|
OUTER HOUSE, COURT OF SESSION
[2007] CSOH 183
|
|
A306/06
|
OPINION OF LORD MALCOLM
in the cause
WILLIAM HENDERSON
AND ANOTHER
Pursuers;
against
CHRIS SAYER, T/A CHRIS
SAYER, SOLICITORS
Defender:
ннннннннннннннннн________________
|
Pursuers: R. Skinner;
Russell Jones & Walker
Defender: Young, Q.C.;
Dundas &
Wilson, C.S. L.L.P.
15 November 2007
[1] The
pursuers bought a property known as Lakeside, Torphichan,
West Lothian.
They intended to live in it after the first pursuer's retirement. Lakeside is a large
modern property with grounds, including a lake.
The defender is a solicitor, and acted for the pursuers in respect of
the conveyancing of Lakeside. The pursuers plead that he neglected to
advise them of a burden in the Land Certificate which
was in the following terms:
"THIRD The
occupier undertakes that the planning permission subjects shall be constructed
all in terms of the consent. The
planning permission subjects, once constructed shall be used as a single
dwelling house in all time coming solely for the occupation of one person and
his or her family or dependants and for no other purpose whatsoever and said
person must be solely or mainly employed in the management and or running of
the fish hatchery and sport fishery operated on the planning unit."
[2] In
January 2003, the pursuers paid the purchase price of г793,763. They carried out certain improvements to the
property. The planning authority drew
the pursuers' attention to the condition, and threatened enforcement
action. There was no question of the
pursuers being able to comply with the condition. Attempts to modify the terms of the planning
consent were unsuccessful. As a result,
the pursuers were unable to occupy the property. They sold it in December 2005
for г700,000, which is said to have been the best price which could be
achieved. The sum sued for is made up of
the loss on resale; expenses incurred on
renovating the property of just under г130,000; legal costs and outlays in the purchase and
then sale of the property of about г55,000; and loss of interest on the purchase
price. The total sum claimed is just
over г381,500.
[3] As
to negligence, it is averred that before the conclusion of missives the
defender should have advised the pursuers as to the burden on the title and its
implications. In particular, he should
have told them that if they used Lakeside simply as a
dwelling house, without also running the said business, this would be a breach
of planning control, and thus the relevant planning permission could be
revoked.
[4] At
a hearing on the procedure roll, Mr Young, QC for the defender submitted
that the action should be dismissed. So
far as damages are concerned, the pursuers have simply listed the sums they
paid out, added interest on the purchase price, and then deducted
receipts. There is no fall back approach,
such as diminution in the value of the property consequential on the
restriction in the title. Mr Young
submitted that the pursuers' pleadings do not contain adequate averments "to
tie in" that single approach on damages to the duties pled against the defender,
thus the action should be dismissed. He
referred to the speech of Lord Hoffman in South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 (SAAMCO).
His Lordship distinguishes between cases based on a failure to provide
information, and those flowing from negligent advice as to whether to pursue a
particular course of action. In the
latter type of case, there is greater scope for full recovery of all losses flowing
from the transaction. However, in an
information case the defender is only liable for losses which are caused by the
information provided being wrong. Losses
which would still have occurred had the information been correct are not the
responsibility of the defender. They are
not within the scope of his duty of care, and thus are not recoverable. On this basis the negligent valuers in SAAMCO were not liable for losses
attributable to a generalised fall in property values. Those losses would have been suffered even if
the valuation had been correct.
[5] Mr Young
submitted that the present action is an information case, and he criticised the
pursuers' pleadings for not demonstrating how the various items of loss claimed
are the result of the provision of wrong information as to the state of the
title. He accepted that in principle the
pursuers' approach to damages might be appropriate, but he insisted that it is
not enough for the pursuers to simply say that if they had been given the
correct information they would not have bought the house. The losses have to be linked to the duties of
the defender in the sense explained by Lord Hoffman. There should be averments showing how all the
heads of loss fall within the scope of the duties undertaken by the
defender. In Mr Young's submission,
the absence of such averments was a fundamental flaw in the way in which the
pursuers' action has been framed.
[6] Mr Young
also referred to Dent and Another v Davies Blank Furniss and Others [2001]
ChD 534, a case where a solicitor failed to advise a purchaser as to a
restriction in title. Blackburne J
ruled that the damages should be the difference between the open market value
of the property, assuming it to be free from the adverse restriction in title,
and the lesser of (a) the sums spent on and in acquiring the property, and
(b) its value as so improved. He
rejected an approach based on deducting the current market value from all the
expenditure incurred by the plaintiffs.
That approach was described as the "global expenses" or the "extrication
costs" approach. Importantly, in my
view, the evidence in that case was that the purchasers had moved into and
would be staying in the subjects. They
were not extricating themselves from the consequences of the negligence. This can be contrasted with the present case,
where the pursuers were forced to abandon their plans for Lakeside. Indeed, they never lived in the house.
