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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/1005.html
Cite as: [2007] Lloyd's Rep PN 20, [2004] EWCA Civ 1005

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Neutral Citation Number: [2004] EWCA Civ 1005
A2/2004/0577

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE PENRY-DAVEY)

Royal Courts of Justice
Strand
London, WC2
8 July 2004

B e f o r e :

LORD JUSTICE RIX
LORD JUSTICE CARNWATH
LORD SLYNN OF HADLEY

____________________

PATRICIA DIXON Claimant/Respondent
-v-
CLEMENT JONES SOLICITORS (A FIRM) Defendant/Appellant

____________________

(Computer-Aided Transcript of the Stenograph Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)

____________________

MR SIMON MONTY QC (instructed by MSSRS JAMES CHAPMAN & CO SOLICITORS, MANCHESTER) appeared on behalf of the Appellants
MR CHARLES DOUTHWAITE (instructed by MESSRS GEORGE IDE, PHILLIPS SOLICITORS, CHICHESTER) appeared on behalf of the Respondent

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

  1. LORD JUSTICE RIX: This appeal arises out of the acknowledged negligence of a firm of solicitors, Clement Jones Solicitors, in allowing a claim to be lost through its being struck out for failure to serve a statement of claim. The underlying claim was for professional negligence against a firm of accountants known as The Dyer Partnership for failing to advise the claimant, Mrs Patricia Dixon, properly on a business transaction.
  2. The question which the judge at trial had to determine was whether Mrs Dixon had lost anything of value in being deprived of the chance to take that underlying claim forward to judgment or settlement. The judge found that the struck out claim was of some value. He found that Mrs Dixon had a potentially valuable claim against the firm of accountants, which he assessed at 30 per cent. It is at any rate now common ground that the accountants were negligent in failing to warn Mrs Dixon explicitly of the dangers inherent in the viability of the projected figures for her business venture and of risking her home as security for the borrowings necessary to start up that venture. Nevertheless, the judge assessed the value of the lost claim at only 30 per cent because he felt that Mrs Dixon was, on balance, likely to have pressed ahead despite receiving the warnings which she should have got, but did not in fact receive.
  3. In those circumstances the solicitors, now appellants, say that the judge below, Penry-Davey J, was obliged to have dismissed Mrs Dixon's claim against the solicitors or should have assessed its value as negligible and certainly at less than 30 per cent.
  4. The essential facts of the claim were that Mrs Dixon had for a long time been contemplating that a position which was subsequently developed and became known as Moggy's at 12 Crundles, Moggs Head, Herne Farm Estate, Petersfield in Hampshire would make a good convenience store. She pursued this idea in partnership with a friend, Mr Mooney.
  5. The prospect of development became a live one in 1990 and she obtained an option of first refusal from the developers. Armed with this Mr Mooney approached his bank, Barclays, for a loan. On 20th November 1990 Barclays wrote to Mr Mooney. In a reply full of kindness and sound advice, but on the instant request negative, the bank declined the loan and concluded as follows:
  6. "To finance the purchase, shop fitting and initial stocking would require a lending of between 170,000 and 200,000 and to lend such a sum solely because adequate security is available would be little better than pawn broking. To put at risk everything that you and Mrs Dixon have accumulated over the past 40 years is an undertaking which, I regret, does not fall within the parameters of an acceptable banking proposition and I am afraid that the bank cannot support you in this venture.
    I know that this decision will be a disappointment to you but I really must ask you to stand back from the proposition and re-examine the risks and potential benefits. I have no doubt that you could obtain sufficient commercial finance to enable you to proceed if you are determined to do so but I hope you will consider my comments in the constructive manner intended."
  7. As a result of receiving that letter on 21st November 1990 Mrs Dixon wrote to Mrs Dyer of The Dyer Partnership asking for her advice as to the best place to approach for funds, but also adding:
  8. "We calculated that we should need a total of approximately 170,000 to set up and get started, with possibly a further sum on overdraft of up to 10,000 for setting up stock. We are now re-assessing our financial plans ... Finally, perhaps you would be kind enough to look at our figures more deeply and re-assess our ideas, as we now feel a little unsure of ourselves without professional advice."
  9. Passing over his detailed findings of fact, about which I shall say a little further below, I go straightway to the judge's essential conclusions towards the end of his judgment. At paragraph 41 he said this:
  10. "In my judgment because of her eagerness to proceed with the venture, the claimant was not only willing to take on the National Home Loans loan but also to provide security by way of her house, and her eagerness was such that the risks of proceeding, which had been clearly spelt out in the Barclays letter, were put to the back of her mind and not allowed to stand in the way of a venture which she was determined to pursue. However, she maintains her complaint that she was never warned that the projected turnover was unrealistic or that the project was financially doomed."
  11. The judge then considered the three ways in which a case of negligence was put against the accountants. He said that the first way of putting Mrs Dixon's case regarding her lost claim alleged a failure by the accountants properly to advise regarding all aspects of the business transaction, including advising on whether it was sensible to proceed with the purchase and business proposition. On that limb the judge essentially found that there was a realistic claim in negligence against the accountants. He put it in this way at the end of paragraph 43:
  12. "...it was the duty of Dyer to warn emphatically and again of the risks, either in a meeting or in writing. They did not do so. However, in view of the claimant's determination to go ahead despite the Barclays letter, I do not feel able to conclude that she would necessarily have accepted the advice and although I do not exclude the possibility that she might have done so, it is in my judgment more likely having regard to her determination to go through with the project that she would have rejected the warning and in the event that she was able to obtain the necessary finance, would have gone ahead."
  13. The judge next considered two other ways in which the claim of negligence would have been put against the accountants, but rejected both of them as wholly unsubstantiated. The first of those two further cases was to the effect that Mrs Dixon had been positively persuaded to mortgage her unencumbered home by the accountants on the basis that the business proposition was viable and that the house would not be at risk. The third way in which she would have put her case alleged that the accountants had given positive advice to take out the National Home Loans loan secured on Mrs Dixon's home. As I said the judge rejected both those second and third limbs of the claim as entirely unsubstantiated. He then concluded in these paragraphs:
