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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> LEONARD WILLIAM HARTLE v. MESSRS LACEYS (A Firm) [1997] EWCA Civ 1130 (28th February, 1997) URL: https://www.bailii.org/ew/cases/EWCA/Civ/1997/1130.html Cite as: [1999] Lloyds Rep PN 315, [1999] 1 PN 315, (2000) 16 Const LJ 44, [1997] EWCA Civ 1130, [1999] Lloyd's Rep PN 315 |
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HARTLE
v.
MESSRS
LACEYS
(A Firm) [1997] EWCA Civ 1130 (28th February, 1997)
v-
Hartle
is an engineer and at the material time during the 1970s and 1980s he
was also a dealer in land and a property developer. In the opinion of his Bank
manager Mr
Hartle
was a man of integrity and foresight who was extremely
intelligent and the bank had the utmost confidence in him.
Laceys
are a reputable firm of solicitors. Since about 1971 Mr
Hartle
had instructed
one of the partners, Mr Wyllys, in the purchase and sale of some 35 properties
including those which we are concerned. They had a good professional
relationship, each having a healthy respect for the other and they became
“almost friends."
Hartle
enjoyed a fair measure of success in his development
business until the transaction which is the subject of this appeal. It has
proved to be a catastrophic failure. Mr
Hartle
has been ruined. His case is
that the losses he has suffered were caused by the negligence of Mr Wyllys.
That negligence is not now in dispute. Damages are. On 3rd November 1994 His
Honour Judge Rich Q.C. sitting as a Deputy Judge of the High Court awarded him
£50,000 which, with interest, resulted in judgment being entered for some
£81,164.50. Mr
Hartle
has appealed that judgment and seeks to increase the
award of damages in his favour.
Hartle
acquired a property
at 8-10
Victoria
Avenue, Swanage for £16.500 subject to a mortgage of
£9,000. The
vendor
was Rhodaus Property Company, operated by the Sloggett
Brothers. They had endeavoured to increase the price to take account of the
development potential of the site but, having been unable to agree terms with
them, Mr
Hartle
was required to enter into a covenant recited in the conveyance
in these terms:-
Vendor
that he (the purchaser and his successors in
title) shall at all times hereafter observe and perform the stipulations and
restrictions following in relation to the property...
Vendor’s
written consent to erect or permit to be erected
more than four residential flats on the said land and that before undertaking
such building development the Purchaser will obtain and produce to the
Vendor
all requisite planning and by-law consents and his plans of the proposed
buildings for approval by the
Vendor
(which approval shall not be unreasonably
withheld).”
void
as against a purchaser for money or
money’s worth of a legal estate of the land charged with it unless the
land charge is registered in the appropriate register before the completion of
the purchase. The problems in this case arose because Rhodaus Property Company
did not immediately register that charge.
viable.
The Bank, as Mr Wyllys well knew, were lending him the whole of the
purchase price of £185,000 and insisted on charges not only over this new
property, but also a second charge over the original plot and over the Manor
House in which he lived. On 27th January 1988 contracts were exchanged with
completion to follow on 8th April and Mr Wyllys wrote with obvious sincerity
then, though the words now ring hollowly:-
Hartle’s
intention to sell on to a
developer as fast as he could. He was proceeding in a manner notably different
from the way many of the deals were taking place at that time in a rising
market where, in the intoxicating gallop for riches,
very
few paused to reflect
that every boom must burst. As his note dated 22nd February 1988 makes plain,
Mr
Hartle
made his plans contingent on a possibility that a down-turn in the
market was imminent. His cash flow projections presented to the Bank at the
beginning of March envisaged a hope to sell
Victoria
Avenue for £360,000
in June which, after payment of legal costs and £8.000 he earmarked as
necessary to discharge his obligations under the restrictive covenant, would
nonetheless produce healthy profit.
