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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Corbett v Bond Pearce (A Firm) [2001] EWCA Civ 531 (11 April 2001) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2001/531.html Cite as: [2001] EWCA Civ 531, [2001] Lloyd's Rep PN 501, [2001] PNLR 31, [2001] 3 All ER 769, [2001] WTLR 419, [2001] Lloyds Rep PN 501 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
(Mr Justice Eady)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE LONGMORE
and
SIR CHRISTOPHER SLADE
____________________
WILLIAM CORBETT (as administrator of the estate of Miss N A Tresawna (deceased)) |
Claimant/ Respondent |
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and – |
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BOND PEARCE (A Firm) |
Defendant/ Appellant |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Jeffrey Onions QC (instructed by Russell Jones & Walker for the Respondent)
____________________
Crown Copyright ©
SIR CHRISTOPHER SLADE :
(a) she appointed John Somerville, Glending Wight and John Foster to be her executors;
(b) she devised her property "Lamellyn" to her niece, Mrs Arthur;
(c) she devised her property "Tolcarne" to her nephew, the claimant; and
(d) she left the residue of her estate to Mrs Arthur and the claimant with gifts over in favour of Mrs Arthur's infant sons, James and Jonathan.
(a) to make a lifetime gift of Lamellyn to Mrs Arthur, instead of a testamentary gift;
(b) to make a lifetime gift of Tolcarne to the claimant, instead of a testamentary gift;
(c) to make a new will taking account of these proposed lifetime gifts, appointing John Newey and David Bennett as her executors in place of the executors named in the February will and leaving the residue of her estate to James and Jonathan Arthur.
She instructed the defendants to draw up on her behalf a new will and two deeds of gift accordingly.
(a) her properties at Truck and Probus, Cornwall, to Mrs Arthur;
(b) her home, Myrtle Cottage, to the claimant;
(c) her residuary estate to James and Jonathan Arthur.
(a) the costs of all parties in that court and the court below should be paid out of the estate;
(b) the Executors' costs be taxed on an indemnity basis;
(c) the claimant, not the estate, should pay certain costs of the Solicitors' Indemnity Fund incurred by reason of an unsuccessful application by the claimant for an order that the Fund should pay the costs of the Will action.
The costs payable out of the estate pursuant to this order amount to some £150,000. An application was made to the Court of Appeal in March 1999, when an order was made, subject to certain undertakings, which had the effect of staying the costs order made in 1996 until after the outcome of the present proceedings. The claimant was faced with the problem that, if Mr Newey's costs had to be paid without any such delay, he would have to realise certain assets which the beneficiaries might wish to retain - as well as creating a liability to Capital Gains Tax. The loss and inconvenience could never be compensated for by the reimbursement of those costs if these proceedings were successfully concluded. It was that timing problem that the Court was concerned to alleviate by the order made on that occasion.
"(1) In the above circumstances, is the claimant, as personal representative of Miss Tresawna, able to recover damages for breach of contract or for negligence against the defendant firm by reference to the loss suffered by the estate by reason of either or both of the following:
(a) the diminution of the value of the estate attributable to the costs payable in the Will action; or
(b) any other loss or liability incurred by the estate as a result of the Will action, the costs order made in the Will action and the delay in the administration of estate caused by the defendant's breach of contract and negligence?
(2) Does the answer to the question posed in paragraph (1) above, or any part of it, depend upon whether the estate, after payment of the liabilities referred to in sub-paragraphs (a) and (b), would contain sufficient assets to discharge all the creditors of the estate, distribute specific legacies and still leave a balance to form a residue for distribution in accordance with the terms of the February will?"
The legal background
"In the forefront stands the extraordinary fact that, if such a duty is not recognised, the only persons who might have a valid claim (i.e. the testator and his estate) have suffered no loss, and the only person who has suffered a loss (i.e. the disappointed beneficiary) has no claim: see Ross v Caunters, [1980] Ch 297, 303A per Sir Robert Megarry V-C. It can therefore be said that, if the solicitor owes no duty to the intended beneficiaries, there is a lacuna in the law which needs to be filled. This I regard as being a point of cardinal importance in the present case."