  14. "47. In the light of those findings, I have to consider whether as a result of her claim against Dyer being struck out the claimant has lost something which had a real and substantial value rather than a merely negligible prospect of success. In relation to that the evidential burden rests on the negligent defendant, to prove that she has not. In my judgment on the limited basis which I have set out, the claimant has lost something of real and substantial value, and the defendant has failed to prove that the overall value of the claim was negligible. However, because of the limited basis on which the claim might have succeeded, and having regard to the likelihood that even with the benefit of warnings and advice that were not given by Dyer the claimant would have proceeded with the venture in any event, I assess the prospects of success had the original litigation been fought out at 30% . In arriving at that figure, I have borne in mind the principle in Armory v Delamirie (1722) 1 Str 505 and encouragement to assess the prospects generously given that it was the defendant's negligence which deprived the claimant of the chance of succeeding in greater measure.
    48. Submissions have been addressed to me on behalf of the defendant following on the decision of the Court of Appeal in Galoo v- Bright Grahame Murray (1994) 1 WLR 1360. It is submitted that the cause of the business collapsing was the inability to meet turnover figures and that Dyer's breach of duty if there was such merely provided the opportunity for the losses to be incurred. I have set out my conclusions on the prospects of success of the original litigation. Albeit that the chances of success were limited, there was a prospect in my judgment of the claimant proving that if Dyer had complied with their duty of care she would not have proceeded with the venture and sustained loss. In those circumstances in my judgment the negligence was the effective cause of the loss and the claimant is entitled on that basis to recover damages."
  15. In the light of those findings, on this appeal Mr Simon Monty QC, on behalf of the solicitors, has raised three issues. They are essentially as follows: (1) whether Mrs Dixon fails on the simple ground that, in the light of the judge's findings, she would, on the balance of probabilities, have been unable in the underlying litigation against the accountants to prove the causation of her loss because on those findings she was likely to have pressed on with her decision to buy the shop and secure her borrowings on her home despite any warnings that Mrs Dyer would have given, in other words even in the absence of any negligence on the part of the accountants; (2) whether even if it is a matter of assessing Mrs Dixon's overall chances in the underlying litigation, including the chances of her succeeding on that causation issue, like any other issue that would arise in that litigation, nevertheless the correct view of the judge's findings should have led him to assess those chances as negligible and therefore zero; and (3) whether on the same basis the correct view of the judge's findings should have led him to assess those chances at no more than five to ten per cent.
  16. I need now to set out in a little further detail the underlying facts and findings regarding this litigation. Mrs Dixon's enthusiasm for a convenience store at 12 Crundles went back as long as 1981 or 1982, but at any rate by 1990, as I have mentioned, with the development of the location, Mrs Dixon got her chance to proceed. She was then some 59 or 60 years old.
  17. On 12th November 1990 she and her partner, Mr Mooney, met Mrs Dyer for the first time. On the next day, 13th November, she faxed Mrs Dyer asking her firm to accept them as clients in the transaction. I have already mentioned the Barclays' letter of 20th November and the terms in which the proposition was declined. Similarly, I have mentioned the important letter of 21st November which Mrs Dixon wrote on the very next day to Mrs Dyer asking her to look at the projected figures more deeply since they were "a little unsure of ourselves without professional advice".
  18. There was a meeting on the following day, 22nd November, between Mrs Dixon and Mrs Dyer and a mortgage broker called Mr Chrimes. On 27th November there was, Mrs Dixon said, a second and, on her account, critical meeting with Mrs Dyer at which Mrs Dixon said that Mrs Dyer had persuaded her to use her home as security for the venture under the assurance that the business was viable and she would never be in any risk of losing her home and that she should "go for it". But the judge ultimately found that the evidence regarding that meeting was so unsatisfactory that he was not even able to conclude that there was any sufficient evidence to substantiate Mrs Dixon's account that Mrs Dyer was present at that meeting at all, or indeed at any other meeting at which she had used the alleged persuasion and assurances.
  19. On 5th January 1991 Mrs Dixon and Mr Mooney received a mortgage offer from National Home Loans which was the proposal which they ultimately took up. On 7th January there was a file note on Mrs Dyer's files to the effect that the business would not be viable if it had to meet an extra 900 per month in the way of costs. At that time the 900 per month figure there in question was the possibility that insurance on the joint lives of both Mrs Dixon and Mr Mooney would cost not 900 per month, which was a figure within the equations, but a further 900.
  20. On 9th January Mrs Dyer produced her first cash flow forecast which she faxed that day to the partners and which she followed up on 14th January 1991 with a letter regarding that cash flow forecast. Those figures were based on figures prepared by Mr Mooney and which were made available at the parties' original meeting.
  21. In her letter Mrs Dyer explained that, on the basis of those figures, the venture ought to move into positive cash flow in the fifth month and also in that month would show a small profit dependant on a certain level of turnover. However, those figures took account of a sum of only 466 per month by way of salaries, took no account of the prospect that as turnover might rise that figure was too low, and allowed nothing for depreciation, VAT or withdrawals by the partners.
  22. On 25th January contracts were exchanged and, so far as Mrs Dixon and her partner were concerned, the die was cast. Just over a month later on 28th February Mrs Dyer wrote to the two partners again with a revised cash flow forecast, this time showing no profit within the first year at all. The essential difference, as I understand it, was that she was now working on a revised salary figure. Again no allowance was made for VAT, depreciation or withdrawals by the partners. Those figures showed, in effect, that the business was not viable, but not even on that occasion, let alone on the previous occasion before contracts had been exchanged for the purchase of the shop, had any warning been given as to the risks involved.
