Jersey Unreported Judgments

Loan - application by the second defendant to strike out order of justice and application by the plaintiff to amend order of justice.

[2013]JRC181A

Royal Court

(Samedi)

16 September 2013

Before     :

M. J. Thompson, Esq., Master of the Royal Court, sitting alone.

 

Advocate D. S. Steenson for the Plaintiff.

Advocate R. A. Leeuwenburg for the First Defendant.

Advocate M. T. Jowitt for the Second Defendants.

judgment

the Master:

The Submissions

1.        This is an application by the second defendant to strike out the Order of Justice insofar as it contains allegations against the second defendant.  The application is brought under Rule 6/13(1)(a) of the Royal Court Rules 2004, as amended, on the grounds that the Order of Justice discloses no reasonable cause of action against the second defendant. 

2.        There is also before me a summons issued by the plaintiff seeking leave to amend his Order of Justice against both defendants.  The first defendant through her advocate has consented to the application to amend.  The second defendant has not consented in light of its application under Rule 6/13(1)(a) but indicated at the hearing if that application was unsuccessful it would not otherwise oppose the application to amend.  I therefore elected to hear the second defendant's summons to strike out before considering the application to amend. 

Background

3.        I take the background to the application from the contents of the Order of Justice, always bearing in mind that the matters pleaded in the Order of Justice and the proposed amended Order of Justice are merely allegations at this stage.  In relation to the proposed amendments to the Order of Justice it was accepted by Mr Jowitt for the second defendant I could take those into account in considering his application.  Both the first and second defendant have also filed Answers to the Order of Justice. 

4.        The proceedings brought by the plaintiff relate to his relationship with the first defendant which regrettably has now broken down. 

5.        On 15^th September, 2000, the plaintiff and the first defendant jointly purchased a property in Grouville known as No.4 La Grande Pre ("the property").  It appears that all times they dealt with Mr Kendall a partner in second defendant in relation to their purchase.  The property was bought by the plaintiff and the first defendant by each granting a general power of attorney in favour of the second defendant. 

6.        On around the same day as the plaintiff and the first defendant purchased the property they also signed a cohabitation agreement.  Pursuant to the terms of that agreement the ownership of the property was split 60% as to the first defendant and 40% as to the plaintiff.  The cohabitation agreement also provided as to what should happen should the relationship between plaintiff and first defendant terminate. 

7.        At some point in early 2001, the plaintiff was looking to borrow funds to invest in a business.  The plaintiff alleges that the first defendant offered to lend him £20,000 to enable him to make the proposed investment. 

8.        The Order of Justice further alleges that on or about 21^st June, 2001, the plaintiff was required at short notice to attend a meeting of the offices of the second defendant in relation to the proposed loan from the first defendant.  At the meeting it is alleged that the first defendant confirmed she remained willing in principle to lend £20,000 but explained she required security in order to protect her two children.  The plaintiff in his proposed amendment avers that his understanding of what was proposed was that the first defendant would be taking a second charge over his 40% interest in the property which would rank after an existing hypothèque in favour of HSBC. 

9.        Accordingly, and without taking independent legal advice the plaintiff agreed to sign a loan agreement incorporating certain terms.  The plaintiff alleges that Mr Kendall summarised the material terms as pleaded at paragraph 10 of the Order of Justice which provides as follows:-

"THAT in the presence of the First Defendant, Mr Kendall summarised the terms of the Loan Agreement to the Plaintiff, representing that the following were the material terms thereof:-

(i)        the Plaintiff would be borrowing £20,000 from the First Defendant for two years;

(ii)       the Plaintiff would make a fixed "interest" payment of £5,000;

(iii)      the Plaintiff would repay the First Defendant a total of £25,000 on or before the second anniversary of the Loan Agreement (i.e. on or before 22^nd June 2003);

(iv)      if the Plaintiff failed to repay the £25,000 on or before 22^nd June 2003 (and only in that event), he would be liable to forfeit his 40% interest in 4 Le Grand Pŕe;

(v)       pending repayment of the £25,000, the Plaintiff's interest in 4 Le Grand Pŕe would act as security for the loan."

10.      The proposed amendment to the Order of Justice seeks to add to sub-paragraph (v) of paragraph 10 the following:-

"As pleaded in paragraph 8 hereof the Plaintiff understood by this that the First Defendant would be taking a second charge over his 40% interest in 4 La Grande Pre". 