Vidler,
made an offer. The main Board knew and also approved. On 30th June
Mr Bawden wrote to confirm the company’s willingness to purchase, subject
to contract, for £400,000 with an early exchange of contracts and
completion by 16th September 1988 or earlier by mutual consent. He made this
stipulation:-
Hartle
to deal with the conveyancing. He was aware
of the restrictive covenant and on 14th July reminded Mr
Hartle
of it. He wrote:-
vendor
at that time wished you pay an additional sum of £4,000 in respect of each
unit of which you obtained planning permission in excess of 4. You are not
prepared to agree to this condition, and after some negotiation it was agreed
to limit the use of the property for 4 units only, and for plans of such
building to be approved by Rhodaus Property Ltd. I am investigating the
possibility of a restrictive covenant indemnity and will write to you again as
soon as I have some further news.”
Hartle
saying:-
vary
the covenants
contained in the conveyance to you. It may well be possible to prove that Mr
Sloggett does not own any land in the
vicinity
capable of benefiting from this
covenant, in which case an application the Lands Tribunal to set aside this
covenant may well be successful, but such application will take time and
expense.”
Hartle
spoke on the telephone. Pursuant to the earlier advice given to
him, Mr
Hartle
was making his own attempts to trace Mr Sloggett. On the
conveyancing front, Mr Wyllys reported that Berkeley’s solicitors had
raised a query with regard to the covenants and that:-
Hartle
and explained the relevance of this
non-registration. In particular he will have pointed out:-
Hartle
would not be liable for any breach of
the covenant contained in clause 2(iii) of the conveyance after he had disposed
of the building plot.
variation
of the covenant which would
otherwise be necessary, it would be possible to offer the purchaser a
reduction in the price without affecting the amount of the net proceeds of sale
which Mr
Hartle
would eventually receive.
Hartle’s
proposal to
redevelop the site and the adjoining property by the erection of 14
self-contained flats. Rhodaus immediately registered the charge on 11th August
and began a
very
tough negotiation to take full advantage of the ransom effect
of the covenant. Thus through the negligence of his solicitor Mr
Hartle
had
lost the opportunity to sell the land free of the covenant and the result of
this case depends upon what might have happened had proper advice been given.
The approach take by the learned Deputy Judge was this:-
value
of his property as at
that date. The plaintiff claims that the result of the registration was that he
lost the sale to Berkeley, and he is therefore entitled to be compensated for
his resulting losses” (p.7 A-B)..."
Hartle
to satisfy me that the defendants’
negligent advice caused him to lose a sale which he would otherwise have
concluded, between August and December 1988, he has to show on the balance of
probabilities that he would have concluded such a sale to some other
person...This involves both my accepting that Mr
Hartle
would probably offered
it to someone other than Berkeley, and secondly, that someone other than
Berkeley would have accepted such offer and concluded the purchase at a price
which Mr
Hartle
would have accepted, (p.13 D-G)...
value
of the property as at the date of the negligence. (P.16
F-G)...
value
of the property, in the actual circumstances of
August 1988, due to the registration of the covenants which resulted from the
negligence of the defendant, as being £50,000 and it is that sum which I
will award by way of damages." (P. 17G-H).
v-
Simmons & Simmons
[1995] 1 WLR 1602 and
Banque
Bruxelles Lambert S.A. -
v-
Eagle Star Insurance Co.Ltd
[1996] 3 WLR 87. The significance of these cases is not appreciated by Mr
Hartle
who appears in person on this appeal. Their impact is, however, not lost
on Mr Davidson. I would wish to pay tribute to the way in which he has so
admirably managed both to be fair to the litigant in person and assist us
whilst at the same time pursuing a resolute and
very
persuasive defence of his
client’s position. He is forced to acknowledge that these recent
developments in the law undermine the approach taken in the court below and he
acknowledges that the previous misconceptions affected both the way the case
was presented and the way it was decided. I have sympathy for counsel and for
the Deputy Judge. The approach which in my judgment should have been taken, and
which I shall now follow is this:-
valuer
is liable must precede any
consideration of the measure of damages. For this purpose it is better to begin
at the beginning and consider the lender’s cause of action.”
valuable
than the land
without registration. The true loss in this case flows from the failure to give
advice as to the effect of non-registration and as to the courses of action
open to Mr
Hartle
to take what advantage he could from that situation. It was
the loss of the opportunity to complete a sale before the Sloggetts registered.
