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England and Wales Court of Appeal (Civil Division) Decisions

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Cite as: [2000] EWCA Civ 70

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Case No: QBENF 98/1475 A2

Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 10th March 2000

B e f o r e :
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(1) SJ BERWIN & Co (a firm)
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Edward Bannister, QC (instructed by Messrs Barlow Lyde Gilbert, London for the Appellant)
Robin Purchas, QC & Suzanne Ornsby (instructed by Messrs Kirkwoods, Epsom for the Respondent)
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As Approved by the Court
Crown Copyright ©

The Decision
This is an appeal from the judgment of Longmore J entered for the respondents against the appellants in the sum of £869,545.39 being £626,814.40 damages and interest. The judge gave judgment for a 2nd defendant, Richard Unwin against the respondents. That judgment was dated the 2nd November 1998. On the 18th December of that year the judge made further orders, namely:
an order that the appellants pay a further sum by way of interest to the respondents of £39,035.31 together with interest on the judgment at the judgment rate from the 2nd November 1998 to the 18th December;
that the respondent should pay the costs of the 2nd Defendant, Mr Unwin, to be taxed if not agreed;
that the appellants should indemnify the respondents in respect of Mr Unwin's costs incurred on or after the 11th September 1997, the date on which the appellant's amended their defence to allege that any failure by them to fulfil their obligations to the respondents had been caused by the 2nd defendant's failure to provide the appellants with certain relevant documents;
that the appellants should pay the respondents costs of the action save in so far as such costs were incurred only against the 2nd defendant, such costs to be taxed of not agreed;
that the appellants should pay the respondents the costs of the hearing on the 18th December 1998 to be taxed if not agreed, and finally;
that the respondents, in so far as it was required, should be granted leave to appeal against the order for costs.
The Parties
The respondents are a private limited company engaged in the development and operation of petrol service stations. At one time the company was known as Matzest Motors Limited. The owner and managing director of the company was Mr Kevin Reardon.
The appellants are a well known firm of solicitors. One of the fields of the law in which they practise is that of Town and Country Planning. The respondents formally retained the appellants as the respondents solicitors to act for the respondents in a planning appeal on the 24th December 1991.
The retaining of the appellants by the respondents was at the suggestion of the 2nd defendant, Mr Unwin who is a fellow of the Royal Institution of Chartered Surveyors practising from offices in Manchester and holding himself out as experienced in matters relating to Town and Country Planning.
The history of the Planning Application
In July 1991 the respondents acquired a triangular site of ½ a hectare located on the roundabout where Segensworth Road and Southampton Road (the A27) meet in Fareham, Hampshire. The southern boundary of the site was the old Segensworth Road and two lines of trees bordering the old Segensworth Road as it had been before the roundabout and a new link to the M27 to the north of the roundabout was constructed. The respondents paid £150,000 for the site, although it was agreed between the parties at the trial that the market value of the site without planning permission was £5,000.
The 2nd defendant was retained and employed by the respondents as their Town and Country Planning expert in respect of the site in July 1991. On the 7th August 1991 the 2nd defendant submitted the respondents' application for planning permission to the local planning authority, the Fareham Borough Council. The respondents' site formed the northern tip of a narrow corridor or finger of undeveloped land situated between Locks Heath and Titchfield. On the 1st October 1991 there was a meeting between planning officers of the local planning authority, Mr Nye the Chief Planning Officer and a Mr Stanniland and the 2nd defendant and two other persons representing the respondents. At that meeting Mr Nye made clear his opposition to the respondent's site being developed.
There was a concurrent planning application by a company known as ABT in respect of the respondents site and additional land to the south of the respondents' site forming part of the corridor or finger of undeveloped land. On the 11th December 1991 the Planning Committee of the Fareham Borough Council met to consider the respondents' application and ABT's application. The committee had before it a report by the Chief Planning Officer recommending refusal of both applications. The planning committee refused both applications.
Following that refusal the 2nd defendant advised the respondents to appeal it being his opinion that an appeal had a 65% chance of success. He suggested that for the purposes of the appeal the respondents should retain the services of the appellants as their solicitors. On the 24th December 1991 the respondents formally instructed the appellants to bring an appeal on their behalf. On the 7th January 1992 the Local Planning Authority notified the respondents of the refusal of planning permission. On the same day the partner in the appellant firm who was to oversee the respondents appeal, Mrs Thomas, met Mr Reardon and expressed the view that an appeal was worth pursuing and that the chances of a successful appeal were little better than 50/50. The person within the appellant firm who had the immediate handling of the appeal was a Mr Drukarz. On the 10th January 1992 the appeal documents were lodged by the appellants on the respondents' behalf..
Counsel Mr W Hicks was instructed by the appellants. The first conference with counsel was held on the 19th March 1992. The preparation of the appeal included a second conference with counsel on the 7th April 1992. The hearing of the appeal opened on the 27th May 1992 before Inspector Machin. On the 15th July 1992 the Inspector dismissed the respondents' appeal.
The Development of the Local Plan
The respondents application for planning permission to the Fareham Borough Council and the respondents appeal against that authority's refusal of their application took place during a period in which a new local plan was being developed. That plan, once finalised, would have increased the importance in planning applications and planning appeals of the policies contained in that plan because of the introduction into the Town and Country Planning Act 1990 of s. 54A. That section, which came into force on the 25th September 1991, provides:
"Where, in making any determination under the planning Acts, regard is to be had to the development plan, the determination shall be made in accordance with the plan unless material considerations indicate otherwise."
