ROYAL COURT
(Samedi Division)
21 May 1999
Before: Sir Peter Crill K B E Commissioner
and Jurats Rumfitt and Georgelin.
Between: Donald Bass Plaintiff
And: Barry Keith Pickersgill and David Eldon Le Cornu
(practising as Pickersgill and Le Cornu) Defendant
Claim for professional negligence.
Advocate AD Hoy for the Plaintiff
Advocate M St J O'Connell for the Defendant
JUDGMENT
THE COMMISSIONER: 9-10 Devonshire Place, St. Helier, consists of a garage on the ground floor and residential flats above. The whole property is owned by a company called Nodol Investments Limited, 2,600 of whose shares entitles the holder to the exclusive occupation of the garage. At the time of the events complained of, the plaintiff and Mr. and Mrs. R. Langdon, the holders of the 2,600 shares, were clients of the first defendant, a partner in the firm of Pickersgill and Le Cornu.
In 1991, Mr. and Mrs. Langdon needed to borrow a substantial sum to replace earlier borrowings. Mr. Pickersgill approached the plaintiff (and other clients) to enquire if he would be interested in lending the Langdons, via the company, £540,000. That sum would be secured by way of a security interest agreement. Mr. Bass agreed to do so under certain specific conditions. Because of the way the action proceeded we need only mention one. This was that his would be the only charge and that any second charge would require his written consent. Later the amount was increased to £570,000. In both cases Mr. Bass was relying on the written assurance of Mr. Pickersgill that, in the event of a breach of the terms of the agreement, he could immediately call in the shares which Mr. Pickersgill was holding to his order.
In 1993 the Langdons were in some financial difficulties with their bank, the Midland Bank. Mr. Pickersgill tried to help them and, to that end, negotiated a loan for £39,000 from Esso Petroleum Limited. That loan would also be secured against the shares of Nodol Investments Limited, by a secured charge, ranking after that of Mr. Bass. Mr. Pickersgill obtained Mr. Bass' consent. The proposed loan, which was what may be described as a marketing loan, inasmuch as it would have helped the garage over supplies of petrol and at the end have been extinguished without the borrower having to repay it, fell through. Later on Mr. Pickersgill - believing that the permission he had clearly obtained from Mr. Bass for the Esso loan, covered any other sort of second charge - negotiated, after considerable difficulty, a second charge from the Midland Bank for £158,000. There is a considerable conflict of evidence as to whether Mr. Pickersgill did obtain Mr. Bass' consent in the form claimed by Mr. Pickersgill which we shall mention later. At any rate the Langdons did not default upon their payments of interest until April, 1994. In the meantime the accounts of the garage, not those of Nodol Investments, had been sent to Mr. Bass in February, and he noticed for the first time, according to his evidence, that the Midland Bank had a second charge. Not satisfied with the explanations of Mr. Pickersgill he changed his lawyers to Michael Voisin and Co. He had other complaints about Mr. Pickersgill's handling of his affairs over this matter, but for the same reason why we have confined ourselves to the claim arising out of the second charge, we do not think these are now relevant, except in one respect. They show - and the evidence was not challenged, although Mr. Pickersgill had assured Mr. Bass regarding the amount of the insurance cover which was based on a valuation called for some inexplicable reason an "informal valuation" but one that the parties had relied on in 1991 - that Mr. Bass' interest would be endorsed on the policy for that sum (£900,000) and that he (Mr. Pickersgill) nevertheless had relied on the word of Mr. Langdon and did not verify these two important matters for himself or at any rate through a member of his staff. That shows, we think, a rather slipshod way of proceeding and that, in fact, as we shall also show, was reflected in the matter of obtaining Mr. Bass' consent to the Midland Bank's second charge.
Returning to the narrative of events. On 8th March, 1994, after he had received the accounts in which he said he noticed there had been a second charge obtained without his written consent which was a breach of the agreement, Mr. Bass gave notice to Mr. and Mrs. Langdon and called in the loan. Unhappily for him, after a failed attempt to obtain a remise des biens, the Langdons declared themselves en désastre some three days after Mr. Bass had finally obtained the shares which had also been held to the order of Midland Bank by Mr. Pickersgill and it required some persuasion from Advocate Voisin for the bank to authorise Mr. Pickersgill to hand over the shares. Not unnaturally the Viscount claimed the shares in respect of the désastre and after a lot of argument it was not until March, 1995, that Mr. Bass was able to use them to let the garage on a fully repairing and insuring lease for nine years at £60,000 per annum with rent increases. The rent is now £66,738.
As a result of having to wait to realise his security Mr. Bass brings this action against the defendants alleging that they failed to exercise any or due or sufficient care in the conduct of his affairs. The standard test in a case of this nature is that of a reasonably competent solicitor and it is against that standard that we have examined the evidence to decide whether or not Mr. Pickersgill had in fact not come up to what was required normally of a solicitor acting for a client. Obviously if Mr. Pickersgill did obtain Mr. Bass' consent to the second charge the allegation falls away in its entirety. Like most lawyers, Mr. Pickersgill keeps file notes of conversations. We have examined them. They cover the period from 21st January, 1993, to 23rd April, 1993. One of them is annotated in the handwriting of Mr. Pickersgill's secretary who said that, if she is asked to tell a client the contents of any note prepared by Mr. Pickersgill, she would normally read the whole of it to that client unless ordered to the contrary. Nevertheless she does not appear to have read the whole of the note of 12th March, 1993, to Mr. Langdon when she telephoned him on 16th March, 1993. Mr. Pickersgill was undoubtedly aware of the need to obtain Mr. Bass' consent and indeed tried to do so on two occasions, without success, as Mr. Bass was away. The crucial entry is that of the file note for the 23rd April which reads as follows:
"23.4.93
Ray Langdon
- the bank is threatening you again - Esso will give you £39,000 to sell their fuel for the next ten years - they want a second charge on your business premises. This money is never repaid and the debt is forgiven at 5 years.