Hartle
would have attempted to persuade Berkeley or
some other to an early completion to defeat the covenant and also whether he
would have reduced the price as an incentive to their doing so.
view
of them and he would inevitably have developed a "feel" for the case which
it is difficult to capture from the written word. If follows that his
judgment commands our great respect. Mr.
Hartle
has attacked his findings of
fact but the attack was not sustained and cannot be sustained. Stating it
broadly, the judge's findings must be honoured wherever possible. At the same
time we must be astute to recognise that the findings were shaped by his
approach to the case which was, as we now know the law, erroneous in several
respects as, for example, is apparent from the following passage to which I
have added the emphasis to show how it conflicts with the
Allied
Maples
judgment set out above:-
Hartle
to satisfy me that the defendants’
negligent advise
caused
it lose the sale which he would otherwise have concluded, between August and
December 1988 he has to show
on
the balance of probabilities
that he would have concluded such a sale with some other person.”
Hartle.
He was prepared to pay no
more than £20,000 and was threatening to go to the Lands Tribunal if
agreement could not be reached at that price. So far as Berkeley were
concerned, their solicitor, Mr White, advised that the prudent course for them
to adopt would be to insist on the covenant being cleared. Mr Wyllys continued
to labour under a mistaken
view
of the law and gave inconsistent and incorrect
advice. By 23rd September Mr
Hartle
was recorded by Mr Wilcox as becoming
concerned at the delay. On 11th October an open offer was made in the sum of
£20,000 with a further threat to go to the Lands Tribunal if it was not
accepted. On 16th November counsel was instructed to advise. He recommended an
offer of £30,000 which was put forward on 22nd November. By 5th December
Mr
Hartle
was, as Mr Wyllys recorded, worried and distraught. He had discussed
his anxieties with a solicitor friend who had apparently seen quite quickly
that Mr
Hartle
had been receiving the wrong advice. He challenged Mr Wyllys
about it and on the following day 6th December 1988, Mr Wyllys wrote suggesting
that Mr
Hartle
seek independent advice.
Hartle,
to submit
their plans for twelve as opposed to fourteen flats. On 10th August he
submitted a detailed planning application. On 6th September he put to Wessex
Water a proposal for a catchment soakaway and bore hole which Wessex Water
found satisfactory subject to the Local Authority’s approval. On 28th
September 1988 Berkeley’s application for planning permission for their
twelve flats with garages underneath was approved subject to satisfactory
resolution of the following points:
Hartle
reached agreement with the Sloggetts for the release of the covenant at a price
of £35,000. On the 10th February formal planning permission was given.
Despite the agreement as to the price, there was much wrangling over the
conveyancing and in June Mr Turner withdrew his offer. He did eventually buy
and the staggered sale was completed as to part on 5th February 1993 for a
price of £70,000 and the remainder on 27th January 1994 for £80,000.
Hartle
have
done if he had been told that neither he nor the purchaser would be bound by
the terms of the covenant if a sale could be completed before it was
registered and that it would be possible to offer the purchaser a reduction in
the price without affecting the net proceeds which Mr
Hartle
would receive were
he obliged to negotiate with the Sloggetts.
view
of the lack of registration of the covenant. If I had been so
advised, I would certainly have considered selling to somebody else. I would in
the first instance have told Berkeley Homes that I wanted to get on with the
purchase as agreed or that I would sell elsewhere...”
view
of the
covenant who I should be selling it to?
Hartle
but you have got to get rid of this thing with Mr
Sloggett, because this is what we want.” Then you have to take your
decision whether to approach Mr Sloggett or not.