11.      The Order of Justice at paragraph 11 makes allegations of negligence against Mr Kendall in that he failed and neglected to inform the plaintiff that the loan agreement provided that the plaintiff would transfer his 40% in the property immediately to the first defendant and that if and only if he repaid the £25,000 on or before the second anniversary of the loan agreement would the first defendant be obliged to retransfer that interest back to the plaintiff.  The plaintiff further avers that he was not provided with a copy of the loan agreement at the time and merely relied on Mr Kendall's oral summary of the loan agreement.  He also avers he did not know that his interest in the property was transferred on 29^th June, 2001, to the first defendant using the power of attorney granted in 2000 to acquire the property (see paragraph 24 of the Order of Justice). 

12.      The Order of Justice at paragraph 27 avers that the second defendant owed a duty of care in contract and in tort to the plaintiff.  It is admitted by the second defendant in the Answer filed that it owed a duty of care to the plaintiff.  I refer to this admission because it is relevant to the nature of the application brought by the second defendant to strike out the Order of Justice.  The application is not brought on the basis that no duty of care is owed; rather it is on the basis that either no loss and/or damage has been suffered by the plaintiff or alternatively that if there is any loss and/or damage it was not caused by the negligence of the second defendant.  Advocate Jowitt fairly accepted in argument that the plaintiff's allegations of breach of duty by the second defendant were arguable and therefore not capable of being struck out. 

13.      Paragraphs 35 and 36 of the proposed amended Order of Justice further allege that the second defendant should not have acted for the plaintiff at all, alternatively should not have used the power of attorney granted in June 2000, to effect a transfer of the plaintiff's interest and further should have spelt out in the clearest terms, if the second defendant was able to act, the effect of the loan agreement to the plaintiff and that the plaintiff understood that he was agreeing to transfer his legal title to the property to the first defendant immediately upon execution of the loan agreement. 

14.      It is not in dispute that the plaintiff's interest in the property was transferred to the first defendant in June 2001 using the power of attorney granted by the plaintiff to the second defendant in September 2000. 

15.      The Order of Justice also contains further allegations against the first defendant which relate to alleged variations of the loan agreement.  In one sense these allegations are not relevant to the second defendant's application because the second defendant played no role in relation to any alleged variation of the terms of the loan agreement.  However, they are relevant to the question of whether or not any alleged breach of duty by second defendant has caused any loss to the plaintiff and the nature and extent of that loss. 

16.      In particular, the plaintiff alleges that the time period by which he had to make repayment pursuant to the terms of the loan agreement was varied by agreement with the first defendant.  This allegation is disputed by the first defendant. 

17.      Although payments of £10,000 and £15,000 were made by the plaintiff to the first defendant in 2006 and 2007, the first defendant also disputes that these payments were either repayments of the loan or were made pursuant to any agreed variation.  The first defendant has therefore refused to transfer to the plaintiff any interest in the property to the plaintiff. 

18.      As against the first defendant, the plaintiff therefore seeks to set aside the transaction of 21^st June, 2001, including on the grounds of erreur and a declaration that the first defendant is obliged to retransfer a 40% interest in the property back to the plaintiff.  Alternatively he seeks a ruling that a penalty was imposed by virtue of the loan agreement namely the loss of the plaintiff's interest in the property and that the said penalty be reduced by such an amount or in such a way as the Court shall see fit as well as general damages or alternatively repayment of the payments made in 2006 and 2007 totalling £25,000. 

19.      The above relief is not sought against the second defendant.  What is sought against the second defendant are general damages and/or equitable compensation together with interest. 

The Law

20.      The law on a strike out application under Rule 6/13(1)(a) is well known.  The principles applicable to striking out applications have been considered by the Courts in Jersey on numerous occasions.  There has been cited regularly with approval commentary from The Supreme Court Practice ("The White Book") in what was Order 18 Rule 19 of the Rules of Supreme Court of the United Kingdom which is in similar terms to Rule 6/13 of the Royal Court Rules.  That commentary is set out in The White Book (1999 Edition) at paragraphs 18/19/1 to 18/19/39 on pages 347 to 355 inclusive. 