The meaning of development plan outside the area of Greater London and the Metropolitan Counties is to be found in s. 54 of the Act. The development plan consists of
"(a) the provisions of the structure plan for the time being in operation in the area;
(b) any alterations to that structure plan; ........
(c) the provisions of the local plan ...... for the time being in operation in the area;
(d) any alterations to that local plan; ......
together with the resolutions of the authority who made or altered the plan ....."
The Western Wards of Fareham Action Area Plan 1979 provided under the heading "Countryside Areas"
"The areas to which the countryside polices will apply are shown on the proposal's map"
In March 1989 a new local plan intended to supersede the Western Wards Plan was placed on deposit and became the Deposit Draft of the Fareham Borough Local Plan. Section 3 of that Deposit Draft set out its "Coast and Countryside Policies". Policy C1 provided as follows:
"In the Coast and Countryside area shown on the proposals, there is a general presumption against development and in the strategic gaps shown on the proposals maps this is a strong presumption. In the coast and countryside, planning permission will normally only be granted for development which is: either, essential for the efficient use of agricultural or horticultural or forestry land with an overriding need for a countryside location; or of an outdoor recreational use, such as a sports ground, golf course or park which does not require major new buildings or structures; or the redevelopment, reuse or limited extension of an existing building ....."
On the Deposit Local Plan the corridor or finger including the respondents' site was shown as a coast and countryside area but not as a strategic gap.
The structure plan relevant to this area was the South Hampshire Structure Plan 1988. In that plan the County Council had developed a "Countryside Heritage policy to conserve the diversity and attractiveness of Hampshire's countryside". Several of those policies require a brief description because they featured in the Planning Appeal before Mr Machin and in the evidence and submissions heard by the judge and in the submissions heard by this court. The first E1 was that:
"Development will not normally be permitted outside existing or proposed built up areas ....."
That was to protect the countryside from scattered or sporadic development, the policy providing a general presumption against new development outside existing urban areas and planned extension to them. Exceptions might be made to the general rule for such uses as small scale industries and redundant buildings, development associated with the rural economy, agricultural or replacement buildings and development associated with countryside recreation. The second policy was E3 namely that:
"Development which adversely affects the landscape will not normally be permitted."
Landscape in this policy was also to include landscape within urban areas. The final policy that requires stating is E6, namely:
"There will be a strong presumption against development in open areas which provide gaps between settlements."
The Local Plan Inspector who held an inquiry into objections to the Deposit Local Plan and who reported on the Deposit Local Plan and made recommendations was Mr Gill. That inspector reported on the 8th April 1991. In that report the inspector commented on the corridor or "green finger" of which the respondents' site formed the northern tip. The relevant paragraphs were:
"1.140 The WWFLP showed the "green finger" extending northwards beyond the roundabout, along the A27 and pointing to the countryside outside the built up area. There can be advantages for wild life with these sorts of corridors but this one is more easily seen on a map than on the ground. The FBLP has now cut out the length of the A27 towards junction 9 but has kept the roundabout in the open countryside. I find it hard to accept that this isolated pocket of green encircled by busy roads can be considered even for the notation let alone the description as countryside. In addition the area is almost surrounded by large scale commercial buildings. The exception is the objection site but even here FBC was prepared to see an hotel. Development would not affect the amenities of residents in Segensworth Road and Titchfield Park Road nor impinge on the area of ecological value. Planning conditions would ensure that the visual impact was agreeable. I think that development of the kind proposed by ABT might perhaps be considered favourably.
1.141 I was not being asked to judge a planning application, however, and there are several aspects to be agreed before a decision could be made. If a consent were to be given then it would be better if the countryside notation were deleted and the roundabout reconsidered at the same time. It would not be right to anticipate this sort of outcome by allocating land now in the FBLP.
1.142 I recommend that there be no change to the Local Plan."
The objection site referred to by the Local Planning Inspector consisted of the respondents' site and an area of about one and half hectares immediately to the south of the respondents' site. The objection was that of a commercial concern referred to as ABT.
The Fareham Borough Council sought clarification of certain parts of the inspector's report, one of which was the passage cited above. The Planning Directorate of the Department of the Environment passed the request for clarification on to the inspector on the 23rd July 1991 in the following terms:
"Is it to be assumed that there is no merit in retaining this site in the countryside? If so, why is it not right to reallocate the site now? Does this indicate that there is in fact some uncertainty about whether there is need for the development proposed, or some concern that the development would cause traffic problems?"
On the 7th August 1991 the inspector sought to clarify his report by writing:
"Yes, I do not believe that this site should be retained in the countryside. FBC accepted the idea of an hotel here at one time and I thought that the kind of development being proposed by ABT might be considered favourably. I was not considering a planning application however and did not feel able to recommend an allocation. One approach would be to show the site as white land, but since this notation does not appear at all in the Fareham Borough Local Plan I concluded that there should be no change. In the light of what was said in my report, I assumed that either planning permission would have been given by the time the local plan was adopted or some other proposal would have emerged."
The Inspector's further observation was conveyed to the Fareham Borough Council by the Department on the 9th August 1991. The letter from the Department to the Inspector seeking clarification, the Inspector's reply and the letter of the Department to the Fareham Borough Council forwarding the Inspector's clarification, were referred to before the judge as the "Addendum".