Hartle,
on being so advised, would himself have approached
Messrs
Vidler
and Mr Bawden of Berkeley, as he told me in cross examination he
would. They, in their turn would have wanted to discuss the matter further with
their solicitor, whom they meet on a weekly basis, and with what I may describe
as their head office or parent company... They were themselves keen to
purchase. I do not therefore think that they would have given any outright
refusal to accept, at least within the immediacy. Mr
Hartle
for his part
believed that Berkeley offer was a good offer and, as he said, he wanted to
stay with them. I do not believe that he would, in the event, have taken the
decision to offer the property elsewhere; he would have remained in
negotiation and discussion with Berkeley, at least until the drainage problem
was resolved by Berkeley expense. He might, however, I accept, have sought some
reassurance for himself, by at least enquiring as to the interest among local
builders and maybe even the possibility of other national builders.”
Hartle
would not have immediately begun a
negotiation with the Sloggetts but would have tried to persuade Berkeley to
complete before the covenant was registered. That is an essential finding. Mr
Davidson relies upon the judge’s
view
that he would have remained in
negotiations with Berkeley at least until the drainage problem was resolved.
The difficulty about relying upon this as a finding binding upon us is that it
is predicated upon a
view
of Berkeley response and immediately one is inquiring
into how the third party would have reacted, then one is dealing with chance
not probability. The learned judge’s conclusions in this respect are,
therefore, tainted. The proper answer to the first question must be that on a
balance of probabilities Mr
Hartle
would not have entered into immediate
negotiations with the Sloggetts but would rather have attempted to persuade
Berkeley to agree to urgent completion.
Hartle
frequently sought advice and he invariably took it. The good advice
would have pointed out the advantages of a reasonable discount for an early
completion.
visited
regularly. Nonetheless he did not know that the
adjoining property had been sold to Mr
Hartle
and since it appears to have
happened without it being advertised for sale, he may not have realised that
the property was sold at all. Although he said he took care to keep his eyes
open for planning applications, he failed to spot the application to develop
these sites. He may have had little cause to think that development was
imminent. He apparently did not know that the covenant was not registered.
There was, therefore, nothing to give him any cause for anxiety. Because Mr
Wilcox had interested potential purchasers on his books, there was no need to
advertise the property and there was no real chance that further marketing
would have put Mr Sloggett on notice. As it happened he and his brothers were
negotiating the break-up of the Sloggett Group in a way which would have meant
that the benefit of the covenant would have passed to one of Mr Lawrence
Sloggett’s companies. That conveyancing transaction was completed on 23rd
November 1988 and that would undoubtedly have revealed that the covenant had
not been registered. It seems to me, therefore, to be fairly clear that there
was a substantial chance that the Sloggetts would not have discovered the fact
of nonregistration until shortly before the restructuring was completed in
November 1988.
Hartle
had laid
before the Local Authority and putting forward an amended Berkeley design. Not
much may have turned on the reduction of flats from fourteen to twelve but
apparently the new design required different foundations which required
different engineering calculations, and matters of this kind might have taken
second place to the urgent need to carry out the porosity tests and secure the
agreement of Wessex Water and the Technical Division.
view
that the company would not have exchanged contracts unless and until planning
permission for either fourteen or twelve flats was actually granted?
Hartle
with refusing to
deal with you and selling elsewhere?
very
little risk involved other than the fact
that you are contracted subject to getting what you want. So the risk factor is
non-existent.
viability
etc.”
view
that he would have wanted to see the
planning permission document before committing himself to pay the price.
Because the right questions were not asked of him, his evidence is not as
compelling as it might otherwise have been.
very
much of a problem at all
compared to what problems we do get with the Local Authority. This is just a
fairly standard thing that they were doing prior to issuing the consent, or
something like that - a drainage test or whatever test that wants doing. I
don’t really see it as a great insurmountable problem.