21.      Paragraph 18/19/6 states the basis on which powers of striking out should be exercised.  The relevant extract is in the following terms:-

"Exercise of powers under this rule - It is only in plain and obvious cases that recourse should be had to the summary process under this rule, per Lindley M.R. in Hubbuck v. Wilkinson [1899] 1 QB 86 at 91 (Mayor etc., of the City of London v. Horner (1914) 111 L.T. 512, CA).  See also Kemsley v. Foot [1951] 2 K.B. 34; [1951]1 All E.R. 331, CA, affirmed [1952] A.C. 345, HL.  It cannot be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the Plaintiff really has a cause of action (Wenlock v. Moloney [1965] 1 W.L.R. 1238; [1965] 2 All E.R. 871, CA).  If there is a point of law which requires serious discussion, an objection should be taken on the pleadings, and the point set down for argument under 0.33, r.3 (Hubbuck v. Wilkinson [1899] 1 QB 86 at 91).

Where an application to strike out pleadings involves a prolonged and serious argument, the Court should, as a rule decline to proceed with the argument unless it not only harbours doubts about the soundness of the pleading but, in addition, is satisfied that striking out would obviate the necessity for a trial or substantially reduce the burden of preparing for a trial, and therefore where the Court is satisfied, even after substantial argument both at first instance and on appeal, that the defence does not disclose a reasonable ground of defence, it will order it to be struck out (Williams & Humbert Ltd v. W. &H. Trade Marks (Jersey) Ltd [1986] A.C. 368; [1986] 1 All E.R. 129 HL).

However, by following the procedure under this rule to strike out the statement of claim rather than the procedure for determining a preliminary issue of law under 0.33 r.3, the defendant does not adopt such an inherently defective procedure as would require the Court not to proceed to determine the issues raised, and since the effect of the Court deciding these issues against the Plaintiff would be to terminate the action, the Court is entitled to entertain the application and to strike out the offending pleading (Smith v. Croft (No.2) [1988] 8 Ch. 114 [1987] 3 All E.R. 909).

An application to determine a point of law under 0.14A and to dismiss the action may be made at the same time as an application to strike out as disclosing no cause of action.

A stay or even dismissal of proceedings may "often be required by the very essence of justice to be done" (per Lord Blackburn in Metropolitan Bank v. Pooley (1885) 10 App.Cas. 210 at 221) so as to prevent parties being harassed and put to expense by frivolous, vexatious or hopeless litigation (cited with approval by Lawton L.J. in Riches v. Director of Public Prosecutions [1973] 1 W.L.R. 1019 at 1027; [1973] 2 All E.R. 935 at 942)."

22.      Paragraph 18/19/10 sets out the principles to be considered in deciding whether to strike out a pleading as disclosing no reasonable cause of action.  The relevant extract states as follows:-

"A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered (per Lord Pearson in Drummond-Jackson v. British Medical Association [1970] 1 W.L.R. 688; [1970] 1 All E.R. 1094, CA).  So long as the statement of claim or the particulars (Davey v. Bentinck [1893] 1 QB 185) disclose some cause of action, or raise some question fit to be decided by a Judge or a jury, the mere fact that the case is weak, and not likely to succeed, is no ground for striking out."

23.      There was no dispute between the parties as to the test to be applied although Advocate Steenson expressly reminded me that a case should only be struck out in plain and obvious cases.  It is also well known that a plaintiff should not lightly be deprived of the right to sue a defendant. 

The application

24.      The application brought by the second defendant is that the Order of Justice discloses no reasonable cause of action against the second defendant because on the plaintiff's pleaded case:-

(i)        the plaintiff has as yet sustained neither loss nor damage;

(ii)       even if the plaintiff could claim to have sustained loss or damage, such loss or damage on his own case was caused exclusively by the first defendant and not at all by the second defendant;

(iii)      even if the plaintiff could claim but for the acts or omissions of the second defendant he would have not been put to the costs of suing the first defendant for the recovery of his property, he has in fact sustained no loss and damage until such time he successfully sues the first defendant and incurs irrecoverable costs in so doing. 

25.      In relation to this application as noted at paragraph 3 above the second defendant does not dispute that it owed a duty of care to the plaintiff.  The issue I am asked to consider, assuming a duty of care is owed and assuming an arguable breach of that duty is whether such a breach caused any loss or damage sufficient to entitle the plaintiff to sue the second defendant or whether the action should be stuck out as disclosing no reasonable cause of action.  The second defendant's application therefore raised the question of when damage can be said to have been suffered. 