Can we have Mr. Bass' consent to a second charge.
Mr. Pickersgill said two things: first, that he believed that he had told Mr. Bass about the bank loan when speaking to him and secondly that the contents of an earlier note about what he had intended to say to Mr. Bass indicated that, when he did speak to him, he said what he had in fact put down. One thing is clear, Mr. Bass' consent was not given, if it was given at all, in writing as required by the agreement. That, we think, is yet a further indication of a rather casual attitude by Mr. Pickersgill. Mr. Bass was adamant that he was not told during the telephone conversation of 23rd April about the Midland Bank loan. Mr. Pickersgill, however, felt that he had done so because his subsequent conduct was consistent with his indeed having done so.
Apart from the evidence of the parties we may note the following:
1.Only Esso is mentioned in the file note of 23rd April.
2.In writing to the Midland Bank on the same day in respect of the bank's charge only Esso was specifically mentioned and not a general permission.
3.In its letter to Mr. and Mrs. Langdon of 30th April, 1993, the bank informs them that Mr. Bass had in fact given consent.
Mr. Pickersgill asked us to find that what he told Mr. Bass on 23rd April included a general consent from Mr. Bass to any second charge. We think this is unsustainable. What limit was there to be? Moreover the Esso loan differed from that of the bank in two significant ways: it was for a very much larger amount, and secondly, as we have noted, would have run itself out. We are satisfied from the evidence and the surrounding circumstances that Mr. Pickersgill's main concern in April, 1993, was to assist the Langdons and that in so doing, he did not tell Mr. Bass about the bank loan and obtaining his consent, rather through inadvertence than in a deliberate attempt to mislead him. We therefore cannot accept Mr. Bass' allegations that Mr. Pickersgill lied to him. That is not, however, the end of the matter. Having found for the plaintiff on this main point, there remain three other questions before the amount of damages, if any, can be decided. In the event the plaintiff is now claiming as special damages his loss of income for the time when he could have let the premises from 26th April, 1994, to the time he actually did sell on 1st May, 1995. The claim for a capital sum has been dropped leaving a claim for general damages only, apart from the special damages which we have already mentioned.
The three questions are:
1.Was there a loss at all?
2.If there was, was it too remote?
As regards question one the defendants ask us to look at the present value of the premises. It has been valued at £675,000. The plaintiff does not challenge this figure but says that it is irrelevant in assessing his loss of income. The defendants say that taking into account the value of the garage the plaintiff would not be out of pocket at all; it is a question of simple arithmetic. If that were all we might have agreed but the differing valuations of the property over the years and the fluctuations and unpredictable fortunes of the garage business in Jersey lead us to the conclusion that to do so out of hand would be unwise.
The second question concerning the remoteness flows from the claim by the defendants' counsel that the Viscount's acting as he did is something for which his clients could not be held liable. Undoubtedly the Viscount acted as he thought best in seizing the shares to protect the other creditors although eventually he handed them over, as we have already said. If Mr. Bass, in our opinion, had been alerted by Mr. Pickersgill to the financial position of the borrowers at a much earlier date in February, 1994, when Mr. Bass discovered the position it does not follow that there would have been a désastre so soon after his taking possession of the shares. We find that Mr. Bass acted with reasonable speed and that the insolvency of the Langdons - to the detriment of Mr. Bass - flowed naturally, we think, from the failure of Mr. Pickersgill to carry out his instructions properly.
Mr. Bass did what he could to mitigate his loss and did not apply to the Royal Court, which he might have done, because, as he told us - and we have some sympathy with him - there would have been long delays. Accordingly we find ourselves entitled to find for Mr. Bass not only on the question of liability but on the damages claimed. We therefore award Mr. Bass the special damages of £74,746.13 and we award him general damages of £5,000 and interest will be paid at the Court rate from 26th April, 1994.
Authorities
The Guide to the Professional Conduct of Solicitors (7th Ed'n) Chapters 15 & 25.
Jackson and Powell on Professional Negligence (4th Ed'n) pp.446-464; 524-568.
McGregor on Damages (16th Ed'n) pp.827-840.
Hirschfield & Ors. -v- Sinel (23rd February, 1999) Jersey Unreported. [1999.037]
Hotel Savoy Ltd & Ors -v- DSL & Ors (4th December, 1997) Jersey Unreported. [1997.218a]
Dixon & Ors -v- Jefferson Seal (30th July, 1997) Jersey Unreported.
Blacklock & Ors -v- Perrier & Labesse (1980) JJ 197.
Boyce -v- Mouat [1993] 4 All ER 268.
Viberts -v- Golder (1995) JLR 223.
Stanton Ltd -v- Mourant du Feu & Jeune (1994) JLR 82.
Swindle -v- Harrison [1997] 4 All ER 705.
National Home Loans Corp plc -v- Giffen Couch & Archer [1997] 3 All ER 808.
Banque Bruxelles Lambert SA -v- Eagle Star Insurance Co Ltd [1995] 2 All ER 769.
Carradine Properties Ltd -v- DJ Freeman & Co Ltd [1989] Construction Law Journal 267.