Victoria
Avenue you would have been able through one or other of your companies and
colleagues, to have purchased both or conducted both developments at the same
time?
view
on this aspect is that he did not
fully answer the question in the light of the hypothetical possibilities. A
purchaser’s response would be shaped by the amount of discount that would
be offered both in respect of the covenant and in respect of entering into a
sale conditional on planning permission. Looking at the evidence as a whole, I
am bound to conclude that there were real chances that a conditional sale might
have been concluded or at least, as the judge was inclined to
view
it, that
completion would have been effected shortly after the developers agreed the
drainage difficulties with the Technical Division on 17th November. If there
had been greater incentive to get that agreement earlier, then there seems to
me to have been a real chance of succeeding in pushing the Technical Division
to an earlier decision.
Vidler...told
me that in the absence of the covenant problem, Berkeley might
have gone ahead after 17th November, when the surface water drainage was
agreed, but he said (and I accept) that they would have been willing to do so
only at a reduced price. Having seen how Mr
Hartle
met the Sloggetts demands
for £60,000, I do not think he would readily have agreed a reduced price,
within the couple weeks before Berkeley withdrew. In any case I think it
probable that a proposal by Mr
Vidler
that Berkeley should exchange contracts,
even at a lower price than the originally proposed £400,000 would have led
to that review by those responsible for approving the exchange of contracts,
which clearly took place
very
shortly after, and would have precipitated an
early withdrawal by Berkeley from the deal....I therefore conclude that even if
the covenantees had not been alerted and the covenant had remained
unregistered, and even if, as Mr White (who acted as Berkeley's solicitor)
tells me he would have advised against, Berkeley had been willing to accept the
property without formal release of the covenants, other than as a result of the
failure to register, I do not think that the plaintiff’s deal with
Berkeley could have been completed before Berkeley changed their mind in
December 1988.”
Hartle
would have offered a
drop in the price to secure early completion. They would have had to judge two
risks, firstly of a non-effective covenant nonetheless, and however wrongly,
causing difficulties to prospective purchasers of the flats, and, secondly, the
risk of planning permission not being granted. Mr Bawden’s
view
about the
latter was (T.19th p. 20) that if they had carried out their own porosity test
satisfactorily and were confident of the solution then, answering what his
recommendation would have been to exchanging and completing on that day,:-
Hartle
would have taken the decision to offer the property elsewhere but would
have remained in negotiation and discussion with Berkeley at least until the
drainage problem was resolved by Berkeley and at Berkeley’s expense. I
cannot agree with that conclusion. The hypothetical position is that Mr
Hartle
would invite Berkeley to complete in order to defeat the covenant and would be
willing to discount the price to achieve that purpose. I do not see how any
prevarication was possible. Time was of the essence and a clear answer would
have to have been given. Berkeley’s solicitor, Mr White preferred the
cautious route of clearing the covenant. His advice was not perfectly
understood by his client. They would have taken a commercial decision whether
to run the risk as the price of the discount. Even on the judge’s
view
of
the matter, Mr
Hartle
would have enquired as to the interest among local
builders. This would have produced the interest shown in the development by Mr
Turner and Mr Cruse.
view
was well justified because in cross examination Mr Turner was driven to
say that he would not have accepted a conveyance before the grant of planning
permission which was not achieved until 10th February 1989. One is left to
speculate, however, how he would have reacted to the possibility of purchasing
the site, which was opposite one at which he was working if he could get it
cheaply. His evidence was (19th October p. 54) that “land was short so
when it came up we bought it.” Although he said, :-
Hartle
was already dealing with
Berkeley and was not prepared to go back on that deal. His statement of
evidence records that had the property come back on the market in July/August
1988 “we would definitely have been interested in buying, probably still
for £410,000.” When the sale to Berkeley Homes fell through he
offered the full asking price of £400,000 in March 1989 and went through
the early stages of purchase through the solicitors. They only decided not to
proceed because the market had started to slow down and they wanted to be
cautious. Significantly he says in his statement::-
view
as to his interests were he to be offered discounts both for a quick
completion to avoid the risk of the covenant biting or a further discount to
overcome his anxieties about the planning position.