  23. Some time in 1992 the partners' relationship with the accountants collapsed, possibly over a fee dispute. In the meantime the business was not going well. In early 1994 National Home Loans started possession proceedings to obtain possession of Mrs Dixon's home and in August 1995 her home was repossessed. Some time after that, and certainly by 17th January 1996, the partners had approached the solicitors in this litigation to assist them in presenting a claim against the accountants. I say that that approach had been made by 17th January 1996 because on that date the solicitors made an application for legal aid, albeit without stating any assessment of the chances of success on the standard application form. However, in successive applications of 12th March and 16th August 1996 the solicitors assessed the prospects of success as 50 to 60 per cent and 60 to 80 per cent, respectively. In the meantime, however, on 28th February 1996 Mr Mooney had unfortunately died and Mrs Dixon shut up shop as a direct consequence of losing her partner.
  24. The proceedings against the accountants were commenced by the solicitors on behalf of Mrs Dixon in September 1996 and her claim was struck out for failure to serve a statement of claim on 10th October 1997. It was on 30th January 2002 that Mrs Dixon issued her claim form against the solicitors in these proceedings.
  25. The judge made detailed findings about Mrs Dixon's evidence. Mrs Dixon was in fact the only witness at the trial. At paragraph 40 of his judgment he said this:
  26. "In considering her evidence I bear in mind that by reason of the negligence of the defendant she is being asked to recall events after a considerable delay which is likely to impair memory. Additionally, some of her documents are no longer available having gone missing during the course of these protracted events. On the other hand, I detected a willingness on occasions on her part to give evidence which she thought would advantage her case, in her eagerness to recover something from the sad ruins of the business which had been her dream. In my judgment she attempted in the course of her evidence to downplay considerably the extent of the research and work that she and Mr. Mooney had done in preparation for this business, so as to increase the extent of reliance that she claimed was placed upon the professionals including Dyer."
  27. He then gave detailed examples of the respects in which he could not accept Mrs Dixon's evidence, perhaps the most significant part of which is as follows, also taken from paragraph 40:
  28. "The state of the evidence as to the meeting on 27 November 1990 is so unsatisfactory that I conclude there is no sufficient evidence to substantiate the suggestion that Mrs. Dyer was present at any meeting where there was discussion about the house being used as security, or that she ever encouraged the use of the house in that way. The later correspondence demonstrates that the claimant is prepared in order to advance her case to make contentions that are wholly untrue or at best only partially true. In my judgment, lapse of time which is not the fault of the claimant plays no part in that process, and it renders significantly more difficult acceptance of other aspects of the claimant's evidence."
  29. Perhaps it was very much because of the cloud thereby cast over Mrs Dixon's credibility as a whole that the judge later went on in a passage which I have already read to conclude that despite her evidence to the contrary she would have pressed on in purchasing the shop and setting up the business even if she had been warned by Mrs Dyer, as she should have been, about the risks of doing so.
  30. In the light of those findings Mr Monty has submitted that the judge, in concluding that Mrs Dixon's credibility was shot to pieces and in finding that she would, on the balance of probabilities, have pressed on, regardless of any advice that she might have received from the accountants, that the vital aspect of proving causation of loss against the accountants could not have been proved by Mrs Dixon and that, therefore, the judge ought to have concluded that the claim against the accountants must have failed and could, as a consequence, only be assessed as of negligible, that is to say zero value. In any event, Mr Monty submits that on the same basis the judge's assessment of a 30 per cent chance of success against the accountants was to put the matter far too high.
  31. The law regarding the evaluation of the loss of a chance when a solicitor by his negligence has lost for his client a claim being litigated against some third party is set out in what are by now some well-known cases. I will, as briefly as I can, make reference to them. The leading case in modern times is usually said to be Kitchen v Royal Air Force Association [1958] 1 WLR 563. In his judgment in that case Lord Evershed MR analysed the matter in a much cited passage at 574/5 as follows:
  32. "I come last to what may be the most difficult point of all; namely, assuming that she has established negligence, has the plaintiff proved anything other than nominal damages? It is necessary to say something of the nature of the problem which (as I understand the law) the court has to solve in determining the measure of damages in such a case as this. Mr O'Connor's point is that we have now to consider the question of liability as between the plaintiff and the electricity company (or their successors) as though it were a distinct proceeding within the present action; and Mr O'Connor says that, if we find on balance against the plaintiff, that is to say, that she fails in her claim against the electricity board (considered as if it were a separate and existing proceeding), then it follows that her damage is no more than nominal. If that is the right approach, it must follow that in any case such as the present the result expressed in terms of money is always all for the plaintiff or nothing. I cannot, for my part, accept that as the right formulation of the problem.
    If, in this kind of action, it is plain that an action could have been brought, and if it had been brought that it must have succeeded, of course the answer is easy. The damaged plaintiff then would recover the full amount of the damages lost by the failure to bring the action originally. On the other hand, if it be made clear that the plaintiff never had a cause of action, that there was no case which the plaintiff could reasonably ever have formulated, then it is equally plain that the answer is that she can get nothing save nominal damages for the solicitors' negligence. I would add, as was conceded by Mr Neil Lawson, that in such a case it is not enough for the plaintiff to say:
    'Though I had no claim in law, still, I had a nuisance value which I could have so utilized as to extract something from the other side and they would have had to pay something to me in order to persuade me to go away.'
    But the present case falls into neither one nor the other of the categories which I have mentioned. There may be cases where it would be quite impossible to try 'the action within the action' as Mr O'Connor asks. It may be that for one reason or another the action for negligence is not brought till, say, twenty years after the event and in the process of time the material witnesses or many of them may have died or become quite out of reach for the purpose of being called to give evidence.
    In my judgment, what the court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the court to determine that value as best it can."