26.      Prior to the hearing taking place I invited counsel for the plaintiff and the second defendant to address me on the case of Nykredit Mortgage Bank plc-v-Edward Erdman Group Limited [1997] 1 WLR at 1627, a case referred to by the Court of Appeal in the case of Pickersgill & Le Cornu-v-Riley [2002] JLR 459.  While the decision of the Court of Appeal on liability was overturned on other gounds by the Privy Council, the observations of the Court of Appeal on causation or loss were not addressed by their Lordships in their judgment.  Accordingly, I consider I am entitled to have regard to the Nykredit Mortgage Bank plc-v-Edward Erdman Group Limited case. 

27.      Advocate Jowitt quite properly also drew my attention to the English Court of Appeal case of Bell-v-Peter Browne and Co [1990] 2 QB 497 referred to in Nykredit at page 1034 paragraph B-C. 

28.      Mr Jowitt's application was for the Order of Justice to be struck out in its entirety insofar as it concerns the second defendant on the grounds set out at paragraph 24 above. 

29.      In reaching my decision I note that the allegations made by the plaintiff against the second defendant are pleaded both in contract and in tort in the alternative.  It is therefore my duty to consider whether each of these claims can be struck out on the basis argued for by Mr Jowitt. 

30.      In relation to the claim in contract, as Advocate Jowitt acknowledged at paragraph 10 of his further skeleton on the Nykredit case and in submission, the claim in contract arises at the time of the breach whether there is actual loss or damage or not.  Mr Jowitt further accepted that the plaintiff does advance a claim for breach of contract.  Nevertheless he submitted that because the most the plaintiff might be expected to recover would be nominal damages the case should still be struck out. 

31.      However, in my view, this submission is inconsistent with Nykredit.  At page 1632 line G2H in the context of considering when a cause of action arose and whether it only arose once a lender realised his security Lord Hoffmann stated:-

"It would be all the more surprising when one has in mind that a lender's cause of action against his negligent valuer in breach of contract, as distinct from a claim in tort, arises when the negligent valuation is given."

32.      In my judgment because it is conceded by Advocate Jowitt that there is an arguable claim for breach of contract then the plaintiff has a reasonable cause of action and therefore I cannot strike out the claim on the basis sought. 

33.      I also do not consider there is any other basis to strike out the claim in contract.  Firstly, there is no such application before me and Advocate Jowitt did not advance this part of his submission with any force.  Secondly, what he did contend was that I should stay the proceedings.  However again, no such application is before me and the plaintiff has not had time to consider the question of a stay of its claim against the second defendant.  I would want to hear proper argument before deciding on whether such a claim should be stayed.  Thirdly, the usual protection afforded to a defendant where only nominal damages are ordered is a costs order in its favour.  I see no reason to depart from normal practice. 

34.      Accordingly that is sufficient to dispose of the plaintiff's summons.  However, I was in the alternative invited to strike out the claim in negligence even if I was not prepared to strike out the claim in contract.  I accepted I had power to do so and neither counsel argued otherwise even though the summons did not expressly plead that the claim should be struck out in negligence.  I therefore have jurisdiction to strike out part of a claim where the application is made to strike out an Order of Justice in its entirety.  However, in future applications a party seeking to strike out parts of an Order of Justice should identify expressly which parts should be struck out.  Nevertheless in this case in light of the arguments advanced by both counsel I agreed to deal with the application to strike out the plaintiff's claim against the second defendant in negligence.  

35.      In relation to the question of whether or not plaintiff has suffered a loss in negligence Advocate Jowitt contended that the plaintiff had suffered no loss.  He submitted that before entering into the loan agreement the plaintiff had a 40% interest in the property.  He stated that after the transaction the plaintiff still had a 40% interest and the plaintiff held that interest by virtue of his contract with the first defendant.  There was no damage as the interest had not been dissipated by the first defendant who still owned the property.  The position was no different from the first defendant holding the property under a declaration of trust.  The loss only arose when the action against the first defendant was concluded.  Advocate Jowitt also emphasised that on his own case the plaintiff knew that he was giving security (see paragraph 10(5) of the Order of Justice). 