Hartle
would have accepted. He would still have
hoped to reach a deal with Berkeley. He had no reason to think that the
Sloggetts would prove as difficult as in the event they turned out to
be...”
very
much of a problem at all compared to
what problems we do get with the Local Authority. This is just a fairly
standard thing that they were doing prior issuing the consent, or something
like that - drainage test or whatever test that wants doing. I really
don’t see it as a great insurmountable problem.
Victoria
Avenue you would have been able, through one or other of your companies and
colleagues to have purchased both or conducted both developments at that time?
Hartle’s
reactions
:
He was aware that the Sloggetts were in a strong bargaining position. It was
obvious that the covenant commanded as much a ransom price as a ransom strip of
land. In the opinion of the defendant’s
valuer,
Mr Beauchamp (20th p.60)
if the property had the benefit of full planning permission in
July/August/September 1988 one would only knock off a small amount money if the
deal could be done
very
quickly. He thought the amount was in the order of
£10,000 to £15,000 he did not seem to think that a bigger discount
would be necessary as the price to pay for a staged completion subject to the
right to buy back if planning permission did not come through eventually. Mr
Hartle
had allowed £8,000 in his calculations. He was prepared to offer
£20,000 to satisfy the Sloggett’s demands. He eventually agreed
£35,000. He knew that £400,000 was a “full price”. He had
some leeway and was clearly willing to bargain.
value
had in fact sunk £360,000. In the summer
the market was keen. The choice of reducing the price for a quick sale was
obviously more attractive than defeating a ransom claim which would have
delayed a sale. A full discount for the depreciated
value
of the land having
regard to the covenant which was agreed at £24,000, but Mr Beauchamp
thought a reduction in the order of £150,000 to £200,000 would be
appropriate. Had good advice been followed it seems to me that there was a good
chance that the deal would have been completed
very
quickly subject to planning
permission proving to be satisfactory, and a modest further discount for a
conditional agreement may have been required. I consider that there was a real
chance of a sale going through at £375,000. Even at the worst scenario,
and without allowing for the urgency producing an earlier agreement with Wessex
Water Authority and the Technical Services Division in the Local Authority,
completion could have been effected by 18th November 1988. In my judgment
completing the sale for £375,000 by 18th November 1988 had a slightly
better than even chance of being achieved. Taking account of uncertainties, I
would assess the chance at 60%.
ventured
some
very
tentative
views
on the remoteness of
any further loss and on the
various
possible ways of making the necessary
calculations. We then heard further
very
helpful submissions.
Hartle
only entitled
to statutory interest on his damages?
Hartle
is entitled to recover the following sums which he
would not have had to incur had Mr Wyllys acted with proper skill and care:
Hartle
submits, "The last 8 years have had a traumatic effect on my life. I now
have serious health problems... I have had to sell practically
everything,...and have lived on social security...All of this from a position
of substance which I had built up over many years. Simple justice demands that
I be awarded compensation for this."
vexation,
tension or aggravation which his breach of
contract may cause to the innocent party...But the rule is not absolute. Where
the
very
object of a contract is to provide pleasure, relaxation, peace of
mind or freedom from molestation, damages will awarded if the fruit of the
contract is not provided or if the contrary result is procured instead. If the
law did not cater for this exceptional category of case it would be defective.
A contract to survey the condition of a house for a prospective purchaser does
not, however, fall within this exceptional category:"
v-
Morrow
[1991] 1 WLR 1421, 1445. I am quite satisfied that the retainer of a
solicitor to act on the sale of a commercial property is similarly not within
the exceptional category.