Thereafter the Fareham Borough Council published the Statement of the Council's Decision on the Inspector's Report and Recommendations on the 20th September 1991. That document contained the following note:
"Local Authorities are not obliged to accept the Inspector's recommendations: they are however required to prepare a statement of their decision on each recommendation with reasons. It is particularly important that on each point where an authority do not accept a recommendation they not only make this clear but provide a clear explanation, including the relevant substantive arguments, of the reason for their decision."
This note reflects the terms of Regulation 29 of the Town and Country Planning (Structure and Local Plans) Regulations, 1982.
Appendix 1 attached to that document in relation to the site the subject of ABT's objection set out the Inspector's recommendation that there be no change to the Local Plan and the comments contained in the Inspector's report. The clarification of his comments contained in his letter of the 7th August 1991 did not appear in that Appendix. The comments of the local Planning Authority's officers were:
"In response to the Inspector's comments, a planning application for this site is being submitted and will need to be considered on its merits, following which any necessary departure or alteration procedures can be followed. The County Surveyor regrets that no reference was made to the highway issues relating to the site. The Highway Authority would maintain its opposition to access to the site from the A27, in particular because it could prejudice the possible improvements to the Segensworth roundabout. The traffic impact of any proposed development on this roundabout and M27 Junction 9 would need to be assessed in detail."
At this stage the Deposit Local Plan would not be part of the Development Plan, so that the newly in force s. 54A would not apply to its contents.
On the 23rd January 1992 Fareham Borough Council told Mr Drukarz that the deposit Local Plan was likely to be adopted on the 31st of that month. On the 28th January 1992 the appellants requested the Department of Environment to direct Fareham Borough Council to defer adoption of the Deposit Local Plan until the Secretary of State had decided whether or not to call the plan in. The appellants suggested that the Council had failed to consider the respondents' proposals in the light of the Inspector's full recommendations relating to the site. And that the adoption of the Plan should be delayed because of the impact of s. 54A of the 1990 Act would have on the respondents' interests. On the 31st January the Department of the Environment declined to direct the Fareham Borough Council to delay adopting the Plan or to call the plan in. Consequently the Plan was adopted on that date.
Notice of Adoption was published on the 5th February 1992. Under s. 287 of the 1990 Act the respondents had a period of six weeks from that date in which to mount a challenge to the Local Plan on the ground of failure to comply with Regulation 29 of the 1982 Regulations. That period expired on the 18th March 1992. Once that period had expired the validity of the Local Plan could not be questioned in any legal proceedings whatsoever, see s. 284 of the Act. The effect of the expiry of that period was summarised by the judge in his judgment in a way which was accepted by both parties to this appeal. The judge said:
"Prior to the adoption of a Local Plan, an Inspector's Report in respect of it can constitute a material consideration of substantial weight in considering a determination under s. 70 of the 1990 Act: see Ravebuild Ltd -v- Secretary of State for the Environment and Hammersmith and Fulham Borough Council [1996] JPL 107. In contrast with the above proposition, once a Local Plan has been adopted such a report is of no materiality: see Jeantwill Ltd -v- Secretary of State for the Environment and Cherwell District Council [1993] JPL 445."
The Judgment
The judge found that Mr Reardon the Managing Director of the respondents knew virtually nothing about planning, was heavily reliant on others for advice in that respect and that Mr Reardon would not usually start a legal process unless his advisors could say that it would be more likely to succeed than to fail. The judge found that although Mr Unwin failed to obtain the documents referred to as the Addendum until requested to do so by counsel, Mr Hicks at the conference on the 19th March 1992, the appellants had the Local Planning Authority's Statement of Decisions on the Inspector's Report and Recommendations well before the 18th March 1992.
The judge found that the appellants should have advised the respondents to challenge the Adopted Local Plan and that the respondents would have accepted and acted on such advice had it been given. The judge went on to find that such a challenge would have been successful and as a consequence, the respondents' appeal against the refusal of their application for planning permission for their site would have been in the context of a Development Plan in which the appeal site was not designated as Coast and Countryside. The judge went on to find that if such a challenge had been mounted then the respondents' appeal would have followed the challenge and would have come before a different inspector. Such an appeal would have had a real or substantial chance of success. The chance of such an appeal being successful would not have been merely fanciful or speculative. The judge assessed the chances of success in such an appeal at 40%.
The judge awarded damages on the basis that the site with Planning Permission for a petrol filling station and with such a petrol filling station having been constructed and in operation would have been worth just over £2.3 m. From that figure were to be deducted the costs of constructing the petrol filling station agreed at £750,000 and a further £5,000 being the value of the site following the unsuccessful appeal before Inspector Machin, that is to say the site with no prospect of obtaining planning permission for any development, unless the Local Planning Authority altered its attitude to the site and redesignated the site in the Local Plan. The resulting figure was a little over £1.5 m. and 40% of that figure came to the sum awarded by the judge as damages in his judgment, that is to say £626,814.40.