36.      In Nykredit Lord Nicholls, who gave the leading judgment, stated at paragraph 1631 D-F as follows:-

"When, then, does the lender first sustain measurable, relevant loss?  The first step in answering this question is to identify the relevant measure of loss.  It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position.  Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property.  When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction.  That is the basic comparison."

37.      In assessing what a valuer was said to be liable for in negligence His Lordship stated at pages 1631 H to 1632 B as follows:-

"For what, then, is the valuer liable?  The valuer is liable for the adverse consequences, flowing from entering into the transaction, which are attributable to the deficiency in the valuation.  This principle of liability, easier to formulate than to apply, has next to be translated into practical terms.  As to this, the basic comparison remains in point, as the means of identifying whether the lender has suffered any loss in consequence of entering into the transaction.  If he has not, then currently he has no cause of action against the valuer.  The deficiency in security has, in practice, caused him no damage.  However, if the basic comparison throws up a loss, then it is necessary to inquire further and see what part of the loss is the consequence of the deficiency in the security. 

Typically, the answer to this further inquiry will correspond with the amount of the loss as shown by the basic comparison, for the lender would not have entered into the transaction had he been properly advised, but limited to the extent of the overvaluation."

38.      Lord Nicholls specifically addressed the question of what happened if qualification was carried out before rather than after the security was often been sold and stated at pages 1632 E to 1633 B as follows:-

"It should be acknowledged at once that, to greater or lesser extent, quantification of the lender's loss is bound to be less certain, and therefore less satisfactory, if the quantification exercise is carried out before, rather than after, the security is ultimately sold.  This consideration weighed heavily with the High Court of Australia in Wardley Australia Ltd. v. State of Western Australia (1992) 175 C.L.R. 514.  But the difficulties of assessment at the earlier stage do not seem to me to lead to the conclusion that at the earlier stage the lender has suffered no measurable loss and has no cause of action, and that it is only when the assessment becomes more straightforward or final that loss first arises and with it the cause of action.  (my emphasis)

Indeed, for the cause of action to arise only when the lender realises his security would be a highly unattractive proposition.  It would mean that, however obvious it may be that the lender will not recover his money, he cannot start proceedings.  He must wait until he manages to sell the property, a process which may be protracted.  This would be a surprising stance for the law to take.  It would be all the more surprising when one has in mind that a lender's cause of action against his negligent valuer for breach of contract, as distinct from a claim in tort, arises when the negligent valuation is given.  If disaster were evident and the lender were to sue his valuer for breach of contract without waiting until he had realised his security, it is inconceivable that the court would award only nominal damages.  The court would do its best to assess the loss.  This prompted the trenchant observation of Bingham L.J. in D. W. Moore & Co. Ltd. v. Ferrier [1988] 1 W.L.R. 267, 280:

"If, in a contractual claim for negligence, the court would have awarded other than nominal damages, I do not see how it can be said that an action in tort based on the same negligence would have been bound to fail for want of any damage as an essential ingredient of the cause of action."

As Mr. Briggs submitted, no accountant or prospective buyer, viewing the loan book of a commercial lender, would say that the shortfall in security against outstanding loans to defaulting borrowers did not represent a loss to the lender merely because the securities had yet to be sold. Realisation of the security does not create the lender's loss, nor does it convert a potential loss into an actual loss. Rather, it crystallises the amount of a present loss, which hitherto had been open to be aggravated or diminished by movements in the property market."

39.      Finally at page 1633 D and G he considered the argument that an assessment could only be made with the required degree of prescision once a security was realised as follows:-

"It is not necessary, in order to achieve a sensible and fair result, to go so far as asserting that the plaintiff has no cause of action, and hence may not issue a writ, until the assessment can be made with the degree of precision that accompanies a realisation of the security.  Further, within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action.  This is especially so if the law provides parallel causes of action in contract and in tort in respect of the same conduct.  The disparity between the time when these parallel causes of action arise should be smaller, rather than greater.  (my emphasis again)

I recognise that in practice the basic comparison may well not reveal a loss so long as the borrower's covenant is performing satisfactorily.  For this reason there is little risk of a lender finding his action statute-barred before he needs to resort to the deficient security.  But it would be unwise to elevate this practical consideration into a rigid proposition of law."