Viscount
Haldane L.C. in
British
Westinghouse Electric and Manufacturing Company Ltd -
v-
Underground Electric
Railways Company of London Ltd
[1912] AC 673, 689, that:-
Hartle’s
solicitors full and
frank disclosure of his means in the context of ancillary relief proceedings
following the breakdown of their marriage. Having acted in the purchase of this
property, Mr Wyllys was aware of the full extent of his client's borrowing not
only in connection with this
venture,
but also for another development in Lyme
Regis. He knew that the Bank held charges over all his properties including his
home and he knew their terms of business. Moreover he was fully informed by Mr
Hartle
of his wish and indeed his need for a quick sale, fearing the collapse
of the property market. He knew that the proceeds of sale had to discharge the
borrowings to prevent the collapse of the whole enterprise. He knew total
borrowings exceeded the anticipated sale proceeds.The conclusion is inescapable
that Mr
Hartle
would in fact have applied the whole of the net proceeds of sale
not only to repay
v-
La Pintada Compania Navigacion S.A.
[1985] 1 A.C. 104. The difficulties sprang from the opinion reluctantly
expressed in
London,
Chatham and Dover Railway Company -
v-
South Eastern Railway Company
[1893] AC 429 that at common law, in the absence of any agreement or
statutory provisions for the payment of interest, a court had no power to award
interest, simple or compound, by way of damages for the late payment of a debt.
Notwithstanding the expression of strong sympathy with such a claim, that
decision was treated as applying to the award of interest as any form of
damages. In 1951 the first tentative judicial inroad into the previously
accepted understanding of the scope of that decision was made by Denning and
Romer L.JJ. in
Trans
Trust S.P.R.L. -
v-
Danubian Trading Company Ltd
[1952] 2 Q.B. 257, followed in 1981 by
Wadsworth
-
v-
Lydall
[1981] 1 W.L.R. 589. Of the latter decision Lord Brandon said:-
v-
Baxendale
9 Exch. 341 (general damages) and damages recoverable under the second part of
that rule (special damages). On the facts of the case before him Brightman
L.J. found that, by reason of special matters known to both parties at the time
of contracting, the two items of special damages claimed by the plaintiff came
within the second part of that rule. Accordingly, treating the
London,
Chatham and Dover Railway
case as applying only to damages falling within the first part of the rule in
Hadley
-
v-
Baxendale
(general damages), he saw no reason why the plaintiff should not recover the
first two disputed items of special damages under the second part of that rule.
In my opinion the
ratio
decidendi
of
Wadsworth
-
v-
Lydall
...that
the
London,
Chatham and Dover Railway case
... applied only to claims for interest by way of general damages, and did not
extend to claims for special damages, in the sense in which it is clear that
Brightman L.J. was using those two expressions, was correct and should be
approved by your Lordships. On the assumption that your Lordships gave such
approval, the effect will be to reduce considerably the scope of the
London,
Chatham and Dover Railway
case by comparison with what it had in general previously been understood to be."
v-
Lips Maritime Corporation
[1988] 1 A.C. 395, 423 Lord Brandon confirmed that the first matter decided in
the
La
Pintada
case was that:-
v-
Baxendale
...and
did not extend to claims to recover interest as special damage under the second
part of that rule."
Hartle's
claim falls under the first or
under the second part of the rule in
Hadley
-
v-
Baxendale
.
Under the first part,
Victoria
Laundry (Windsor) Ltd -
v-
Newman Industries Ltd
[1949] 2 K.B. 528, 539 as follows:-
v-
Baxendale.
It would, as Mr Davidson acknowledges, be an extraordinary result if the
instruction to sell had the natural consequence that the money borrowed to
purchase the property, £185,000 in this case, should fall within the first
part of the rule whereas the balance would fall within the second part of the
rule because Mr Wyllys was specifically made aware of facts he might not
ordinarily contemplate that the client was indebted to the Bank to a sum in
excess of the sale price and that the Bank were, therefore, demanding to be
paid the whole amount.
Hartle
lost the chance of selling his property before the
market slumped. We have decided that he had a real chance of selling for
£375,000, that being our
valuation
of the price which would have been
agreed between a willing
vendor
- Mr
Hartle
- and a willing purchaser in the
market conditions of the day. Had such a sale taken place, only the net
proceeds would have enured for his benefit and so the agent’s and
solicitors' costs fall to be deducted. Making some estimate of those and
perhaps rounding down, I assess the net proceeds of the lost sale to be
£360,000. That is my starting point. The parties are at liberty to
calculate a more precise figure, but I do not encourage it.