    In the present case the judge directed himself inter alia by reference to that analysis.

  33. The peculiarly difficult position of a solicitor sued for the negligence of losing litigation for his client by reason of having his client's claim struck out is referred to in a passage of Lord Diplock's judgment in Allen v Sir Alfred MacAlpine and Sons [1968] 2 QB 229 at 256/257 as follows:
  34. "It is true that if the action for professional negligence were fought, the court which tried it would have to assess what those chances were. But on this issue the plaintiff would be in a much more advantageous position than if he had sought, despite the inordinate delay, to establish liability against the defendant in the action which had been dismissed. Not only would there be available to him any advice or material which had been given or obtained by his solicitor in support of his case in the dismissed action, but the principle of Armory v Delamirie (1722) 1 Stra. 505 would apply and would impose upon the solicitor the onus of satisfying the court that the plaintiff's claim in the dismissed action would not have succeeded had it been prosecuted with diligence. This would be a heavy onus to sustain after so great a lapse of time. The probabilities are that in any case in which the plaintiff had been advised to bring the action which had been dismissed and had never been advised to discontinue it, his subsequent action against his solicitor for negligence would be settled. One would hope that, for the good name of the profession, it would be settled promptly."
  35. Building upon those two authorities in more recent years in Mount v Barker Austin (a firm) (1998) PNLR 493 at 510/511, Simon Brown LJ formulated the following principles as being applicable to a solicitor sued for negligence in allowing his client's underlying litigation to be struck out:
  36. "1. The legal burden lies on the plaintiff to prove that in losing the opportunity to pursue his claim (or defence to counter-claim) he has lost something of value i.e. that his claim (or defence) had a real and substantial rather than merely a negligible prospect of success. (I say `negligible' rather than `speculative' - the word used in a somewhat different context in Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602 - lest `speculative' may be thought to include considerations of uncertainty of outcome, considerations which in my judgment ought not to weigh against the plaintiff in the present context, that of struck-out litigation.)
    2. The evidential burden lies on the defendants to show that despite their having acted for the plaintiff in the litigation and charged for their services, that litigation was of no value to their client, so that he lost nothing by their negligence in causing it to be struck out. Plainly the burden is heavier in a case where the solicitors have failed to advise their client of the hopelessness of his position and heavier still where, as here, two firms of solicitors successively have failed to do so. 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.
    3. If and insofar as the court may now have greater difficulty in discerning the strength of the plaintiff's original claim (or defence) than it would have had at the time of the original action, such difficulty should not count against him, but rather against his negligent solicitors. It is quite likely that the delay will have caused such difficulty and quite possible, indeed, that that is why the original action was struck out in the first place. That, however, is not inevitable: it will not be the case in particular (a) where the original claim (or defence) turned on questions of law or the interpretation of documents, or (b) where the only possible prejudice from the delay can have been to the other side's case.
    4. If and when the court decides that the plaintiff's chances in the original action were more than merely negligible it will then have to evaluate them. That requires the court to make a realistic assessment of what would have been the plaintiff's prospects of success had the original litigation been fought out. Generally speaking one would expect the court to tend towards a generous assessment given that it was the defendants' negligence which lost the plaintiff the opportunity of succeeding in full or fuller measure. To my mind it is rather at this stage than the earlier stage that the principle established in Armory v Delamirie (1722) 1 Stra. 505 comes into play."
  37. The only comment which I would make about that most helpful restatement of the relevant principles relates to the passage where in principle 4 Simon Brown LJ referred to the plaintiff's prospects of success 'had the original litigation been fought out'. I am inclined to think that what Simon Brown LJ was referring to there was simply to the underlying litigation. There is no requirement in such a loss of a chance case to fight out a trial within a trial, indeed the authorities show as a whole that that is what should be avoided. It is the prospects and not the hypothetical decision in the lost trial that have to be investigated. Moreover, one of the possibilities, as the cases repeatedly mentioned, of the loss of a valid and non-negligible claim is that whatever might have been the result if it had been fought out, the claim may well have been settled. That again emphasises that the test is not to find what the original decision of the underlying litigation would have been as if that litigation had been fought out, but to assess what the prospects were.
  38. Simon Brown LJ's restatement of the principles has since been applied in other cases, for instance Sharif v Garret & Co (a firm) (2001) EWCA Civ 1269; [2002] 1 WLR 3118.
  39. That the essence of this jurisprudence is not to fight out a trial within a trial was emphasised in Hanif v Middleweeks (a firm) [2000] Lloyd's Rep PN 920. Mance LJ there said:
  40. "13. It is the sentences in which Lord Evershed says that "There may be cases where it would be quite impossible to try 'the action within the action'" and "It may be that for one reason or another the action for negligence is not brought till, say, twenty years after the event and in the process of time the material witnesses or many of them may have died or become quite out of reach for the purpose of being called to give evidence" upon which Mr Gibson places principal reliance. He does so, however, by inverting the sense of the sentences. In his submission, although Lord Evershed quite clearly did not consider Kitchen itself as such a case, Lord Evershed was suggesting that in cases where the considerations of delay or absence of witnesses to which he referred did not apply, then it would or might be appropriate for the trial judge to determine one way or the other what would have been the outcome of the previous trial.