Grounds of Appeal
Mr Bannister for the appellant has argued three grounds of appeal. The first is that this case was not a "lost chance" case and the judge was in error in dealing with the case on the principle found in Allied Maples -v- Simmons and Simmons [1995] 1 WLR 1602 CA. Second, that the judge's assessment of the chances of a Planning Appeal being successful following a successful challenge to the Local Plan at 40% was against the weight of the evidence. Moreover the manner in which the judge made his assessment was inadequate because the judge did not review and analyse the expert evidence he had heard despite saying that the expert evidence he had heard had been of assistance to him on this issue. Mr Bannister criticised the judge in this part of his judgment as having failed to analyse the evidence properly or to give adequate reasons for the conclusion he reached. Had the judge subjected the evidence to proper analysis and sought to find cogent reasons for his conclusion, the judge would have realised that the conclusion he had reached was not available to him on the evidence he had heard. Third, the judge should have deducted the sum paid by the respondents for the site, namely £150,000 from the value of the site with Planning Permission and not merely £5,000 for the value of the site without Planning Permission when quantifying the plaintiff's loss.
The First Ground of Appeal
This point was not taken in the court below. Mr Bannister, QC for the appellants told us that it was accepted on all sides at trial that the Allied Maples principle applied to the question "What would have been the result of the Planning Appeal had the C1 designation been quashed?" On this approach, provided that there was, as a matter of causation a real or substantial, as opposed to speculative chance that the appeal would have succeeded, quantum would have been calculated by reference to the value of that chance. As a result of further consideration of the point following the judge's decision, Mr Bannister believed his concurrence in this approach to the case had been wrong. What had been in issue in the Allied Maple's line of cases was the loss of the right or opportunity to take some step which, if taken, might, depending upon the actions of a third party, have produced a valuable benefit for the claimant. In such a case, once it is established that the defendants' fault caused the opportunity to be lost, the court is faced with the task of putting a value on the opportunity lost by assessing the degree of chance that it would have come good. That was to be contrasted to the present case where, on the judge's finding, the respondents had bought the site which from the moment of its acquisition was never, on the balance of probabilities going to obtain consent. It was not the appellants' negligence which had caused the respondents to fail to obtain planning permission for the site; it was the fact that the site was never going to achieve planning permission for a petrol filling station or for any other purpose. The site as a development site had been doomed from the outset.
Mr Bannister submitted the case fell within the principle of Hotson -v- East Berkshire Health Authority [1987] AC 750. The issue was whether the appellants' breach of contract or negligence caused the respondents to fail at the appeal inquiry before Mr Machin. That issue had to be decided on the balance of probabilities. The judge's finding that the respondents had a 40% chance of succeeding on an appeal even with a successful challenge to the Local Plan is a finding that the respondents had not established on the balance of probabilities that the appellants' failure to challenge the Local Plan had caused the respondents any loss.
Mr Bannister took us to the facts and decision in Hotson's case. In that case a boy fell and sustained an acute traumatic fracture of his left femoral epiphysis. He was taken to hospital where there was a failure to diagnose correctly his injury for some five days. Consequently the injury was not treated. In the result the boy suffered permanent and serious damage to his hip joint. In an action for damages brought on the boy's behalf, Simon Brown J, as he then was, found that even if the injury had been correctly diagnosed on admission to hospital and prompt treatment had been given, there was a high probability which the judge assessed at 75% that the serious and permanent damage to the hip would still have developed. The judge held that the plaintiff was entitled to damages for the loss of the 25% chance that he would, with prompt treatment, have made a nearly full recovery. The Court of Appeal upheld this decision. On appeal by the Health Authority the House of Lords allowed the appeal, deciding that it was for the plaintiff to establish on the balance of probabilities that the delay in treatment had at least materially contributed to the development of the permanent damage to the hip. On the judge's finding, based on his view of conflicting medical evidence, the plaintiff had failed to do this. The judge's findings of fact had been unmistakably to the effect that on the balance of probabilities the initial injury had been the sole cause of the permanent damage to the hip.
Mr Bannister submitted that the respondents site was in effect the equivalent to the boy's left hip after the boy's accident. On the balance of probabilities, it was never going to be developed.
Mr Bannister was right to draw our attention to the case of Hotson in which the speeches of the members of the House of Lords are instructive. Their Lordships made it clear that the first step for a judge is to analyse whether the question he has to answer is one of causation, in which case it must be decided on a balance of probabilities, or whether it is an assessment of damage, in which case if what has been lost is a chance, then the assessment of that lost chance is to be made on a percentage basis provided that the lost chance was real or substantial and not negligible. Their Lordships in Hotson's case were agreed that the question for the judge had been one of causation and not one of assessment of lost chance. For example, in his speech at page 792 E - H Lord Ackner said:
"In the result the judge had by his clear findings decided that the negligence of the defendants in failing to diagnose and treat for a period of five days had not caused the deformed left hip. The judge, in agreement with the submission made to your Lordships by counsel for the defendants, said in terms that in the end the problem came down to one of classification [1985] 1 WLR 1036, 1043-1044:
"Is this on true analysis a case where the plaintiff is concerned to establish causative negligence or is it rather a case where the real question is the proper quantum of damages?"
The judge thought at p. 1044 that the case "hovers near the border." To my mind, the first issue which the judge had to determine was an issue of causation - did the breach of duty cause the damage alleged. If it did not, as the judge so held, then no question of quantifying damage arises. The debate on the loss of chance cannot arise where there has been a positive finding that before the duty arose the damage complained of had already been sustained or had become inevitable."