[7] In
Dent Blackburne J said:
"In so far as
the approach (of the plaintiffs) is founded upon the basis that, if they had
been properly advised, they would not have entered into the transaction and
therefore are entitled to the whole of their expenditure giving credit only for
the value received (or receivable) by them for it, it fails, in my view, to
distinguish between their overall loss from having invested in the property and
that part of their loss which is within the scope of the defendant's duty of
care and for which the defendant's are therefore responsible. Recovery of the whole of their expenditure,
giving credit only for the value of what that expenditure has produced, would
enable the defendants to recover that element of the cost of their acquisition
and improvement of the property (a) which is unmatched by any commensurate
increase in the value of the land (b) which it was their intention to
spend to produce what they wanted and (c) which, if there had been no
common land registration, they could never have recovered. Given that the Dents show every sign of intending to continue living at the property,
recovery on this basis would enable them to enjoy the advantages of living at a
property which cost just under г500,000 to acquire and construct, but at a
cost to themselves equivalent only to its open market value at whatever date is
taken for the purpose of calculating the amount for which they must give
credit."
Mr Young founded on this
passage. In the course of the
discussion, it was observed that if a claimant spent money which did not
enhance the value of the property, for example on an unattractive folly in the
grounds, or gold plated taps, then it would be wrong to make the negligent
solicitor liable for this expenditure.
The pursuers' approach of simply deducting receipts from all expenditure
runs the risk that expenditure which did not provide good value for money will
be laid at the defender's door, even though the same expenditure would have been
incurred had there been no occupancy condition.
The schedule of losses relating to the renovation costs is vague and
inconclusive on this question. It
follows that the pursuers have failed to aver sufficient to allow the case to
go to proof on the one approach to damages put forward in the pleadings.
[8] It
would only be right to dismiss the action if I am satisfied that the defender
is bound to be assoilzied because of the irrelevancy of the damages claim. I am not so satisfied. In SAAMCO
it was obvious that a substantial element in the claim was attributable to a
general fall in property market values, and so there was a clear legal question
to be resolved. In Dent the claimants put forward a method of calculating their loss
which contradicted the facts of the case, in that it wrongly assumed that they
were extricating themselves from the bargain.
In both of those cases it was entirely understandable that a different
method of quantifying damages had to be found.
In the present case there is no clear equivalent of the generalised
property value fall in SAAMCO, nor of
the mismatch so evident in Dent. On the contrary, the present pursuers were
forced to extricate themselves from the bargain. While Mr Young insisted that further
averments are necessary before a proof can be allowed, I was left uncertain as
to what those further averments might be.
Each case has to be considered on its own facts and circumstances, and I
can identify no obvious disconnection between the scope of the averred duties
and the claimed losses, albeit there may be room for dispute on particular
heads of loss and the specific sums; and
of course a different picture might emerge after a proof.
[9] In
the end of the day, Mr Young's submission boiled down to a concern that
certain elements of the claim, perhaps especially the renovation costs, might well
have been caused by the pursuers own decisions and conduct, not by the
negligence. That may prove to be the
case, but I do not consider that I can reach that decision now. If, for example, the pursuers fail to prove
that the г48,000 spent on a new kitchen was reflected in an extra г48,000
obtained on resale, then the claim may well be overstated. Similarly if the pursuers paid too much for
the subjects in 2003; but I cannot prejudge
these issues now in advance of evidence.
In any event, given the other items of loss claimed, it would not
necessarily follow that no damages are recoverable. In essence Mr Young invited me to conclude
that his concerns are sufficient to force a rethink by the pursuers as to their
damages claim, otherwise proof should be disallowed. I consider that this is too extreme a position. Though there may be potential problems for
the pursuers on the current approach to quantum,
and while they might have been well advised to offer more than one approach to
calculation of their loss, I do not consider that it would be proper to dismiss
the action at the relevancy stage.
[10] In any event, Mr Young's submission depended upon the submission
that this is an information case, not an advice case, all as explained in SAAMCO.
This approach was not accepted by Mr Skinner on behalf of the
pursuers. He submitted that the defender
should have told the pursuers not to buy the property, given that it was
clearly unsuitable for their intended purpose.
As he put it, the restrictive occupancy condition "was utterly
destructive of the known purpose of the transaction". Much might be said on both sides of this
debate, and again I consider that it would be wrong to resolve it without hearing
evidence.
[11] For completeness, I should indicate that Mr Young made two
other specification criticisms of the pleadings. One was largely dealt with by way of
amendment at the Bar, and the other, which related to the method of calculating
lost interest, was hardly pressed by Mr Young. I shall allow a proof before answer on all
averments and pleas-in-law.