    14. I doubt, myself, whether this was what Lord Evershed meant. It seems to me that it is more likely that he was giving one set of reasons why it is that, in a case such as the present, the court only assesses prospects and awards damages on a percentage basis - unless it is overwhelmingly clear on the material before the court that the claimant was almost bound to succeed or had, conversely, only a negligible prospect of success, in which case the court may move to a 100% or nil award.
    15. Whatever the explanation of those sentences in Lord Evershed's judgment, they find very limited (if any) echo and no apparent application in subsequent authority, except in the sense which I have mentioned; that is that, if the evidence or the law is so clear that the subsequent court can treat the prospects as overwhelming or negligible, then the claim against the negligent professional may be assessed at 100% or nil."
  41. Finally I would refer briefly to Hatswell v Goldbergs (a firm) [2002] Lloyd's Rep PN 359, which is an example of the albeit rare case in this context where a judge finds that the loss of the underlying litigation was worthless. That was a case where an underlying claim in medical negligence was, in the opinion of both the trial judge and this court, made simply impossible by a complete and determinative line of medical notes the effect of which meant that the claim was bound to fail and therefore had no value at all. That, however, in my judgment, throws no light on the present case where the judge found that Mrs Dixon's claim did have a real value, albeit only 30 per cent, and was not bound inevitably to fail.
  42. Now all the cases which I have mentioned so far are cases of solicitors' negligence in the conduct of a claim against a third party where that negligence has led to the dismissal of the underlying claim. That situation can be contrasted with a claim in negligence against solicitors, or it may well be members of a different profession, which arises not out of the loss of litigation of an underlying claim against third parties, but out of a transaction in which the solicitors or other professionals have acted and/or advised the claimant. A leading example of such a transaction-based claim for professional negligence in recent years is the case of Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602. In that case two critical issues, amongst others, arose. One was whether the plaintiffs there would, if they had received the right advice from their solicitors, have sought to renegotiate a contract with their sellers and, if so, secondly, whether they would have succeeded in that renegotiation. The first question depended only on the claimants themselves: would they have sought to renegotiate? The second question, however, depended on the actions of a third party, the sellers. All three members of this court held that an important distinction lay between those two questions. Thus at 1609/1610 Stuart-Smith LJ analysed the matter as follows:
  43. "In these circumstances, where the plaintiffs' loss depends upon the actions of an independent 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.
    (1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists of some positive act or misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant's act, for example the careless driving, caused the plaintiff's loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury.
    Questions of quantification of the plaintiff's loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis, whether he will continue to earn at the same rate until retirement, whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court's assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which it should be noted depends in part at least on the hypothetical acts of a third party, namely the plaintiff's employer.
    (2) If the defendant's negligence consists of an omission, for example to provide proper equipment, given [sic 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. But in many cases the risk is not obvious and the precaution may be tedious or uncomfortable, for example the need to use ear-defenders in noisy surroundings or breathing apparatus in dusty ones. It is unfortunately not unknown for workmen persistently not to wear them even if they are available and known to be so. A striking example of this is McWilliams v Sir William Arrol & Co Ltd [1962] 1 WLR 295; the employers failed in breach of their statutory duty to provide a safety belt for the deceased steel erector. But his widow failed in her claim under the Factories Act 1937, because there was compelling evidence that, even if it had been provided, he would not have worn 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. In the present case the plaintiffs had to prove that if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection...
    (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 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."
  44. At 1618 Hobhouse LJ agreed with that judgment and the reasons given in it, and at page 1623 in a judgment in which Millett LJ dissented on the factual conclusion, he nevertheless agreed with Stuart-Smith LJ's analysis of the distinction that arises between the two questions, in the following passage:
  45. "That left the second head of loss: the chance that, if properly advised, the plaintiffs might have succeeded in persuading the defendants to agree to reinstate warranty 29 or to provide some other total or partial protection against the risk of first tenant liability. This depended on (i) whether the plaintiffs would have sought to reopen the negotiations to obtain such protection and (ii) whether and if so how far they would have been successful. The first of these again depended on what the plaintiffs themselves would have done in a hypothetical situation and accordingly had to be established on a balance of probabilities. The judge thought that it had been so established, and I agree with Stuart-Smith LJ that there was evidence to support his conclusion."
  46. The question is whether that analysis from Allied Maples, which I would emphasise arose in a transaction situation and not in a struck-out litigation situation, applies to the present case which is of the latter variety. Mr Monty submits that it does and that therefore once the judge found, as he did, on the balance of probabilities that Mrs Dixon would have been likely to have continued, despite any warnings she had received from the accountants, her claim was lost as a matter of the issue of causation and had become a worthless claim.
  47. The question raised by that submission has never, so far as I am aware, been definitively decided, but a case that comes very close to it is Hanif v Middleweeks, to which I have previously referred on another point. That was a claim against solicitors for the loss of underlying struck-out litigation. The underlying litigation was a claim against insurance brokers for the loss of a valid insurance policy. The claimant had suffered loss because the property which he had wished to insure was burnt to the ground. However one of the issues raised in the underlying litigation before it was struck out was that the claimant, or his associate, had himself set fire to the property in question, that it was a case of sell-inflicted arson and not accident or misfortune at all.
  48. It might have been thought, therefore, if Mr Monty were correct in his submission, that the issue of arson or not was an issue rather like the causation issue which arose in Allied Maples, and so it is interesting to see how that matter was dealt with in Hanif. Indeed the submission now made by Mr Monty was made on behalf of the solicitors in that case, see Mance LJ's judgment at page 921:
  49. "7. The first point raised is that the judge not only assessed prospects, but also found positively, that there was arson by the respondent's partner, Mr Sheikh, and that the judge should not then have gone on to assess the prospects of the respondent persuading a judge on a trial of the counterclaim that there was not arson by Mr Sheikh. Or, to put the matter the other way round, should not have gone on to assess the prospect of insurers failing to prove in 1995 what it is said that the present judge found."
  50. However, Mance LJ rejected that submission. Thus at paragraph 17 and following he said:
  51. "17. There would, in fact, be some odd consequences if one were to accept Mr Gibson's submission in relation to situations where the prospects lay between the overwhelming and the negligible. A judge could then be invited to hold a trial within a trial regarding the facts or matters in issue in the previous litigation. He could reach a firm conclusion about that on the balance of probability (the civil test) and, even if it was only quite a narrow balance, he could then give effect to that as a finding one way or the other entitling the claimant either to a 100% award in the present litigation, if the balance of probability was in his favour, or to no damages at all if it was against him.
    18. I would reject Mr Gibson's submissions. In my view, the judge's role here, and the only role which he assumed, was to assess whether there were any, and if so what, significant prospects under the original counterclaim. Further, and in any event, I do not think that it follows from his judgment or from an analysis of the issues that the trial of the counterclaim would have followed anything like the same path, necessarily, as the trial before the judge. First, it is clear that the present action was fought out on both sides and its merits were evaluated by the judge on a very limited basis."
  52. In a later passage Mance LJ went on to advert to the significance of the possibility of a settlement:
  53. "21. Thirdly, it seems to me legitimate to bear in mind that insurers might well have made an offer which would have been acceptable, as the appellants themselves were apparently hopeful that they would. In short, it was not the present judge's role to make findings of fact but findings as to prospects, and that is what I read him as having done."
  54. Mance LJ then went on to cite from passages of the trial judge's judgment where the latter expressed the view on balance that the claimant and his partner in that case had set light to the premises, while accepting that a defence to that charge of fraudulent conduct was not entirely doomed to failure. The trial judge valued that chance at 25 per cent, not very far from the judge's figure in the present case. Mance LJ commented:
  55. "28. It seems to me that that represents the slender foundation for Mr Gibson's submissions that there was here a finding (separate from any finding about prospects) by the judge as to the actual fact of arson. Indeed, he seems to have put his own view rather more tentatively than the view he thought that a 1995 judge would reach.
    29. In reality, however, I consider that what he was doing was consistent with the task which he had set himself: working through the material before him with the single aim of coming to an ultimate conclusion as to the prospects of success on a trial in 1995. I think it is wrong to treat him as having assumed the role of deciding on the material before him what was the actual position regarding arson. Furthermore, if he had assumed that role, then I consider that he would, in the light of accepted principle and authority, have been wrong in this case to do so."
  56. Roch LJ, who agreed, perhaps put the point even more clearly in the following passage:
  57. "56. I do not accept this analysis. This is a case of an omission or omissions by the appellants as the respondent's solicitors: the failure to prosecute his claim with due diligence which led to his counterclaim being struck out. Had that omission not occurred, the fate of the counterclaim would have depended on several factors: the witnesses called for the respondent and for the insurers, which might not have been identical to the witnesses heard by His Honour Judge Tetlow; whether witnesses would have given evidence and submitted themselves to cross-examination; their performance in the witness box; and, ultimately, the decision taken by the judge trying the issues which would have arisen between the respondent and his insurers.
    57. There can be no certainty as to the outcome of those proceedings. Consequently, His Honour Judge Tetlow was correct, in my judgment, that what he had to assess was the chance of the respondent succeeding on his counterclaim.
    58. The judge was right to rely on the decision of this court in Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602, where, at page 1611, dealing with the third of the possible situations which can arise, Stuart-Smith LJ said..."

    and the relevant part of Stuart-Smith LJ's judgment dealing with his third category, namely the hypothetical actions of a third party which I have already cited above, were set out by Roch LJ.

  58. Roch LJ continued to say that he had no doubt that that was the exercise that the trial judge was performing. He cited passages from the judgment below, some of them similar to those already cited by Mance LJ.
  59. I would understand that judgment as affirming, in the context of a submission that on the arson issue the question should be treated as falling within Stuart-Smith's second rather than his third category, a decision that in a solicitor negligence case arising out of the dismissal of underlying litigation the true analysis is that, like any other issue in the underlying litigation, it falls under the third category of Stuart-Smith LJ's analysis.
  60. Is that the correct analysis in such a case of a claim against solicitors arising out of the loss through strike-out of underlying litigation? No case has been cited to the court that suggests that it is not. The discussions in Jackson and Powell on Professional Negligence, 5th edition, 2002, and McGregor on Damages, 17th edition, 2003, which I have consulted, do not suggest that the transaction situation analysis concerning the issue of causation, as far as that depends on the claimant's own actions, applies to the loss of underlying litigation situation. None of the loss of struck-out litigation cases which I have considered in this judgment, including cases which are subsequent to and cite Allied Maples, suggest that any causation issue in the underlying litigation is dealt with as a matter of a finding on the balance of probabilities, rather than as merely another issue within the generality of issues in the underlying litigation which have to be assessed for their prospects only; nor should the position, in my judgment, be otherwise. The causation issue is, in truth, just one among a number of issues which, in the underlying litigation, would have had to have been litigated or settled. Provided the underlying claim is of some real value, then the separate causation issue which arises in the instant claim out of the loss of underlying litigation answers itself. In other words, unless the underlying claim is at one or other end of the Kitchen spectrum, it is not possible to say on the findings of fact in this case that every judge would have regarded the issue in the same way. Ultimately, the value of the underlying litigation did not lie in Mrs Dixon's own hands, but in the hands of the court (or, in the case of settlement, in the hands of bilateral negotiation).
  61. In this connection I would express my own personal scepticism that I would have decided as the judge below found that Mrs Dixon was likely to have continued regardless. Such a finding is after all against the inherent probabilities of the matter, even when full account is taken of the fact that she was very keen on the venture and determined to proceed if she possibly could. Nevertheless, that she was not oblivious to the promptings or dictates of prudence is made clear by the fact that in the light of the Barclays' letter she expressly asked the accountants to advise her, expressing herself and her partner to be in need of professional advice. In the critical finding from paragraph 41 of his judgment, which I cited at paragraph 7 above, the judge merely referred to Mrs Dixon's willingness to proceed despite the warnings clearly spelt out in the Barclays' letter as being proof of her overriding determination. He expressed that by saying that in the light of that determination she had put the Barclays warning "to the back of her mind".
  62. I bear in mind that it was the judge who heard Mrs Dixon's evidence. But in truth that was not, in my judgment, a fair or complete assessment. She had not put that warning to the back of her mind. She had, on the basis of that warning, immediately and expressly asked the accountants to give her their own advice on the figures. The judge did not at this point of his judgment refer back to that important letter from Mrs Dixon to the accountants of 21st November in which she sought that advice. I do not see what is in any way unlikely about the possibility or probability that, if she had been warned that the cash flow forecasts did not stand up to a viable business proposition and that she should not, in those circumstances, risk her capital, let alone her home, she would not in those circumstances have been determined to proceed. If it had been spelt out to her that the salary figure was unrealistic and that no allowance had been made for depreciation or any withdrawals of any kind from the business, why would she have been absolutely determined to proceed? In such a case her own accountants would have added their own warnings to that of Barclays, and as a result of her own specific request for advice in the light of Barclays' warning.
  63. I make these remarks not because there is on this appeal any question of reversing the judge's finding about this matter. There is, in any event, no cross-appeal against that finding. Nevertheless, I put forward my own personal views as an illustration of the possibility that although one judge may look upon the matter in one way, another judge may well look upon it in another way. This is the sort of situation where, if this issue arose on appeal, an appeal court would be likely to say that whatever might be the personal feelings of the appeal court judge it was not possible to say that the trial judge, who had heard the witnesses, was wrong in his conclusion. But that is not the issue in this case. The issue here is whether the trial judge's findings are to be read as findings that not only was Mrs Dixon unlikely to accept good professional advice from accountants, in his judgment, but that her claim against the accountants was bound to fail: in other words that no judge could reasonably have come to any other conclusion. It is for that reason that I have made these remarks about my own personal way of looking at the matter.
  64. Moreover, quite apart from the possibility that the trial judge back in 1997, or thereabouts, would have had a different view of the matter, it is also not possible to say that at the underlying trial, if the litigation had survived, more witnesses or documents might not have been available which might have thrown a different light on the matter (and see the opening sentences of the judge's para 40, cited above). In this respect I do not, however, take into account the possibility that Mrs Dixon's evidence might have been supported by Mr Mooney because he, unfortunately, had died very early on in February 1996. But it is at any event impossible to be categoric about what effect the cross-examination of Mrs Dyer herself would have had on the litigation.