It is of interest in this case, that Lord Ackner went on to say at page 792-H - 793A:
"Kitchen -v- Royal Airforce Association [1958] 1 WLR 563 has no relevance to this appeal. In that case there was an undoubted breach of contract which caused the plaintiff to suffer more than nominal damages. By reason of the solicitor's negligence, she had lost a worthwhile action. What the court there had to do was to value that action. It is, of course, obvious that it is not only actions that are bound to succeed that have a value. Every action that has a prospect of success has a value and it is a familiar task for the court to assess that value where negligence has prevented such an action being brought."
At first sight, the submissions of Mr Bannister were compelling. On proper analysis of the facts and the judge's findings in this case my judgment is that these submissions must be rejected.
In the case of Allied Maples Group Ltd -v- Simmons & Simmons (A Firm) [above] the plaintiffs wished to take over four department stores owned by a subsidiary company of the vendor company. The plaintiffs engaged the defendants as their solicitors to act for them. The leases of the department stores were personal to the subsidiary company. To avoid loss of the leases, the plaintiffs agreed with the vendor company to purchase the subsidiary company's issued share capital, while all the subsidiary company's other assets and liabilities were sold to another subsidiary company in the vendor group of companies. The defendants drafted an agreement with a warranty which would have given the plaintiffs complete protection against existing or contingent liabilities of the subsidiary company in respect of any properties leased by it. In the course of negotiations that warranty was replaced by a term which gave the plaintiffs protection only against such liabilities as should, as a matter of accountancy practice, have been provided for in the completed balance sheet. Contingent liabilities of the subsidiary company materialised which were not liabilities which should have been provided for in the completed balance sheet. Consequently the plaintiffs had no protection against such liabilities. The plaintiffs sued the defendants. At the trial of preliminary issues, the judge found on the balance of probabilities that there was a real and not a speculative chance that the plaintiffs could have renegotiated with the vendor company so as to obtain proper protection against the liabilities of the subsidiary company which had materialised. The judge also held that the defendants had been negligent in allowing the plaintiffs to proceed with the acquisition without advising them of this risk. The damage was the loss of the chance to renegotiate.
The defendants appealed to the Court of Appeal. The appeal was dismissed. This court held that where the defendants negligence consisted of an omission, causation depended on the hypothetical question of what the plaintiffs would have done if the omission had not occurred. That was a matter of inference to be determined from all the circumstances and was to be decided on the balance of probabilities. When the plaintiffs' loss depended on the hypothetical action of a third party, they were entitled to succeed if they could show that there was a real or substantial, rather than a negligible, chance that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiffs. At page 1609 H of the report Stuart Smith LJ said:
"In these circumstances, where the plaintiffs' loss depends upon the actions of an independant third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins."
At page 1610 C the judgment goes on:
"(2) If the defendant's negligence consists of an omission, for example to provide proper equipment, give proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff's own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. ...............
Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour. .............
(3) In many cases the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party, would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided that he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?
Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson's submission is wrong and the second alternative is correct."
Turning to the facts in the present case, the obligation on the appellants was to advise the respondents that they could challenge the Local Plan; that that challenge had a real prospect of success and if successful would improve the respondents' chances of successfully appealing the Local Planning Authority's refusal of their application for planning permission. The appellants omitted to give that information and advice to the respondents. Causation then depended upon the answer to the hypothetical question "What would the respondents have done if given that information and advice?" The judge has dealt with that question on the balance of probabilities and found that the respondents would have challenged the Local Plan. The judge has gone further and decided, again on the balance of probabilities, what the outcome of such a challenge would have been. He has found that it would have been, on the balance of probabilities, successful. On those findings, what was lost by the respondents in this case was the opportunity to appeal the refusal of the application for planning permission for their site in the context of the site being removed from the Countryside Designation and therefore free of the C1 Policy. In this appeal Mr Bannister has submitted, as Mr Jackson submitted in the Allied Maples case that the respondents had to prove on the balance of probability that a planning inspector in such an appeal would have allowed the appeal and granted planning permission. In my judgment that analysis is not correct. The chance of an appeal, following a successful challenge to the Local Plan being successful was a question of quantification of loss and, provided the chances of such an appeal being successful were substantial and not negligible the judge was entitled to assess that loss on a percentage basis.
The opportunity that was lost was the opportunity to challenge the Local Plan. The judge found that the respondents would have challenged and would have challenged successfully. The value of that lost opportunity has to be assessed. The judge did that by assessing the chances of an appeal against refusal of planning permission in the context of a successful challenge to the Local Plan and the site being undesignated and therefore not subject to Policy C1 being successful. This analysis can be tested by considering what would have happened if counsel in the conference of the 19th March 1992 had advised the respondents that because the Local Plan could no longer be challenged, their appeal against refusal of Planning Permission had no prospect of success and should be abandoned. In those circumstances, in a trial in which the judge made the same findings as Longmore J made in this case, the appellants could have had no defence to the respondents' claim apart from that of establishing that an appeal, to a Planning Inspector, following a successful challenge would not have had a real or substantial chance of success, but merely a negligible chance of success.
The Second Ground of Appeal
The second ground of appeal is that the judge's finding that the respondents would have had a 40% chance of success at a Planning Appeal following the quashing of the Local Plan was against the weight of the evidence. Further, given the way the judge dealt with this crucial issue, it is open to this court to reach its own conclusion on the question, which should be that the chance of such an appeal being successful was negligible.