Lord Goff expressed his conclusion thus (at p. 268):
"In my opinion, therefore, your Lordships' House should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle [Hedley Byrne & Co. Ltd. v Heller & Partners Ltd [1964] AC 465] by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor."
"At first sight the facts in the present case take it outside the principle as stated by Lord Goff. This is a case in which the estate itself would have a remedy.
The question, therefore, is whether the remedy which the House of Lords was prepared to extend to a disappointed beneficiary in White v Jones [1995] 2 AC 207 is confined to those cases, of which White v Jones was an example, in which the estate itself has no remedy - so that, absent a remedy at the suit of the beneficiary, there is no remedy at all; or is to be further extended to cases in which the estate does have a remedy but where the estate's remedy will be of no advantage to the disappointed beneficiary," [because the estate's remedy would have enured for the benefit of residue instead of the disappointed specific legatee].
The Judge answered the question in the negative. He said [1997] 2 All E.R. 614, 628:
'It seems to me unacceptable that solicitors should be at risk of two separate claims for identical loss at the suit both of the personal representatives and a beneficiary, when recovery by one would not bar recovery by the other.'
I agree. If that were the result which the law required it would properly be regarded as unacceptable and unjust. But, as it seems to me, it ought properly [to] be regarded as equally unacceptable and unjust if the result which the law requires is that, because of the solicitors' negligence, the loss which the personal representatives are able to recover on behalf of the estate passes to someone who was not the beneficiary intended by the testatrix; leaving the intended beneficiary without recompense."
"If the law in this field is to reflect what would generally be recognised as acceptable and just the application of the relevant principles should lead to the result that the estate and its beneficiaries are restored to the position in which they would have been if the solicitors had not failed in their duty to the testatrix."
After pointing out (at p. 336A to B) that, on a proper analysis, the service of a notice of severance was part of the will-making process and that the plaintiff was as much an intended beneficiary as she was of the specific gift in the will, he said (at p. 336B to C):
"I am satisfied that, subject to the need to avoid the injustice of imposing double liability on the solicitors, it would be consistent with the approach of the majority of the House of Lords in White -v- Jones [1995] 2 AC 207 to recognise that the plaintiff is a person in relation to whom the assumption of liability by the defendants towards their client, the testatrix, ought to be extended."
"The key, as it seems to me, is to recognise that, in a case of this nature, the duties owed by the solicitors are limited by reference to the kind of loss from which they must take care to save harmless the persons to whom those duties are owed: see per Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 AC 605, 627, cited by Lord Hoffmann in Banque Bruxelles Lambert S.A. v Eagle Star Insurance Co. Ltd [1997] AC 191, 212. The duty owed by the solicitors to the testator is a duty to take care that effect is given to his testamentary intentions. That is the context in which the duty to take care to ensure that the relevant property forms part of the estate arises. The duty in relation to the relevant property is a duty to take care to ensure that that property forms part of the testator's estate so that it can pass to the intended beneficiaries on his death. It is not in contemplation, in a case of this nature, that the testator will dispose of the property in his lifetime. The loss from which the testator and his estate are to be saved harmless is the loss which those interested in the estate (whether as a creditors or as beneficiaries) will suffer if effect is not given to the testator's testamentary intentions.
The duty owed by the solicitors to the specific legatee is not a duty to take care to ensure that the specific legatee receives his legacy. It, also, is a duty to take care to ensure that effect is given to the testator's testamentary intentions. The loss from which the specific legatee is to be saved harmless is the loss which he will suffer if effect is not given to the testator's testamentary intentions. That is the loss of the interest which he would have had as a beneficiary in an estate comprising the relevant property.