  65. Moreover, although there was no positive evidence regarding the possibility of settlement in the underlying litigation, it is impossible not to have regard to the fact that in a case where, in effect, as Mr Monty accepts, there was negligence on the part of the accountants, some settlement of real value would have been arrived at.
  66. For these reasons, in my judgment, the judge approached the matter in a perfectly logical manner. He had to assess the prospects. On one way of putting the claim against the accountants he was, in effect, satisfied that there was a good claim for negligence. It is not now disputed that the accountants were negligent. He did not assess the value of that claim by itself, but there was a good claim that the accountants were negligent. Nevertheless he marked Mrs Dixon's lost claim down in value on the basis of his view about her determination to proceed in any event. In doing so, however, he emphasised two or three times that he was not saying that her claim was doomed to failure. He expressly accepted at one point the possibility that she might have accepted the advice. He expressly said (at para 48) that there was a prospect of Mrs Dixon proving that if the accountants had complied with their duty of care she would not have proceeded. He expressly accepted that the lost claim had some real value, albeit he assessed it as low at 30 per cent.
  67. For these reasons it ought to be clear, as I hope it is, that each of Mr Monty's three grounds of appeal must fail. In my judgment this kind of litigation against a solicitor for negligence arising out of the dismissal of his client's lost litigation is different from the transaction class of claim discussed in Allied Maples. Therefore there was no requirement as a matter of law for Mrs Dixon to prove on the balance of probabilities or else lose her case entirely that she would not have proceeded if she had received the right advice. It follows that Mr Monty's first ground of appeal must fail.
  68. It also follows from what I have said that the judge was clearly of the opinion that despite the strictures that he had to make about Mrs Dixon's credibility in general, and her determination to proceed in particular, he was unable to assess the value of her claim at zero; it had a real value. Therefore I am unable to accede to Mr Monty's submission that the judge should have assessed the value of Mrs Dixon's claim as negligible or at zero.
  69. Finally, the question arises as to whether this court should interfere with his assessment of 30 per cent. That assessment is essentially a matter for the trial judge. It is inherently akin to an assessment, for instance, of contributory negligence, a context where this court has repeatedly said that an assessment will not be interfered with on appeal unless the judge has gone fundamentally wrong. For myself, for reasons I have explained, I would have thought that 30 per cent was putting the matter even perhaps too low. In any event I am wholly unable to say that it is put too high.
  70. For these reasons I would dismiss this appeal.
  71. LORD JUSTICE CARNWATH: I agree. The law in these cases is reasonably clear, as I think in the end Mr Monty accepted. Mrs Dixon lost the opportunity to pursue her claim as a result of the negligence of her solicitors. The court has to decide whether she lost something of value, in the sense that the prospects were better than negligible. If the answer to that is 'yes', then it has to put a figure on what she has lost. That, as Simon Brown LJ said in Mount v Barker Austin, depends on a realistic assessment of the prospects of a successful outcome. As my Lord has said, that may include successful outcome due to a settlement. I agree with him that the reference in Simon Brown LJ's judgment to the litigation being "fought out" does not imply that one has to assume a full trial of the action.
  72. The complaint here seems to be a suggested conflict between paragraphs 43 and 47. In the first, the judge found that she would have gone ahead with the project in any event even if proper advice had been given; in the second, he found that she had a 30 per cent prospect of success, in an action which depended on her establishing the contrary. I see no necessary inconsistency. The judge was not trying the action against the accountants. The opportunity for a trial of that had been lost. His view as to what the outcome would have been was strictly irrelevant, except as one stage in the process of deciding the value of the loss opportunity. The terms in which he expressed his findings as to the likelihood of her going ahead, in paragraph 43, make quite clear that he was dealing with the point on the balance of probabilities. It was a finding that she was more likely than not to have gone ahead. That may mean no more than that. Viewed at the time the opportunity was lost, her prospects were less than 50 per cent. Accordingly, I see no inconsistency with the judge's assessment of the lost opportunity as representing a prospect of 30 per cent.
  73. LORD SLYNN: For the reasons given by my Lord I too would dismiss this appeal. Understandably, great emphasis has been put by Mr Monty on the final sentence of paragraph 43 of the judgment in which, as has already been stated, the judge felt that he could not conclude that Mrs Dixon would necessarily have accepted the advice, and although he did not exclude the possibility that she might have done so, the judge thought in his judgment that it was more likely, having regard to her determination to go through with the project, that she would have rejected the warning and would have gone ahead. I do not read that as saying that she was bound to go ahead or that she was bound to fail. It seems to me that the passage which comes later in the judgment really undermines Mr Monty's emphasis on this point. My Lord has referred to it, but I think it is worth reading it in full:
  74. "48. I have set out my conclusions on the prospects of success of the original litigation. Albeit that the chances of success were limited, there was a prospect in my judgment of the claimant proving that if Dyer had complied with their duty of care she would not have proceeded with the venture and sustained loss. In those circumstances in my judgment the negligence was the effective cause of the loss and the claimant is entitled on that basis to recover damages."
  75. That shows conclusively what was really in the judge's mind and with that brief supplementary point, I agree that the appeal be dismissed.
  76. ORDER: Appeal dismissed. Appellants to pay Respondent's costs of appeal. Costs subject to detailed assessment.


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