Mr Bannister's principal criticism of the way the judge dealt with this issue was that the judge did not remind himself of the evidence of the three expert witnesses on this point; still less did the judge attempt to analyse their evidence or, if he was rejecting the opinions of the experts called on behalf of the defendants why he was doing that. Mr Bannister referred us to the case of Flannery -v- Halifax Estate Agencies Ltd [2000] 1 All ER 373 CA in which an appeal was allowed and a new trial ordered because of the failure by the trial judge to give reasons for the conclusion he had reached which was to prefer the expert evidence called on behalf of the defendants to that called on behalf of the plaintiffs, in a case where the issue was whether the flat the plaintiffs had purchased had subsidence damage at the time the property was inspected so that the defendants were in breach of contract and negligent, their valuer, who had inspected the property, having failed to detect any subsidence. In the judgment of this court delivered by Henry LJ this court found that the first instance judgment given in that case was "entirely opaque - it gives the judge's conclusions, but not his reasons for reaching that conclusion." This court made certain general comments on the duty of a judge to give reasons. The first of which was:
"(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties - especially the losing party - should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in ex p Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not. ..............
(3) The extent of the duty, or rather the breach of what is required to fulfil it, depends on the subject matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases."
Here the judge heard three expert witnesses, Mr Robinson for the respondents who expressed the view that the chances of a Planning Appeal being allowed following a successful challenge to the Local Plan were 75%. The appellants' expert Mr Bullock expressed the view that challenge or no challenge and whatever the outcome of that challenge, the respondents' appeal would have been dismissed. Mr Bowhill, the 2nd defendants' expert said this in the conclusions of his report:
"In any event, it is unlikely that such a challenge would have been successful. Furthermore, the Countryside designation of the site had been confirmed on a number of occasions (including a former appeal decision) and therefore I find it highly unlikely that a Planning Inspector would have effectively overturned this in respect of the Appeal."
Mr Bannister went on to point out that each expert gave oral evidence and their views were tested by cross-examination. The judge did not when dealing with this particular issue make any reference to the evidence given by the expert. Mr Bannister further criticised the judge for not referring to any of the other planning policies that would still have applied to the respondents' site even if the designation of the site in the Local Plan as Countryside had been quashed. Although the judge referred to having been taken by counsel through the planning history of the "green finger" of land, the judge made no attempt to evaluate the light that that history cast upon the chances of an appeal following a successful challenge to the Local Plan being successful. The appellants expert, Mr Bullock had given evidence that that planning history was of considerable importance, particularly the dismissal of an appeal against an enforcement order by an Inspector, Mr Martin, on the 16th January 1992 in respect of land elsewhere in the "green finger".
Both Mr Bullock and Mr Bowhill had relied upon the fact that Policy E1 would still have applied to the respondents' site, even if a challenge to the Local Plan had been successful, and that s. 54A would have required any Inspector to make his determination in accordance with that policy unless material considerations indicated otherwise. Mr Bannister accepted that Mr Bowhill in cross-examination had conceded that the efficacy of Policy E1 would have been reduced following a successful challenge to the Local Plan. This aspect of the expert evidence called by the defendants had found no place in the judges' judgment.
These are powerful arguments which give this court cause to consider whether this is a case where this court should put the judge's finding to one side and consider reaching its own conclusion on the question. The relevant part of the judge's judgment is to be found at page 34E of the transcript of his judgment and can be set out in full:
This was hotly debated. Mr Lynagh for Mr Unwin carried the burden of the argument here. He relied strongly on Mr Nye's express opposition to any development of the site and on the fact that this South Hampshire Structure Plan and the WWFLP both showed the land as unallocated for development. He took me through the history of the site applications for permission to build on the green finger and the numerous rejections which there had been of applications for permission for a hotel on an area including the site.
Mr Purchas submitted that the objection of the Chief Planning Officer could hardly be definitive since the whole point of an appeal was that the Inspector conducting the inquiry was independant of Local Planning Officers. Nor could the Structure Plan or the old Local Plan be decisive since a new Local Plan was emerging which was intended to supersede the old plan and Mr Gill's own comments would be pertinent. The Council had at least contemplated the possibility of a hotel on the site at an earlier date. A fair reading of the Council's decision for rejection of planning permission in December 1991, and in particular Mr Machin's reasons for rejecting the appeal in July 1992, showed that they were both relying heavily on the fact that the application related to a site in the countryside which the Local Plan had apparently recommended should not be available for development. Once the Local Plan had been quashed in respect of this site, the matter would realistically be completely open.
Having listened to the argument on this aspect of the matter, I can only say it is not at all easy to predict what would have happened if there had been an effective challenge to the Local Plan. I am certainly not convinced that permission would have been granted, neither am I convinced that the chances of obtaining permission were negligible. There are powerful arguments for permission which could be advanced. There was development on every side of the roundabout apart from the site. There was some, albeit challenged, evidence of need.. Mr Unwin thought the prospects of getting planning permission were good even without seeing the addendum.
My conclusion is that the chances of obtaining permission were not negligible or speculative. No doubt Mr Unwin may have been somewhat optimistic in favour of his client. Miss Thomas put the chances at little more that 50/50 when she was asked her initial advice.. That was on the basis of the absence of any challenge to the Local Plan. She also may have been too optimistic, but there was, in my view an eminently respectable rather than a merely speculative chance. I would myself put it somewhat less high than Miss Thomas did and would assess it at 40%."