Hartle
did not lose £360,000. He lost the chance of making it. Given all
the imponderables and uncertainties, the chance of achieving such a sale could
not be rated at more than 60%. The damages for the loss of that chance appeared
to me at first sight to be £216,000. That sum would of course have to be
reduced because, although he lost that chance of a sale he did not lose the
property. It was still there to sell. Credit, it appeared to me, would have to
be given for the proceeds of the actual sale. We now know he received
£70,000 on 5th February 1993 and £80,000 on 27th January 1994. Costs
were inevitably incurred in connection with those sales but it would not be
right to deduct them for the purpose of these calculations. Having reduced the
notional sale proceeds to the net figure, it would be a wrongful duplication to
discount the actual proceeds of sale.
views
to the parties, I said, without giving it much thought
at all, that credit against the damages of £216,000 should be given for
the £150,000 actually received. That would mean judgment for £66,000.
But is that the right approach? Prompted by Mr Davidson once again so fairly
sowing seeds of doubt about the correctness of that approach, I have wrestled
with the mathematics. If “a” is the lost sale proceeds and
“b” the actual proceeds, are the damages properly to be awarded (a
x 60%) - b or are they (a - b) x 60%. That can be further reduced to either
0.6a - b or 0.6a - 0.6b. On the figures, is it £ 216,000 - £150,000
i.e. £ 66,000 or is it 60% of the difference between £360,000 and
£150,000 i.e. £126,000.
value
of the opportunity to sell before 18th November 1988 and the
value
of the opportunity to sell after that date or is it the difference
between the price he lost the chance of achieving and the actual selling price,
that difference being reduced by 40% to reflect the
value
of the chance? I
confess I have not found it easy to decide.
Hartle
had lost a
certain sale, or one as certain as certain can be. His damages would be a - b
with no discount because the chance is assessed at 100%. If the chance were
99%, one would make the 1% reduction. On the facts we have found a - b is to be
reduced by 40%. The unfairness of the former solution can be tested in this
way. Assume we had found an 80% chance of a sale. 80% of £375,000 is
£300, 000. Assume the property was sold 12 months later for £300,000.
It cannot be right that the loss of such a high chance does not sound in
damages. If the 0.6a -0.6b formula is adopted, then the loss of the chance
always has a
value.
Hartle
did not lose everything when he lost this
sale. He lost the chance of the sale but he did not lose the property itself.
He retained the chance to sell it at some indeterminate time for some
indeterminate price. He lost the chance of getting the excess of a over b but
his chance of getting a - b was only 60% and so he should only recover 60% of
it.
Hartle
in the position in which he would have been had he
been to pay £360,000 into his account on 18th November 1988, a calculation
must be done of the notional reduction in the compound interest and the bank
charges
Hartle’s
account if a sale had been
achieved for £375,000 in November 1988 and the net proceeds paid to the
bank. It may be that these calculations can best be done with the Bank’s
help if the Bank will give it and even if a fee (assuming and hoping a not
extravagant fee) is charged for the service, it may be money well spent. This
figure would represent the amounts which would not have been debited to the
account if £360,000 had been available. Since there was only a 60% chance
that it would have come into the account, the damages are only 60% of the
calculated overcharge.
v-
The Elderslie Steamship Company Ltd
[1905] 2 KB 516 is, to quote the head note:-
Hartle's
inability to pay them the proceeds of
sale of the property. In my judgment the calculation of that compound interest
and the bank charges must be made to the day of judgment of this court. That
will be the amount of the judgment for damages under this head, although, if
payments have been made by the Defendants on account of damages, then credits
can be given for those payments. From the day of the of this court’s
judgment, interest at the judgment debt rate will run.
Hartle
for his courteous submissions and to Mr Davidson above all for the
very great help he has given me.