40.      I also refer to a passage in Bell-v-Peter Browne [1990] 2 QB 497 at page 502 D2:-

"So when agreement did the plaintiff first sustain damage by reason of his solicitors' negligence?  On this it is necessary to distinguish between (a) the solicitors' failure to see that the parties' was recorded formally in a suitable declaration of trust or other instrument and (b) their failure to protect the plaintiff's interest in the house or the proceeds of sale by lodging a caution.  As to failure (a), clearly the damage, such as it may have been, was sustained when the transfer was executed and handed over.  At that point the plaintiff parted with title to the house, and he became subject to the practical inconveniences which might flow from his not having wife's signature on a formal document.  If the wife thereafter chose to deny his entitlement to one-sixth of the proceeds of sale, the plaintiff would have to rely on the correspondence between the solicitors coupled with part performance.  To the extent that this was less satisfactory than a formal document recording the deal, the plaintiff suffered prejudice.  He suffered that prejudice when the transaction was implemented without his having the protection of a formal document. 

The extent of that prejudice depended on the attitude adopted thereafter by his wife.  All we know is that, according to the pleadings and the plaintiff's affidavit evidence, when she sold the house she disposed of all the proceeds and did not account to her former husband for his agreed one-sixth share.  But the uncertainty surrounding her future goes only to the quantum of the loss the plaintiff sustained when the transfer was executed without him having the same degree of protection as would be provided by a formal document." (my emphasis again)

41.      How do these principles apply to the plaintiff.  Prior to June 2001 the plaintiff had a 40% interest in the property.  He and the first defendant had a cohabitation agreement.  He was also recorded as the joint owner.  His case now is that he would have granted security by a second charge in favour of the first defendant over his 40% interest.  Presumably this could have involved changing his status from a joint owner to ownership as a tenant in common with the plaintiff granting security over his interest in the property.  The amended Order of Justice pleads that had the plaintiff been properly advised he would not have signed the loan agreement. 

42.      Prior to the loan agreement the plaintiff was registered as a joint owner and enjoyed a 40% beneficial interest.  After signing the loan agreement and after the plaintiff's interest in the property as joint owner was transferred to the first defendant, the plaintiff became an unsecured creditor as far as the first defendant was concerned with a contractual covenant without any security. 

43.      In my judgment the plaintiff suffered damage once he parted with an asset in return for an unsecured covernant.  He did not have the same protection as a joint owner after the transfer of the property to the first defendant as he enjoyed prior to June 2001.  Instead, he was only an unsecured creditor with no asset in his own name and no rights in relation to the property.   There was no declaration of trust in his favour.  He also did not have an interest in the property which operated  as security for the loan agreement.  Rather he had transferred his interest in its entirity and on his case unbeknown to him. 

44.      What occurred by virtue of the transfer of his interest was not the risk of forfeiture in the future should the plaintiff not repay the loan but the immediate loss of an asset.  Advocate Steenson submitted what the plaintiff claims as damage is the difference between his position as it was and it would have been if the second defendant had performed his duty. 

45.      Advocate Jowitt's argument is that there is no loss until the plaintiff has sued the first defendant and has sought to enforce his covernant.  He asserted that the plaintiff's covenant has value up and until there is default.  Only then is loss sustained by the plaintiff which is claimable against the second defendant.  

46.      In my judgment the relevance of the plaintiff's claim against the first defendant, if the first defendant had been willing to retransfer a 40% interest to the plaintiff, is that the plaintiff's loss would be fully mitgated.  However, in my judgment that does not mean that a loss has not arisen.  The basic comparison as required by Nykredit of the plaintiff's position is that prior to June 2001 he owned an asset and after June 2001 he did not.  The fact that the precise amount of the loss and damage may not be completely quantifable until questions of mitigation have been dealt with does not mean that loss and damage has not been suffered.  The plaintiff's position is different from a lender who receives a negligent valuation because a lender still has the security of an ownership interest in an asset until it falls in value.  In the present case the plaintiff has lost his asset in return for an unsecured promise. 

47.      If I am wrong in that view, in my judgment at the very least loss and damage arises when the first defendant refused to retransfer any interest in  the property to the plaintiff.  At that point in time the plaintiff was put to the expense of issuing proceedings.  I consider it is inevitable that the plaintiff in those circumstance will suffer at its lowest some irrecoverable costs.  Such costs alone are sufficient to amount to loss and damage entitling the plaintiff to bring a claim against the second defendant in tort.  Even therefore if the second defendant is correct that no loss is suffered simply by virtue of the transfer (which I do not agree with for the reasons set out above) once the first defendant refused to retransfer the property a loss arose at that stage.  That is sufficient to found an arguable claim in tort. 