The evidence of the experts showed that there was a very wide divergence in their views on this issue. Mr Robinson thought that there was a 75% chance of success. Mr Bullock thought that there was no real chance of success, whether a successful or unsuccessful challenge of the Local Plan had been mounted. Mr Bowhill considered that a challenge to the Local Plan would have failed and accordingly there was no prospect of an appeal succeeding.
It is clear that the judge rejected Mr Bowhill's view that a challenge to the Local Plan would not succeed. It had to follow from that that the judge must also have rejected Mr Bowhill's view that there was no prospect of an appeal succeeding. The judge was not bound to chose between the opinions of Mr Robinson and Mr Bullock. The importance of the expert evidence was that it identified the factors which would have been in play in the hypothetical planning appeal which would have followed a successful challenge to the Local Plan. It is also to be remembered that in deciding this issue the judge had before him written submissions by counsel for the defendants and counsel for the plaintiffs setting out the competing considerations relevant to such an appeal and counsel's submissions on each of those considerations, which incorporated or at least reflected these experts' opinions.
Submissions made by Mr Purchas, QC for the respondents are, in my judgment, of considerable weight in the consideration by this court of this ground of appeal. The first submission was that the judgment was to be read by parties wholly familiar with the issues and the facts of the case. For example, although the judge did not refer to the planning history in detail , the parties were all aware that no previous application for planning permission or any previous appeal had related to the respondents' site alone, and that the respondents' site was separated from the rest of the green finger by the original Segensworth Road and the two lines of trees that had bordered the old Segensworth Road. The enforcement Notice Appeal decided in January 1992 had involved a different location in the green finger of land and many planning factors which would not have been in play in the appeal the respondents had lost the opportunity of bringing.
Mr Purchas's second submission was that the judge was making a value judgment on facts that were not in dispute. The material facts are set out in the judgment read as a whole. Once the facts are found it is a question of an assessment which is to be made, not by experts, but by the judge. The judge saw and heard the witnesses and saw the site. This court, submitted Mr Purchas, not having had those advantages should be slow to interfere with the judge's assessment.
Mr Purchas further submitted that the approach adopted by the judge was in keeping with the way in which courts make assessments of lost opportunities, namely that the assessment of that opportunity leading to a successful outcome for the claimant is to be approached not on a minute examination of every detail but on a more general estimate of the chances of success. We were referred by Mr Purchas to a passage in the speech of Lord Reid in Davies -v- Taylor [1974] AC 207 at 212D
"To my mind the issue and the sole issue is whether that chance or probability was substantial. If it was it must be evaluated. If it was a mere possibility it must be ignored. Many different words could be and have been used to indicate the dividing line. I can think of none better than "substantial" on the one hand, or "speculative" on the other. It must be left to the good sense of the tribunal to decide on broad lines, without regard to legal niceties, but on a consideration of all the facts in proper perspective. I am well aware of the fact that in real life chances rarely are or can be estimated on mathematical terms."
Although I accept that the judge might have expressed his reasons for reaching the assessment he did more fully, the conclusion I have reached is that the judge expressed his assessment and the route by which he arrived at that assessment sufficiently to enable this court to consider whether that decision was wrong and should be overturned in this appeal. This is not a case, in my judgment, where the judgment was "entirely opaque", giving simply the judges' conclusion but not his reasons for reaching the conclusion. The judge has sufficiently discharged his duty to state reasons.
Two further submissions made by Mr Purchas are deserving of notice. The first concerned the advice given by the appellants and by Mr Unwin to the respondents as to the prospects of success of the appeal which was heard by Mr Machin, and the weight which should be attached to that advice. It is clear that Mr Unwin considered that the prospects of that appeal being successful were very good, of the order of 65%. Miss Thomas was less optimistic believing that the chances of success were little better than 50/50. Those assessments were made in respect of an appeal where the Policy C1 would have to be applied by the Inspector. It is clear from Mr Machin's decision letter of the 15th July 1992 that that policy and the adoption of the Local Plan were the two most important factors leading Mr Machin to his decision. At one point Mr Machin wrote:
"Most importantly in my view the FBLP has now been adopted with the appeal site and adjoining land shown as subject to countryside development restraint policies."
A little later Mr Machin wrote:
"Therefore contrary to your view, I do not consider that the comments of the Local Plan Inspector should now be accorded such importance as to override the adopted polices in the FBLP."
Paragraphs 7 and 9 of Mr Machin's letter which contain the guts of his decision, read:
"7. The proposal includes petrol pumps, car wash, toilets, a shop, telephones and local tourist information facilities. Policy C1 of the FBLP presumes against development in the countryside for which it is not essential to have a countryside location. Whilst I acknowledge that petrol filling stations are found in the countryside, they are not, in my opinion, development for which it is normally essential to have a countryside location. I consider that your clients' proposal would, by reason of the proposed buildings, canopy, hardstandings, signs and illuminations, which would occupy a large majority of the site, be highly visible, obviously purposely so to attract customers. I do not doubt that a significant element of landscaping could be incorporated into the proposal. Neither is there, in my view, any reason why a high standard of design could not be achieved. Nevertheless, I consider that the proposal would cause harm by the urbanisation of the appeal site which would thereby erode the open appearance of the land between the Segensworth and Southampton Roads. The changed appearance and character of the site would be dramatically evident when viewed from the roundabout as drivers travel south east along the A27 towards Fareham. In addition, the value of the appeal site to local residents as part of an open area which provides visual relief from the continuous development thereabouts would be undermined.. Finally, and of the utmost importance in my opinion, approval in this case would undermine the integrity of the very recently adopted countryside protection policies in the FBLP and the Council's ability to defend them would be thrown into considerable doubt. ............