The duties owed by the solicitors to the testator and to the specific legatee are not inconsistent. They are complementary. To the extent that the duty to the specific legatee is fulfilled, the duty to the testator is cut down. If and to the extent that the relevant property would have been distributed to the specific legatee in the ordinary course of administration, the other persons interested in the estate can suffer no loss. In so far as the relevant property or any part of it would have been applied in the ordinary course of administration to discharge liabilities of the estate, the specific legatee can suffer no loss.
To impose duties on the solicitors which enabled both the personal representatives and the specific legatee to receiver for the loss of the relevant property would involve both double recovery and double liability. The duties would not be commensurate with the loss against which the persons to whom they were owed were to be saved harmless. But there is no reason in principle, as it seems to me, why, in cases of this nature, the law should not impose complementary duties; so that for breach of the one the specific legatee is enabled to recover the loss which he has suffered and for breach of the other the personal representatives are enabled to recover, and recover only, the loss suffered by the other persons interested in the estate. Justice will be done to each of the three interests concerned - the specific legatee, the estate and the solicitors - if solicitors who, in the course of carrying out the testator's testamentary instructions, have failed to take care to ensure that the relevant property forms part of the estate are liable to compensate the specific legatee for the loss which he has suffered as a result of the breach of duty owed to him; and are liable to compensate the estate for the loss (if any) suffered by the other persons interested in the estate for breach of the duty owed to the testator."
"If the solicitor's breach of duty under his retainer has given rise to the need for expensive probate proceedings, resulting in unrecovered costs, then, prima facie, those costs fall to be borne by the estate for the reasons which I have already sought to explain. If the estate bears the costs thereby and suffers loss then, if there is to be a remedy against the solicitor, it should be the estate's remedy for the loss to the estate. There is no need to fashion an independent remedy for a beneficiary who has been engaged in the probate proceedings. His or her costs, if properly incurred in obtaining probate of the true will, can be provided for out of the estate. If there has been a breach of duty by the solicitor, the estate can recover from the solicitor the additional costs (including the costs to which the beneficiary is entitled out of the estate). The practical difficulties which would be likely to arise if solicitors were held to owe duties directly to beneficiaries under earlier wills provide powerful support for the view that it would not be appropriate to provide a remedy in circumstances in which it is not needed."
For present purposes the significance of this case lies in the fact that the Court of Appeal accepted that in a case where a solicitor's negligence in regard to the preparation or execution of a will was the cause of expensive probate proceedings after the testator's death, this could give rise to a claim for damages against the solicitors at the suit of the testator's personal representatives for the benefit of the estate generally. On the particular facts of that case, the testator's personal representatives would have had a good cause of action for the loss suffered and, if they had pursued this claim, the solicitor would have been exposed to no double liability.
The claimant's case
The defendants' case
"A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc v Dickman [1990] 2 AC 605. The auditors' failure to use reasonable care in auditing the company's statutory accounts was a breach of their duty of care. But they were not liable to an outside take-over bidder because the duty was not owed to him. Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares. Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares. As Lord Bridge of Harwich said, at p. 627:
'It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless.'
In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed."
All their Lordships agreed with Lord Hoffmann's judgment. Though these observations were made in a case which concerned the duty owed by a valuer, I see no reason why any different principles should apply in the case of solicitors. However, as Carnwath J observed in British Racing Drivers Club Limited v Hextall Erskine & Co [1996] 3 All ER 667 at p. 681:
"It needs of course to be borne in mind that, in cases of solicitor's negligence, it is unlikely that the conduct of the solicitor will itself be the direct cause of the damage which is suffered. More usually the basis of the claim is the solicitor's failure to protect the client against some other effective cause. The question, therefore, is whether the particular loss was within the reasonable scope of the dangers against which it was the solicitor's duty to provide protection."
Conclusions
LORD JUSTICE LONGMORE:
LORD JUSTICE BROOKE: