding this James Jay told the tenants that although they had no rights to remain in occupation, he would be prepared to grant them a new lease of the unit in the standard form for the estate (and he made it quite clear that he was not prepared to agree any variation), or they could have a tenancy at will. I sent Gabb & Co a copy of the standard draft lease for the estate.

James Jay has now had a telephone call from the tenant. Although the tenant claimed that he could do a deal with Mr Jay, in fact the tenant said he was not prepared to sign up a lease in the standard from (he does not like paying a service charge), and he said he is not prepared to sign a tenancy at will He has indicated that he is not going to give vacant possession of the unit on the 30th November.

....

James Jay would like some advice on what to do next and it seems to me that we are going to have to go for a Possession Order. Clearly the tenant is hoping to string this matter out as long as possible but the time has come to draw it to a head."

36. It is by no means clear what communications there were directly between Mr Jay and Mr Fairbrother, but it may well be that at about that time there was telephone communication between them.
37. It appears from the memorandum that Mr Jay was only willing to offer a lease on the standard form of lease or a tenancy at will. There is no suggestion that he was willing to offer a lease with a break clause, and it is far from clear what the terms of the tenancy at will were intended to be. There is no clear evidence that any particular terms were offered at this time.
38. On 4 December Mr Fairbrother spoke to the partner of the defendants on the telephone. Her note reads:

"Does want to stay. Suggest 1 year with break clause and thereafter 6 monthly breaks. (3 year term). Wants rent at same level and service charge at same level fixed for at least a year. Send details on likely costs."

39. There followed a telephone conversation on the next day in which Mr Fairbrother provided details of the service charge and rent. He concluded by saying that if the defendants were going to send a letter to the landlords he would like to see it first.
40. However, before such a letter was drafted, the defendants and Mr Fairbrother received a letter dated 5 December from TEVB noting the claimants' failure to apply for a new tenancy and the fact that the tenancy terminated on 30 November 1995 in accordance with the notice of 17 May. The letter asked the claimant to vacate Unit 12 within 14 days, failing which proceedings for possession would be taken and costs sought. No rent or mesne profits would be accepted in the meantime. The letter received by the defendants expressly stated that,"at the current time" the landlords did not intend to enter into negotiations for a new lease.
41. By a letter dated 6 December to the claimants, the defendants summarised the position of the various interests. Thus it summarised the landlord's position as stated in the letter of 5 December, the claimants' position as stated in the telephone conversation of 4 December, and the effect of the incorrect advice, namely that the claimants were now prohibited from applying to the court for a new lease. The defendants added that they could not say what terms the court would have offered and suggested that the claimants instruct other solicitors.
42. On 7 December Mr Fairbrother rang to say that he did not wish to instruct another solicitor, but would try to speak to Mr Jay. In the event he sent a fax to Mr Jay asking for confirmation of a number of financial matters. He concluded as follows:

"As we have discussed, I would be prepared to sign a three year lease agreement providing:-

a. There are no increases to the amount of rent and service charges currently being paid.

b. The lease incorporates a six month 'Get Out' clause after an initial twelve month period.

I look forward to hearing from you in due course."

43. However, he received an unhelpful reply from TEVB dated 13 December saying that the landlords wanted possession by 19 December.
44. On 18 December there was a further telephone conversation with the partner in the defendants in which Mr Fairbrother said he did not wish to consult other solicitors. The note of the telephone conversation concludes:

"Having considered all options and looked into alternatives he (and his wife) are now prepared to enter into a 3 year lease (with rent at its current level).

If he can get a 3 year lease that confirms he would be happy with it and would not look to us for any losses/damages. I agreed to write fax letter from Thomas Eggar Verrall Bowles."

45. The defendants wrote to TEVB on 19 December saying that the claimants were now willing to enter into a 3-year lease on standard terms at the current level of rent. However, that offer was rejected by letter dated January 1996. It was only after that that the claimants consulted other solicitors.
46. In my judgment, those exchanges do not support the conclusion that the landlords ever offered, or indicated a willingness to agree, a term lease with appropriate break clauses at any time after, say, September 1995. Moreover, to my mind, there is no convincing evidence to the contrary in the oral evidence of Mr Jay. It was suggested that the offer of a break clause originally made, and indeed said to have been agreed some considerable time earlier, was still on the table. To my mind that is extremely unconvincing. There were undoubtedly discussions about the possibility of a tenancy at will, but they remained undeveloped and somewhat obscure. The position is that the claimants were trying to negotiate with the landlords until the end. They ultimately capitulated but, by the time they did so, the landlords decided that it was too late and refused to agree a lease even on the terms at which they had until then requested.

The appeal

47. I have set out the facts in some detail because they seem to me to be relevant to the issues raised in this appeal. The judge set out the facts in much less detail, although I certainly do not criticise him in any way for that.
48. The judge expressly held, as was conceded by the defendants, that, but for the defendants' negligence, the claimants would probably have made an application to the court and would thereafter have entered into a new lease on terms settled by the court. The judge did not, however, make any finding as to the terms on which the court would have granted a new lease. It appears that his view was that that question would only arise after he had answered question 1.
49. The judge held that the dominant or effective cause of the defendants' failure to enter into a new lease was Mr Fairbrother's refusal to reach reasonable terms with Mr Jay and not the defendants' negligent advice which resulted in the claimants losing their right to seek a new lease from the court. The judge did not identify what he meant by "reasonable terms", but it seems to me to be reasonably clear that he must have meant the standard terms being offered by the landlords, namely a lease for a fixed term of three years at the same rent and with a service charge calculated on the same basis as before.
50. The judge described Mr Fairbrother's reasons for refusing to "come to reasonable terms" in this way:

"The reason for that stance by Mr Fairbrother was, I find because he did not want to commit himself to a lease at a time when he thought he might wish to move to larger or more advantageous premises if he could find them. That had also been the reason why he had refused to enter into a lease since moving into unit 12 in December 1993. It was only after he realised in December 1995 that Mr Jay would require him to leave before he had been able to find more suitable premises that he finally agreed to enter the lease which had been offered to him. Unfortunately for him by then it was too late.

....

In my judgment if Mr Fairbrother had entered the negotiations with Mr Jay for a new lease with the genuine desire that those negotiations should succeed, the Claimants would have entered into a new lease of unit 12. It was because he had (at least until November 30 1995) no such genuine desire that the negotiations failed)."

51. I entirely agree with the judge that the reason why the claimants did not enter into a new lease on the terms proposed (viz a 3-year lease) was that he did not want to commit himself to a lease at a time when he thought he might wish to move to larger or more advantageous premises if he could find them. I can, therefore, understand that if the terms of the new lease granted by the court would be the same, or substantially the same, as the terms offered by the landlords, the cause of the claimants' failure to obtain a new lease would, or at least might, not be the negligence of the defendants' of depriving him of his opportunity to apply to the court for a new lease, but his failure to accept the terms offered over a considerable period between September and November 1995.
52. It was, to my mind, in the context of those conclusions that the judge referred to the decision in this court in Galoo Limited v Bright Graham Murray [1994] 1 WLR 1360. I accept that in order for a claimant to establish that a particular consequence was caused by negligence or breach of contract, it is not sufficient to show that, but for the negligence or breach of contract, the consequence would not have happened. That is a necessary but generally not a sufficient condition for satisfying the test. All will depend on the circumstances which include the application of common sense: see Galoo but compare some of the considerations adverted to by Lord Hoffmann in his lectures to the Chancery Bar Association, dated 15 June 1999, entitled "Common Sense and Causing Loss".
53. In the instant case, if the position is that if claimants had applied to the court for a new tenancy the court would have granted a tenancy for, say, three years with shorter breaks of, say, three or six months, then the claimants' failure to enter into a new tenancy on those terms was to my mind caused by negligence or breach of contract. That is because the only way that the claimants could have achieved a tenancy with three or six months breaks was by application to the court. The landlords did not offer a lease on such terms at any stage after mid-September. In particular, they did not do so after the defendants and their clients (the claimants) became aware of the mistake over the dates in mid-October. On the contrary, as I indicated earlier, in TEVB's letter of 1 November, which was written on the express instructions of the landlords, they rejected the proposal for an agreement which provided for termination of three months' notice either way, contained in the letter of 18 October from the defendants to which I have already referred.
54. It is common ground that if the terms of a new tenancy had been settled by the court, they would have included a break clause. Thus, the defendants' skeleton argument, prepared by Mr Smith who has appeared on their behalf, includes the following:

"6.1 [If] the defendant accepted that, absent its negligence, Mr Jay and the claimants probably would have reached agreement as to the new lease. So far as relevant a 3-year lease with 3-month breaks would have been agreed. The claimants would have agreed the service charge and rental provisions that were proposed by Mr Jay (and accepted by all the other tenants on the industrial estate). If not, claimants would have been forced to accept such charges/rent by the Court.

....

29.1 Question 2: 3-year lease with 3-month break clause (ie at the 3rd month and every 3 months thereafter) on same terms as to rent and service charges as before."

55. The skeleton argument drafted by Mr Stenhouse on behalf of the claimants includes similar statements. He has expressly accepted in the course of the argument that the court would indeed have granted a new lease on those terms if it had been asked to do so.
56. It follows that the only way the claimants could have achieved what they wanted throughout, namely a lease with a break clause, which, as the judge put it, would have enabled them to move to larger or more advantageous premises if they could find them, was by application to the court. Since it was the defendants' negligence or breach of contract which prevented them from applying to the court for such a tenancy, it further follows that the question posed by the judge must be answered in the affirmative. The problem here is that insufficient attention was paid by the parties to the nature of the question being asked.
57. Thus, until the nature of the "new lease of business premises" is identified, it is impossible to answer the question, whether there the claimants' failure to enter into such a lease was caused by the breach? However, once it is appreciated that the new lease is, or would have been, a lease on terms which include a break clause, for the reasons I have given, it becomes clear that the failure to enter into to such a clause was caused by the defendants' negligence or breach of contract.
58. I would add that the essence of the defendants' case is that the claimants acted intransigently, or, in other words, unreasonably. It strikes me that the defendants were essentially saying that the defendants failed to take reasonable steps to mitigate their potential loss. Both counsel have confirmed in the course of argument that, although the defendants' submissions were not couched in terms of failure to mitigate the loss, they depended upon the submission that the landlord acted wholly unreasonably in refusing to accept what he was offered, such that it could properly be held that the cause of his not entering into the lease offered was that unreasonable conduct or intransigence and not the breach of contract or negligence of the defendants.
59. In the course of his judgment, delivered on 17 October 2001, the judge said:

"25. Despite Mr Jay's awareness of the fact that after 17 September 1995 the Claimants negotiating position was considerably weakened, for over two months he neither broke off negotiations nor did he propose more onerous terms than he had been proposing prior to that date. On the contrary, I find he was anxious that a lease should be concluded and did all he reasonably could to accommodate Mr Fairbrother's wishes in that respect. After 30 November 1995 his patience was exhausted and he refused to negotiate further."