9. Whilst I see no agricultural value in the appeal site, by virtue of its size, and no conflict of the proposal with the Council's roadside tree planing scheme, I find the erosion of open land and the conflict with the relevant statutory policies determinant in your clients' appeal which should therefore be dismissed."
The important point is that even with the difficulties posed by the adoption of the Local Plan, the contemporary opinions of Mr Unwin and Miss Thomas were that the prospects of the respondents' appeal succeeding were more than 50%.
Simon Brown LJ in the case of Mount -v- Barker Austin( a firm) [1998] PNLR 493 observed at page 510 F
"If, of course, the solicitors have advised their client with regard to the merits of his claim or defence, such advice is likely to be highly relevant"
The appellants case that despite the advice the respondents were given at the time an appeal was being considered, that appeal and indeed an appeal following a successful challenge to the Local Plan, had no real prospect of success is not an argument which will readily win the acceptance of the Court. I suspect that Mr Bowhill appreciated this and consequently based his view on the outcome of the appeal on his opinion that a challenge to the Local Plan would almost certainly fail.
The second matter is the continued application of the E1 Policy even were the Local Plan to be successfully challenged. It is correct that the E1 Policy would still have had to be considered and applied by a Planning Inspector in an appeal following a successful challenge to the Local Plan. However the E1 Policy was not as strongly against the respondent's application as was the C1 Policy. It is true that the Inspector would have had to have regard to the E1 Policy and to have made his determination in accordance with it unless material considerations indicated otherwise. However, the Local Plan Inspector's views that the application site should be taken out of the Countryside designation and that development of the site would be appropriate, had a successful challenge to the Local Plan been mounted would have been at any subsequent Planning Appeal "a material consideration of substantial weight" See Ravebuild Ltd -v- Secretary of State for the Environment and the Hammersmith and Fulham Council (above).
Finally it has to be remembered that the other objections to the respondents' applications such as the loss of trees objection, the highway objection and the visual amenity objection had all been overcome as was recorded by Mr Machin in his decision letter.
In the light of all these circumstances the judge could not have held that there was no prospect of the hypothetical planning appeal succeeding or that there was only a negligible prospect of success. The evidence did not compel the judge to find the chances of an appeal succeeding with the site undesignated were negligible. The most that Mr Bannister can say, in my judgment, is that the points he has made to this court indicated that the odds on such an appeal being successful were against. That was the judge's conclusion. The judge assessed those odds at 60/40 against. In my opinion having listened carefully to the submissions of Mr Bannister and Mr Purchas it cannot be said that the judge's assessment was clearly wrong or indeed wrong at all. For those reasons I would dismiss this ground of appeal.
The Third Ground of Appeal
I would uphold this ground of appeal.
The judge decided that only £5,000 and not £150,000 should be deducted from the value of the site when developed as a petrol filling station in this way:
"Mr Bannister had a final point that since the claim was essentially a loss of profit claim, the sum paid for the site by MCP should be brought into account (that was £150,000) which should be deducted from the resulting figure as well as the £750,000 construction costs. I do not consider that to be right, partly because £150,000 has in any event been already paid, but mainly because it is, in my view, irrelevant to bring into account whatever it was that MCP in fact paid. The correct calculation is the difference between what the land was in fact worth in 1992 without planning permission, which was agreed to be £5,000, and what the land would have been worth if it had planning permission. The figure of £5,000, but no more, thus falls to be deducted from the calculated figure."
With respect to the judge I disagree. The starting point for calculating the damages urged upon the judge and accepted by him was the value the land would have had with planning permission and with a petrol filling station in operation. Consequently the costs of constructing the filling station had to be deducted from the figure of £2.3 million, because that was a cost of developing the site as a filling station. So too was the sum of £150,000 paid by the respondents for the site. That sum had had to be paid in order for the respondents to acquire the opportunity to develop the site. That sum was spent before the appellants were instructed.
Had the respondents' claim at trial been (as was originally pleaded) for the value of the site with planning permission for a petrol filling station (£1.5 million) less the value of the site without that permission, I would have agreed with the judge and with the submissions of Mr Purchas. But the respondents sought more than that. They sought the value of the site after it had been developed as a petrol filling station. In that case, in my judgment, all the development costs had to be brought into account in determining the true amount of that loss. This means that the damages become 40% of the difference between £2,322,036 and £900,000 namely £568.814.40
Consequently I would reduce the damages awarded, namely the sum of £626,814.40 by the sum of £58,000 and to that extent I would allow this appeal. It will be necessary for the interest on the damages to be recalculated.
MR JUSTICE GAGE: I also agree
Order: Appeal allowed on third ground. Respondents to repay to Appellants £92,046.17, to carry interest at the judgment rate of £20.17 per day; Respondents to recover 4/5th of their costs of appeal, to be taxed if not agreed. Leave to appeal refused to both parties. (Order does not form part of the approved judgment)

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