48.      I also do not consider it is necessary for the plaintiff's action against the first defendant to have to have been concluded for damage to arise.  I regard that assertion being inconsistent with remarks of Lord Nicholls at page 1633 D to G that I have quoted above.  The effect of such a submission in addition, if correct, would also retard rather than advance the accrual of a cause of action in tort.  On this point Advocate Jowitt conceded that for the purposes of his application to strike out the claim in tort against the second defendant that the claim was not time barred.  However he did reserve his position if I did not accede to his request to strike out the Order of Justice as to when a cause of action in tort might then arise.  Advocate Jowitt's contention for the purpose of this application has the effect of producing a significant disparity between the accrual of a cause of action in contract which appears to be June 2001 and accrual of a cause of action in tort which on the case as put to me has not occurred.  I am not pursuaded that the plaintiff's loss and on damage should be construed in such a way to produce this result. 

49.      I accept that evidential diffculties may arise in relation to quantification of damages against the second defendant assuming that second defendant were found to be liable to the plaintiff for breach of contract or in negligence and that a precise quantification may well depend in part on to what extent the plaintiff can recover against the first defendant and the strength of the first defendant's covenant.  However, as in Bell-v-Peter Browne it creates an uncertainty that goes to the quantum of the loss not whether there is a loss at all.  That uncertainty might justify postponing the hearing of an assessment of damages against the second defendant until after the determination of liability against both defendants and quantum against the first defendant.  It does not lead me to conclude that no damage can be established for the reasons I have given.  I also wish to stress that such an application is not before me and is therefore a matter for a case management hearing; nevertheless it was a suggestion that I put in argument to both counsel as a possible practical way of addressing the concerns expressed by the second defendant about the difficulties of assesssing quantum. 

Conclusion

50.      In my judgment:-

(i)        The plaintiff has an arguable claim against the second defendant in contract which does not require the plaintiff to establish loss or damage;

(ii)       It is also my judgment that the plaintiff did sustain loss and damage sufficient to found an arguable claim in negligence when the property was transferred from the plaintiff to the first defendant.  At that point in time the plaintiff lost ownership of an asset and return received a contracual covenant only.  The first defendant disputes she is obliged to honour that covenant.  The plaintiff's loss subject to questions of mitigation is therefore the difference between a 40% interest in the property and a covenant which the first defendant has refused to honour.  Alternatively the plaintiff suffered arguable loss once the first defendant refused to return a 40% interest to the plaintiff. 

(iii)      To the extent there is a risk of only nominal damages being awarded for a claim in contract or there being practical difficulties in assessing damages for a claim for breach of the contract in tort, those can be addressed by posponing an assessment of damages hearing against the second defendant until after the trial on liability against both defendants and assessment of damages against the first defendant has ocurred. 

The Plaintiff's application to amend paragraph 3

51.      The plaintiff's application to amend was agreed by the first defendant.  As far as the second defendant is concerned, its position was that its application to strike out was not affected by the amendments proposed.  Mr Jowitt confirmed to me that if I did not find in his favour then otherwise he had no objection to the proposed amendments.  In view of my decison on the strike out application, I order that the Order of Justice may be amended as proposed by the plaintiff. 

52.      In relation to the future conduct of the action, I wish to hear from the parties on all the directions they propose.  I also wish to hear from the parties on whether quantification of a claim against the second defendant should be heard at the same time as the remainder of the action having regards to my observations at paragraph 49 above.  I therefore direct the parties to fix a date before me with time estimate of 1 hour to propose directions and to address me on whether or not I should exercise my powers under Rule 6/11.  In the meantime I also direct the parties to endeavour to agree directions for the filing of amended pleadings. 

Authorities

Royal Court Rules 2004.

Nykredit Mortgage Bank plc-v-Edward Erdman Group Limited [1997] 1 WLR at 1627.

Pickersgill & Le Cornu-v-Riley [2002] JLR 459.

Bell-v-Peter Browne and Co [1990] 2 QB 497.

The White Book (1999 Edition).