60. If that is the expression of a conclusion that the claimant failed to act reasonably, I am unable to agree with it. I have set out the relevant dates in some detail. I have already expressed my view that the claimants did not act unreasonably in the period before the 17 October. They reasonably wanted a lease with a break clause which was never offered. The defendants themselves advised them not to enter into a tenancy at will. In these circumstances, it was entirely reasonable for them not to do so.
61. After the 18 October the landlord's attitude, as set out in the correspondence from their solicitors which I have set out in some detail, was uncompromising. For example, Mr Jay told his solicitors on 23 October that they should "stick to their guns" and that the claimants must agree to sign a standard lease or "get out".
62. I have already referred twice to the letter of 1 November rejecting the proposal, in effect, for a break clause in the defendants' letter of 18 October.
63. On 13 November the only terms offered by Mr Jay's solicitors were 3 6 or 9 years without a break clause. That remained Mr Jay's formal position throughout. I do not think that the claimants can fairly be said to have acted unreasonably or intransigently in refusing to accept it. I would accept Mr Stenhouse's submission that throughout Mr Fairbrother proceeded on the footing that he would sooner or later be able to reach an accommodation with the landlords. When he finally capitulated, it was unfortunately too late. To my mind his conduct cannot be categorised as unreasonable, let alone wholly unreasonable.
64. The only other possibility which was raised from time to time was that of a tenancy at will. I have already expressed by view that it was reasonably rejected, or not taken up, in the period before 17 October. Thereafter, the possibility of a tenancy at will was never formally offered by the landlords' solicitors, although it was touched on in correspondence and mentioned as a possibility in conversations between Mr Fairbrother and Mr Jay.
65. However, in circumstances in which the defendants had previously advised against it and where no formal offer on clear terms was ever made, I do not think it could fairly be held that the claimants acted unreasonably in failing to agree to such a tenancy, which would have given them no security of tenure at all, and would certainly not have been granted by the court. Moreover, I do not think that the judge had a tenancy at will in mind in the passages from his judgment which I have quoted.
66. In conclusion, I would hold that the claimants did not act unreasonably in holding out for a tenancy with a break clause, and in not accepting a tenancy without such a clause until a late stage.
67. In all these circumstances I would answer the question 1 in the affirmative and, for the reasons I have given, I would allow the appeal.
68. As to question 2, I would answer it in accordance with what I now understand to be the agreement of the parties, namely a 3-year lease with a 3-month break clause; ie at the third month and every three months thereafter on the same terms as to rent and service charges as before.
69. That leaves question 3: what would the claimants have done had they had the option of accepting the new lease on the above terms? It would not be appropriate for this court to attempt to answer that question. It is closely linked, partly with the conclusions which have been reached to date, and partly with the claimants' detailed case on quantum. The right course is to remit all the remaining issues in the case to the county court for determination in the unhappy event that they cannot be resolved by agreement. Although it will ultimately be a matter for the county court, it does not seem to me that it would be appropriate for any further preliminary issue to be determined.
70. LORD JUSTICE ROBERT WALKER: I agree. I do so with some reluctance, not only because of the further costs to be incurred on this relatively small claim, but also because I feel that, apart from their admitted negligence over time limits under Part II of the Landlord and Tenant Act 1954, the solicitors, both before and after advising Mr Fairbrother of his likely claim against them, provided conscientious and sensible advice to a rather difficult client.
71. In his well constructed submissions, Mr Jamie Smith has sought to uphold the logic of the judge's formulation of three questions as a preliminary issue of causation. But, for the reasons given by my Lord, those questions were not well formulated. It is hard, indeed to my mind impossible, to see how question 1, on its own, could possibly be determinative either way of the issue of liability. But that is how the judge saw the matter in paragraphs 23, 27 and 28 of his judgment.
72. The matter must, therefore, be remitted to the county court as my Lord proposes. Mr Fairbrother should not suppose that the recovery of the whole of his pleaded loss will be the inevitable, or even the likely outcome, of further proceedings. The parties and their advisers should use their best endeavours to settle the matter without further expensive litigation.
Order: Appeal allowed with the costs of the appeal summarily assessed in the sum of £8,000. The costs order below to be discharged and the costs of the hearing below to be reserved to the trial judge. Matter to be remitted to the county court for further consideration in the light of this judgment to deal with all outstanding issued.